I

103D CONGRESS

1ST SESSION H. R. 1200

To provide for health care for every American and to control the cost of

the health care system.

IN THE HOUSE OF REPRESENTATIVES

MARCH 3, 1993

Mr. MCDERMOTT (for himself, Mr. CONYERS, Mr. HILLIARD, Mr. BECERRA,

Mr. BERMAN, Mr. DELLUMS, Mr. EDWARDS of California, Mr. HAMBURG, Mr. MARTINEZ, Mr. MILLER of California, Ms. PELOSI, Mr.

STARK, Mr. TORRES, Mr. TUCKER, Ms. WATERS, Ms. WOOLSEY, Mr.

GEJDENSON, Ms. NORTON, Ms. MCKINNEY, Mr. ABERCROMBIE, Mr.

BEILENSON, Mrs. MINK, Miss COLLINS of Michigan, Mr. EVANS, Mr.

YATES, Mr. FRANK of Massachusetts, Mr. KENNEDY, Mr. MOAKLEY, Mr.

OLVER, Mr. STUDDS, Mr. MFUME, Mrs. COLLINS of Illinois, Mr. OBERSTAR, Mr. VENTO, Mr. CLAY, Mrs. CLAYTON, Mr. PAYNE of New Jersey,

Mr. ACKERMAN, Mr. ENGEL, Mr. HINCHEY, Mr. HOCHBRUECKNER, Mr.

LAFALCE, Mrs. MALONEY, Mr. MANTON, Mr. NADLER, Mr. OWENS, Mr.

RANGEL, Mr. SCHUMER, Mr. TOWNS, Ms. VELA ́ZQUEZ, Mr. STOKES, Ms.

FURSE, Mr. SCOTT, and Mr. SANDERS) introduced the following bill;

which was referred jointly to the Committees on Ways and Means, Energy and Commerce, Armed Service, Post Office and Civil Service, and

Veterans’ Affairs

APRIL 2, 1993

Additional sponsors: Mr. LEWIS of Georgia, Mr. BORSKI, Mr. SABO, Mr.

FLAKE, Mr. REYNOLDS, Mr. ANDREWS of Maine, Mr. LANTOS, and Ms.

ROYBAL-ALLARD

JUNE 28, 1993

Additional sponsors: Mr. SERRANO, Mr. MCCLOSKEY, Mr. BLACKWELL, Mr.

WATT, Mrs. MEEK, Mr. SWIFT, Mr. GUTIERREZ, Mr. MARKEY, Mr. GIBBONS, Mr. DE LUGO, Mr. CLYBURN, Mr. RUSH, Mr. ROMERO-BARCELO ́,

Mr. COYNE, Mr. DIXON, Mr. MURPHY, Mr. FALEOMAVAEGA, Mr. BROWN

of California, Mr. UNDERWOOD, Mr. WASHINGTON, Ms. EDDIE BERNICE

JOHNSON of Texas, Mr. FARR of California, and Mr. THOMPSON of Mississippi

OCTOBER 14, 1993

Additional sponsors: Mr. FORD of Tennessee, Mr. BISHOP, and Mr. RAHALL
2

•HR 1200 SC4

DECEMBER 17, 1993

Additional sponsors: Mr. FIELDS of Louisiana, Mr. SYNAR, Mr. RICHARDSON,

Mr. GONZALEZ, and Mr. WAXMAN

Deleted sponsor: Mr. MFUME (added March 3, 1993; deleted November 22,

1993)

A BILL

To provide for health care for every American and to control

the cost of the health care system.

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 ‘‘American Health Security Act of 1993’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—ESTABLISHMENT OF A STATE-BASED AMERICAN

HEALTH SECURITY PROGRAM; UNIVERSAL ENTITLEMENT; ENROLLMENT

Sec. 101. Establishment of a State-based American Health Security Program.

Sec. 102. Universal entitlement.

Sec. 103. Enrollment.

Sec. 104. Portability of benefits.

Sec. 105. Effective date of benefits.

Sec. 106. Relationship to existing Federal health programs.

TITLE II—COMPREHENSIVE BENEFITS, INCLUDING PREVENTIVE

BENEFITS AND BENEFITS FOR LONG TERM CARE

Sec. 201. Comprehensive benefits.

Sec. 202. Definitions relating to services.

Sec. 203. Special rules for home and community-based long-term care services.

Sec. 204. Exclusions and limitations.

Sec. 205. Certification; quality review; plans of care.

TITLE III—PROVIDER PARTICIPATION
3

•HR 1200 SC4

Sec. 301. Provider participation and standards.

Sec. 302. Qualifications for providers.

Sec. 303. Qualifications for comprehensive health service organizations.

Sec. 304. Limitation on certain physician referrals.

TITLE IV—ADMINISTRATION

Subtitle A—General Administrative Provisions

Sec. 401. American Health Security Standards Board.

Sec. 402. American Health Security Advisory Council.

Sec. 403. Professional, technical, and temporary advisory committees.

Sec. 404. American Health Security Quality Council.

Sec. 405. State health security programs.

Sec. 406. Complementary conduct of related health programs.

SUBTITLE B—CONTROL OVER FRAUD AND ABUSE

Sec. 411. Application of Federal sanctions to all fraud and abuse under American Health Security Program.

Sec. 412. National health care fraud data base.

Sec. 413. Requirements for operation of State health care fraud and abuse control units.

Sec. 414. Assignment of unique provider and patient identifiers.

TITLE V—QUALITY ASSESSMENT

Sec. 501. Functions of Quality Council; development of practice guidelines and

application to outliers.

Sec. 502. State quality review programs.

Sec. 503. Elimination of existing utilization review programs; transition.

Sec. 504. Development of national electronic data base.

TITLE VI—NATIONAL HEALTH SECURITY BUDGET; PAYMENTS;

COST CONTAINMENT MEASURES

Subtitle A—Budgeting and Payments to States

Sec. 601. National health security budget.

Sec. 602. Computation of individual and State capitation amounts.

Sec. 603. State health security budgets.

Sec. 604. Federal payments to States.

Sec. 605. Account for health professional education expenditures.

Subtitle B—Payments by States to Providers

Sec. 611. Payments to hospitals and other facility-based services for operating

expenses on the basis of approved global budgets.

Sec. 612. Payments to health care practitioners based on prospective fee

schedule.

Sec. 613. Payments to comprehensive health service organizations.

Sec. 614. Payments for community-based primary health services.

Sec. 615. Payments for prescription drugs.

Sec. 616. Approved devices and equipment.

Sec. 617. Payments for other items and services.

Sec. 618. Payment incentives for medically underserved areas.

Sec. 619. Authority for alternative payment methodologies.
4

•HR 1200 SC4

Subtitle C—Mandatory Assignment and Administrative Provisions

Sec. 621. Mandatory assignment.

Sec. 622. Procedures for reimbursement; appeals.

TITLE VII—PROMOTION OF PRIMARY HEALTH CARE; DEVELOPMENT OF HEALTH SERVICE CAPACITY; PROGRAMS TO ASSIST

THE MEDICALLY UNDERSERVED

Subtitle A—Promotion and Expansion of Primary Care Professional Training

Sec. 701. Role of Board; establishment of primary care professional output

goals.

Sec. 702. Establishment of advisory committee on health professional education.

Sec. 703. Grants for health professions education, nurse education, and the National Health Service Corps.

Subtitle B—Direct Health Care Delivery

Sec. 711. Setaside for public health block grants.

Sec. 712. Setaside for primary health care delivery.

Sec. 713. Primary care service expansion grants.

Subtitle C—Primary Care and Outcomes Research

Sec. 721. Set-aside for outcomes research.

Sec. 722. Office of Primary Care and Prevention Research.

TITLE VIII—FINANCING PROVISIONS; AMERICAN HEALTH

SECURITY TRUST FUND

Sec. 800. Amendment of 1986 code; section 15 not to apply.

Subtitle A—AMERICAN HEALTH SECURITY TRUST FUND

Sec. 801. American Health Security Trust Fund.

Subtitle B—Increases in Corporate and Individual Income Tax Rates; Health

Security Premium; and Surtax on Individuals With Incomes Over $1,000,000

Sec. 811. Increases in regular income tax rates.

Sec. 812. Increases in minimum tax rates.

Sec. 813. Health security premium.

Sec. 814. Surtax on individuals with incomes over $1,000,000.

Subtitle C—Employment Tax Changes

Sec. 821. Modifications of certain employment tax provisions.

Subtitle D—Other Revenue Increases Primarily Affecting Individuals

Sec. 831. Overall limitation on itemized deductions for high-income taxpayers

made permanent.

Sec. 832. Phaseout of personal exemption of high-income taxpayers made permanent.

Sec. 833. Modifications to deductions for certain moving expenses.

Sec. 834. Top estate and gift tax rates made permanent.

Sec. 835. Elimination of deduction for club membership fees.
5

•HR 1200 SC4

Sec. 836. Increase of Social Security benefits included in income.

Sec. 837. Long-term health care premium for the elderly.

Subtitle E—Other Revenue Increases Primarily Affecting Businesses

Sec. 841. Mark to market accounting method for securities dealers.

Sec. 842. Increase in recovery period for nonresidential real property.

Sec. 843. Taxation of income of controlled foreign corporations attributable to

imported property.

Sec. 844. Repeal of deduction for intangible drilling and development costs.

Sec. 845. Repeal of percentage depletion for oil and gas wells.

Sec. 846. Repeal of application of like-kind exchange rules to real property.

Sec. 847. Amortization of portion of advertising expenses.

Subtitle F—Estimated Tax Provisions

Sec. 851. Individual estimated tax provisions.

Sec. 852. Corporate estimated tax provisions.

Subtitle G—Alternative Taxable Years

Sec. 861. Election of taxable year other than required taxable year.

Sec. 862. Required payments for entities electing not to have required taxable

year.

Subtitle H—Deduction for Charitable Contribution of Appreciated Property

Limited To Adjusted Basis

Sec. 871. Deduction for charitable contribution of appreciated property limited

to adjusted basis.

Subtitle I—Minimum 5 Percent Rate of Tax on Interest Paid To Foreign

Persons

Sec. 881. Minimum 5 percent rate of tax on interest paid to foreign persons.

Sec. 981. Minimum 5 percent rate of tax on interest paid to foreign persons.

1 TITLE I—ESTABLISHMENT OF A

2 STATE-BASED AMERICAN

3 HEALTH SECURITY PRO4 GRAM; UNIVERSAL ENTITLE5 MENT; ENROLLMENT

6 SEC. 101. ESTABLISHMENT OF A STATE-BASED AMERICAN

7 HEALTH SECURITY PROGRAM.

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

9 United States a State-Based American Health Security

10 Program to be administered by the individual States in
6

•HR 1200 SC4

1 accordance with Federal standards specified in, or estab2 lished under, this Act.

3 (b) STATE HEALTH SECURITY PROGRAMS.—In order

4 for a State to be eligible to receive payment under section

5 604, a State must establish a State health security pro6 gram in accordance with this Act.

7 (c) STATE DEFINED.—

8 (1) IN GENERAL.—In this Act, subject to para9 graph (2), the term ‘‘State’’ means each of the fifty

10 States and the District of Columbia.

11 (2) ELECTION.—If the Governor of Puerto

12 Rico, the Virgin Islands, Guam, American Samoa, or

13 the Northern Mariana Islands certifies to the Presi14 dent that the legislature of the Commonwealth or

15 territory has enacted legislation desiring that the

16 Commonwealth or territory be included as a State

17 under the provisions of this Act, such Common18 wealth or territory shall be included as a ‘‘State’’

19 under this Act beginning January 1 of the first year

20 beginning ninety days after the President receives

21 the notification.

22 SEC. 102. UNIVERSAL ENTITLEMENT.

23 (a) IN GENERAL.—Every individual who is a resident

24 of the United States and is a citizen or national of the

25 United States or lawful resident alien (as defined in sub-
7

•HR 1200 SC4

1 section (d) is entitled to benefits for health care services

2 under this Act under the appropriate State health security

3 program. In this section, the term ‘‘appropriate State

4 health security program’’ means, with respect to an indi5 vidual, the State health security program for the State in

6 which the individual maintains a primary residence.

7 (b) TREATMENT OF CERTAIN NONIMMIGRANTS.—

8 (1) IN GENERAL.—The American Health Secu9 rity Standards Board (in this Act referred to as the

10 ‘‘Board’’) may make eligible for benefits for health

11 care services under the appropriate State health se12 curity program under this Act such classes of aliens

13 admitted to the United States as nonimmigrants as

14 the Board may provide.

15 (2) CONSIDERATION.—In providing for eligi16 bility under paragraph (1), the Board shall consider

17 reciprocity in health care services offered to United

18 States citizens who are nonimmigrants in other for19 eign states, and such other factors as the Board

20 determines to be appropriate.

21 (c) TREATMENT OF OTHER INDIVIDUALS.—

22 (1) BY BOARD.—The Board also may make eli23 gible for benefits for health care services under the

24 appropriate State health security program under this

25 Act other individuals not described in subsection (a)
8

•HR 1200 SC4

1 or (b), and regulate the nature of the eligibility of

2 such individuals, in order—

3 (A) to preserve the public health of

4 communities,

5 (B) to compensate States for the addi6 tional health care financing burdens created by

7 such individuals, and

8 (C) to prevent adverse financial and medi9 cal consequences of uncompensated care,

10 while inhibiting travel and immigration to the

11 United States for the sole purpose of obtaining

12 health care services.

13 (2) BY STATES.—Any State health security pro14 gram may make individuals described in paragraph

15 (1) eligible for benefits at the expense of the State.

16 (d) LAWFUL RESIDENT ALIEN DEFINED.—For pur17 poses of this section, the term ‘‘lawful resident alien’’

18 means an alien lawfully admitted for permanent residence

19 and any other alien lawfully residing permanently in the

20 United States under color of law, including an alien with

21 lawful temporary resident status under section 210, 210A,

22 or 234A of the Immigration and Nationality Act (8 U.S.C.

23 1160, 1161, or 1255a).
9

•HR 1200 SC4

1 SEC. 103. ENROLLMENT.

2 (a) IN GENERAL.—Each State health security pro3 gram shall provide a mechanism for the enrollment of indi4 viduals entitled or eligible for benefits under this Act. The

5 mechanism shall—

6 (1) include a process for the automatic enroll7 ment of individuals at the time of birth in the

8 United States and at the time of immigration into

9 the United States or other acquisition of lawful resi10 dent status in the United States,

11 (2) provide for the enrollment, as of January 1,

12 1995, of all individuals who are eligible to be en13 rolled as of such date, and

14 (3) include a process for the enrollment of indi15 viduals made eligible for health care services under

16 subsections (b) and (c) of section 102.

17 (b) AVAILABILITY OF APPLICATIONS.—Each State

18 health security program shall make applications for enroll19 ment under the program available—

20 (1) at local offices of the Social Security

21 Administration,

22 (2) at social services locations,

23 (3) at out-reach sites (such as provider and

24 practitioner locations), and
10

•HR 1200 SC4

1 (4) at other locations (including post offices

2 and schools) accessible to a broad cross-section of

3 individuals eligible to enroll.

4 (c) ISSUANCE OF HEALTH SECURITY CARDS.—In

5 conjunction with an individual’s enrollment for benefits

6 under this Act, the State health security program shall

7 provide for the issuance of a health security card which

8 shall be used for purposes of identification and processing

9 of claims for benefits under the program.

10 SEC. 104. PORTABILITY OF BENEFITS.

11 (a) IN GENERAL.—To ensure continuous access to

12 benefits for health care services covered under this Act,

13 each State health security program—

14 (1) shall not impose any minimum period of

15 residence in the State, or waiting period, in excess

16 of three months before residents of the State are

17 entitled to, or eligible for, such benefits under the

18 program;

19 (2) shall provide continuation of payment for

20 covered health care services to individuals who have

21 terminated their residence in the State and estab22 lished their residence in another State, for the dura23 tion of any waiting period imposed in the State of

24 new residency for establishing entitlement to, or

25 eligibility for, such services; and
11

•HR 1200 SC4

1 (3) shall provide for the payment for health

2 care services covered under this Act provided to indi3 viduals while temporarily absent from the State, for

4 reasons other than to obtain the services, based on

5 the following principles:

6 (A) Payment for such health care services

7 is at the rate that is approved by the State

8 health security program in the State in which

9 the services are provided, unless the States con10 cerned agree to apportion the cost between

11 them in a different manner.

12 (B) Payment for such health care services

13 provided outside the United States is made on

14 the basis of the amount that would have been

15 paid by the State health security program for

16 similar services rendered in the State, with due

17 regard, in the case of hospital services, to the

18 size of the hospital, standards of service, and

19 other relevant factors.

20 (b) CROSS-BORDER ARRANGEMENTS.—A State

21 health security program for a State may negotiate with

22 such a program in an adjacent State a reciprocal arrange23 ment for the coverage under such other program of health

24 care services to enrollees residing in the border region.
12

•HR 1200 SC4

1 SEC. 105. EFFECTIVE DATE OF BENEFITS.

2 Benefits shall first be available under this Act for

3 items and services furnished on or after January 1, 1995.

4 SEC. 106. RELATIONSHIP TO EXISTING FEDERAL HEALTH

5 PROGRAMS.

6 (a) MEDICARE AND MEDICAID.—

7 (1) IN GENERAL.—Notwithstanding any other

8 provision of law, subject to paragraph (2)—

9 (A) no benefits shall be available under

10 title XVIII of the Social Security Act for any

11 item or service furnished after December 31,

12 1994,

13 (B) no individual is entitled to medical as14 sistance under a State plan approved under

15 title XIX of such Act for any item or service

16 furnished after such date, and

17 (C) no payment shall be made to a State

18 under section 1903(a) of such Act with respect

19 to medical assistance for any item or service

20 furnished after such date.

21 (2) TRANSITION.—In the case of inpatient hos22 pital services and extended care services during a

23 continuous period of stay which began before Janu24 ary 1, 1995, and which had not ended as of such

25 date, for which benefits are provided under title

26 XVIII, or under a State plan under title XIX, of the
13

•HR 1200 SC4

1 Social Security Act, the Secretary of Health and

2 Human Services and each State plan, respectively,

3 shall provide for continuation of benefits under such

4 title or plan until the end of the period of stay.

5 (b) FEDERAL EMPLOYEES HEALTH BENEFITS PRO6 GRAM.—No benefits shall be made available under chapter

7 89 of title 5, United States Code, for any part of a cov8 erage period occurring after December 31, 1994.

9 (c) CHAMPUS.—No benefits shall be made available

10 under sections 1079 and 1086 of title 10, United States

11 Code, for items or services furnished after December 31,

12 1994.

13 (d) TREATMENT OF BENEFITS FOR VETERANS AND

14 NATIVE AMERICANS.—Nothing in this Act shall affect the

15 eligibility of veterans for the medical benefits and services

16 provided under title 38, United States Code, or of Indians

17 for the medical benefits and services provided by or

18 through the Indian Health Service.

19 TITLE II—COMPREHENSIVE BEN20 EFITS, INCLUDING PREVEN21 TIVE BENEFITS AND BENE22 FITS FOR LONG TERM CARE

23 SEC. 201. COMPREHENSIVE BENEFITS.

24 (a) IN GENERAL.—Subject to the succeeding provi25 sions of this title, individuals enrolled for benefits under
14

•HR 1200 SC4

1 this Act are entitled to have payment made under a State

2 health security program for the following items and serv3 ices if medically necessary and appropriate for the mainte4 nance of health or for the diagnosis, treatment, or rehabili5 tation of a health condition:

6 (1) HOSPITAL SERVICES.—Inpatient and out7 patient hospital care, including 24-hour a day emer8 gency services.

9 (2) PROFESSIONAL SERVICES.—Professional

10 services of health care practitioners authorized to

11 provide health care services under State law.

12 (3) COMMUNITY-BASED PRIMARY HEALTH

13 SERVICES.—Community-based primary health serv14 ices (as defined in section 202(a)).

15 (4) PREVENTIVE SERVICES.—Preventive serv16 ices (as defined in section 202(b)).

17 (5) LONG-TERM AND CHRONIC CARE SERV18 ICES.—

19 (A) Nursing facility services.

20 (B) Home health services.

21 (C) Home and community-based long term

22 care services (as defined in section 202(c)) for

23 individuals described in section 203(a).

24 (D) Hospice care.
15

•HR 1200 SC4

1 (6) PRESCRIPTION DRUGS, BIOLOGICALS, INSU2 LIN, MEDICAL FOODS.—

3 (A) Outpatient prescription drugs and

4 biologicals, as specified by the Board consistent

5 with section 515.

6 (B) Insulin.

7 (C) Medical foods (as defined in section

8 202(d)).

9 (7) DENTAL SERVICES.—Dental services (as de10 fined in section 202(h)).

11 (8) MENTAL HEALTH SERVICES.—Mental

12 health services (as defined in section 202(e)).

13 (9) SUBSTANCE ABUSE TREATMENT SERV14 ICES.—Substance abuse treatment services (as de15 fined in section 202(f)).

16 (10) DIAGNOSTIC TESTS.—Diagnostic tests.

17 (11) OTHER ITEMS AND SERVICES.—

18 (A) OUTPATIENT THERAPY.—Outpatient

19 physical therapy services, outpatient speech pa20 thology services, and outpatient occupational

21 therapy services in all settings.

22 (B) DURABLE MEDICAL EQUIPMENT.—Du23 rable medical equipment.

24 (C) HOME DIALYSIS.—Home dialysis sup25 plies and equipment.
16

•HR 1200 SC4

1 (D) AMBULANCE.—Emergency ambulance

2 service.

3 (E) PROSTHETIC DEVICES.—Prosthetic de4 vices, including replacements of such devices.

5 (F) ADDITIONAL ITEMS AND SERVICES.—

6 Such other medical or health care items or

7 services as the Board may specify.

8 (b) COST-SHARING.—There are no deductibles, coin9 surance, or copayments applicable to acute care benefits

10 provided under this title.

11 (c) PROHIBITION OF BALANCE BILLING.—As pro12 vided in section 531, no person may impose a charge for

13 covered services for which benefits are provided under this

14 Act.

15 (d) NO DUPLICATE HEALTH INSURANCE.—Each

16 State health security program shall prohibit the sale of

17 health insurance in the State if payment under the insur18 ance duplicates payment for any items or services for

19 which payment may be made under such a program.

20 (e) STATE PROGRAM MAY PROVIDE ADDITIONAL

21 BENEFITS.—Nothing in this Act shall be construed as

22 limiting the benefits that may be made available under a

23 State health security program to residents of the State

24 at the expense of the State.
17

•HR 1200 SC4

1 (f) EMPLOYERS MAY PROVIDE ADDITIONAL BENE2 FITS.—Nothing in this Act shall be construed as limiting

3 the additional benefits that an employer may provide to

4 employees or their dependents, or to former employees or

5 their dependents.

6 SEC. 202. DEFINITIONS RELATING TO SERVICES.

7 (a) COMMUNITY-BASED PRIMARY HEALTH SERV8 ICES.—In this title, the term ‘‘community-based primary

9 health services’’ means ambulatory health services fur10 nished—

11 (1) by a rural health clinic;

12 (2) by a Federally-qualified health center, and

13 which, for purposes of this Act, include services

14 furnished by State and local health agencies;

15 (3) in a school-based setting;

16 (4) by public educational agencies and other

17 providers of services to children entitled to assist18 ance under the Individuals with Disabilities Edu19 cation Act for services furnished pursuant to a

20 written Individualized Family Services Plan or

21 Individual Education Plan under such Act; and

22 (5) public and private non-profit entities receiv23 ing Federal assistance under the Public Health

24 Service Act.

25 (b) PREVENTIVE SERVICES.—
18

•HR 1200 SC4

1 (1) IN GENERAL.—In this title, the term ‘‘pre2 ventive services’’ means items and services—

3 (A) which—

4 (i) are specified in paragraph (2), or

5 (ii) the Board determines to be effec6 tive in the maintenance and promotion of

7 health or minimizing the effect of illness,

8 disease, or medical condition; and

9 (B) which are provided consistent with the

10 periodicity schedule established under para11 graph (3).

12 (2) SPECIFIED PREVENTIVE SERVICES.—The

13 services specified in this paragraph are as follows:

14 (A) Basic immunizations.

15 (B) Prenatal and well-baby care (for in16 fants under one year of age).

17 (C) Well-child care (including periodic

18 physical examinations, hearing and vision

19 screening, and developmental screening and ex20 aminations) for individuals under 18 years of

21 age.

22 (D) Periodic screening mammography, Pap

23 smears, and colorectal examinations and exami24 nations for prostate cancer.

25 (E) Physical examinations.
19

•HR 1200 SC4

1 (F) Family planning services.

2 (G) Routine eye examinations, eyeglasses,

3 and contact lenses.

4 (H) Hearing aids, but only upon a deter5 mination of a certified audiologist or physician

6 that a hearing problem exists and is caused by

7 a condition that can be corrected by use of a

8 hearing aid.

9 (3) SCHEDULE.—The Board shall establish, in

10 consultation with experts in preventive medicine and

11 public health and taking into consideration those

12 preventive services recommended by the Preventive

13 Services Task Force and published as the Guide to

14 Clinical Preventive Services, a periodicity schedule

15 for the coverage of preventive services under para16 graph (1). Such schedule shall take into consider17 ation the cost-effectiveness of appropriate preventive

18 care and shall be revised not less frequently than

19 once every 5 years, in consultation with experts in

20 preventive medicine and public health.

21 (c) HOME AND COMMUNITY-BASED LONG-TERM

22 CARE SERVICES.—In this title, the term ‘‘home and com23 munity-based long term care services’’ means the following

24 services provided to an individual to enable the individual
20

•HR 1200 SC4

1 to remain in such individual’s place of residence within

2 the community:

3 (1) Homemaker services, including meals.

4 (2) Home health aide services.

5 (3) Heavy chores.

6 (4) Adult day health care, social day care or

7 psychiatric day care.

8 (5) Medical social work services.

9 (6) Care coordination services, as defined in

10 subsection (g)(1).

11 (7) Respite care, including training for informal

12 caregivers.

13 (d) MEDICAL FOODS.—In this title, the term ‘‘medi14 cal foods’’ means foods which are formulated to be

15 consumed or administered enterally under the supervision

16 of a physician and which are intended for the specific die17 tary management of a disease or condition for which

18 distinctive nutritional requirements, based on recognized

19 scientific principles, are established by medical evaluation.

20 (e) MENTAL HEALTH SERVICES.—In this title, the

21 term ‘‘mental health services’’ means services related to

22 the prevention, diagnosis, treatment, and rehabilitation of

23 mental illness and promotion of mental health, including

24 the following services:

25 (1) Crisis intervention.
21

•HR 1200 SC4

1 (2) Outpatient mental health services.

2 (3) Partial hospitalization and day and evening

3 treatment programs.

4 (4) Psychosocial rehabilitation services.

5 (5) Pharmacotherapeutic interventions.

6 (6) Other rehabilitation services, including half7 way and three-quarter-way house care.

8 (7) Inpatient mental health services.

9 (8) Care coordination services (as defined in

10 subsection (g)(1)).

11 (f) SUBSTANCE ABUSE TREATMENT SERVICES.—In

12 this title, the term ‘‘substance abuse treatment services’’

13 means services for the treatment of dependency on alcohol

14 or controlled substances provided through a treatment

15 program meeting State qualification standards and in16 cludes the following services:

17 (1) Crisis intervention, including assessment,

18 diagnosis, and referral.

19 (2) Detoxification services, in ambulatory and

20 inpatient settings.

21 (3) Outpatient services, including intensive day

22 and evening programs, continuing care, and family

23 services.

24 (4) Short-term residential services in a hospital

25 or free-standing program.
22

•HR 1200 SC4

1 (5) Long-term residential services, including

2 therapeutic communities and halfway houses.

3 (6) Pharmacotherapeutic interventions.

4 (7) Care coordination services (as defined in

5 subsection (g)(1)).

6 (g) CARE COORDINATION SERVICES.—

7 (1) IN GENERAL.—In this title, the term ‘‘care

8 coordination services’’ means services provided by

9 care coordinators (as defined in paragraph (2)) to

10 individuals described in paragraph (3) for the co11 ordination and monitoring of mental health services,

12 substance abuse treatment services, and home and

13 community-based long term care services to ensure

14 appropriate, cost-effective utilization of such services

15 in a comprehensive and continuous manner, and in16 cludes—

17 (A) transition management between inpa18 tient facilities and community-based services,

19 including assisting patients in identifying and

20 gaining access to appropriate ancillary services;

21 and

22 (B) evaluating and recommending appro23 priate treatment services, in cooperation with

24 patients and other providers and in conjunction
23

•HR 1200 SC4

1 with any quality review program or plan of care

2 under section 205.

3 (2) CARE COORDINATOR.—

4 (A) IN GENERAL.—In this title, the term

5 ‘‘care coordinator’’ means an individual or non6 profit or public agency or organization which

7 the State health security program determines—

8 (i) is capable of performing directly,

9 efficiently, and effectively the duties of a

10 care coordinator described in paragraph

11 (1), and

12 (ii) demonstrates capability in estab13 lishing and periodically reviewing and re14 vising plans of care, and in arranging for

15 and monitoring the provision and quality

16 of services under any plan.

17 (B) INDEPENDENCE.—State health secu18 rity programs shall establish safeguards to as19 sure that care coordinators have no financial in20 terest in treatment decisions or placements.

21 Care coordination may not be provided through

22 any structure or mechanism through which

23 quality review is performed.

24 (3) ELIGIBLE INDIVIDUALS.—An individual de25 scribed in this paragraph is an individual—
24

•HR 1200 SC4

1 (A) described in section 203 (relating to

2 individuals qualifying for long term and chronic

3 care services); or

4 (B) determined (in a manner specified by

5 the Board)—

6 (i) to have a serious mental illness (as

7 defined by the Board), or

8 (ii) to have a history of substance

9 abuse displaying severe associated illness

10 or previous treatment failure (as defined

11 by the Board).

12 (h) DENTAL SERVICES.—In this title, the term ‘‘den13 tal services’’ means preventive and prophalactic dental

14 treatment consistent with a periodicity schedule estab15 lished by the Board and treatment for dental disease and

16 injury in children under 18 years of age, and does not

17 include orthodontic services.

18 (i) NURSING FACILITY; NURSING FACILITY SERV19 ICES.—Except as may be provided by the Board, the

20 terms ‘‘nursing facility’’ and ‘‘nursing facility services’’

21 have the meanings given such terms in sections 1919(a)

22 and 1905(f), respectively, of the Social Security Act.

23 (j) OTHER TERMS.—Except as may be provided by

24 the Board, the definitions contained in section 1861 of the

25 Social Security Act shall apply.
25

•HR 1200 SC4

1 SEC. 203. SPECIAL RULES FOR HOME AND COMMUNITY2 BASED LONG-TERM CARE SERVICES.

3 (a) QUALIFYING INDIVIDUALS.—For purposes of sec4 tion 201(a)(5)(C), individuals described in this subsection

5 are the following individuals:

6 (1) ADULTS.—Individuals 18 years of age or

7 older determined (in a manner specified by the

8 Board)—

9 (A) to be unable to perform, without the

10 assistance of an individual, at least 2 of the fol11 lowing 5 activities of daily living (or who has a

12 similar level of disability due to cognitive

13 impairment)—

14 (i) bathing;

15 (ii) eating;

16 (iii) dressing;

17 (iv) toileting; and

18 (v) transferring in and out of a bed or

19 in and out of a chair; or

20 (B) due to cognitive or mental impair21 ments, requires supervision because the individ22 ual behaves in a manner that poses health or

23 safety hazards to himself or herself or others.

24 (2) CHILDREN.—Individuals under 18 years of

25 age determined (in a manner specified by the Board)
26

•HR 1200 SC4

1 to meet such alternative standard of disability for

2 children as the Board develops.

3 (b) LIMIT ON SERVICES.—

4 (1) IN GENERAL.—No individual is entitled to

5 receive benefits under a State health security pro6 gram with respect to home and community-based

7 long term care services in a period (specified by the

8 Board) to the extent the amount of payments for

9 such benefits exceeds 65 percent (or such alternative

10 ratio as the Board establishes under paragraph (2))

11 of the average of amount of payment that would

12 have been made under the program during the pe13 riod if the individual were a resident of a nursing fa14 cility in the same area in which the services were

15 provided.

16 (2) ALTERNATIVE RATIO.—The Board may es17 tablish for purposes of paragraph (1) an alternative

18 ratio (of payments for home and community-based

19 long term care services to payments for nursing fa20 cility services) as the Board determines to be more

21 consistent with the goal of providing cost-effective

22 long-term care in the most appropriate and least

23 restrictive setting.
27

•HR 1200 SC4

1 SEC. 204. EXCLUSIONS AND LIMITATIONS.

2 (a) IN GENERAL.—Subject to section 201(e), benefits

3 for service are not available under this Act unless the

4 services meet the standards specified in section 201(a).

5 (b) MENTAL HEALTH SERVICES AND SUBSTANCE

6 ABUSE TREATMENT SERVICES.—

7 (1) IN GENERAL.—Mental health services and

8 substance abuse treatment services furnished for an

9 individual in excess of a threshold specified in para10 graph (2) are not covered services unless the services

11 are determined under a utilization review program to

12 meet the standards specified in section 201(a) and,

13 with respect to inpatient or residential treatment

14 services, to be provided in the least restrictive and

15 most appropriate setting.

16 (2) UTILIZATION REVIEW THRESHOLD.—

17 (A) IN GENERAL.—Subject to subpara18 graphs (B) and (C), the thresholds specified in

19 this paragraph are—

20 (i) 20 outpatient visits in a year, and

21 (ii) 15 days of inpatient services in a

22 year.

23 (B) ALTERNATIVE NATIONAL THRESH24 OLDS.—The Board may specify alternative

25 thresholds to those specified in subparagraph

26 (A).
28

•HR 1200 SC4

1 (C) ADDITIONAL STATE THRESHOLDS.—A

2 State health security program may specify

3 thresholds in addition to those established

4 under the previous subparagraphs, which

5 thresholds may be higher or lower than the

6 number of outpatient visits or days of inpatient

7 services otherwise specified.

8 (c) TREATMENT OF EXPERIMENTAL SERVICES.—In

9 applying subsection (a), the Board shall make, after con10 sultation with a technical advisory committee, national

11 coverage determinations with respect to those services that

12 are experimental in nature. Such determinations shall be

13 made consistent with a process that provides for profes14 sional input and public comment.

15 (d) APPLICATION OF NATIONAL PRACTICE GUIDE16 LINES.—In the case of services for which the Board has

17 recognized national practice guidelines, the services are

18 considered to meet the standards specified in section

19 201(a) only if they have been provided in accordance with

20 such guidelines or in accordance with such guidelines as

21 are provided by the State health security program consist22 ent with title V.

23 (e) SPECIFIC LIMITATIONS.—

24 (1) LIMITATIONS ON EYEGLASSES, CONTACT

25 LENSES, HEARING AIDS, AND DURABLE MEDICAL
29

•HR 1200 SC4

1 EQUIPMENT.—Subject to section 201(e), the Board

2 may impose such limits relating to the costs and fre3 quency of replacement of eyeglasses, contact lenses,

4 hearing aids, and durable medical equipment to

5 which individuals enrolled for benefits under this Act

6 are entitled to have payment made under a State

7 health security program as the Board deems appro8 priate.

9 (2) OVERLAP WITH PREVENTIVE SERVICES.—

10 The coverage of services described in section 201(a)

11 (other than paragraph (3)) which also are preventive

12 services are required to be covered only to the extent

13 that they are required to be covered as preventive

14 services.

15 (3) MISCELLANEOUS EXCLUSIONS FROM COV16 ERED SERVICES.—Covered services under this Act

17 do not include the following:

18 (A) Surgery and other procedures (such as

19 orthodontia) performed solely for cosmetic pur20 poses (as defined in regulations) and hospital or

21 other services incident thereto, unless—

22 (i) required to correct a congenital

23 anomaly;

24 (ii) required to restore or correct a

25 part of the body which has been altered as
30

•HR 1200 SC4

1 a result of accidental injury, disease, or

2 surgery; or

3 (iii) otherwise determined to be medi4 cally necessary and appropriate under sec5 tion 201(a).

6 (B) Personal comfort items or private

7 rooms in inpatient facilities, unless determined

8 to be medically necessary and appropriate

9 under section 201(a).

10 (C) The services of a professional practi11 tioner if they are furnished in a hospital or

12 other facility which is not a participating pro13 vider.

14 (f) NURSING FACILITY SERVICES AND HOME

15 HEALTH SERVICES.—Nursing facility services and home

16 health services (other than post-hospital services, as de17 fined by the Board) furnished to an individual who is not

18 described in section 203(a) are not covered services unless

19 the services are determined to meet the standards speci20 fied in section 201(a) and, with respect to nursing facility

21 services, to be provided in the least restrictive and most

22 appropriate setting.
31

•HR 1200 SC4

1 SEC. 205. CERTIFICATION; QUALITY REVIEW; PLANS OF

2 CARE.

3 (a) CERTIFICATIONS.—State health security pro4 grams may require, as a condition of payment for institu5 tional health care services and other services of the type

6 described in such sections 1814(a) and 1835(a) of the So7 cial Security Act, periodic professional certifications of the

8 kind described in such sections.

9 (b) QUALITY REVIEW.—For requirement that each

10 State health security program establish a quality review

11 program that meets the requirements for such a program

12 under title V, see section 405(b)(1)(H).

13 (c) PLAN OF CARE REQUIREMENTS.—A State health

14 security program may require, consistent with standards

15 established by the Board, that payment for services ex16 ceeding specified levels or duration be provided only as

17 consistent with a plan of care or treatment formulated by

18 one or more providers of the services or other qualified

19 professionals. Such a plan may include, consistent with

20 subsection (b), case management at specified intervals as

21 a further condition of payment for services.

22 TITLE III—PROVIDER

23 PARTICIPATION

24 SEC. 301. PROVIDER PARTICIPATION AND STANDARDS.

25 (a) IN GENERAL.—An individual or other entity fur26 nishing any covered service under a State health security
32

•HR 1200 SC4

1 program under this Act is not a qualified provider unless

2 the individual or entity—

3 (1) is a qualified provider of the services under

4 section 302;

5 (2) has filed with the State health security pro6 gram a participation agreement described in sub7 section (b); and

8 (3) meets such other qualifications and condi9 tions as are established by the Board or the State

10 health security program under this Act.

11 (b) REQUIREMENTS IN PARTICIPATION AGREE12 MENT.—

13 (1) IN GENERAL.—A participation agreement

14 described in this subsection between a State health

15 security program and a provider shall provide at

16 least for the following:

17 (A) Services to eligible persons will be fur18 nished by the provider without discrimination

19 on the ground of race, national origin, income,

20 religion, age, sex or sexual orientation, disabil21 ity, handicapping condition, or (subject to the

22 professional qualifications of the provider) ill23 ness. Nothing in this subparagraph shall be

24 construed as requiring the provision of a type
33

•HR 1200 SC4

1 or class of services which services are outside

2 the scope of the provider’s normal practice.

3 (B) No charge will be made for any cov4 ered services other than for payment authorized

5 by this Act.

6 (C) The provider agrees to furnish such in7 formation as may be reasonably required by the

8 Board or a State health security program, in

9 accordance with uniform reporting standards

10 established under section 401(g)(1), for—

11 (i) quality review by designated enti12 ties;

13 (ii) the making of payments under

14 this Act (including the examination of

15 records as may be necessary for the ver16 ification of information on which payments

17 are based);

18 (iii) statistical or other studies re19 quired for the implementation of this Act;

20 and

21 (iv) such other purposes as the Board

22 or State may specify.

23 (D) The provider agrees not to bill the pro24 gram for any services for which benefits are not

25 available because of section 204(g).
34

•HR 1200 SC4

1 (E) In the case of a provider that is not

2 an individual, the provider agrees not to employ

3 or use for the provision of health services any

4 individual or other provider who or which has

5 had a participation agreement under this sub6 section terminated for cause.

7 (F) In the case of a provider paid under a

8 fee-for-service basis under section 612, the pro9 vider agrees to submit bills and any required

10 supporting documentation relating to the provi11 sion of covered services within 30 days (or such

12 shorter period as a State health security pro13 gram may require) after the date of providing

14 such services.

15 (2) TERMINATION OF PARTICIPATION AGREE16 MENTS.—

17 (A) IN GENERAL.—Participation agree18 ments may be terminated, with appropriate no19 tice—

20 (i) by the Board or a State health se21 curity program for failure to meet the

22 requirements of this title, or

23 (ii) by a provider.

24 (B) TERMINATION PROCESS.—Providers

25 shall be provided notice and a reasonable oppor-
35

•HR 1200 SC4

1 tunity to correct deficiencies before the Board

2 or a State health security program terminates

3 an agreement unless a more immediate termi4 nation is required for public safety or similar

5 reasons.

6 SEC. 302. QUALIFICATIONS FOR PROVIDERS.

7 (a) IN GENERAL.—A health care provider is consid8 ered to be qualified to provide covered services if the pro9 vider is licensed or certified and meets—

10 (1) all the requirements of State law to provide

11 such services,

12 (2) applicable requirements of Federal law to

13 provide such services, and

14 (3) any applicable standards established under

15 subsection (b).

16 (b) MINIMUM PROVIDER STANDARDS.—

17 (1) IN GENERAL.—The Board shall establish,

18 evaluate, and update national minimum standards to

19 assure the quality of services provided under this

20 Act and to monitor efforts by State health security

21 programs to assure the quality of such services. A

22 State health security program may also establish ad23 ditional minimum standards which providers must

24 meet.
36

•HR 1200 SC4

1 (2) NATIONAL MINIMUM STANDARDS.—The na2 tional minimum standards under paragraph (1) shall

3 be established for institutional providers of services,

4 individual health care practitioners, and comprehen5 sive health service organizations. Except as the

6 Board may specify in order to carry out this title,

7 a hospital, nursing facility, or other institutional

8 provider of services shall meet standards for such a

9 facility under the medicare program under title

10 XVIII of the Social Security Act. Such standards

11 also may include, where appropriate, elements relat12 ing to—

13 (A) adequacy and quality of facilities;

14 (B) training and competence of personnel

15 (including continuing education requirements);

16 (C) comprehensiveness of service;

17 (D) continuity of service;

18 (E) patient satisfaction (including waiting

19 time and access to services); and

20 (F) performance standards (including or21 ganization, facilities, structure of services, effi22 ciency of operation, and outcome in palliation,

23 improvement of health, stabilization, cure, or

24 rehabilitation).
37

•HR 1200 SC4

1 (3) TRANSITION IN APPLICATION.—If the

2 Board provides for additional requirements for pro3 viders under this subsection, any such additional re4 quirement shall be implemented in a manner that

5 provides for a reasonable period during which a pre6 viously qualified provider is permitted to meet such

7 an additional requirement.

8 (4) EXCHANGE OF INFORMATION.—The Board

9 shall provide for an exchange, at least annually,

10 among State health security programs of informa11 tion with respect to quality assurance and cost

12 containment.

13 SEC. 303. QUALIFICATIONS FOR COMPREHENSIVE HEALTH

14 SERVICE ORGANIZATIONS.

15 (a) IN GENERAL.—For purposes of this Act, a com16 prehensive health service organization (in this section re17 ferred to as a ‘‘CHSO’’) is a public or private organization

18 which, in return for a capitated payment amount, under19 takes to furnish, arrange for the provision of, or provide

20 payment with respect to—

21 (1) a full range of health services (as identified

22 by the Board), including at least hospital services

23 and physicians services, and

24 (2) out-of-area coverage in the case of urgently

25 needed services,
38

•HR 1200 SC4

1 to an identified population which is living in or near a

2 specified service area and which enrolls voluntarily in the

3 organization.

4 (b) ENROLLMENT.—

5 (1) IN GENERAL.—All eligible persons living in

6 or near the specified service area of a CHSO are eli7 gible to enroll in the organization; except that the

8 number of enrollees may be limited to avoid overtax9 ing the resources of the organization.

10 (2) MINIMUM ENROLLMENT PERIOD.—Subject

11 to paragraph (3), the minimum period of enrollment

12 with a CHSO shall be twelve months, unless the en13 rolled individual becomes ineligible to enroll with the

14 organization.

15 (3) WITHDRAWAL FOR CAUSE.—Each CHSO

16 shall permit an enrolled individual to disenroll from

17 the organization for cause at any time.

18 (c) REQUIREMENTS FOR CHSOS.—

19 (1) ACCESSIBLE SERVICES.—Each CHSO, to

20 the maximum extent feasible, shall make all services

21 readily and promptly accessible to enrollees who live

22 in the specified service area.

23 (2) CONTINUITY OF CARE.—Each CHSO shall

24 furnish services in such manner as to provide con25 tinuity of care and (when services are furnished by
39

•HR 1200 SC4

1 different providers) shall provide ready referral of

2 patients to such services and at such times as may

3 be medically appropriate.

4 (3) BOARD OF DIRECTORS.—In the case of a

5 CHSO that is a private organization—

6 (A) CONSUMER REPRESENTATION.—At

7 least one-third of the members of the CHSO’s

8 board of directors must be consumer members

9 with no direct or indirect, personal or family

10 financial relationship to the organization.

11 (B) PROVIDER REPRESENTATION.—The

12 CHSO’s board of directors must include at

13 least one member who represents health care

14 providers.

15 (4) PATIENT GRIEVANCE PROGRAM.—Each

16 CHSO must have in effect a patient grievance pro17 gram and must conduct regularly surveys of the sat18 isfaction of members with services provided by or

19 through the organization.

20 (5) MEDICAL STANDARDS.—Each CHSO must

21 provide that a committee or committees of health

22 care practitioners associated with the organization

23 will promulgate medical standards, oversee the pro24 fessional aspects of the delivery of care, perform the

25 functions of a pharmacy and drug therapeutics com-
40

•HR 1200 SC4

1 mittee, and monitor and review the quality of all

2 health services (including drugs, education, and pre3 ventive services).

4 (6) PREMIUMS.—Premiums or other charges by

5 a CHSO for any services not paid for under this Act

6 must be reasonable.

7 (7) UTILIZATION AND BONUS INFORMATION.—

8 Each CHSO must—

9 (A) comply with the requirements of sec10 tion 1876(i)(8) of the Social Security Act (re11 lating to prohibiting physician incentive plans

12 that provide specific inducements to reduce or

13 limit medically necessary services), and

14 (B) make available to its membership utili15 zation information and data regarding financial

16 performance, including bonus or incentive pay17 ment arrangements to practitioners.

18 (8) PROVISION OF SERVICES TO ENROLLEES AT

19 INSTITUTIONS OPERATING UNDER GLOBAL BUDG20 ETS.—The organization shall arrange to reimburse

21 for hospital services and other facility-based services

22 (as identified by the Board) for services provided to

23 members of the organization in accordance with the

24 global operating budget of the hospital or facility ap25 proved under section 611.
41

•HR 1200 SC4

1 (9) BROAD MARKETING.—Each CHSO must

2 provide for the marketing of its services (including

3 dissemination of marketing materials) to potential

4 enrollees in a manner that is designed to enroll indi5 viduals representative of the different population

6 groups and geographic areas included within its

7 service area and meets such requirements as the

8 Board or a State health security program may

9 specify.

10 (10) ADDITIONAL REQUIREMENTS.—Each

11 CHSO must meet—

12 (A) such requirements relating to mini13 mum enrollment,

14 (B) such requirements relating to financial

15 solvency,

16 (C) such requirements relating to quality

17 and availability of care, and

18 (D) such other requirements,

19 as the Board or a State health security program

20 may specify.

21 (d) PROVISION OF EMERGENCY SERVICES TO

22 NONENROLLEES.—A CHSO may furnish emergency serv23 ices to persons who are not enrolled in the organization.

24 Payment for such services, if they are covered services to

25 eligible persons, shall be made to the organization unless
42

•HR 1200 SC4

1 the organization requests that it be made to the individual

2 provider who furnished the services.

3 SEC. 304. LIMITATION ON CERTAIN PHYSICIAN REFERRALS.

4 (a) APPLICATION TO AMERICAN HEALTH SECURITY

5 PROGRAM.—Section 1877 of the Social Security Act, as

6 amended by subsections (b) and (c), shall apply under this

7 Act in the same manner as it applies under title XVIII

8 of the Social Security Act; except that in applying such

9 section under this Act any references in such section to

10 the Secretary or title XVIII of the Social Security Act are

11 deemed references to the Board and the American Health

12 Security Program under this Act, respectively.

13 (b) EXPANSION OF PROHIBITION TO CERTAIN DES14 IGNATED SERVICES.—Section 1877 of the Social Security

15 Act (42 U.S.C. 1395nn) is amended—

16 (1) by striking ‘‘clinical laboratory services’’

17 and ‘‘CLINICAL LABORATORY SERVICES’’ and insert18 ing ‘‘designated health services’’ and ‘‘DESIGNATED

19 HEALTH SERVICES’’, respectively, each place either

20 appears in subsections (a)(1), (b)(2)(A)(ii)(I),

21 (b)(4), (d)(1), (d)(2), and (d)(3);

22 (2) by adding at the end of such section the fol23 lowing new subsection:

24 ‘‘(i) DESIGNATED HEALTH SERVICES DEFINED.—In

25 this section, the term ‘designated health services’ means—
43

•HR 1200 SC4

1 ‘‘(1) clinical laboratory services;

2 ‘‘(2) physical therapy services;

3 ‘‘(3) radiology services, including magnetic reso4 nance imaging, computerized axial tomography

5 scans, and ultrasound services;

6 ‘‘(4) radiation therapy services;

7 ‘‘(5) the furnishing of durable medical equip8 ment;

9 ‘‘(6) the furnishing of parenteral and enteral

10 nutrition equipment and supplies;

11 ‘‘(7) the furnishing of outpatient prescription

12 drugs;

13 ‘‘(8) ambulance services;

14 ‘‘(9) home infusion therapy services;

15 ‘‘(10) occupational therapy services; and

16 ‘‘(11) inpatient and outpatient hospital services

17 (including services furnished at a psychiatric or re18 habilitation hospital).’’;

19 (3) in subsection (d)(2), by striking ‘‘labora20 tory’’ and by inserting ‘‘entity’’;

21 (4) in subsection (g)(1), by striking ‘‘clinical

22 laboratory service’’ and by inserting ‘‘designated

23 health service’’; and
44

•HR 1200 SC4

1 (5) in subsection (h)(7)(B), by striking ‘‘clinical

2 laboratory service’’ and by inserting ‘‘designated

3 health service’’.

4 (c) CONFORMING AMENDMENTS.—Such section is

5 further amended—

6 (1) in subsection (a)(1)(A), by striking ‘‘for

7 which payment otherwise may be made under this

8 title’’ and by inserting ‘‘for which a charge is

9 imposed’’;

10 (2) in subsection (a)(1)(B), by striking ‘‘under

11 this title’’;

12 (3) by amending paragraph (1) of subsection

13 (g) to read as follows:

14 ‘‘(1) DENIAL OF PAYMENT.—No payment may

15 be made under a State health security program for

16 a designated health service for which a claim is pre17 sented in violation of subsection (a)(1)(B). No indi18 vidual, third party payor, or other entity is liable for

19 payment for designated health services for which a

20 claim is presented in violation of such subsection.’’;

21 and

22 (4) In subsection (g)(3), by striking ‘‘for which

23 payment may not be made under paragraph (1)’’

24 and by inserting ‘‘for which such a claim may not

25 be presented under subsection (a)(1)’’.
45

•HR 1200 SC4

1 TITLE IV—ADMINISTRATION

2 Subtitle A—General Administrative

3 Provisions

4 SEC. 401. AMERICAN HEALTH SECURITY STANDARDS

5 BOARD.

6 (a) ESTABLISHMENT.—There is hereby established

7 an American Health Security Standards Board.

8 (b) APPOINTMENT AND TERMS OF MEMBERS.—

9 (1) IN GENERAL.—The Board shall be com10 posed of—

11 (A) the Secretary of Health and Human

12 Services, and

13 (B) 6 other individuals (described in para14 graph (2)) appointed by the President with the

15 advice and consent of the Senate.

16 The President shall first nominate individuals under

17 subparagraph (B) on a timely basis so as to provide

18 for the operation of the Board by not later than

19 January 1, 1994.

20 (2) SELECTION OF APPOINTED MEMBERS.—

21 With respect to the individuals appointed under

22 paragraph (1)(B):

23 (A) They shall be chosen on the basis of

24 backgrounds in health policy, health economics,
46

•HR 1200 SC4

1 the healing professions, and the administration

2 of health care institutions.

3 (B) They shall provide a balanced point of

4 view with respect to the various health care in5 terests and at least two of them shall represent

6 the interests of individual consumers.

7 (C) Not more than three of them shall be

8 from the same political party.

9 (3) TERMS OF APPOINTED MEMBERS.—Individ10 uals appointed under paragraph (1)(B) shall serve

11 for a term of 6 years, except that the terms of 5 of

12 the individuals initially appointed shall be, as des13 ignated by the President at the time of their ap14 pointment, for 1, 2, 3, 4, and 5 years. During a

15 term of membership on the Board, no member shall

16 engage in any other business, vocation or employ17 ment.

18 (c) VACANCIES.—

19 (1) IN GENERAL.—The President shall fill any

20 vacancy in the membership of the Board in the same

21 manner as the original appointment. The vacancy

22 shall not affect the power of the remaining members

23 to execute the duties of the Board.

24 (2) VACANCY APPOINTMENTS.—Any member

25 appointed to fill a vacancy shall serve for the re-
47

•HR 1200 SC4

1 mainder of the term for which the predecessor of the

2 member was appointed.

3 (3) REAPPOINTMENT.—The President may re4 appoint an appointed member of the Board for a

5 second term in the same manner as the original ap6 pointment. A member who has served for two con7 secutive 6-year terms shall not be eligible for re8 appointment until two years after the member has

9 ceased to serve.

10 (4) REMOVAL FOR CAUSE.—Upon confirmation,

11 members of the Board may not be removed except

12 by the President for cause.

13 (d) CHAIR.—The President shall designate one of the

14 members of the Board, other than the Secretary, to serve

15 at the will of the President as Chair of the Board.

16 (e) COMPENSATION.—Members of the Board (other

17 than the Secretary) shall be entitled to compensation at

18 a level equivalent to level II of the Executive Schedule,

19 in accordance with section 5313 of title 5, United States

20 Code.

21 (f) GENERAL DUTIES OF THE BOARD.—

22 (1) IN GENERAL.—The Board shall develop

23 policies, procedures, guidelines, and requirements to

24 carry out this Act, including those related to—

25 (A) eligibility;
48

•HR 1200 SC4

1 (B) enrollment;

2 (C) benefits;

3 (D) provider participation standards and

4 qualifications, as defined in title III;

5 (E) national and State funding levels;

6 (F) methods for determining amounts of

7 payments to providers of covered services, con8 sistent with subtitle B of title VI;

9 (G) the determination of medical necessity

10 and appropriateness with respect to coverage of

11 certain services;

12 (H) assisting State health security pro13 grams with planning for capital expenditures

14 and service delivery;

15 (I) planning for health professional edu16 cation funding (as specified in title VI);

17 (J) allocating funds provided under title

18 VII; and

19 (K) encouraging States to develop regional

20 planning mechanisms (described in section

21 405(a)(3)).

22 (2) REGULATIONS.—Regulations authorized by

23 this Act shall be issued by the Board in accordance

24 with the provisions of section 553 of title 5, United

25 States Code.
49

•HR 1200 SC4

1 (g) UNIFORM REPORTING STANDARDS; ANNUAL RE2 PORT; STUDIES.—

3 (1) UNIFORM REPORTING STANDARDS.—

4 (A) IN GENERAL.—The Board shall estab5 lish uniform reporting requirements and stand6 ards to ensure an adequate national data base

7 regarding health services practitioners, services

8 and finances of State health security programs,

9 approved plans, providers, and the costs of fa10 cilities and practitioners providing services.

11 Such standards shall include, to the maximum

12 extent feasible, health outcome measures.

13 (B) REPORTS.—The Board shall analyze

14 regularly information reported to it, and to

15 State health security programs pursuant to

16 such requirements and standards.

17 (2) ANNUAL REPORT.—Beginning January 1,

18 of the second year beginning after the date of the

19 enactment of this Act, the Board shall annually

20 report to Congress on the following:

21 (A) The status of implementation of the

22 Act.

23 (B) Enrollment under this Act.

24 (C) Benefits under this Act.
50

•HR 1200 SC4

1 (D) Expenditures and financing under this

2 Act.

3 (E) Cost-containment measures and

4 achievements under this Act.

5 (F) Quality assurance.

6 (G) Health care utilization patterns, in7 cluding any changes attributable to the pro8 gram.

9 (H) Long-range plans and goals for the de10 livery of health services.

11 (I) Differences in the health status of the

12 populations of the different States, including in13 come and racial characteristics.

14 (J) Necessary changes in the education of

15 health personnel.

16 (K) Plans for improving service to medi17 cally underserved populations.

18 (L) Transition problems as a result of im19 plementation of this Act.

20 (M) Opportunities for improvements under

21 this Act.

22 (3) STATISTICAL ANALYSES AND OTHER STUD23 IES.—The Board may, either directly or by con24 tract—
51

•HR 1200 SC4

1 (A) make statistical and other studies, on

2 a nationwide, regional, state, or local basis, of

3 any aspect of the operation of this Act, includ4 ing studies of the effect of the Act upon the

5 health of the people of the United States and

6 the effect of comprehensive health services upon

7 the health of persons receiving such services;

8 (B) develop and test methods of providing

9 through payment for services or otherwise, ad10 ditional incentives for adherence by providers to

11 standards of adequacy, access, and quality;

12 methods of consumer and peer review and peer

13 control of the utilization of drugs, of laboratory

14 services, and of other services; and methods of

15 consumer and peer review of the quality of serv16 ices;

17 (C) develop and test, for use by the Board,

18 records and information retrieval systems and

19 budget systems for health services administra20 tion, and develop and test model systems for

21 use by providers of services;

22 (D) develop and test, for use by providers

23 of services, records and information retrieval

24 systems useful in the furnishing of preventive

25 or diagnostic services;
52

•HR 1200 SC4

1 (E) develop, in collaboration with the phar2 maceutical profession, and test, improved ad3 ministrative practices or improved methods for

4 the reimbursement of independent pharmacies

5 for the cost of furnishing drugs as a covered

6 service; and

7 (F) make such other studies as it may con8 sider necessary or promising for the evaluation,

9 or for the improvement, of the operation of this

10 Act.

11 (4) REPORT ON USE OF EXISTING FEDERAL

12 HEALTH CARE FACILITIES.—Not later than one year

13 after the date of the enactment of this Act, the

14 Board shall recommend to the Congress one or more

15 proposals for the treatment of health care facilities

16 of the Federal Government.

17 (h) EXECUTIVE DIRECTOR.—

18 (1) APPOINTMENT.—There is hereby estab19 lished the position of Executive Director of the

20 Board. The Director shall be appointed by the

21 Board and shall serve as secretary to the Board and

22 perform such duties in the administration of this

23 title as the Board may assign.

24 (2) DELEGATION.—The Board is authorized to

25 delegate to the Director or to any other officer or
53

•HR 1200 SC4

1 employee of the Board or, with the approval of the

2 Secretary of Health and Human Services (and sub3 ject to reimbursement of identifiable costs), to any

4 other officer or employee of the Department of

5 Health and Human Services, any of its functions or

6 duties under this Act other than—

7 (A) the issuance of regulations; or

8 (B) the determination of the availability of

9 funds and their allocation to implement this

10 Act.

11 (3) COMPENSATION.—The Executive Director

12 of the Board shall be entitled to compensation at a

13 level equivalent to level III of the Executive Sched14 ule, in accordance with section 5314 of title 5,

15 United States Code.

16 (i) INSPECTOR GENERAL.—The Inspector General

17 Act of 1978 (5 U.S.C. App.) is amended—

18 (1) in section 11(1) by inserting after ‘‘Cor19 poration;’’ the following: ‘‘the Chair of the American

20 Health Security Standards Board;’’;

21 (2) in section 11(2) by inserting after ‘‘Infor22 mation Agency,’’ the following: ‘‘the American

23 Health Security Standards Board,’’; and

24 (3) by inserting after section 8F the following:
54

•HR 1200 SC4

1 ‘‘§ 8G. Special provisions concerning American

2 Health Security Standards Board

3 ‘‘The Inspector General of the American Health Se4 curity Standards Board, in addition to the other authori5 ties vested by this Act, shall have the same authority, with

6 respect to the Board and the American Health Security

7 Program under this Act, as the Inspector General for the

8 Department of Health and Human Services has with re9 spect to the Secretary of Health and Human Services and

10 the medicare and medicaid programs, respectively.’’.

11 (j) STAFF.—The Board shall employ such staff as the

12 Board may deem necessary.

13 (k) ACCESS TO INFORMATION.—The Secretary of

14 Health and Human Services shall make available to the

15 Board all information available from sources within the

16 Department or from other sources, pertaining to the

17 duties of the Board.

18 SEC. 402. AMERICAN HEALTH SECURITY ADVISORY COUN19 CIL.

20 (a) IN GENERAL.—The Board shall provide for an

21 American Health Security Advisory Council (in this sec22 tion referred to as the ‘‘Council’’) to advise the Board on

23 its activities.

24 (b) MEMBERSHIP.—The Council shall be composed

25 of—
55

•HR 1200 SC4

1 (1) the Chair of the Board, who shall serve as

2 Chair of the Council, and

3 (2) twenty members, not otherwise in the em4 ploy of the United States, appointed by the Board

5 without regard to the provisions of title 5, United

6 States Code, governing appointments in the competi7 tive service.

8 The appointed members shall include, in accordance with

9 subsection (e), individuals who are representative of State

10 health security programs, public health professionals, pro11 viders of health services, and of individuals (who shall con12 stitute a majority of the Council) who are representative

13 of consumers of such services, including a balanced rep14 resentation of employers, unions, consumer organizations,

15 and population groups with special health care needs.

16 (c) TERMS OF MEMBERS.—Each appointed member

17 shall hold office for a term of four years, except that—

18 (1) any member appointed to fill a vacancy oc19 curring during the term for which the member’s

20 predecessor was appointed shall be appointed for the

21 remainder of that term; and

22 (2) the terms of the members first taking office

23 shall expire, as designated by the Board at the time

24 of appointment, five at the end of the first year, five

25 at the end of the second year, five at the end of the
56

•HR 1200 SC4

1 third year, and five at the end of the fourth year

2 after the date of enactment of this Act.

3 (d) VACANCIES.—

4 (1) IN GENERAL.—The Board shall fill any va5 cancy in the membership of the Council in the same

6 manner as the original appointment. The vacancy

7 shall not affect the power of the remaining members

8 to execute the duties of the Council.

9 (2) VACANCY APPOINTMENTS.—Any member

10 appointed to fill a vacancy shall serve for the re11 mainder of the term for which the predecessor of the

12 member was appointed.

13 (3) REAPPOINTMENT.—The Board may re14 appoint an appointed member of the Council for a

15 second term in the same manner as the original

16 appointment.

17 (e) QUALIFICATIONS.—

18 (1) PUBLIC HEALTH REPRESENTATIVES.—

19 Members of the Council who are representative of

20 State health security programs and public health

21 professionals shall be individuals who have extensive

22 experience in the financing and delivery of care

23 under public health programs.

24 (2) PROVIDERS.—Members of the Council who

25 are representative of providers of health care shall
57

•HR 1200 SC4

1 be individuals who are outstanding in fields related

2 to medical, hospital, or other health activities, or

3 who are representative of organizations or associa4 tions of professional health practitioners.

5 (3) CONSUMERS.—Members who are represent6 ative of consumers of such care shall be individuals,

7 not engaged in and having no financial interest in

8 the furnishing of health services, who are familiar

9 with the needs of various segments of the population

10 for personal health services and are experienced in

11 dealing with problems associated with the consump12 tion of such services.

13 (f) DUTIES.—

14 (1) IN GENERAL.—It shall be the duty of the

15 Council—

16 (A) to advise the Board on matters of gen17 eral policy in the administration of this Act, in

18 the formulation of regulations, and in the per19 formance of the Board’s duties under section

20 401; and

21 (B) to study the operation of this Act and

22 the utilization of health services under it, with

23 a view to recommending any changes in the ad24 ministration of the Act or in its provisions

25 which may appear desirable.
58

•HR 1200 SC4

1 (2) REPORT.—The Council shall make an an2 nual report to the Board on the performance of its

3 functions, including any recommendations it may

4 have with respect thereto, and the Board shall

5 promptly transmit the report to the Congress, to6 gether with a report by the Board on any rec7 ommendations of the Council that have not been

8 followed.

9 (g) STAFF.—The Council, its members, and any com10 mittees of the Council shall be provided with such sec11 retarial, clerical, or other assistance as may be authorized

12 by the Board for carrying out their respective functions.

13 (h) MEETINGS.—The Council shall meet as fre14 quently as the Board deems necessary, but not less than

15 four times each year. Upon request by seven or more mem16 bers it shall be the duty of the Chair to call a meeting

17 of the Council.

18 (i) COMPENSATION.—Members of the Council shall

19 be reimbursed by the Board for travel and per diem in

20 lieu of subsistence expenses during the performance of du21 ties of the Board in accordance with subchapter I of chap22 ter 57 of title 5, United States Code.

23 (j) FACA NOT APPLICABLE.—The provisions of the

24 Federal Advisory Committee Act shall not apply to the

25 Council.
59

•HR 1200 SC4

1 SEC. 403. PROFESSIONAL, TECHNICAL, AND TEMPORARY

2 ADVISORY COMMITTEES.

3 (a) IN GENERAL.—The Board shall appoint the

4 standing advisory committees specified in subsections (b)

5 through (f), and such other standing professional and

6 technical committees in order to advise it in carrying out

7 its duties under this Act.

8 (b) ADVISORY COMMITTEE ON BENEFITS.—

9 (1) IN GENERAL.—The Board shall appoint a

10 standing Advisory Committee on Benefits to advise

11 it with respect to the several classes of covered

12 services under this Act.

13 (2) MEMBERSHIP.—The membership of the

14 committee shall include individuals (in such number

15 as the Board may determine) drawn from the health

16 professions, from consumers of health services, from

17 providers of health services (including non-medical

18 licensed and non-licensed providers), or from other

19 sources, whom the Board deems best qualified to ad20 vise it with respect to the professional and technical

21 aspects of the furnishing and utilization of, and the

22 evaluation of, a class of covered services designated

23 by the Board, and with respect to the relationship

24 of that class of services to other covered services. In

25 appointing such individuals, the Board shall assure
60

•HR 1200 SC4

1 significant representation of consumers of health

2 services and providers of health services.

3 (c) ADVISORY COMMITTEE ON COST CONTAIN4 MENT.—

5 (1) IN GENERAL.—The Board shall appoint a

6 standing Advisory Committee on Cost Containment

7 to advise it with respect to the payments and cost

8 containment measures contained in title VI of this

9 Act.

10 (2) MEMBERSHIP.—The membership of the

11 committee shall include individuals (in such number

12 as the Board may determine) with national recogni13 tion for their expertise in health economics, health

14 care financing, provider reimbursement, and related

15 fields. In appointing individuals the Board shall as16 sure significant representation of consumers of

17 health services and providers of health services.

18 (d) ADVISORY COMMITTEE ON PRIMARY CARE AND

19 THE MEDICALLY UNDERSERVED.—

20 (1) IN GENERAL.—The Board shall appoint a

21 standing Advisory Committee on Primary Care and

22 the Medically Underserved to advise it with respect

23 to title VII of this Act, including with respect to the

24 delivery of services and the education and training

25 of health professionals, and to consider means of in-
61

•HR 1200 SC4

1 creasing the supply and expanding the scope of

2 practice of mid-level professionals and the use of

3 community health outreach workers and other non4 professional health care workers.

5 (2) MEMBERSHIP.—The membership of the

6 committee shall include individuals (in such number

7 as the Board may determine) from the health pro8 fessions and health services with expertise in—

9 (A) primary care services;

10 (B) the education and training of primary

11 care practitioners;

12 (C) the special health needs of medically

13 underserved populations;

14 (D) the training, educational, and financial

15 incentives that would encourage health practi16 tioners to serve in medically underserved areas;

17 (E) the delivery of health services through

18 community-based and public facilities; and

19 (F) developing alternative models of deliv20 ering primary health services to medically un21 derserved populations.

22 In appointing such individuals, the Board shall as23 sure significant representation of consumers of

24 health services and providers of health services.
62

•HR 1200 SC4

1 (e) ADVISORY COMMITTEE ON MENTAL HEALTH AND

2 SUBSTANCE ABUSE TREATMENT SERVICES.—

3 (1) IN GENERAL.—The Board shall appoint a

4 standing Advisory Committee on Mental Health and

5 Substance Abuse Treatment Services to advise it

6 with respect to the manner in which the benefits

7 under this Act for mental health services and sub8 stance abuse treatment services should be modified

9 to best meet the objectives of this Act.

10 (2) MEMBERSHIP.—The membership of the

11 committee shall include individuals (in such number

12 as the Board may determine) with expertise in

13 health care economics, who are representative of the

14 multi-disciplinary range of providers of such serv15 ices, who are consumers of such services, and who

16 represent advocacy groups representing consumers

17 of such services.

18 (3) RESPONSIBILITIES.—The committee shall—

19 (A) study changes in the utilization pat20 terns and costs which accompany the provision

21 of mental health services and substance abuse

22 treatment services;

23 (B) study and make recommendations on

24 any changes that may be advisable in the utili-
63

•HR 1200 SC4

1 zation review thresholds specified in section

2 204(b)(2)(A);

3 (C) make recommendations on ways to cre4 ate a continuum of care and encourage the pro5 vision of care in the least restrictive appropriate

6 setting;

7 (D) develop a standard set of practices for

8 care coordination services, including—

9 (i) the range of care coordination

10 services that should be offered for a spe11 cific target population,

12 (ii) the organizational structure in

13 which care coordination services should be

14 based,

15 (iii) the minimum training require16 ments for care coordinators, and

17 (iv) the standards for the clinical ne18 cessity of care coordination services,

19 and study (and make recommendations con20 cerning) peer care coordination services; and

21 (E) report any initial recommendations to

22 the Board by January 1, 1995.

23 (4) ROLE OF SUBSTANCE ABUSE AND MENTAL

24 HEALTH SERVICES ADMINISTRATION.—The Board

25 shall consult with the Administrator of the Sub-
64

•HR 1200 SC4

1 stance Abuse and Mental Health Services Adminis2 tration in the appointment of members to, and

3 operation of, the committee.

4 (f) ADVISORY COMMITTEE ON PRESCRIPTION

5 DRUGS.—

6 (1) IN GENERAL.—The Board shall appoint a

7 standing Advisory Committee on Prescription Drugs

8 to advise it with respect to the list of approved pre9 scription drugs and biologicals under section

10 616(a)(1) and other matters relating to the coverage

11 of prescription drugs under this Act.

12 (2) MEMBERSHIP.—

13 (A) IN GENERAL.—The membership of the

14 committee shall include individuals (in such

15 number as the Board may determine) with ex16 pertise in appropriate utilization of prescription

17 and nonprescription drug and biological thera18 pies and of the relative safety and efficacy of

19 prescription drugs and biologicals.

20 (B) AREAS OF EXPERTISE.—A majority of

21 the members of the committee shall be physi22 cians. Members of the committee shall include

23 at least a dentist, a nurse, and a pharmacist,

24 and individuals with special knowledge or exper25 tise in at least the following areas: geriatric, ob-
65

•HR 1200 SC4

1 stetric, pediatric, psychiatric, and neurological

2 problems associated with drug therapies; clini3 cal pharmacology; pharmacoepidemiology; and

4 comparative clinical trials of drugs (including

5 statisticians and biopharmaceutic specialists).

6 (C) CONFLICT OF INTEREST PROHIBI7 TION.—No individual who is an employee of a

8 manufacturer of a drug or biological or who

9 otherwise has a material financial interest di10 rectly or indirectly with respect to such a manu11 facturer, or who has an immediate family mem12 ber (as defined by the Board) who is such an

13 employee or has such an interest, shall serve as

14 a member of the committee.

15 (3) RESPONSIBILITIES.—The committee shall—

16 (A) continuously review scientific and med17 ical information pertaining to the relative safety

18 and efficacy, and the comparability, of prescrip19 tion drugs and biologicals approved for market20 ing in the United States; and

21 (B) recommend drug use classifications

22 and identify, within such a classification, drugs

23 that are therapeutic alternates for a given indi24 cation and indications for which particular

25 drugs are superior based on safety and efficacy.
66

•HR 1200 SC4

1 The committee is not authorized to engage in drug

2 price negotiations nor define acceptable costs for any

3 product.

4 (4) CONSUMER INPUT.—In conducting its ac5 tivities, the committee shall solicit advice and com6 ments from a panel of consumer advocates.

7 (g) TEMPORARY COMMITTEES.—The Board is au8 thorized to appoint such temporary professional and tech9 nical committees as it deems necessary to advise it on spe10 cial problems not encompassed in the assignments of

11 standing committees appointed under this section or to

12 supplement the advice of standing committees.

13 (h) REPORTING.—Committees appointed under this

14 section shall report from time to time (but not less often

15 than biannually) to the Board, and copies of their reports

16 shall be transmitted by the Board to the American Health

17 Security Advisory Council and be made readily available

18 to the public.

19 (i) COMPENSATION.—All members of the committees

20 established under this section shall be reimbursed by the

21 Board for travel and per diem in lieu of subsistence ex22 penses during the performance of duties of the Board in

23 accordance with subchapter I of chapter 57 of title 5,

24 United States Code.
67

•HR 1200 SC4

1 (j) ADVICE FROM PROSPECTIVE PAYMENT ASSESS2 MENT COMMISSION, PRACTITIONER PAYMENT REVIEW

3 COMMISSION, ETC.—For provisions relating to role of cer4 tain commissions in reviewing payment rates, see section

5 620.

6 SEC. 404. AMERICAN HEALTH SECURITY QUALITY COUNCIL.

7 (a) ESTABLISHMENT.—There is hereby established

8 an American Health Security Quality Council.

9 (b) APPOINTMENT AND TERMS OF MEMBERS.—

10 (1) IN GENERAL.—The Council shall be com11 posed of 10 members appointed by the President.

12 The President shall first appoint individuals on a

13 timely basis so as to provide for the operation of the

14 Council by not later than January 1, 1994.

15 (2) SELECTION OF MEMBERS.—Each member

16 of the Council shall be a member of a health profes17 sion. Six members of the Council shall be physicians.

18 Individuals shall be appointed to the Council on the

19 basis of national reputations for clinical and aca20 demic excellence.

21 (3) TERMS OF MEMBERS.—Individuals ap22 pointed to the Council shall serve for a term of 5

23 years, except that the terms of 4 of the individuals

24 initially appointed shall be, as designated by the
68

•HR 1200 SC4

1 President at the time of their appointment, for 1, 2,

2 3, and 4 years.

3 (c) VACANCIES.—

4 (1) IN GENERAL.—The President shall fill any

5 vacancy in the membership of the Council in the

6 same manner as the original appointment. The va7 cancy shall not affect the power of the remaining

8 members to execute the duties of the Council.

9 (2) VACANCY APPOINTMENTS.—Any member

10 appointed to fill a vacancy shall serve for the re11 mainder of the term for which the predecessor of the

12 member was appointed.

13 (3) REAPPOINTMENT.—The President may re14 appoint a member of the Council for a second term

15 in the same manner as the original appointment. A

16 member who has served for two consecutive 5-year

17 terms shall not be eligible for reappointment until

18 two years after the member has ceased to serve.

19 (d) CHAIR.—The President shall designate one of the

20 members of the Council to serve at the will of the Presi21 dent as Chair of the Council.

22 (e) COMPENSATION.—Members of the Council who

23 are not employees of the Federal Government shall be en24 titled to compensation at a level equivalent to level II of
69

•HR 1200 SC4

1 the Executive Schedule, in accordance with section 5313

2 of title 5, United States Code.

3 (f) GENERAL DUTIES OF THE COUNCIL.—The Coun4 cil is responsible for quality review activities under title

5 V. The Council shall report to the Board annually on the

6 conduct of activities under such title and shall report to

7 the Board annually specifically on findings from outcomes

8 research and development of practice guidelines that may

9 affect the Board’s determination of coverage of services

10 under section 401(f)(1)(G).

11 SEC. 405. STATE HEALTH SECURITY PROGRAMS.

12 (a) SUBMISSION OF PLANS.—

13 (1) IN GENERAL.—Each State shall submit to

14 the Board a plan for a State health security pro15 gram for providing for health care services to the

16 residents of the State in accordance with this Act.

17 (2) REGIONAL PROGRAMS.—A State may join

18 with one or more neighboring States to submit to

19 the Board a plan for a regional health security pro20 gram instead of separate State health security

21 programs.

22 (3) REGIONAL PLANNING MECHANISMS.—The

23 Board shall provide incentives for States to develop

24 regional planning mechanisms to promote the ration25 al distribution of, adequate access to, and efficient
70

•HR 1200 SC4

1 use of, tertiary care facilities, equipment, and

2 services.

3 (b) REVIEW AND APPROVAL OF PLANS.—

4 (1) IN GENERAL.—The Board shall review

5 plans submitted under subsection (a) and determine

6 whether such plans meet the requirements for ap7 proval. The Board shall not approve such a plan un8 less it finds that the plan (or State law) provides,

9 consistent with the provisions of this Act, for the

10 following:

11 (A) Payment for required health services

12 for eligible individuals in the State in accord13 ance with this Act.

14 (B) Adequate administration, including the

15 designation of a single State agency responsible

16 for the administration (or supervision of the

17 administration) of the program.

18 (C) The establishment of a State health

19 security budget.

20 (D) Establishment of payment methodolo21 gies (consistent with subtitle B of title VII).

22 (E) Assurances that individuals have the

23 freedom to choose practitioners and other

24 health care providers for services covered under

25 this Act.
71

•HR 1200 SC4

1 (F) A procedure for carrying out long-term

2 regional management and planning functions

3 with respect to the delivery and distribution of

4 health care services that—

5 (i) ensures participation of consumers

6 of health services and providers of health

7 services, and

8 (ii) gives priority to the most acute

9 shortages and maldistributions of health

10 personnel and facilities and the most seri11 ous deficiencies in the delivery of covered

12 services and to the means for the speedy

13 alleviation of these shortcomings.

14 (G) The licensure and regulation of all

15 health providers and facilities to ensure compli16 ance with Federal and State laws and to

17 promote quality of care.

18 (H) Establishment of a quality review sys19 tem in accordance with section 502.

20 (I) Establishment of an independent om21 budsman for consumers to register complaints

22 about the organization and administration of

23 the State health security program and to help

24 resolve complaints and disputes between con25 sumers and providers.
72

•HR 1200 SC4

1 (J) Publication of an annual report on the

2 operation of the State health security program,

3 which report shall include information on cost,

4 progress towards achieving full enrollment, pub5 lic access to health services, quality review,

6 health outcomes, health professional training,

7 and the needs of medically underserved popu8 lations.

9 (K) Provision of a fraud and abuse preven10 tion and control unit that the Inspector General

11 determines meets the requirements of section

12 413(a).

13 (L) Provision that—

14 (i) all claims or requests for payment

15 for services shall be accompanied by the

16 unique provider identifier assigned under

17 section 414(a) to the provider and the

18 unique patient identifier assigned to the

19 individual under section 414(b);

20 (ii) no payment shall be made under

21 the program for the provision of health

22 care services by any provider unless the

23 provider has furnished the program with

24 the unique provider identifier assigned

25 under section 414(a);
73

•HR 1200 SC4

1 (iii) the plan shall use the unique pa2 tient identifier assigned under section

3 414(b) to an individual as the identifier of

4 the individual in the processing of claims

5 and other purposes (as specified by the

6 Board); and

7 (iv) queries made under section

8 412(c)(2) shall be made using the unique

9 provider identifier specified under section

10 414(a).

11 (M) Prohibit payment in cases of prohib12 ited physician referrals under section 304.

13 (N) Effective January 1, 2000, provide for

14 use of a uniform electronic data base in accord15 ance with section 504(a).

16 (O) Effective as of January 1, 1997, im17 plement malpractice reform provisions in ac18 cordance with section 801.

19 (2) CONSEQUENCES OF FAILURE TO COMPLY.—

20 If the Board finds that a State plan submitted

21 under paragraph (1) does not meet the requirements

22 for approval under this section or that a State

23 health security program or specific portion of such

24 program, the plan for which was previously ap25 proved, no longer meets such requirements, the
74

•HR 1200 SC4

1 Board shall provide notice to the State of such fail2 ure and that unless corrective action is taken within

3 a period specified by the Board, the Board shall

4 place the State health security program (or specific

5 portions of such program) in receivership under the

6 jurisdiction of the Board.

7 (c) STATE HEALTH SECURITY ADVISORY COUN8 CILS.—

9 (1) IN GENERAL.—For each State, the Gov10 ernor shall provide for appointment of a State

11 Health Security Advisory Council to advise and

12 make recommendations to the Governor and State

13 with respect to the implementation of the State

14 health security program in the State.

15 (2) MEMBERSHIP.—Each State Health Security

16 Advisory Council shall be composed of at least 11 in17 dividuals. The appointed members shall include indi18 viduals who are representative of the State health

19 security program, public health professionals, provid20 ers of health services, and of individuals (who shall

21 constitute a majority) who are representative of con22 sumers of such services, including a balanced

23 representation of employers, unions and consumer

24 organizations.

25 (3) DUTIES.—
75

•HR 1200 SC4

1 (A) IN GENERAL.—Each State Health Se2 curity Advisory Council shall review, and sub3 mit comments to the Governor concerning the

4 implementation of the State health security pro5 gram in the State.

6 (B) ASSISTANCE.—Each State Health Se7 curity Advisory Council shall provide assistance

8 and technical support to community organiza9 tions and public and private non-profit agencies

10 submitting applications for funding under ap11 propriate State and Federal public health pro12 grams, with particular emphasis placed on as13 sisting those applicants with broad consumer

14 representation.

15 (d) STATE USE OF FISCAL AGENTS.—

16 (1) IN GENERAL.—Each State health security

17 program, using competitive bidding procedures, may

18 enter into such contracts with qualified entities, such

19 as voluntary associations, as the State determines to

20 be appropriate to process claims and to perform

21 other related functions of fiscal agents under the

22 State health security program.

23 (2) RESTRICTION.—Except as the Board may

24 provide for good cause shown, in no case may more
76

•HR 1200 SC4

1 than one contract described in paragraph (1) be

2 entered into under a State health security program.

3 SEC. 406. COMPLEMENTARY CONDUCT OF RELATED

4 HEALTH PROGRAMS.

5 In performing functions with respect to health per6 sonnel education and training, health research, environ7 mental health, disability insurance, vocational rehabilita8 tion, the regulation of food and drugs, and all other mat9 ters pertaining to health, the Secretary of Health and

10 Human Services shall direct all activities of the Depart11 ment of Health and Human Services toward contributions

12 to the health of the people complementary to this Act.

13 Subtitle B—Control Over Fraud

14 and Abuse

15 SEC. 411. APPLICATION OF FEDERAL SANCTIONS TO ALL

16 FRAUD AND ABUSE UNDER AMERICAN

17 HEALTH SECURITY PROGRAM.

18 The following sections of the Social Security Act shall

19 apply to State health security programs in the same man20 ner as they apply to State medical assistance plans under

21 title XIX of such Act (except that in applying such provi22 sions any reference to the Secretary is deemed a reference

23 to the Board):

24 (1) Section 1128 (relating to exclusion of indi25 viduals and entities).
77

•HR 1200 SC4

1 (2) Section 1128A (civil monetary penalties).

2 (3) Section 1128B (criminal penalties).

3 (4) Section 1124 (relating to disclosure of own4 ership and related information).

5 (5) Section 1126 (relating to disclosure of cer6 tain owners).

7 SEC. 412. NATIONAL HEALTH CARE FRAUD DATA BASE.

8 (a) ESTABLISHMENT.—The American Health Secu9 rity Standards Board, through the Inspector General,

10 shall establish a national data base (in this section

11 referred to as the ‘‘data base’’) containing information

12 relating to health care fraud and abuse.

13 (b) DATA INCLUDED.—

14 (1) IN GENERAL.—The data base shall include

15 such information as the Inspector General, in con16 sultation with the Board, shall specify, and shall

17 include at least the information described in

18 paragraph (2).

19 (2) SPECIFIED INFORMATION.—The informa20 tion specified in this paragraph is, with respect to

21 providers of health care services, the identity of any

22 provider—

23 (A) that has been convicted of a crime for

24 which the provider may be excluded from par-
78

•HR 1200 SC4

1 ticipation under a health program (as defined

2 in paragraph (3));

3 (B) whose license to provide health care

4 has been revoked or suspended (as described in

5 section 1128(b)(5) of the Social Security Act);

6 (C) that has been excluded or suspended

7 from a health program under section 1128 of

8 the Social Security Act or from any other

9 Federal or State health care program;

10 (D) with respect to whom a civil money

11 penalty has been imposed under this Act or the

12 Social Security Act; or

13 (E) that otherwise is subject to exclusion

14 from participation under a health program .

15 (3) HEALTH PROGRAM DEFINED.—In this sec16 tion, the term ‘‘health program’’ means a State

17 health security program and includes the medicare

18 program (under title XVIII of the Social Security

19 Act) and a State health care program (as defined in

20 section 1128(h) of such Act).

21 (c) REPORTING REQUIREMENT.—

22 (1) REPORTING.—Each State health security

23 program shall provide such information to the In24 spector General as the Inspector General may re25 quire in order to carry out fraud and abuse control
79

•HR 1200 SC4

1 activities and for purposes of maintaining the data

2 base.

3 (2) QUERYING.—In accordance with rules es4 tablished by the Board (in consultation with the In5 spector General), each State health security program

6 shall query periodically (as specified by the Inspector

7 General)—

8 (A) the data base to determine if providers

9 of health services for which the program makes

10 payment are not disqualified from providing

11 such services, and

12 (B) the Secretary of Health and Human

13 Services, concerning information obtained by

14 the Secretary under part B of the Health Care

15 Quality Improvement Act of 1986 relating to

16 practitioners.

17 (3) COORDINATION WITH MALPRACTICE DATA

18 BASE.—The Secretary of Health and Human Serv19 ices shall provide for the coordination of the report20 ing and disclosure of information under this section

21 with information under part B of the Health Care

22 Quality Improvement Act of 1986.

23 (4) UNIFORM MANNER.—Information shall be

24 reported under this subsection in a uniform manner

25 (in accordance with standards of the Inspector Gen-
80

•HR 1200 SC4

1 eral) that permits aggregation of reported informa2 tion.

3 (5) ACCESS FOR AUDIT.—Each State health se4 curity program shall provide the Inspector General

5 such access to information as may be required to

6 verify the information reported under this sub7 section.

8 (6) PENALTY FOR FALSE INFORMATION.—Any

9 person that submits false information required to be

10 provided under this subsection or that denies access

11 to information under paragraph (5) may be impris12 oned for not more than 5 years, or fined, or both,

13 in accordance with title 18, United States Code.

14 (7) CONFIDENTIALITY.—The Board shall estab15 lish rules that protect the confidentiality of the

16 information in the data base.

17 SEC. 413. REQUIREMENTS FOR OPERATION OF STATE

18 HEALTH CARE FRAUD AND ABUSE CONTROL

19 UNITS.

20 (a) REQUIREMENT.—In order to meet the require21 ment of section 405(b)(1)(K), each State health security

22 program must establish and maintain a health care fraud

23 and abuse control unit (in this section referred to as a

24 ‘‘fraud unit’’) that meets requirements of this section and

25 other requirements of the Board. Such a unit may be a
81

•HR 1200 SC4

1 State medicaid fraud control unit (described in section

2 1903(q) of the Social Security Act).

3 (b) STRUCTURE OF UNIT.—The fraud unit must—

4 (1) be a single identifiable entity of the State

5 government;

6 (2) be separate and distinct from the State

7 agency with principal responsibility for the adminis8 tration of the State health security program; and

9 (3) meet 1 of the following requirements:.

10 (A) It must be a unit of the office of the

11 State Attorney General or of another depart12 ment of State government which possesses

13 statewide authority to prosecute individuals for

14 criminal violations.

15 (B) If it is in a State the constitution of

16 which does not provide for the criminal prosecu17 tion of individuals by a statewide authority and

18 has formal procedures, approved by the Board,

19 that (i) assure its referral of suspected criminal

20 violations relating to the State health insurance

21 plan to the appropriate authority or authorities

22 in the States for prosecution, and (ii) assure its

23 assistance of, and coordination with, such au24 thority or authorities in such prosecutions.
82

•HR 1200 SC4

1 (C) It must have a formal working rela2 tionship with the office of the State Attorney

3 General and have formal procedures (including

4 procedures for its referral of suspected criminal

5 violations to such office) which are approved by

6 the Board and which provide effective coordina7 tion of activities between the fraud unit and

8 such office with respect to the detection, inves9 tigation, and prosecution of suspected criminal

10 violations relating to the State health insurance

11 plan.

12 (c) FUNCTIONS.—The fraud unit must—

13 (1) have the function of conducting a statewide

14 program for the investigation and prosecution of vio15 lations of all applicable State laws regarding any

16 and all aspects of fraud in connection with any as17 pect of the provision of health care services and ac18 tivities of providers of such services under the State

19 health security program;

20 (2) have procedures for reviewing complaints of

21 the abuse and neglect of patients of providers and

22 facilities that receive payments under the State

23 health security program, and, where appropriate, for

24 acting upon such complaints under the criminal laws
83

•HR 1200 SC4

1 of the State or for referring them to other State

2 agencies for action; and

3 (3) provide for the collection, or referral for col4 lection to a single State agency, of overpayments

5 that are made under the State health security pro6 gram to providers and that are discovered by the

7 fraud unit in carrying out its activities.

8 (d) RESOURCES.—The fraud unit must—

9 (1) employ such auditors, attorneys, investiga10 tors, and other necessary personnel,

11 (2) be organized in such a manner, and

12 (3) provide sufficient resources (as specified by

13 the Board),

14 as is necessary to promote the effective and efficient con15 duct of the unit’s activities.

16 (e) COOPERATIVE AGREEMENTS.—The fraud unit

17 must have cooperative agreements (as specified by the

18 Board) with—

19 (1) similar fraud units in other States,

20 (2) the Inspector General, and

21 (3) the Attorney General of the United States.

22 (f) REPORTS.—The fraud unit must submit to the

23 Inspector General an application and annual reports con24 taining such information as the Inspector General deter-
84

•HR 1200 SC4

1 mines to be necessary to determine whether the unit meets

2 the previous requirements of this section.

3 SEC. 414. ASSIGNMENT OF UNIQUE PROVIDER AND PA4 TIENT IDENTIFIERS.

5 (a) PROVIDER IDENTIFIERS.—

6 (1) IN GENERAL.—The Board shall provide for

7 the assignment, to each individual or entity provid8 ing health care services under a State health secu9 rity program, of a unique provider identifier.

10 (2) RESPONSE TO QUERIES.—Upon the request

11 of a State health security program with respect to

12 a provider, the Board shall provide the program with

13 the unique provider identifier (if any) assigned to

14 the provider under paragraph (1).

15 (b) PATIENT IDENTIFIERS.—The Board shall provide

16 for the assignment, to each eligible individual, of a unique

17 patient identifier. The identifier so assigned may be the

18 Social Security account number of the individual.

19 (c) REQUIREMENT TO USE IDENTIFIERS.—Each

20 State health security program is required under section

21 405(b)(1)(L) to use the unique identifiers assigned under

22 this section.
85

•HR 1200 SC4

1 TITLE V—QUALITY ASSESSMENT

2 SEC. 501. FUNCTIONS OF QUALITY COUNCIL; DEVELOP3 MENT OF PRACTICE GUIDELINES AND APPLI4 CATION TO OUTLIERS.

5 (a) DEVELOPMENT OF PRACTICE GUIDELINES.—The

6 American Health Security Quality Council (in this title

7 referred to as the ‘‘Council’’)—

8 (1) shall collect data from outcomes research,

9 including data on patient satisfaction and post-hos10 pital discharge experience, on an ongoing basis

11 (whether conducted by the Federal Government or

12 other entities), and

13 (2) on the basis of such data and existing

14 clinical knowledge, shall develop practice guidelines.

15 Such guidelines may vary based upon the area in which

16 the services are provided and the degree of training, spe17 cialization, or similar characteristics of providers. Such

18 guidelines must be updated on an annual basis and based

19 on monitoring of outcomes research and other clinical

20 data. Such guidelines shall be based on the degree to

21 which a process of care increases the probability of desired

22 patient outcomes.

23 (b) PROFILING OF PATTERNS OF PRACTICE; IDENTI24 FICATION OF OUTLIERS.—The Council shall adopt meth25 odologies for profiling the patterns of practice of health
86

•HR 1200 SC4

1 care professionals and for identifying outliers (as defined

2 in subsection (f)).

3 (c) CENTERS OF EXCELLENCE.—The Council shall

4 develop guidelines for certain medical procedures des5 ignated by the Board to be performed only at tertiary care

6 centers which can meet standards for frequency of proce7 dure performance and intensity of support mechanisms

8 that are consistent with the high probability of desired pa9 tient outcome. Reimbursement under this Act for such a

10 designated procedure may only be provided if the

11 procedure was performed at a center that meets such

12 standards.

13 (d) REMEDIAL ACTIONS.—The Council shall develop

14 standards for education and sanctions with respect to

15 outliers so as to assure the quality of health care services

16 provided under this Act.

17 (e) DISSEMINATION.—The Council shall disseminate

18 to the State—

19 (1) the guidelines developed under subsections

20 (a) and (c),

21 (2) the methodologies adopted under subsection

22 (b), and

23 (3) the standards developed under subsection

24 (d),

25 for use by the States under section 502.
87

•HR 1200 SC4

1 (f) OUTLIER DEFINED.—In this title, the term

2 ‘‘outlier’’ means a health care provider whose pattern of

3 practice, relative to applicable practice guidelines, suggests

4 deficiencies in the quality of health care services being

5 provided.

6 SEC. 502. STATE QUALITY REVIEW PROGRAMS.

7 (a) REQUIREMENT.—In order to meet the require8 ment of section 405(b)(1)(H), each State health security

9 program shall establish one or more qualified entities to

10 conduct quality reviews of persons providing covered serv11 ices under the program, in accordance with standards es12 tablished under subsection (b)(1) (except as provided in

13 subsection (b)(2)) and subsection (d).

14 (b) FEDERAL STANDARDS.—

15 (1) IN GENERAL.—The Council shall establish

16 standards with respect to—

17 (A) the adoption of practice guidelines (de18 veloped under section 501(a)),

19 (B) the identification of outliers (consist20 ent with methodologies adopted under section

21 501(b)),

22 (C) the development of remedial programs

23 and monitoring for outliers, and
88

•HR 1200 SC4

1 (D) the application of sanctions (consistent

2 with the standards developed under section

3 501(c)).

4 (2) STATE DISCRETION.—A State may apply

5 under subsection (a) standards other than those es6 tablished under paragraph (1) so long as the State

7 demonstrates to the satisfaction of the Council on an

8 annual basis that the standards applied have been as

9 efficacious in promoting and achieving improved

10 quality of care as the application of the standards

11 established under paragraph (1). Positive improve12 ments in quality shall be documented by reductions

13 in the variations of clinical care process and

14 improvement in patient outcomes.

15 (c) QUALIFICATIONS.—

16 (1) IN GENERAL.—An entity is not qualified to

17 conduct quality reviews under subsection (a) unless

18 the entity—

19 (A) is administratively independent of the

20 individual or board that administers the State

21 health security program, and

22 (B) does not provide any financial incen23 tive to reviewers to favor one pattern of practice

24 over another.
89

•HR 1200 SC4

1 (2) PROVIDER-SPECIFIC ENTITIES.—Subject to

2 paragraph (1), a State may provide that an individ3 ual hospital (or other institutional provider) may

4 serve as a qualified entity to conduct quality reviews

5 under subsection (a).

6 SEC. 503. ELIMINATION OF UTILIZATION REVIEW PRO7 GRAMS; TRANSITION.

8 (a) INTENT.—It is the intention of this title to re9 place by January 1, 1998, random utilization controls with

10 a systematic review of patterns of practice that com11 promise the quality of care.

12 (b) SUPERSEDING CASE REVIEWS.—

13 (1) IN GENERAL.—Subject to the succeeding

14 provisions of this subsection, the program of quality

15 review provided under the previous sections of this

16 title supersede all existing Federal requirements for

17 utilization review programs, including requirements

18 for random case-by-case reviews and programs re19 quiring pre-certification of medical procedures on a

20 case-by-case basis.

21 (2) TRANSITION.—Before January 1, 1998, the

22 Board and the States may employ existing utiliza23 tion review standards and mechanisms as may be

24 necessary to effect the transition to pattern of prac25 tice-based reviews.
90

•HR 1200 SC4

1 (3) CONSTRUCTION.—Nothing in this sub2 section shall be construed—

3 (A) as precluding the case-by-case review

4 of the provision of care—

5 (i) in individual incidents where the

6 quality of care has significantly deviated

7 from acceptable standards of practice, and

8 (ii) with respect to a provider who has

9 been determined to be an outlier; or

10 (B) as precluding the case management of

11 catastrophic, mental health, or substance abuse

12 cases where such management is necessary to

13 achieve appropriate, cost-effective, and bene14 ficial comprehensive medical care, as provided

15 for in section 204.

16 SEC. 504. DEVELOPMENT OF NATIONAL ELECTRONIC DATA

17 BASE.

18 (a) USE BY STATES.—In order to meet the require19 ment of this section, for purposes of section

20 405(b)(1)(N)), each State health security program shall

21 develop and use a uniform electronic data base which uses

22 the software designated under subsection (b) and which

23 assures confidentiality under subsection (c), for all patient

24 records in order to enable systematic quality review and

25 outcomes analysis. Subject to subsection (c), data in such
91

•HR 1200 SC4

1 data base shall be made available, under rules established

2 by the Board, in order to facilitate the portability of pa3 tient records and comparative outcomes research analysis.

4 (b) UNIFORM SOFTWARE.—The Board shall des5 ignate the uniform software that shall be used by States

6 in the operation of their electronic data bases, in order

7 to facilitate the portability of patient records and com8 parative outcomes research analysis. The Board shall not

9 grant any waiver of the requirement of the previous

10 sentence.

11 (c) CONFIDENTIALITY.—The Board shall establish

12 standards that are designed to protect the privacy and

13 otherwise shield the identity of the patients whose records

14 are included in the data base. Under such standards, gov15 ernment agencies shall not have access to information in

16 the data base that will identify individual patients except

17 in cases of quality review procedures which require that

18 individual patients be informed of necessary changes in

19 their treatment.
92

•HR 1200 SC4

1 TITLE VI—HEALTH SECURITY

2 BUDGET; PAYMENTS; COST

3 CONTAINMENT MEASURES

4 Subtitle A—Budgeting and

5 Payments to States

6 SEC. 601. NATIONAL HEALTH SECURITY BUDGET.

7 (a) NATIONAL HEALTH SECURITY BUDGET.—

8 (1) IN GENERAL.—By not later than September

9 1 before the beginning of each year (beginning with

10 1995), the Board shall establish a national health

11 security budget, which—

12 (A) specifies the total expenditures (includ13 ing expenditures for administrative costs) to be

14 made by the Federal Government and the

15 States for covered health care services under

16 this Act, and

17 (B) allocates those expenditures among the

18 States consistent with section 604.

19 Pursuant to subsection (b), such budget for a year

20 shall not exceed the budget for the preceding year

21 increased by the percentage increase in gross domes22 tic product.

23 (2) DIVISION OF BUDGET INTO COMPONENTS.—

24 The national health security budget shall consist of

25 at least 4 components:
93

•HR 1200 SC4

1 (A) A component for quality assessment

2 activities (described in title V).

3 (B) A component for health professional

4 education expenditures.

5 (C) A component for administrative costs.

6 (D) A component (in this title referred to

7 as the ‘‘operating component’’) for operating

8 and other expenditures not described in sub9 paragraphs (A) through (C), consisting of

10 amounts not included in the other components.

11 A State may provide for the allocation of this

12 component between capital expenditures and

13 other expenditures.

14 (3) ALLOCATION AMONG COMPONENTS.—Tak15 ing into account the State health security budgets

16 established and submitted under section 603, the

17 Board shall allocate the national health security

18 budget among the components in a manner that—

19 (A) assures a fair allocation for quality as20 sessment activities (consistent with the national

21 health security spending growth limit); and

22 (B) assures that the health professional

23 education expenditure component is sufficient

24 to provide for the amount of health professional

25 education expenditures sufficient to meet the
94

•HR 1200 SC4

1 need for covered health care services (consistent

2 with the national health security spending

3 growth limit under subsection (b)(2)).

4 (b) BASIS FOR TOTAL EXPENDITURES.—

5 (1) IN GENERAL.—The total expenditures speci6 fied in such budget shall be the sum of the capita7 tion amounts computed under section 602(a) and

8 the amount of Federal administrative expenditures

9 needed to carry out this Act.

10 (2) NATIONAL HEALTH SECURITY SPENDING

11 GROWTH LIMIT.—For purposes of this subtitle, the

12 national health security spending growth limit de13 scribed in this paragraph for a year is zero, or, if

14 greater, the percentage increase in the gross domes15 tic product (in current dollars) from the first quar16 ter of the second previous year to the first quarter

17 of the previous year.

18 (c) DEFINITIONS.—In this title:

19 (1) CAPITAL EXPENDITURES.—The term ‘‘cap20 ital expenditures’’ means expenses for the purchase,

21 lease, construction, or renovation of capital facilities

22 and for equipment and includes return on equity

23 capital.

24 (2) HEALTH PROFESSIONAL EDUCATION EX25 PENDITURES.—The term ‘‘health professional edu-
95

•HR 1200 SC4

1 cation expenditures’’ means expenditures in hospitals

2 and other health care facilities to cover costs associ3 ated with teaching and related research activities.

4 SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPI5 TATION AMOUNTS.

6 (a) CAPITATION AMOUNTS.—

7 (1) INDIVIDUAL CAPITATION AMOUNTS.—In es8 tablishing the national health security budget under

9 section 601(a) and in computing the national aver10 age per capita cost under subsection (b) for each

11 year, the Board shall establish a method for comput12 ing the capitation amount for each eligible individual

13 residing in each State. The capitation amount for an

14 eligible individual in a State classified within a risk

15 group (established under subsection (d)(2)) is the

16 product of—

17 (A) a national average per capita cost for

18 all covered health care services (computed

19 under subsection (b)),

20 (B) the State adjustment factor (estab21 lished under subsection (c)) for the State, and

22 (C) the risk adjustment factor (established

23 under subsection (d)) for the risk group.

24 (2) STATE CAPITATION AMOUNT.—
96

•HR 1200 SC4

1 (A) IN GENERAL.—For purposes of this

2 title, the term ‘‘State capitation amount’’

3 means, for a State for a year, the sum of the

4 capitation amounts computed under paragraph

5 (1) for all the residents of the State in the year,

6 as estimated by the Board before the beginning

7 of the year involved.

8 (B) USE OF STATISTICAL MODEL.—The

9 Board may provide for the computation of

10 State capitation amounts based on statistical

11 models that fairly reflect the elements that com12 prise the State capitation amount described in

13 subparagraph (A).

14 (C) POPULATION INFORMATION.—The Bu15 reau of the Census shall assist the Board in de16 termining the number, place of residence, and

17 risk group classification of eligible individuals.

18 (b) COMPUTATION OF NATIONAL AVERAGE PER CAP19 ITA COST.—

20 (1) FOR 1995.—For 1995, the national average

21 per capita cost under this paragraph is equal to—

22 (A) the average per capita health care ex23 penditures in the United States in 1993 (as

24 estimated by the Board),
97

•HR 1200 SC4

1 (B) increased to 1994 by the Board’s esti2 mate of the actual amount of such per capita

3 expenditures during 1994, and

4 (C) updated to 1995 by the national health

5 security spending growth limit specified in sec6 tion 601(b)(2) for 1995.

7 (2) FOR SUCCEEDING YEARS.—For each suc8 ceeding year, the national average per capita cost

9 under this subsection is equal to the national aver10 age per capita cost computed under this subsection

11 for the previous year increased by the national

12 health security spending growth limit (specified in

13 section 601(b)(2)) for the year involved.

14 (c) STATE ADJUSTMENT FACTORS.—

15 (1) IN GENERAL.—Subject to the succeeding

16 paragraphs of this subsection, the Board shall de17 velop for each State a factor to adjust the national

18 average per capita costs to reflect differences

19 between the State and the United States in—

20 (A) average labor and nonlabor costs that

21 are necessary to provide covered health services;

22 (B) any social, environmental, or geo23 graphic condition affecting health status or the

24 need for health care services, to the extent such
98

•HR 1200 SC4

1 a condition is not taken into account in the es2 tablishment of risk groups under subsection (d);

3 (C) the geographic distribution of the

4 State’s population, particularly the proportion

5 of the population residing in medically under6 served areas, to the extent such a condition is

7 not taken into account in the establishment of

8 risk groups under subsection (d); and

9 (D) any other factor relating to operating

10 costs required to assure equitable distribution

11 of funds among the States.

12 (2) MODIFICATION OF HEALTH PROFESSIONAL

13 EDUCATION COMPONENT.—With respect to the por14 tion of the national health security budget allocated

15 to expenditures for health professional education, the

16 Board shall modify the State adjustment factors so

17 as to take into account—

18 (A) differences among States in health

19 professional education programs in operation as

20 of the date of the enactment of this Act, and

21 (B) differences among States in their rel22 ative need for expenditures for health profes23 sional education, taking into account the health

24 professional education expenditures proposed in
99

•HR 1200 SC4

1 State health security budgets under section

2 603(a).

3 (3) BUDGET NEUTRALITY.—The State adjust4 ment factors, as modified under paragraph (2), shall

5 be applied under this subsection in a manner that

6 results in neither an increase nor a decrease in the

7 total amount of the Federal contributions to all

8 State health security programs under subsection (b)

9 as a result of the application of such factors.

10 (4) PHASE-IN.—In applying State adjustment

11 factors under this subsection during the five-year pe12 riod beginning with 1995, the Board shall phase-in,

13 over such period, the use of factors described in

14 paragraph (1) in a manner so that the adjustment

15 factor for a State is based on a blend of such factors

16 and a factor that reflects the relative actual average

17 per capita costs of health services of the different

18 States as of the time of enactment of this Act.

19 (5) PERIODIC ADJUSTMENT.—In establishing

20 the national health security budget before the begin21 ning of each year, the Board shall provide for appro22 priate adjustments in the State adjustment factors

23 under this subsection.

24 (d) ADJUSTMENTS FOR RISK GROUP CLASSIFICA25 TION.—
100

•HR 1200 SC4

1 (1) IN GENERAL.—The Board shall develop an

2 adjustment factor to the national average per capita

3 costs computed under subsection (b) for individuals

4 classified in each risk group (as designated under

5 paragraph (2)) to reflect the difference between the

6 average national average per capita costs and the

7 national average per capita cost for individuals clas8 sified in the risk group.

9 (2) RISK GROUPS.—The Board shall designate

10 a series of risk groups, determined by age, health in11 dicators, and other factors that represent distinct

12 patterns of health care services utilization and costs.

13 (3) PERIODIC ADJUSTMENT.—In establishing

14 the national health security budget before the begin15 ning of each year, the Board shall provide for appro16 priate adjustments in the risk adjustment factors

17 under this subsection.

18 SEC. 603. STATE HEALTH SECURITY BUDGETS.

19 (a) ESTABLISHMENT AND SUBMISSION OF BUDG20 ETS.—

21 (1) IN GENERAL.—Each State health security

22 program shall establish and submit to the Board for

23 each year a proposed and a final State health secu24 rity budget, which specifies the following:
101

•HR 1200 SC4

1 (A) The total expenditures (including ex2 penditures for administrative costs) to be made

3 under the program in the State for covered

4 health care services under this Act, consistent

5 with subsection (b), broken down as follows:

6 (i) By the 4 components (described in

7 section 601(a)(2)), consistent with sub8 section (b).

9 (ii) Within the operating component—

10 (I) expenditures for operating

11 costs of hospitals and other facility12 based services in the State,

13 (II) expenditures for payment to

14 comprehensive health service organiza15 tions,

16 (III) expenditures for payment of

17 services provided by health care prac18 titioners, and

19 (IV) expenditures for other cov20 ered items and services.

21 Amounts included in the operating compo22 nent include amounts that may be used by

23 providers for capital expenditures.

24 (B) The total revenues required to meet

25 the State health security expenditures.
102

•HR 1200 SC4

1 (2) PROPOSED BUDGET DEADLINE.—The pro2 posed budget for a year shall be submitted under

3 paragraph (1) not later than June 1 before the year.

4 (3) FINAL BUDGET.—The final budget for a

5 year shall—

6 (A) be established and submitted under

7 paragraph (1) not later than October 1 before

8 the year, and

9 (B) take into account the amounts estab10 lished under the national health security budget

11 under section 601 for the year.

12 (4) ADJUSTMENT IN ALLOCATIONS PER13 MITTED.—

14 (A) IN GENERAL.—Subject to subpara15 graphs (B) and (C), in the case of a final

16 budget, a State may change the allocation of

17 amounts among components.

18 (B) NOTICE.—No such change may be

19 made unless the State has provided prior notice

20 of the change to the Board.

21 (C) DENIAL.—Such a change may not be

22 made if the Board, within such time period as

23 the Board specifies, disapproves such change.

24 (b) EXPENDITURE LIMITS.—
103

•HR 1200 SC4

1 (1) IN GENERAL.—The total expenditures speci2 fied in each State health security budget under sub3 section (a)(1) shall take into account Federal

4 contributions made under section 604.

5 (2) LIMIT ON CLAIMS PROCESSING AND BILL6 ING EXPENDITURES.—Each State health security

7 budget shall provide that State administrative ex8 penditures, including expenditures for claims proc9 essing and billing, shall not exceed 3 percent of the

10 total expenditures under the State health security

11 program, unless the Board determines, on a case-by12 case basis, that additional administrative expendi13 tures would improve health care quality and cost

14 effectiveness.

15 (3) WORKER ASSISTANCE.—A State health se16 curity program may provide that, for budgets for

17 years before 2000, up to 1 percent of the budget

18 may be used for purposes of programs providing as19 sistance to workers who are currently performing

20 functions in the administration of the health insur21 ance system and who may experience economic dis22 location as a result of the implementation of the

23 program.

24 (c) APPROVAL PROCESS FOR CAPITAL EXPENDI25 TURES PERMITTED.—Nothing in this title shall be con-
104

•HR 1200 SC4

1 strued as preventing a State health security program from

2 providing for a process for the approval of capital expendi3 tures based on information derived from regional planning

4 agencies.

5 SEC. 604. FEDERAL PAYMENTS TO STATES.

6 (a) IN GENERAL.—Each State with an approved

7 State health security program is entitled to receive, from

8 amounts in the National Health Security Trust Fund, on

9 a monthly basis each year, of an amount equal to one10 twelfth of the product of—

11 (1) the State capitation amount (computed

12 under section 602(a)(2)) for the State for the year,

13 and

14 (2) the Federal contribution percentage (estab15 lished under subsection (b)).

16 (b) FEDERAL CONTRIBUTION PERCENTAGE.—The

17 Board shall establish a formula for the establishment of

18 a Federal contribution percentage for each State. Such

19 formula shall take into consideration a State’s per capita

20 income and revenue capacity and such other relevant eco21 nomic indicators as the Board determines to be appro22 priate. In addition, during the 5-year period beginning

23 with 1995, the Board may provide for a transition adjust24 ment to the formula in order to take into account current

25 expenditures by the State (and local governments thereof)
105

•HR 1200 SC4

1 for health services covered under the State health security

2 program. The weighted-average Federal contribution per3 centage for all States shall equal 86 percent and in no

4 event shall such percentage be less than 81 percent nor

5 more than 91 percent.

6 (c) USE OF PAYMENTS.—All payments made under

7 this section may only be used to carry out the State health

8 security program.

9 (d) EFFECT OF SPENDING EXCESS OR SURPLUS.—

10 (1) SPENDING EXCESS.—If a State exceeds it’s

11 budget in a given year, the State shall continue to

12 fund covered health services from its own revenues.

13 (2) SURPLUS.—If a State provides all covered

14 health services for less than the budgeted amount

15 for a year, it may retain its Federal payment for

16 that year for uses consistent with this Act.

17 SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDU18 CATION EXPENDITURES.

19 (a) SEPARATE ACCOUNT.—Each State health secu20 rity program shall—

21 (1) include a separate account for health pro22 fessional education expenditures, and

23 (2) specify the general manner, consistent with

24 subsection (b), in which such expenditures are to be
106

•HR 1200 SC4

1 distributed among different types of institutions and

2 the different areas of the State.

3 (b) DISTRIBUTION RULES.—The distribution of

4 funds to hospitals and other health care facilities from the

5 account must conform to the following principles:

6 (1) The disbursement of funds must be consist7 ent with achievement of the national and program

8 goals (specified in section 701(b)) within the State

9 health security program and the distribution of

10 funds from the account must be conditioned upon

11 the receipt of such reports as the Board may require

12 in order to monitor compliance with such goals.

13 (2) The distribution of funds from the account

14 must take into account the potentially higher costs

15 of placing health professional students in clinical

16 education programs in health professional shortage

17 areas.

18 Subtitle B—Payments by States to

19 Providers

20 SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY21 BASED SERVICES FOR OPERATING EXPENSES

22 ON THE BASIS OF APPROVED GLOBAL

23 BUDGETS.

24 (a) DIRECT PAYMENT UNDER GLOBAL BUDGET.—

25 Payment for operating expenses for institutional and facil-
107

•HR 1200 SC4

1 ity-based care, including hospital services and nursing fa2 cility services, under State health security programs shall

3 be made directly to each institution or facility by each

4 State health security program under an annual prospec5 tive global budget approved under the program. Such a

6 budget shall include payment for outpatient care and non7 facility-based care that is furnished by or through the fa8 cility. In the case of a hospital that is wholly owned (or

9 controlled) by a comprehensive health service organization

10 that is paid under section 614 on the basis of a global

11 budget, the global budget of the organization shall include

12 the budget for the hospital.

13 (b) ANNUAL NEGOTIATIONS; BUDGET APPROVAL.—

14 (1) IN GENERAL.—The prospective global budg15 et for an institution or facility shall be developed

16 through annual negotiations between the State

17 health security program and the institution or facil18 ity and be based on a nationally uniform system of

19 cost accounting established under standards of the

20 Board.

21 (2) CONSIDERATIONS.—In developing a budget

22 through negotiations, there shall be taken into

23 account at least the following:
108

•HR 1200 SC4

1 (A) With respect to inpatient hospital serv2 ices, the number, and classification by diag3 nosis-related group, of discharges.

4 (B) An institution’s or facility’s past ex5 penditures.

6 (C) The extent to which debt service for

7 capital expenditures has been included in the

8 proposed operating budget.

9 (D) Change in the consumer price index

10 and other price indices.

11 (E) The cost of reasonable compensation

12 to health care practitioners.

13 (F) The compensation level of the institu14 tion’s or facility’s workforce.

15 (G) The extent to which the institution or

16 facility is providing health care services to meet

17 the needs of residents in the area served by the

18 institution or facility, including the institution’s

19 or facility’s occupancy level.

20 (H) The institution’s or facility’s previous

21 financial and clinical performance, based on uti22 lization and outcomes data provided under this

23 Act.

24 (I) The type of institution or facility, in25 cluding whether the institution or facility is
109

•HR 1200 SC4

1 part of a clinical education program or serves

2 a health professional education, research or

3 other training purpose.

4 (J) Technological advances or changes.

5 (K) Costs of the institution or facility asso6 ciated with meeting Federal and State regula7 tions.

8 (L) The costs associated with necessary

9 public outreach activities.

10 (M) In the case of a for-profit facility, a

11 reasonable rate of return on equity capital,

12 independent of those operating expenses nec13 essary to fulfill the objectives of this Act.

14 (N) Incentives to facilities that maintain

15 costs below previous reasonable budgeted levels

16 without reducing the care provided.

17 (O) With respect to facilities that provide

18 mental health services and substance abuse

19 treatment services, any additional costs involved

20 in the treatment of dually diagnosed individ21 uals.

22 The portion of such a budget that relates to expendi23 tures for health professional education shall be con24 sistent with the State health security budget for

25 such expenditures.
110

•HR 1200 SC4

1 (3) PROVISION OF REQUIRED INFORMATION; DI2 AGNOSIS-RELATED GROUP.—No budget for an insti3 tution or facility for a year may be approved unless

4 the institution or facility has submitted on a timely

5 basis to the State health security program such in6 formation as the program or the Board shall specify,

7 including in the case of hospitals information on dis8 charges classified by diagnosis-related group.

9 (c) ADJUSTMENTS IN APPROVED BUDGETS.—

10 (1) ADJUSTMENTS TO GLOBAL BUDGETS THAT

11 CONTRACT WITH COMPREHENSIVE HEALTH SERVICE

12 ORGANIZATIONS.—Each State health security pro13 gram shall develop an administrative mechanism for

14 reducing operating funds to institutions or facilities

15 in proportion to payments made to such institutions

16 or facilities for services contracted for by a com17 prehensive health service organization.

18 (2) AMENDMENTS.—In accordance with stand19 ards established by the Board, an operating and

20 capital budget approved under this section for a year

21 may be amended before, during, or after the year if

22 there is a substantial change in any of the factors

23 relevant to budget approval.

24 (d) DONATIONS PERMISSIBLE.—The States health

25 security programs may permit institutions and facilities
111

•HR 1200 SC4

1 to raise funds from private sources to pay for newly con2 structed facilities, major renovations, and equipment. The

3 expenditure of such funds, whether for operating or cap4 ital expenditures, does not obligate the State health secu5 rity program to provide for continued support for such ex6 penditures unless included in an approved global budget.

7 SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS

8 BASED ON PROSPECTIVE FEE SCHEDULE.

9 (a) FEE FOR SERVICE.—

10 (1) IN GENERAL.—Every independent health

11 care practitioner is entitled to be paid, for the provi12 sion of covered health services under the State

13 health security program, a fee for each billable cov14 ered service.

15 (2) GLOBAL FEE PAYMENT METHODOLOGIES.—

16 The Board shall establish models and encourage

17 State health security programs to implement alter18 native payment methodologies that incorporate glob19 al fees for related services (such as all outpatient

20 procedures for treatment of a condition) or for a

21 basic group of services (such as primary care serv22 ices) furnished to an individual over a period of

23 time, in order to encourage continuity and efficiency

24 in the provision of services. Such methodologies shall

25 be designed to ensure a high quality of care.
112

•HR 1200 SC4

1 (3) BILLING DEADLINES; ELECTRONIC BILL2 ING.—A State health security program may deny

3 payment for any service of an independent health

4 care practitioner for which it did not receive a bill

5 and appropriate supporting documentation (which

6 had been previously specified) within 30 days after

7 the date the service was provided. Such a program

8 may require that bills for services for which payment

9 may be made under this section, or for any class of

10 such services, be submitted electronically.

11 (b) PAYMENT RATES BASED ON NEGOTIATED PRO12 SPECTIVE FEE SCHEDULES.—With respect to any pay13 ment method for a class of services of practitioners, the

14 State health security program shall establish, on a pro15 spective basis, a payment schedule. The State health secu16 rity program may establish such a schedule after negotia17 tions with organizations representing the practitioners in18 volved. Such fee schedules shall be designed to provide in19 centives for practitioners to choose primary care medicine,

20 including general internal medicine and pediatrics, over

21 medical specialization. Nothing in this section shall be con22 strued as preventing a State from adjusting the payment

23 schedule amounts on a quarterly or other periodic basis

24 depending on whether expenditures under the schedule will
113

•HR 1200 SC4

1 exceed the budgeted amount with respect to such expendi2 tures.

3 (c) BILLABLE COVERED SERVICE DEFINED.—In this

4 section, the term ‘‘billable covered service’’ means a service

5 covered under section 201 for which a practitioner is enti6 tled to compensation by payment of a fee determined

7 under this section.

8 SEC. 613. PAYMENTS TO COMPREHENSIVE HEALTH SERV9 ICE ORGANIZATIONS.

10 (a) IN GENERAL.—Payment under a State health se11 curity program to a comprehensive health service organi12 zation to its enrollees shall be determined by the State—

13 (1) based on a global budget described in sec14 tion 611, or

15 (2) based on the basic capitation amount de16 scribed in subsection (b) for each of its enrollees.

17 (b) BASIC CAPITATION AMOUNT.—

18 (1) IN GENERAL.—The basic capitation amount

19 described in this subsection for an enrollee shall be

20 determined by the State health security program on

21 the basis of the average amount of expenditures that

22 is estimated would be made under the State health

23 security program for covered health care services for

24 an enrollee, based on actuarial characteristics (as de25 fined by the State health security program).
114

•HR 1200 SC4

1 (2) ADJUSTMENT FOR SPECIAL HEALTH

2 NEEDS.—The State health security program shall

3 adjust such average amounts to take into account

4 the special health needs, including a disproportionate

5 number of medically underserved individuals, of pop6 ulations served by the organization.

7 (3) ADJUSTMENT FOR SERVICES NOT PRO8 VIDED.—The State health security program shall ad9 just such average amounts to take into account the

10 cost of covered health care services that are not pro11 vided by the comprehensive health service organiza12 tion under section 303(a).

13 SEC. 614. PAYMENTS FOR COMMUNITY-BASED PRIMARY

14 HEALTH SERVICES.

15 (a) IN GENERAL.—In the case of community-based

16 primary health services, subject to subsection (b), pay17 ments under a State health security program shall—

18 (1) be based on a global budget described in

19 section 611,

20 (2) be based on the basic primary care capita21 tion amount described in subsection (c) for each in22 dividual enrolled with the provider of such services,

23 or

24 (3) be made on a fee-for-service basis under

25 section 612.
115

•HR 1200 SC4

1 (b) PAYMENT ADJUSTMENT.—Payments under sub2 section (a) may include, consistent with the budgets devel3 oped under this title—

4 (1) an additional amount, as set by the State

5 health security program, to cover the costs incurred

6 by a provider which serves persons not covered by

7 this Act whose health care is essential to overall

8 community health and the control of communicable

9 disease, and for whom the cost of such care is other10 wise uncompensated,

11 (2) an additional amount, as set by the State

12 health security program, to cover the reasonable

13 costs incurred by a provider that furnishes case

14 management services (as defined in section

15 1915(g)(2) of the Social Security Act), transpor16 tation services, and translation services, and

17 (3) an additional amount, as set by the State

18 health security program, to cover the costs incurred

19 by a provider in conducting health professional edu20 cation programs in connection with the provision of

21 such services.

22 (c) BASIC PRIMARY CARE CAPITATION AMOUNT.—

23 (1) IN GENERAL.—The basic primary care capi24 tation amount described in this subsection for an en25 rollee with a provider of community-based primary
116

•HR 1200 SC4

1 health services shall be determined by the State

2 health security program on the basis of the average

3 amount of expenditures that is estimated would be

4 made under the State health security program for

5 such an enrollee, based on actuarial characteristics

6 (as defined by the State health security program).

7 (2) ADJUSTMENT FOR SPECIAL HEALTH

8 NEEDS.—The State health security program shall

9 adjust such average amounts to take into account

10 the special health needs, including a disproportionate

11 number of medically underserved individuals, of pop12 ulations served by the provider.

13 (3) ADJUSTMENT FOR SERVICES NOT PRO14 VIDED.—The State health security program shall ad15 just such average amounts to take into account the

16 cost of community-based primary health services

17 that are not provided by the provider.

18 (d) COMMUNITY-BASED PRIMARY HEALTH SERVICES

19 DEFINED.—In this section, the term ‘‘community-based

20 primary health services’’ has the meaning given such term

21 in section 202(a).

22 SEC. 615. PAYMENTS FOR PRESCRIPTION DRUGS.

23 (a) ESTABLISHMENT OF LIST.—

24 (1) IN GENERAL.—Based upon the rec25 ommendations of the Advisory Committee on Pre-
117

•HR 1200 SC4

1 scription Drugs under section 403, the Board shall

2 establish a list of approved prescription drugs and

3 biologicals that the Board determines are necessary

4 for the maintenance or restoration of health or of

5 employability or self-management and eligible for

6 coverage under this Act.

7 (2) EXCLUSIONS.—The Board may exclude re8 imbursement under this Act for ineffective, unsafe,

9 or over-priced products where better alternatives are

10 determined to be available.

11 (b) PRICES.—For each such listed prescription drug

12 or biological covered under this Act, for insulin, and for

13 medical foods, the Board shall from time to time deter14 mine a product price or prices which shall constitute the

15 maximum to be recognized under this Act as the cost of

16 a drug to a provider thereof. The Board may conduct ne17 gotiations, on behalf of State health security programs,

18 with product manufacturers and distributors in determin19 ing the applicable product price or prices.

20 (c) CHARGES BY INDEPENDENT PHARMACIES.—

21 Each State health security program shall provide for pay22 ment for a prescription drug or biological or insulin fur23 nished by an independent pharmacy based on the drug’s

24 cost to the pharmacy (not in excess of the applicable prod25 uct price established under subsection (b)) plus a dispens-
118

•HR 1200 SC4

1 ing fee. In accordance with standards established by the

2 Board, each State health security program, after consulta3 tion with representatives of the pharmaceutical profession,

4 shall establish schedules of dispensing fees, designed to af5 ford reasonable compensation to independent pharmacies

6 after taking into account variations in their cost of oper7 ation resulting from regional differences, differences in the

8 volume of prescription drugs dispensed, differences in

9 services provided, the need to maintain expenditures with10 in the budgets established under this title, and other

11 relevant factors.

12 SEC. 616. PAYMENTS FOR APPROVED DEVICES AND EQUIP13 MENT.

14 (a) ESTABLISHMENT OF LIST.—The Board shall es15 tablish a list of approved durable medical equipment and

16 therapeutic devices and equipment (including eyeglasses,

17 hearing aids, and prosthetic appliances), that the Board

18 determines are necessary for the maintenance or restora19 tion of health or of employability or self-management and

20 eligible for coverage under this Act.

21 (b) CONSIDERATIONS AND CONDITIONS.—In estab22 lishing the list under subsection (a), the Board shall take

23 into consideration the efficacy, safety, and cost of each

24 item contained on such list, and shall attach to any item

25 such conditions as the Board determines appropriate with
119

•HR 1200 SC4

1 respect to the circumstances under which, or the frequency

2 with which, the item may be prescribed.

3 (c) PRICES.—For each such listed item covered under

4 this Act, the Board shall from time to time determine a

5 product price or prices which shall constitute the maxi6 mum to be recognized under this Act as the cost of the

7 item to a provider thereof. The Board may conduct nego8 tiations, on behalf of State health security programs, with

9 equipment and device manufacturers and distributors in

10 determining the applicable product price or prices.

11 (d) EXCLUSIONS.—The Board may exclude from cov12 erage under this Act ineffective, unsafe, or overpriced

13 products where better alternatives are determined to be

14 available.

15 SEC. 617. PAYMENTS FOR OTHER ITEMS AND SERVICES.

16 In the case of payment for other covered health serv17 ices, the amount of payment under a State health security

18 program shall be established by the program—

19 (1) in accordance with payment methodologies

20 which are specified by the Board, after consultation

21 with the American Health Security Advisory Coun22 cil, or methodologies established by the State under

23 section 620, and

24 (2) consistent with the State health security

25 budget.
120

•HR 1200 SC4

1 SEC. 618. PAYMENT INCENTIVES FOR MEDICALLY UNDER2 SERVED AREAS.

3 (a) MODEL PAYMENT METHODOLOGIES.—In addi4 tion to the payment amounts otherwise provided in this

5 title, the Board shall establish model payment methodolo6 gies and other incentives that promote the provision of

7 covered health care services in medically underserved

8 areas, particularly in rural and inner-city underserved

9 areas.

10 (b) CONSTRUCTION.—Nothing in this title shall be

11 construed as limiting the authority of State health security

12 programs to increase payment amounts or otherwise pro13 vide additional incentives, consistent with the State health

14 security budget, to encourage the provision of medically

15 necessary and appropriate services in underserved areas.

16 SEC. 619. AUTHORITY FOR ALTERNATIVE PAYMENT METH17 ODOLOGIES.

18 A State health security program, as part of its plan

19 under section 405(a), may use a payment methodology

20 other than a methodology required under this subtitle so

21 long as—

22 (1) such payment methodology does not affect

23 the entitlement of individuals to coverage, the

24 weighting of fee schedules to encourage an increase

25 in the number of primary care providers, the ability

26 of individuals to choose among qualified providers,
121

•HR 1200 SC4

1 the benefits covered under the program, or the com2 pliance of the program with the State health security

3 budget under subtitle A, and

4 (2) the program submits periodic reports to the

5 Board showing the operation and effectiveness of the

6 alternative methodology, in order for the Board to

7 evaluate the appropriateness of applying the alter8 native methodology to other States.

9 Subtitle C—Mandatory Assignment

10 and Administrative Provisions

11 SEC. 631. MANDATORY ASSIGNMENT.

12 (a) NO BALANCE BILLING.—Payments for benefits

13 under this Act shall constitute payment in full for such

14 benefits and the entity furnishing an item or service for

15 which payment is made under this Act shall accept such

16 payment as payment in full for the item or service and

17 may not accept any payment or impose any charge for

18 any such item or service other than accepting payment

19 from the State health security program in accordance with

20 this Act.

21 (b) ENFORCEMENT.—If an entity knowingly and will22 fully bills for an item or service or accepts payment in

23 violation of subsection (a), the Board may apply sanctions

24 against the entity in the same manner as sanctions could

25 have been imposed under section 1842(j)(2) of the Social
122

•HR 1200 SC4

1 Security Act for a violation of section 1842(j)(1) of such

2 Act. Such sanctions are in addition to any sanctions that

3 a State may impose under its State health security

4 program.

5 SEC. 632. PROCEDURES FOR REIMBURSEMENT; APPEALS.

6 (a) PROCEDURES FOR REIMBURSEMENT.—In accord7 ance with standards issued by the Board, a State health

8 security program shall establish a timely and administra9 tively simple procedure to assure payment within 60 days

10 of the date of submission of clean claims by providers

11 under this Act.

12 (b) APPEALS PROCESS.—Each State health security

13 program shall establish an appeals process to handle all

14 grievances pertaining to payment to providers under this

15 title.
123

•HR 1200 SC4

1 TITLE VII—PROMOTION OF PRI2 MARY HEALTH CARE; DEVEL3 OPMENT OF HEALTH SERV4 ICE CAPACITY; PROGRAMS TO

5 ASSIST THE MEDICALLY UN6 DERSERVED

7 Subtitle A—Promotion and Expan8 sion of Primary Care Profes9 sional Training

10 SEC. 701. ROLE OF BOARD; ESTABLISHMENT OF PRIMARY

11 CARE PROFESSIONAL OUTPUT GOALS.

12 (a) IN GENERAL.—The Board is responsible for—

13 (1) coordinating health professional education

14 policies and goals, in consultation with the Secretary

15 of Health and Human Services (in this title referred

16 to as the ‘‘Secretary’’), to achieve the national goals

17 specified in subsection (b);

18 (2) overseeing the health professional education

19 expenditures of the State health security programs

20 from the account established under section 602(c);

21 (3) developing and maintaining, in cooperation

22 with the Secretary, a system to monitor the number

23 and specialties of individuals through their health

24 professional education, any postgraduate training,

25 and professional practice; and
124

•HR 1200 SC4

1 (4) developing, coordinating, and promoting

2 other policies that expand the number of primary

3 care practitioners.

4 (b) NATIONAL GOALS.—The national goals specified

5 in this subsection are as follows:

6 (1) GRADUATE MEDICAL EDUCATION.—By not

7 later than 5 years after the date of the enactment

8 of this Act, at least 50 percent of the residents in

9 medical residency education programs (as defined in

10 subsection (e)(1)) are primary care residents (as

11 defined in subsection (e)(3)).

12 (2) MIDLEVEL PRIMARY CARE PRACTITION13 ERS.—To assure an adequate supply of primary care

14 practitioners, there shall be a number, specified by

15 the Board, of midlevel primary care practitioners (as

16 defined in subsection (e)(2)) employed in the health

17 care system as of January 1, 2000.

18 (c) METHOD FOR ATTAINMENT OF NATIONAL GOAL

19 FOR GRADUATE MEDICAL EDUCATION; PROGRAM

20 GOALS.—

21 (1) IN GENERAL.—The Board shall establish a

22 method of applying the national goal in subsection

23 (b)(1) to program goals for each medical residency

24 education program or to medical residency education

25 consortia.
125

•HR 1200 SC4

1 (2) CONSIDERATION.—The program goals

2 under paragraph (1) shall be based on the distribu3 tion of medical schools and other teaching facilities

4 within each State health security program, and the

5 number of positions for graduate medical education.

6 (3) MEDICAL RESIDENCY EDUCATION CONSOR7 TIUM.—In this subsection, the term ‘‘medical resi8 dency education consortium’’ means a consortium of

9 medical residency education programs in a contig10 uous geographic area (which may be an interstate

11 area) if the consortium—

12 (A) includes at least one medical school

13 with a teaching hospital and related teaching

14 settings, and

15 (B) has an affiliation with qualified com16 munity-based primary health service providers

17 described in section 202(a) and with at least

18 one comprehensive health service organization

19 established under section 303.

20 (4) ENFORCEMENT THROUGH STATE HEALTH

21 SECURITY BUDGETS.—The Board shall develop a

22 formula for reducing payments to State health secu23 rity programs (that provide for payments to a medi24 cal residency education program) that failed to meet
126

•HR 1200 SC4

1 the goal for the program established under this sub2 section.

3 (d) METHOD FOR ATTAINMENT OF NATIONAL GOAL

4 FOR MIDLEVEL PRIMARY CARE PRACTITIONERS.—To as5 sist in attaining the national goal identified in subsection

6 (b)(2), the Board shall—

7 (1) advise the Public Health Service on alloca8 tions of funding under titles VII and VIII of the

9 Public Health Service Act, the National Health

10 Service Corps, and other programs in order to in11 crease the supply of midlevel primary care practi12 tioners, and

13 (2) commission a study of the potential benefits

14 and disadvantages of expanding the scope of practice

15 authorized under State laws for any class of midlevel

16 primary care practitioners.

17 (e) DEFINITIONS.—In this title:

18 (1) MEDICAL RESIDENCY EDUCATION PRO19 GRAM.—The term ‘‘medical residency education pro20 gram’’ means a program that provides education

21 and training to graduates of medical schools in order

22 to meet requirements for licensing and certification

23 as a physician, and includes the medical school su24 pervising the program and includes the hospital or

25 other facility in which the program is operated.
127

•HR 1200 SC4

1 (2) MIDLEVEL PRIMARY CARE PRACTI2 TIONER.—The term ‘‘midlevel primary care practi3 tioner’’ means a clinical nurse practitioner, certified

4 nurse midwife, physician assistance, or other non5 physician practitioner, specified by the Board, as

6 authorized to practice under State law.

7 (3) PRIMARY CARE RESIDENT.—The term ‘‘pri8 mary care resident’’ means (in accordance with cri9 teria established by the Board) a resident being

10 trained in a distinct program of family practice med11 icine, general practice, general internal medicine, or

12 general pediatrics.

13 SEC. 702. ESTABLISHMENT OF ADVISORY COMMITTEE ON

14 HEALTH PROFESSIONAL EDUCATION.

15 (a) IN GENERAL.—The Board shall provide for an

16 Advisory Committee on Health Professional Education (in

17 this section referred to as the ‘‘Committee’’) to advise the

18 Board on its activities under section 701.

19 (b) MEMBERSHIP.—The Committee shall be com20 posed of—

21 (1) the Chair of the Board, who shall serve as

22 Chair of the Committee, and

23 (2) 12 members, not otherwise in the employ of

24 the United States, appointed by the Board without

25 regard to the provisions of title 5, United States
128

•HR 1200 SC4

1 Code, governing appointments in the competitive

2 service.

3 The appointed members shall provide a balanced point of

4 view with respect to health professional education, primary

5 care disciplines, and health care policy and shall include

6 individuals who are representative of medical schools,

7 other health professional schools, residency programs, pri8 mary care practitioners, teaching hospitals, professional

9 associations, public health organizations, State health

10 security programs, and consumers.

11 (c) TERMS OF MEMBERS.—Each appointed member

12 shall hold office for a term of five years, except that—

13 (1) any member appointed to fill a vacancy oc14 curring during the term for which the member’s

15 predecessor was appointed shall be appointed for the

16 remainder of that term; and

17 (2) the terms of the members first taking office

18 shall expire, as designated by the Board at the time

19 of appointment, two at the end of the second year,

20 two at the end of the third year, two at the end of

21 the fourth year, and three at the end of the fifth

22 year after the date of enactment of this Act.

23 (d) VACANCIES.—

24 (1) IN GENERAL.—The Board shall fill any va25 cancy in the membership of the Committee in the
129

•HR 1200 SC4

1 same manner as the original appointment. The va2 cancy shall not affect the power of the remaining

3 members to execute the duties of the Committee.

4 (2) VACANCY APPOINTMENTS.—Any member

5 appointed to fill a vacancy shall serve for the re6 mainder of the term for which the predecessor of the

7 member was appointed.

8 (3) REAPPOINTMENT.—The Board may re9 appoint an appointed member of the Committee for

10 a second term in the same manner as the original

11 appointment.

12 (e) DUTIES.—It shall be the duty of the Committee

13 to advise the Board concerning graduate medical edu14 cation policies under this title.

15 (f) STAFF.—The Committee, its members, and any

16 committees of the Committee shall be provided with such

17 secretarial, clerical, or other assistance as may be author18 ized by the Board for carrying out their respective

19 functions.

20 (g) MEETINGS.—The Committee shall meet as fre21 quently as the Board deems necessary, but not less than

22 4 times each year. Upon request by four or more members

23 it shall be the duty of the Chair to call a meeting of the

24 Committee.
130

•HR 1200 SC4

1 (h) COMPENSATION.—Members of the Committee

2 shall be reimbursed by the Board for travel and per diem

3 in lieu of subsistence expenses during the performance of

4 duties of the Board in accordance with subchapter I of

5 chapter 57 of title 5, United States Code.

6 (i) FACA NOT APPLICABLE.—The provisions of the

7 Federal Advisory Committee Act shall not apply to the

8 Committee.

9 SEC. 703. GRANTS FOR HEALTH PROFESSIONS EDUCATION,

10 NURSE EDUCATION, AND THE NATIONAL

11 HEALTH SERVICE CORPS.

12 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

13 From the amounts provided under subsection (c), the

14 Board shall make transfers from the American Health Se15 curity Trust Fund to the Public Health Service under sub16 part II of part D of title III, title VII, and title VIII of

17 the Public Health Service Act for the support of the Na18 tional Health Service Corps, health professions education,

19 and nursing education, including education of clinical

20 nurse practitioners, certified registered nurse anesthetists,

21 certified nurse midwives, and physician assistants. Of the

22 amounts so transferred in each year, not less than 50 per23 cent shall be expended for the support of the National

24 Health Service Corps.
131

•HR 1200 SC4

1 (b) RANGE OF FUNDS.—The amount of transfers

2 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 4 3 ⁄100 percent and not to exceed 6 4 ⁄100 percent of the amounts the

5 Board estimates will be expended from the Trust Fund

6 in the fiscal year.

7 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

8 funds provided under this section with respect to provision

9 of services are in addition to, and not in replacement of,

10 funds made available under the provisions referred to in

11 subsection (a) and shall be administered in accordance

12 with the terms of such provisions. The Board shall make

13 no transfer of funds under this section for any fiscal year

14 for which the total appropriations for the programs au15 thorized by such provisions are less than the total amount

16 appropriated for such programs in fiscal year 1993.

17 Subtitle B—Direct Health Care

18 Delivery

19 SEC. 711. SETASIDE FOR PUBLIC HEALTH BLOCK GRANTS.

20 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

21 From the amounts provided under subsection (c), the

22 Board shall make transfers from the American Health Se23 curity Trust Fund to the Public Health Service for the

24 following purposes:
132

•HR 1200 SC4

1 (1) For payments to States under the maternal

2 and child health block grants under title V of the

3 Social Security Act.

4 (2) Preventive health block grants under part A

5 of title XIX of the Public Health Service Act.

6 (3) Grants to States for community mental

7 health services under subpart I of part B of title

8 XIX of the Public Health Service Act.

9 (4) Grants to States for prevention and treat10 ment of substance abuse under subpart II of part B

11 of title XIX of the Public Health Service Act.

12 (5) Grants for HIV health care services under

13 parts A, B, and C of title XXVI of the Public

14 Health Service Act.

15 (b) RANGE OF FUNDS.—The amount of transfers

16 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 1 17 ⁄10 percent and not to exceed 14 18 ⁄100 percent of the amounts the

19 Board estimates will be expended from the Trust Fund

20 in the fiscal year.

21 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

22 funds provided under this section with respect to provision

23 of services are in addition to, and not in replacement of,

24 funds made available under the programs referred to in

25 subsection (a) and shall be administered in accordance
133

•HR 1200 SC4

1 with the terms of such programs. The Board shall make

2 no transfer of funds under this section for any fiscal year

3 for which the total appropriations for such programs are

4 less than the total amount appropriated for such programs

5 in fiscal year 1993.

6 SEC. 712. SETASIDE FOR PRIMARY HEALTH CARE DELIV7 ERY.

8 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

9 From the amounts provided under subsection (c), the

10 Board shall make transfers from the American Health Se11 curity Trust Fund to the Public Health Service for the

12 program of primary care service expansion grants under

13 subpart V of part D of title III of the Public Health

14 Service Act (as added by section 713 of this Act).

15 (b) RANGE OF FUNDS.—The amount of transfers

16 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 6 17 ⁄100 percent and not to exceed 1 18 ⁄10 percent of the amounts the

19 Board estimates will be expended from the Trust Fund

20 in the fiscal year.

21 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

22 funds provided under this section with respect to provision

23 of services are in addition to, and not in replacement of,

24 funds made available under the sections 329, 330, 340,

25 340A, 1001, and 2655 of the Public Health Service Act.
134

•HR 1200 SC4

1 The Board shall make no transfer of funds under this sec2 tion for any fiscal year for which the total appropriations

3 for such sections are less than the total amount appro4 priated under such sections in fiscal year 1993.

5 SEC. 713. PRIMARY CARE SERVICE EXPANSION GRANTS.

6 Part D of title III of the Public Health Service Act

7 (42 U.S.C. 254b et seq.) is amended by adding at the end

8 thereof the following new subpart:

9 ‘‘Subpart V—Primary Care Expansion

10 ‘‘SEC. 340D. EXPANDING PRIMARY CARE DELIVERY CAPAC11 ITY IN URBAN AND RURAL AREAS.

12 ‘‘(a) GRANTS FOR PRIMARY CARE CENTERS.—From

13 the amounts described in subsection (c), the American

14 Health Security Standards Board shall make grants to

15 public and nonprofit private entities for projects to plan

16 and develop primary care centers which will serve medi17 cally underserved populations (as defined in section

18 330(b)(3)) in urban and rural areas and to deliver primary

19 care services to such populations in such areas. The funds

20 provided under such a grant may be used for the same

21 purposes for which a grant may be made under subsection

22 (c) or (d) of section 330.

23 ‘‘(b) PROCESS OF AWARDING GRANTS.—The provi24 sions of subsection (e)(1) of section 330 shall apply to a

25 grant under this section in the same manner as they apply
135

•HR 1200 SC4

1 to a grant under subsection (c) of such section. The provi2 sions of subsection (g)(3) of such section shall apply to

3 grants for projects to plan and develop primary care cen4 ters under this section in the same manner as they apply

5 to grants under such section.

6 ‘‘(c) FUNDING AS SET-ASIDE FROM TRUST FUND.—

7 Funding to carry out this section is provided from the

8 American Health Security Trust Fund in accordance with

9 section 912 of the American Health Security Act.

10 ‘‘(d) PRIMARY CARE CENTER DEFINED.—In this sec11 tion, the term ‘primary care center’ means—

12 ‘‘(1) a migrant health center (as defined in sec13 tion 329(a)(1)),

14 ‘‘(2) a community health center (as defined in

15 section 330(a)),

16 ‘‘(3) an entity qualified to receive a grant under

17 section 340, 340A, 1001, or 2655, or

18 ‘‘(4) a Federally-qualified health center (as de19 fined in section 1905(l)(2)(B) of the Social Security

20 Act).’’.

21 Subtitle C—Primary Care and

22 Outcomes Research

23 SEC. 721. SET-ASIDE FOR OUTCOMES RESEARCH.

24 (a) GRANTS FOR OUTCOMES RESEARCH.—From the

25 amounts provided under subsection (c), the Board shall
136

•HR 1200 SC4

1 make transfers from the Trust Fund to the Agency for

2 Health Care Policy and Research under title IX of the

3 Public Health Service Act for the purpose of carrying out

4 activities under such title.

5 (b) RANGE OF FUNDS.—The amount of transfers

6 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 1 7 ⁄100 percent and not to exceed 2 8 ⁄100 percent of the amounts the

9 Board estimates will be expended from the Trust Fund

10 in the fiscal year.

11 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

12 funds provided under this section with respect to provision

13 of services are in addition to, and not in replacement of,

14 funds made available to the Agency for Health Care Policy

15 and Research under section 926 of the Public Health

16 Service Act. The Board shall make no transfer of funds

17 under this section for any fiscal year for which the total

18 appropriations under such section are less than the total

19 amount appropriated under such section and title in fiscal

20 year 1993.

21 (d) CONFORMING AMENDMENT.—Section 926(a) of

22 the Public Health Service Act (42 U.S.C. 299c–5(a)) is

23 amended by striking ‘‘$35,000,000’’ and all that follows

24 through the end and inserting ‘‘for each fiscal year (begin-
137

•HR 1200 SC4

1 ning with fiscal year 1994) such sums as may be

2 necessary.’’.

3 SEC. 722. OFFICE OF PRIMARY CARE AND PREVENTION RE4 SEARCH.

5 (a) IN GENERAL.—Title IV of the Public Health

6 Service Act, as amended by section 2 of Public Law 101–

7 613, is amended—

8 (1) by redesignating section 486 as section

9 485A;

10 (2) by redesignating parts F through H as

11 parts G through I, respectively; and

12 (3) by inserting after part E the following new

13 part:

14 ‘‘PART F—RESEARCH ON PRIMARY CARE AND

15 PREVENTION

16 ‘‘SEC. 486. OFFICE OF PRIMARY CARE AND PREVENTION

17 RESEARCH.

18 ‘‘(a) ESTABLISHMENT.—There is established within

19 the Office of the Director of NIH an office to be known

20 as the Office of Primary Care and Prevention Research

21 (in this part referred to as the ‘Office’). The Office shall

22 be headed by a director, who shall be appointed by the

23 Director of NIH.

24 ‘‘(b) PURPOSE.—The Director of the Office shall—
138

•HR 1200 SC4

1 ‘‘(1) identify projects of research on primary

2 care and prevention that should be conducted or

3 supported by the national research institutes, with

4 particular emphasis on—

5 ‘‘(A) clinical patient care,

6 ‘‘(B) diagnostic effectiveness,

7 ‘‘(C) primary care education,

8 ‘‘(D) health and family planning services,

9 ‘‘(E) medical effectiveness outcomes of pri10 mary care procedures and interventions,

11 ‘‘(F) the use of multidisciplinary teams of

12 health care practitioners.

13 ‘‘(2) identify multidisciplinary research related

14 to primary care and prevention that should be so

15 conducted;

16 ‘‘(3) promote coordination and collaboration

17 among entities conducting research identified under

18 any of paragraphs (1) and (2);

19 ‘‘(4) encourage the conduct of such research by

20 entities receiving funds from the national research

21 institutes;

22 ‘‘(5) recommend an agenda for conducting and

23 supporting such research;
139

•HR 1200 SC4

1 ‘‘(6) promote the sufficient allocation of the re2 sources of the national research institutes for con3 ducting and supporting such research; and

4 ‘‘(7) prepare the report required in section

5 486B.

6 ‘‘(c) PRIMARY CARE AND PREVENTION RESEARCH

7 DEFINED.—For purposes of this part, the term ‘primary

8 care and prevention research’ means research on improve9 ment of the practice of family medicine, general internal

10 medicine, and general pediatrics, and includes research

11 relating to—

12 ‘‘(1) obstetrics and gynecology, dentistry, or

13 mental health or substance abuse treatment when

14 provided by a primary care physician or other

15 primary care practitioner, and

16 ‘‘(2) primary care provided by multidisciplinary

17 teams.

18 ‘‘SEC. 486A. NATIONAL DATA SYSTEM AND CLEARINGHOUSE

19 ON PRIMARY CARE AND PREVENTION RE20 SEARCH.

21 ‘‘(a) DATA SYSTEM.—The Director of NIH, in con22 sultation with the Director of the Office, shall establish

23 a data system for the collection, storage, analysis, re24 trieval, and dissemination of information regarding pri25 mary care and prevention research that is conducted or
140

•HR 1200 SC4

1 supported by the national research institutes. Information

2 from the data system shall be available through informa3 tion systems available to health care professionals and pro4 viders, researchers, and members of the public.

5 ‘‘(b) CLEARINGHOUSE.—The Director of NIH, in

6 consultation with the Director of the Office and with the

7 National Library of Medicine, shall establish, maintain,

8 and operate a program to provide, and encourage the use

9 of, information on research and prevention activities of the

10 national research institutes that relate to primary care

11 and prevention research.

12 ‘‘SEC. 486B. BIENNIAL REPORT.

13 ‘‘(a) IN GENERAL.—With respect to primary care

14 and prevention research, the Director of the Office shall,

15 not later than one year after the date of the enactment

16 of this part, and biennially thereafter, prepare a report—

17 ‘‘(1) describing and evaluating the progress

18 made during the preceding two fiscal years in re19 search and treatment conducted or supported by the

20 National Institutes of Health;

21 ‘‘(2) summarizing and analyzing expenditures

22 made by the agencies of such Institutes (and by

23 such Office) during the preceding two fiscal years;

24 and
141

•HR 1200 SC4

1 ‘‘(3) making such recommendations for legisla2 tive and administrative initiatives as the Director of

3 the Office determines to be appropriate.

4 ‘‘(b) INCLUSION IN BIENNIAL REPORT OF DIRECTOR

5 OF NIH.—The Director of the Office shall submit each

6 report prepared under subsection (a) to the Director of

7 NIH for inclusion in the report submitted to the President

8 and the Congress under section 403.’’.

9 (b) REQUIREMENT OF SUFFICIENT ALLOCATION OF

10 RESOURCES OF INSTITUTES.—Section 402(b) of the Pub11 lic Health Service Act (42 U.S.C. 282(b)) is amended—

12 (1) in paragraph (10), by striking ‘‘and’’ after

13 the semicolon at the end;

14 (2) in paragraph (11), by striking the period at

15 the end and inserting ‘‘; and’’; and

16 (3) by inserting after paragraph (11) the fol17 lowing new paragraph:

18 ‘‘(12) after consultation with the Director of

19 the Office of Primary Care and Prevention Re20 search, shall ensure that resources of the National

21 Institutes of Health are sufficiently allocated for

22 projects on primary care and prevention research

23 that are identified under section 486(b).’’.

24 (c) AUTHORIZATION OF APPROPRIATIONS.—Section

25 408 of the Public Health Service Act (42 U.S.C. 284(a))
142

•HR 1200 SC4

1 is amended by adding at the end the following new

2 paragraph:

3 ‘‘(3) For the Office of Primary Care and Pre4 vention Research, there are authorized to be appro5 priated $150,000,000 for fiscal year 1994,

6 $180,000,000 for fiscal year 1995, and

7 $216,000,000 for fiscal year 1996.’’.

8 (d) CONFORMING AMENDMENT.—Section 485(g) of

9 the Public Health Service Act (42 U.S.C. 287c–2(g)) is

10 amended by striking ‘‘section 486’’ and inserting ‘‘section

11 485A’’.

12 TITLE VIII—FINANCING PROVI13 SIONS; AMERICAN HEALTH

14 SECURITY TRUST FUND

15 SEC. 800. AMENDMENT OF 1986 CODE; SECTION 15 NOT TO

16 APPLY.

17 (a) AMENDMENT OF 1986 CODE.—Except as other18 wise expressly provided, whenever in this title an amend19 ment or repeal is expressed in terms of an amendment

20 to, or repeal of, a section or other provision, the reference

21 shall be considered to be made to a section or other provi22 sion of the Internal Revenue Code of 1986.

23 (b) SECTION 15 NOT TO APPLY.—The amendments

24 made by subtitle B shall not be treated as a change in
143

•HR 1200 SC4

1 a rate of tax for purposes of section 15 of the Internal

2 Revenue Code of 1986.

3 Subtitle A—American Health

4 Security Trust Fund

5 SEC. 801. AMERICAN HEALTH SECURITY TRUST FUND.

6 (a) IN GENERAL.—There is hereby created on the

7 books of the Treasury of the United States a trust fund

8 to be known as the American Health Security Trust Fund

9 (in this section referred to as the ‘‘Trust Fund’’). The

10 Trust Fund shall consist of such gifts and bequests as

11 may be made and such amounts as may be deposited in,

12 or appropriated to, such Trust Fund as provided in this

13 Act.

14 (b) APPROPRIATIONS INTO TRUST FUND.—

15 (1) TAXES.—There are hereby appropriated to

16 the Trust Fund for each fiscal year (beginning with

17 fiscal year 1995), out of any moneys in the Treasury

18 not otherwise appropriated, amounts equivalent to

19 100 percent of the aggregate increase in tax liabil20 ities under the Internal Revenue Code of 1986 which

21 is attributable to the application of the amendments

22 made by this title. The amounts appropriated by the

23 preceding sentence shall be transferred from time to

24 time (but not less frequently than monthly) from the

25 general fund in the Treasury to the Trust Fund,
144

•HR 1200 SC4

1 such amounts to be determined on the basis of esti2 mates by the Secretary of the Treasury of the taxes

3 paid to or deposited into the Treasury; and proper

4 adjustments shall be made in amounts subsequently

5 transferred to the extent prior estimates were in ex6 cess of or were less than the amounts that should

7 have been so transferred.

8 (2) CURRENT PROGRAM RECEIPTS.—Notwith9 standing any other provision of law, there are hereby

10 appropriated to the Trust Fund for each fiscal year

11 (beginning with fiscal year 1995) the amounts that

12 would otherwise have been appropriated to carry out

13 the following programs (and any other Federal pro14 gram identified by the Board, in consultation with

15 the Secretary of the Treasury, as providing for pay16 ment for health services the payment of which may

17 be made under this Act):

18 (A) The medicare program, under parts A

19 and B of title XVIII of the Social Security Act

20 (other than amounts attributable to any pre21 miums under such parts).

22 (B) The medicaid program, under State

23 plans approved under title XIX of such Act.
145

•HR 1200 SC4

1 (C) The Federal employees health benefit

2 program, under chapter 89 of title 5, United

3 States Code.

4 (D) The CHAMPUS program, under chap5 ter 55 of title 10, United States Code.

6 (c) INCORPORATION OF PROVISIONS.—The provisions

7 of subsections (b) through (i) of section 1817 of the Social

8 Security Act sxall apply to the Trust Fund undur this Act

9 in the same manner as they applied to the Federal Hos10 pital Insurance Trust Fund under part A of title XVIII

11 of such Act, except that the American Health Security

12 Standards Board shall constitute the Board of Trustees

13 of the Trust Fund.

14 (d) TRANSFER OF FUNDS.—Any amounts remaining

15 in the Federal Hospital Insurance Trust Fund or the Fed16 eral Supplementary Medical Insurance Trust Fund after

17 the settlement of claims for payments under title XVIII

18 have been completed, shall be transferred into the Amer19 ican Health Security Trust Fund.
146

•HR 1200 SC4

1 Subtitle B—Increases in Corporate

2 and Individual Income Tax

3 Rates; Health Security Pre4 mium; Surtax on Individuals

5 With Incomes Over $1,000,000

6 SEC. 811. INCREASES IN REGULAR INCOME TAX RATES.

7 (a) INCREASE IN TOP CORPORATE INCOME TAX

8 RATE.—Subparagraph (C) of section 1(b)(1) (relating to

9 tax imposed on corporations) is amended by striking ‘‘34

10 percent’’ and inserting ‘‘38 percent’’.

11 (b) INCREASE IN INDIVIDUAL INCOME TAXES.—Sec12 tion 1 (relating to tax imposed) as amended by striking

13 subsections (a) through (e) and inserting the following:

14 ‘‘(a) MARRIED INDIVIDUALS FILING JOINT RETURNS

15 AND SURVIVING SPOUSES.—There is hereby imposed on

16 the taxable income of—

17 ‘‘(1) every married individual (as defined in sec18 tion 7703) who makes a single return jointly with

19 his spouse under section 6013, and

20 ‘‘(2) every surviving spouse (as defined in sec21 tion 2(a)), a tax determined in accordance with the

22 following table:

‘‘If taxable income is: The tax is:

Not over $38,000 .......................... 15% of taxable income.

Over $38,000 but not over

$91,900.

$5,700, plus 31% of the excess over

$38,000.

Over $91,900 but not over

$200,000.

$22,409, plus 34% of the excess over

$91,900.
147

•HR 1200 SC4

‘‘If taxable income is: The tax is:

Over $200,000 ............................... $59,163, plus 38% of the excess over

$200,000.

1 ‘‘(b) HEADS OF HOUSEHOLDS.—There is hereby im2 posed on the taxable income of every head of a household

3 (as defined in section 2(b)) a tax determined in accordance

4 with the following table:

‘‘If taxable income is: The tax is:

Not over $30,500 .......................... 15% of taxable income.

Over $30,500 but not over

$78,750.

$4,575, plus 31% of the excess over

$30,500.

Over $78,750 but not over

$172,000.

$19,532.50, plus 34% of the excess

over $78,750.

Over $172,000 ............................... $51,237.50, plus 38% of the excess

over $172,000.

5 ‘‘(c) UNMARRIED INDIVIDUALS (OTHER THAN SUR6 VIVING SPOUSES AND HEADS OF HOUSEHOLDS).—There

7 is hereby imposed on the taxable income of every individ8 ual (other than a surviving spouse as defined in section

9 2(a) or the head of a household as defined in section 2(b))

10 who is not a married individual (as defined in section 770)

11 a tax determined in accordance with the following table:

‘‘If taxable income is: The tax is:

Not over $22,750 .......................... 15% of taxable income.

Over $22,750 but not over

$55,150.

$3,412.50, plus 31% of the excess

over $22,750.

Over $55,150 but not over

$120,000.

$13,456.50, plus 34% of the excess

over $55,150.

Over $120,000 ............................... $35,505, plus 38% of the excess over

$120,000.

12 ‘‘(d) MARRIED INDIVIDUALS FILING SEPARATE RE13 TURNS.—There is hereby imposed on the taxable income

14 of every married individual (as defined in section 7703)

15 who does not make a single return jointly with his spouse
148

•HR 1200 SC4

1 under section 6013, a tax determined in accordance with

2 the following table:

‘‘If taxable income is: The tax is:

Not over $19,000 .......................... 15% of taxable income.

Over $19,000 but not over

$45,950.

$2,850, plus 31% of the excess over

$19,000.

Over $45,950 but not over

$100,000.

$11,204.50, plus 34% of the excess

over $45,950.

Over $100,000 ............................... $29,581.50, plus 38% of the excess

over $100,000.

3 ‘‘(e) ESTATES AND TRUSTS.—There is hereby im4 posed on the taxable income of—

5 ‘‘(1) every estate, and

6 ‘‘(2) every trust,

7 taxable under this subsection a tax determined in accord8 ance with the following table:

‘‘If taxable income is: The tax is:

Not over $3,000 ............................ 15% of taxable income.

Over $3,000 but not over $5,000 .. $450, plus 31% of the excess over

$3,000.

Over $5,000 but not over $7,000 .. $1,070, plus 34% of the excess over

$5,000.

Over $7,000 ................................... $1,750, plus 38% of the excess over

$7,000.’’

9 (c) CONFORMING AMENDMENTS.—

10 (1) Section 541 is amended by striking ‘‘28

11 percent’’ and inserting ‘‘38 percent’’.

12 (2)(A) Subsection (f) of section 1 is amended—

13 (i) by striking ‘‘1990’’ in paragraph (1)

14 and inserting ‘‘1995’’, and

15 (ii) by striking ‘‘1989’’ in paragraph

16 (3)(B) and inserting ‘‘1994’’.
149

•HR 1200 SC4

1 (B) Subparagraph (B) of section 32(i)(1) is

2 amended by striking ‘‘1989’’ and inserting ‘‘1994’’.

3 (C) Subparagraph (C) of section 41(e)(5) is

4 amended by striking ‘‘1989’’ each place it appears

5 and inserting ‘‘1994’’.

6 (D) Subparagraph (B) of section 63(c)(4) is

7 amended by striking ‘‘1989’’ and inserting ‘‘1994’’.

8 (E) Subparagraph (B) of section 68(b)(2) is

9 amended by striking ‘‘1989’’ and inserting ‘‘1994’’.

10 (F) Subparagraphs (A)(ii) and (B)(ii) of section

11 151(d)(4) are each amended by striking ‘‘1989’’ and

12 inserting ‘‘1994’’.

13 (G) Clause (ii) of section 513(h)(2)(C) is

14 amended by striking ‘‘1989’’ and inserting ‘‘1994’’.

15 (H) Subsection (a) of section 1201 is amended

16 by striking ‘‘34 percent’’ each place it appears and

17 inserting ‘‘38 percent’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 1994.

21 SEC. 812. INCREASES IN MINIMUM TAX RATES.

22 (a) IN GENERAL.—Subparagraph (A) of section

23 55(b)(1) (relating to tentative minimum tax) is amended

24 by striking ‘‘20 percent (24 percent’’ and inserting ‘‘25

25 percent (28 percent’’.
150

•HR 1200 SC4

1 (b) CONFORMING AMENDMENT.—Paragraph (2) of

2 section 897(a) is amended by striking ‘‘21’’ in the heading

3 of such paragraph and in subparagraph (A) and inserting

4 ‘‘28’’.

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

6 this section shall apply to taxable years beginning after

7 December 31, 1994.

8 SEC. 813. HEALTH SECURITY PREMIUM.

9 (a) GENERAL RULE.—Subchapter A of chapter 1 (re10 lating to determination of tax liability) is amended by add11 ing at the end thereof the following new part:

12 ‘‘PART VIII—HEALTH SECURITY PREMIUM

‘‘Sec. 59B. Imposition of premium.

13 ‘‘SEC. 59B. IMPOSITION OF PREMIUM.

14 ‘‘(a) GENERAL RULE.—In the case of an individual—

15 ‘‘(1) the amount of the tax imposed under sec16 tion 1 for such taxable year shall be increased by 7.5

17 percent of the tax imposed under section 1 for such

18 taxable year (determined without regard to this

19 paragraph and section 59C), and

20 ‘‘(2) the amount of the tentative minimum tax

21 determined under section 55 for such taxable year

22 shall be increased by 7.5 percent of the amount of

23 the tentative minimum tax for such taxable year (de-
151

•HR 1200 SC4

1 termined without regard to this paragraph and

2 59D).

3 ‘‘(b) SPECIAL RULES.—

4 ‘‘(1) SURTAX TO APPLY TO ESTATES AND

5 TRUSTS.—For purposes of this section, the term ‘in6 dividual’ includes any estate or trust taxable under

7 section 1.

8 ‘‘(2) COORDINATION WITH OTHER PROVI9 SIONS.—The provisions of this section shall be ap10 plied—

11 ‘‘(A) shall be applied after the application

12 of section 1(h), but

13 ‘‘(B) before the application of any other

14 provision of this title which refers to the

15 amount of tax imposed by section 1 or 55, as

16 the case may be.’’

17 (b) CLERICAL AMENDMENT.—The table of parts for

18 subchapter A of chapter 1 is amended by adding at the

19 end the following new item:

‘‘Part VIII. Health security premium.’’

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

21 this section shall apply to taxable years beginning after

22 December 31, 1993.
152

•HR 1200 SC4

1 SEC. 814. SURTAX ON INDIVIDUALS WITH INCOMES OVER

2 $1,000,000.

3 (a) GENERAL RULE.—Subchapter A of chapter 1 (re4 lating to determination of tax liability) is amended by

5 adding at the end thereof the following new part:

6 ‘‘PART IX—SURTAX ON INDIVIDUALS WITH

7 INCOMES OVER $1,000,000

‘‘Sec. 59C. Surtax on section 1 tax.

‘‘Sec. 59D. Surtax on minimum tax.

‘‘Sec. 59E. Special rules.

8 ‘‘SEC. 59C. SURTAX ON SECTION 1 TAX.

9 ‘‘In the case of an individual who has taxable income

10 for the taxable year in excess of $1,000,000, the amount

11 of the tax imposed under section 1 for such taxable year

12 shall be increased by 10 percent of the amount which

13 bears the same ratio to the tax imposed under section 1

14 (determined without regard to this section and section

15 59B) as—

16 ‘‘(1) the amount by which the taxable income of

17 such individual for such taxable year exceeds

18 $1,000,000, bears to

19 ‘‘(2) the total amount of such individual’s tax20 able income for such taxable year.

21 ‘‘SEC. 59D. SURTAX ON MINIMUM TAX.

22 ‘‘In the case of an individual who has alternative min23 imum taxable income for the taxable year in excess of

24 $1,000,000, the amount of the tentative minimum tax de-
153

•HR 1200 SC4

1 termined under section 55 for such taxable year shall be

2 increased by 2.8 percent of the amount by which the alter3 native minimum taxable income of such taxpayer for the

4 taxable year exceeds $1,000,000.

5 ‘‘SEC. 59E. SPECIAL RULES.

6 ‘‘(a) SURTAX TO APPLY TO ESTATES AND

7 TRUSTS.—For purposes of this part, the term ‘individual’

8 includes any estate or trust taxable under section 1.

9 ‘‘(b) TREATMENT OF MARRIED INDIVIDUALS FILING

10 SEPARATE RETURNS.—In the case of a married individual

11 (within the meaning of section 7703) filing a separate re12 turn for the taxable year, sections 59C and 59D shall be

13 applied by substituting ‘$500,000’ for ‘$1,000,000’.

14 ‘‘(c) COORDINATION WITH OTHER PROVISIONS.—

15 The provisions of this part—

16 ‘‘(1) shall be applied after the application of

17 sections 1(h) and 59B, but

18 ‘‘(2) before the application of any other provi19 sion of this title which refers to the amount of tax

20 imposed by section 1 or 55, as the case may be.’’

21 (b) CLERICAL AMENDMENT.—The table of parts for

22 subchapter A of chapter 1 is amended by adding at the

23 end the following new item:

‘‘Part IX. Surtax on individuals with incomes over $1,000,000.’’
154

•HR 1200 SC4

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

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 Subtitle C—Employment Tax

5 Changes

6 SEC. 821. MODIFICATIONS OF CERTAIN EMPLOYMENT TAX

7 PROVISIONS.

8 (a) INCREASE IN EMPLOYER HOSPITAL INSURANCE

9 TAX; REPEAL OF DOLLAR LIMITATION ON AMOUNT OF

10 WAGES SUBJECT TO EMPLOYEE AND EMPLOYER HOS11 PITAL INSURANCE TAXES.—

12 (1) EMPLOYEE TAX.—Subsection (b) of section

13 3101 is amended by striking ‘‘equal to’’ and all that

14 follows and inserting ‘‘equal to 1.45 percent of the

15 wages (as defined in section 3121(a) without regard

16 to paragraph (1) thereof) received by him with re17 spect to employment (as defined in section

18 3121(b))’’.

19 (2) EMPLOYER TAX.—Subsection (b) of section

20 3111 is amended by striking ‘‘equal to’’ and all that

21 follows and inserting ‘‘equal to 7.9 percent of the

22 wages (as defined in section 3121(a) without regard

23 to paragraph (1) thereof) paid by him with respect

24 to employment (as defined in section 3121(b))’’.
155

•HR 1200 SC4

1 (3) SELF-EMPLOYMENT TAX.—Subsection (b)

2 of section 1401 is amended by striking ‘‘a tax as fol3 lows:’’ and all that follows and inserting ‘‘a tax

4 equal to 8.35 percent of the amount of the self-em5 ployment income (as defined in section 1402(b)

6 without regard to paragraph (1) thereof) for such

7 taxable year’’.

8 (4) RAILROAD RETIREMENT TAXES.—Subpara9 graph (A) of section 3231(e)(2) is amended by add10 ing at the end thereof the following new clause:

11 ‘‘(iii) LIMITATION NOT TO APPLY TO

12 TAXES EQUIVALENT TO HOSPITAL INSUR13 ANCE TAXES.—Clause (i) shall not apply

14 to—

15 ‘‘(I) so much of the rate applica16 ble under section 3201(a) or 3221(a)

17 (as the case may be) as does not ex18 ceed the rate of tax in effect under

19 section 3101(b), and

20 ‘‘(II) so much of the rate of tax

21 applicable under section 3211(a)(1) as

22 does not exceed the rate of tax in ef23 fect under section 1401(b).’’

24 (5) TECHNICAL AMENDMENTS.—
156

•HR 1200 SC4

1 (A) Subsection (b) of section 1402 is

2 amended by striking ‘‘the applicable contribu3 tion base (as determined under subsection (k))’’

4 and inserting ‘‘the contribution and benefit base

5 (as determined under section 231 of the Social

6 Security Act)’’.

7 (B) Section 1402 is amended by striking

8 subsection (k).

9 (C) Paragraph (1) of section 3121(a) is

10 amended—

11 (i) by striking ‘‘applicable contribution

12 base (as determined under subsection (x))’’

13 each place it appears and inserting ‘‘con14 tribution and benefit base (as determined

15 under section 230 of the Social Security

16 Act)’’, and

17 (ii) by striking ‘‘such applicable con18 tribution base’’ and inserting ‘‘such con19 tribution and benefit base’’.

20 (D) Section 3121 is amended by striking

21 subsection (x).

22 (E) Clause (i) of section 3231(e)(2)(B) is

23 amended to read as follows:

24 ‘‘(i) TIER 1 TAXES.—Except as pro25 vided in clause (ii), the term ‘applicable
157

•HR 1200 SC4

1 base’ means for any calendar year the con2 tribution and benefit base determined

3 under section 230 of the Social Security

4 Act for such calendar year.’’

5 (F) Paragraph (3) of section 6413(c) is

6 amended to read as follows:

7 ‘‘(3) SEPARATE APPLICATION FOR HOSPITAL

8 INSURANCE TAXES.—Paragraphs (1) and (2) shall

9 not apply to—

10 ‘‘(A) the tax imposed by section 3101(b)

11 (or any amount equivalent to such tax), and

12 ‘‘(B) so much of the tax imposed by sec13 tion 3201 as is determined at a rate not greater

14 than the rate in effect under section 3101(b).’’

15 (G) Sections 3122 and 3125 are each

16 amended—

17 (i) by striking ‘‘section 3111’’ each

18 place it appears and inserting ‘‘section

19 3111(a)’’, and

20 (ii) by striking ‘‘applicable contribu21 tion base limitation’’ and inserting ‘‘con22 tribution and benefit base limitation’’.

23 (6) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to 1994 and later cal25 endar years.
158

•HR 1200 SC4

1 (b) ADDITIONAL STATE AND LOCAL EMPLOYEES

2 SUBJECT TO HOSPITAL INSURANCE TAX.—

3 (1) IN GENERAL.—Paragraph (2) of section

4 3121(u) is amended by striking subparagraphs (C)

5 and (D).

6 (2) EFFECTIVE DATE.—The amendment made

7 by this subsection shall apply to remuneration paid

8 after December 31, 1994.

9 Subtitle D—Other Revenue In10 creases Primarily Affecting In11 dividuals

12 SEC. 831. OVERALL LIMITATION ON ITEMIZED DEDUCTIONS

13 FOR HIGH-INCOME TAXPAYERS MADE PER14 MANENT.

15 Subsection (f) of section 68 (relating to overall limita16 tion on itemized deductions) is hereby repealed.

17 SEC. 832. PHASEOUT OF PERSONAL EXEMPTION OF HIGH18 INCOME TAXPAYERS MADE PERMANENT.

19 Section 151(d)(3) (relating to phaseout of personal

20 exemption) is amended by striking subparagraph (E).

21 SEC. 833. MODIFICATIONS TO DEDUCTIONS FOR CERTAIN

22 MOVING EXPENSES.

23 (a) REPEAL OF DEDUCTION FOR QUALIFIED RESI24 DENCE SALE, ETC., EXPENSES.—
159

•HR 1200 SC4

1 (1) IN GENERAL.—Paragraph (1) of section

2 217(b) (defining moving expenses) is amended by in3 serting ‘‘or’’ at the end of subparagraph (C), by

4 striking ‘‘, or’’ at the end of subparagraph (D) and

5 inserting a period, and by striking subparagraph

6 (E).

7 (2) CONFORMING AMENDMENTS.—

8 (A) Subsection (b) of section 217 is

9 amended by striking paragraph (2) and redesig10 nating paragraph (3) as paragraph (2).

11 (B) Section 217 is amended by striking

12 subsection (e).

13 (b) DEDUCTION DISALLOWED FOR MEAL EX14 PENSES.—Paragraph (1) of section 217(b) is amended—

15 (1) by striking ‘‘meals and lodging’’ in subpara16 graphs (B), (C) and (D) and inserting ‘‘lodging’’,

17 and

18 (2) by adding at the end thereof the following

19 new sentence:

20 ‘‘Such term shall not include any expenses for

21 meals.’’.

22 (c) OVERALL LIMITATION.—

23 (1) IN GENERAL.—Subparagraph (A) of section

24 217(b)(2) (as redesignated by subsection (a)) is

25 amended to read as follows:
160

•HR 1200 SC4

1 ‘‘(A) DOLLAR LIMITS.—The aggregate

2 amount allowable as a deduction under sub3 section (a) in connection with a commencement

4 of work shall not exceed $5,000. The aggregate

5 amount allowable as a deduction under sub6 section (a) in connection with a commencement

7 of work which is attributable to expenses de8 scribed in subparagraphs (C) or (D) of para9 graph (1) shall not exceed $1,500.’’

10 (2) CONFORMING AMENDMENTS.—

11 (A) Subparagraph (B) of section 217(b)(2)

12 (as so redesignated) is amended by striking the

13 second sentence and inserting the following: ‘‘In

14 the case of a husband and wife filing separate

15 returns, subparagraph (A) shall be applied by

16 substituting ‘$750’ for ‘$1,500’, and by sub17 stituting ‘$2,500’ for ‘$5,000’.’’

18 (B) Paragraph (1) of section 217(h) is

19 amended by striking subparagraphs (B) and

20 (C) and inserting the following:

21 ‘‘(B) subsection (b)(2)(A) shall be applied

22 by substituting ‘$4,500’ for ‘$1,500’, and

23 ‘‘(C) appropriate adjustments to the appli24 cation of the last sentence of subsection

25 (b)(2)(B) shall be made to take into account
161

•HR 1200 SC4

1 the provisions of subparagraph (B) of this para2 graph.’’

3 (d) INCREASE IN MILEAGE REQUIREMENTS.—Para4 graph (1) of section 217(c) is amended by striking ‘‘35

5 miles’’ each place it appears and inserting ‘‘60 miles’’.

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to taxable years beginning after

8 December 31, 1994.

9 SEC. 834. TOP ESTATE AND GIFT TAX RATES MADE PERMA10 NENT.

11 (a) GENERAL RULE.—The table contained in para12 graph (1) of section 2001(c) is amended by striking the

13 last item and inserting the following new items:

‘‘Over $2,500,000 but not over

$3,000,000.

$1,025,800, plus 53% of the excess

over $2,500,000.

Over $3,000,000 ............................ $1,290,800, plus 55% of the excess

over $3,000,000.’’

14 (b) CONFORMING AMENDMENTS.—

15 (1) Subsection (c) of section 2001 is amended

16 by striking paragraph (2) and by redesignating

17 paragraph (3) as paragraph (2).

18 (2) Paragraph (2) of section 2001(c), as redes19 ignated by paragraph (1), is amended by striking

20 ‘‘($18,340,000 in the case of decedents dying, and

21 gifts made, after 1992)’’.
162

•HR 1200 SC4

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

2 this section shall apply in the case of decedents dying, and

3 gifts made, after December 31, 1994.

4 SEC. 835. ELIMINATION OF DEDUCTION FOR CLUB MEM5 BERSHIP FEES.

6 (a) IN GENERAL.—Subsection (a) of section 274 (re7 lating to disallowance of certain entertainment, etc., ex8 penses) is amended by adding at the end thereof the fol9 lowing new paragraph:

10 ‘‘(3) DENIAL OF DEDUCTION FOR CLUB

11 DUES.—Notwithstanding the preceding provisions of

12 this subsection, no deduction shall be allowed under

13 this chapter for amounts paid or incurred for mem14 bership in any club organized for business, pleasure,

15 recreation, or other social purpose.’’

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

17 this section shall apply to amounts paid or incurred after

18 December 31, 1994.

19 SEC. 836. INCREASE OF SOCIAL SECURITY BENEFITS IN20 CLUDED IN INCOME.

21 (a) IN GENERAL.—Subsections (a) and (b) of section

22 86 are each amended by striking ‘‘one-half’’ each place

23 it appears and inserting ‘‘85 percent’’.
163

•HR 1200 SC4

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

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 SEC. 837. LONG-TERM HEALTH CARE PREMIUM FOR THE

5 ELDERLY.

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

7 (b), each individual who at any time in a month is 65

8 years of age or older and is eligible for benefits under title

9 XXI of the Social Security Act in the month shall pay

10 a long-term care/health care premium for the month of

11 $65.

12 (b) EXCEPTION FOR LOW-INCOME ELDERLY.—The

13 Secretary of Health and Human Services shall provide a

14 process whereby individuals with an adjusted gross income

15 which does not exceed $8,500 (or $10,700 in the case of

16 joint adjusted gross income in the case of a married indi17 vidual) are not liable for the premium imposed under

18 paragraph (1).

19 (c) COLLECTION OF PREMIUM.—The premium im20 posed under this section shall be collected in the same

21 manner (including deduction from Social Security checks)

22 as the premium imposed under part B of title XVIII of

23 the Social Security Act was collected under section 1840

24 of such Act as of the date of the enactment of this Act.
164

•HR 1200 SC4

1 (d) DEPOSIT INTO NATIONAL HEALTH TRUST

2 FUND.—Premiums collected under this section shall be

3 transferred to and deposited into the National Health

4 Trust Fund in the same manner as premiums collected

5 under section 1840 of the Social Security Act were

6 transferred and deposited into the Federal Supple7 mentary Medical Insurance Trust Fund.

8 (e) COST-OF-LIVING ADJUSTMENT OF PREMIUM.—In

9 the case of months beginning in any calendar year after

10 1996, the dollar amount contained in paragraph (1) shall

11 be increased by an amount equal to such dollar amount,

12 multiplied by the cost-of-living adjustment determined

13 under section 1(f)(3) for the calendar year in which the

14 month begins.

15 (f) APPLICATION OF SECTION.—This section shall

16 apply to months beginning after December 31, 1994.

17 Subtitle E—Other Revenue In18 creases Primarily Affecting

19 Businesses

20 SEC. 841. MARK TO MARKET ACCOUNTING METHOD FOR

21 SECURITIES DEALERS.

22 (a) GENERAL RULE.—Subpart D of part II of sub23 chapter E of chapter 1 (relating to inventories) is

24 amended by adding at the end thereof the following new

25 section:
165

•HR 1200 SC4

1 ‘‘SEC. 475. MARK TO MARKET ACCOUNTING METHOD FOR

2 DEALERS IN SECURITIES.

3 ‘‘(a) GENERAL RULE.—Notwithstanding any other

4 provision of this subpart, the following rules shall apply

5 to securities held by a dealer in securities:

6 ‘‘(1) Any security which is inventory in the

7 hands of the dealer shall be included in inventory at

8 its fair market value.

9 ‘‘(2) In the case of any security which is not in10 ventory in the hands of the dealer and which is held

11 at the close of any taxable year—

12 ‘‘(A) the dealer shall recognize gain or loss

13 as if such security were sold for its fair market

14 value on the last business day of such taxable

15 year, and

16 ‘‘(B) any gain or loss shall be taken into

17 account for such taxable year.

18 Proper adjustment shall be made in the amount of

19 any gain or loss subsequently realized for gain or

20 loss taken into account under the preceding sen21 tence. The Secretary may provide by regulations for

22 the application of this paragraph at times other than

23 the times provided in this paragraph.

24 ‘‘(b) EXCEPTIONS.—

25 ‘‘(1) IN GENERAL.—Subsection (a) shall not

26 apply to—
166

•HR 1200 SC4

1 ‘‘(A) any security held for investment,

2 ‘‘(B)(i) any security described in sub3 section (c)(2)(C) which is acquired (including

4 originated) by the taxpayer in the ordinary

5 course of a trade or business of the taxpayer

6 and which is not held for sale, and (ii) any obli7 gation to acquire a security described in clause

8 (i) if such obligation is entered into in the ordi9 nary course of such trade or business and is not

10 held for sale, and

11 ‘‘(C) any security which is a hedge with re12 spect to—

13 ‘‘(i) a security to which subsection (a)

14 does not apply, or

15 ‘‘(ii) a position, right to income, or a

16 liability which is not a security in the

17 hands of the taxpayer.

18 To the extent provided in regulations, subparagraph

19 (C) shall not apply to any security held by a person

20 in its capacity as a dealer in securities.

21 ‘‘(2) IDENTIFICATION REQUIRED.—A security

22 shall not be treated as described in subparagraph

23 (A), (B), or (C) of paragraph (1), as the case may

24 be, unless such security is clearly identified in the

25 dealer’s records as being described in such subpara-
167

•HR 1200 SC4

1 graph before the close of the day on which it was ac2 quired, originated, or entered into (or such other

3 time as the Secretary may by regulations prescribe).

4 ‘‘(3) SECURITIES SUBSEQUENTLY NOT EX5 EMPT.—If a security ceases to be described in para6 graph (1) at any time after it was identified as such

7 under paragraph (2), subsection (a) shall apply to

8 any changes in value of the security occurring after

9 the cessation.

10 ‘‘(4) SPECIAL RULE FOR PROPERTY HELD FOR

11 INVESTMENT.—To the extent provided in regula12 tions, subparagraph (A) of paragraph (1) shall not

13 apply to any security described in subparagraph (D)

14 or (E) of subsection (c)(2) which is held by a dealer

15 in such securities.

16 ‘‘(c) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) DEALER IN SECURITIES DEFINED.—The

18 term ‘dealer in securities’ means a taxpayer who—

19 ‘‘(A) regularly purchases securities from or

20 sells securities to customers in the ordinary

21 course of a trade or business; or

22 ‘‘(B) regularly offers to enter into, assume,

23 offset, assign or otherwise terminate positions

24 in securities with customers in the ordinary

25 course of a trade or business.
168

•HR 1200 SC4

1 ‘‘(2) SECURITY DEFINED.—The term ‘security’

2 means any—

3 ‘‘(A) share of stock in a corporation;

4 ‘‘(B) partnership or beneficial ownership

5 interest in a widely held or publicly traded part6 nership or trust;

7 ‘‘(C) note, bond, debenture, or other evi8 dence of indebtedness;

9 ‘‘(D) interest rate, currency, or equity no10 tional principal contract;

11 ‘‘(E) evidence of an interest in, or a deriv12 ative financial instrument in, any security de13 scribed in subparagraph (A), (B), (C), or (D),

14 or any currency, including any option, forward

15 contract, short position, and any similar finan16 cial instrument in such a security or currency;

17 and

18 ‘‘(F) position which—

19 ‘‘(i) is not a security described in sub20 paragraph (A), (B), (C), (D), or (E),

21 ‘‘(ii) is a hedge with respect to such

22 a security, and

23 ‘‘(iii) is clearly identified in the deal24 er’s records as being described in this sub25 paragraph before the close of the day on
169

•HR 1200 SC4

1 which it was acquired or entered into (or

2 such other time as the Secretary may by

3 regulations prescribe).

4 Subparagraph (E) shall not include any contract to

5 which section 1256(a) applies.

6 ‘‘(3) HEDGE.—The term ‘hedge’ means any po7 sition which reduces the dealer’s risk of interest rate

8 or price changes or currency fluctuations, including

9 any position which is reasonably expected to become

10 a hedge within 60 days after the acquisition of the

11 position.

12 ‘‘(d) SPECIAL RULES.—For purposes of this sec13 tion—

14 ‘‘(1) COORDINATION WITH CERTAIN RULES.—

15 The rules of sections 263(g), 263A, and 1256(a)

16 shall not apply to securities to which subsection (a)

17 applies, and section 1091 shall not apply (and sec18 tion 1092 shall apply) to any loss recognized under

19 subsection (a).

20 ‘‘(2) IMPROPER IDENTIFICATION.—If a tax21 payer—

22 ‘‘(A) identifies any security under sub23 section (b)(2) as being described in subsection

24 (b)(1) and such security is not so described, or
170

•HR 1200 SC4

1 ‘‘(B) fails under subsection (c)(2)(F)(iii) to

2 identify any position which is described in sub3 section (c)(2)(F) (without regard to clause (iii)

4 thereof) at the time such identification is

5 required,

6 the provisions of subsection (a) shall apply to such

7 security or position, except that any loss under this

8 section prior to the disposition of the security or po9 sition shall be recognized only to the extent of gain

10 previously recognized under this section (and not

11 previously taken into account under this paragraph)

12 with respect to such security or position.

13 ‘‘(3) CHARACTER OF GAIN OR LOSS.—

14 ‘‘(A) IN GENERAL.—Except as provided in

15 subparagraph (B) or section 1236(b)—

16 ‘‘(i) IN GENERAL.—Any gain or loss

17 with respect to a security under subsection

18 (a)(2) shall be treated as ordinary income

19 or loss.

20 ‘‘(ii) SPECIAL RULE FOR DISPOSI21 TIONS.—If—

22 ‘‘(I) gain or loss is recognized

23 with respect to a security before the

24 close of the taxable year, and
171

•HR 1200 SC4

1 ‘‘(II) subsection (a)(2) would

2 have applied if the security were held

3 as of the close of the taxable year,

4 such gain or loss shall be treated as ordi5 nary income or loss.

6 ‘‘(B) EXCEPTION.—Subparagraph (A)

7 shall not apply to any gain or loss which is allo8 cable to a period during which—

9 ‘‘(i) the security is described in sub10 section (b)(1)(C) (without regard to sub11 section (b)(2)),

12 ‘‘(ii) the security is held by a person

13 other than in connection with its activities

14 as a dealer in securities, or

15 ‘‘(iii) the security is improperly identi16 fied (within the meaning of subparagraph

17 (A) or (B) of paragraph (2)).

18 ‘‘(e) REGULATORY AUTHORITY.—The Secretary shall

19 prescribe such regulations as may be necessary or appro20 priate to carry out the purposes of this section, including

21 rules—

22 ‘‘(1) to prevent the use of year-end transfers,

23 related parties, or other arrangements to avoid the

24 provisions of this section, and
172

•HR 1200 SC4

1 ‘‘(2) to provide for the application of this sec2 tion to any security which is a hedge which cannot

3 be identified with a specific security, position, right

4 to income, or liability.’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Paragraph (1) of section 988(d) is amend7 ed—

8 (A) by striking ‘‘section 1256’’ and insert9 ing ‘‘section 475 or 1256’’, and

10 (B) by striking ‘‘1092 and 1256’’ and in11 serting ‘‘475, 1092, and 1256’’.

12 (2) The table of sections for subpart D of part

13 II of subchapter E of chapter 1 is amended by add14 ing at the end thereof the following new item:

‘‘Sec. 475. Mark to market accounting method for dealers in securities.’’

15 (c) EFFECTIVE DATE.—

16 (1) IN GENERAL.—The amendments made by

17 this section shall apply to all taxable years ending on

18 or after December 31, 1994.

19 (2) CHANGE IN METHOD OF ACCOUNTING.—In

20 the case of any taxpayer required by this section to

21 change its method of accounting for any taxable

22 year—

23 (A) such change shall be treated as initi24 ated by the taxpayer,
173

•HR 1200 SC4

1 (B) such change shall be treated as made

2 with the consent of the Secretary, and

3 (C) the net amount of the adjustments re4 quired to be taken into account by the taxpayer

5 under section 481 of the Internal Revenue Code

6 of 1986 shall be taken into account ratably over

7 the 4-taxable year period beginning with the

8 first taxable year ending on or after Decem9 ber 31, 1994.

10 SEC. 842. INCREASE IN RECOVERY PERIOD FOR

11 NONRESIDENTIAL REAL PROPERTY.

12 (a) GENERAL RULE.—Paragraph (1) of section

13 168(c) (relating to applicable recovery period) is amended

14 by striking the item relating to nonresidential real prop15 erty and inserting the following:

‘‘Nonresidential real property .................................................. 40 years.’’.

16 (b) EFFECTIVE DATE.—

17 (1) IN GENERAL.—Except as provided in para18 graph (2), the amendment made by subsection (a)

19 shall apply to property placed in service by the tax20 payer after December 31, 1994.

21 (2) EXCEPTION.—The amendments made by

22 this section shall not apply to property placed in

23 service by the taxpayer before January 1, 1996, if—

24 (A) the taxpayer or a qualified person en25 tered into a binding written contract to pur-
174

•HR 1200 SC4

1 chase or construct such property before Decem2 ber 31, 1994, or

3 (B) the construction of such property was

4 commenced by or for the taxpayer or a qualified

5 person before December 31, 1994.

6 For purposes of this paragraph, the term ‘‘qualified

7 person’’ means any person who transfers his rights

8 in such a contract or such property to the taxpayer

9 but only if the property is not placed in service by

10 such person before such rights are transferred to the

11 taxpayer.

12 SEC. 843. TAXATION OF INCOME OF CONTROLLED FOREIGN

13 CORPORATIONS ATTRIBUTABLE TO IM14 PORTED PROPERTY.

15 (a) GENERAL RULE.—Subsection (a) of section 954

16 (defining foreign base company income) is amended by

17 striking ‘‘and’’ at the end of paragraph (4), by striking

18 the period at the end of paragraph (5) and inserting ‘‘,

19 and’’, and by adding at the end thereof the following new

20 paragraph:

21 ‘‘(6) imported property income for the taxable

22 year (determined under subsection (h) and reduced

23 as provided in subsection (b)(5)).’’
175

•HR 1200 SC4

1 (b) DEFINITION OF IMPORTED PROPERTY IN2 COME.—Section 954 is amended by adding at the end

3 thereof the following new subsection:

4 ‘‘(h) IMPORTED PROPERTY INCOME.—

5 ‘‘(1) IN GENERAL.—For purposes of subsection

6 (a)(6), the term ‘imported property income’ means

7 income (whether in the form of profits, commissions,

8 fees, or otherwise) derived in connection with—

9 ‘‘(A) manufacturing, producing, growing,

10 or extracting imported property,

11 ‘‘(B) the sale, exchange, or other disposi12 tion of imported property, or

13 ‘‘(C) the lease, rental, or licensing of im14 ported property.

15 Such term shall not include any foreign oil and gas

16 extraction income (within the meaning of section

17 907(c)) or any foreign oil related income (within the

18 meaning of section 907(c)).

19 ‘‘(2) IMPORTED PROPERTY.—For purposes of

20 this subsection—

21 ‘‘(A) IN GENERAL.—Except as otherwise

22 provided in this paragraph, the term ‘imported

23 property’ means property which is imported

24 into the United States by the controlled foreign

25 corporation or a related person.
176

•HR 1200 SC4

1 ‘‘(B) IMPORTED PROPERTY INCLUDES CER2 TAIN PROPERTY IMPORTED BY UNRELATED

3 PERSONS.—The term ‘imported property’ in4 cludes any property imported into the United

5 States by an unrelated person if, when such

6 property was sold to the unrelated person by

7 the controlled foreign corporation (or a related

8 person), it was reasonable to expect that—

9 ‘‘(i) such property would be imported

10 into the United States, or

11 ‘‘(ii) such property would be used as

12 a component in other property which would

13 be imported into the United States.

14 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE15 QUENTLY EXPORTED.—The term ‘imported

16 property’ does not include any property which is

17 imported into the United States and which—

18 ‘‘(i) before substantial use in the

19 United States, is sold, leased, or rented by

20 the controlled foreign corporation or a re21 lated person for direct use, consumption,

22 or disposition outside the United States, or

23 ‘‘(ii) is used by the controlled foreign

24 corporation or a related person as a com-
177

•HR 1200 SC4

1 ponent in other property which is so sold,

2 leased, or rented.

3 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—

4 ‘‘(A) IMPORT.—For purposes of this sub5 section, the term ‘import’ means entering, or

6 withdrawal from warehouse, for consumption or

7 use. Such term includes any grant of the right

8 to use an intangible (as defined in section

9 936(b)(3)(B)) in the United States.

10 ‘‘(B) UNRELATED PERSON.—For purposes

11 of this subsection, the term ‘unrelated person’

12 means any person who is not a related person

13 with respect to the controlled foreign corpora14 tion.

15 ‘‘(C) COORDINATION WITH FOREIGN BASE

16 COMPANY SALES INCOME.—For purposes of this

17 section, the term ‘foreign base company sales

18 income’ shall not include any imported property

19 income.’’

20 (c) SEPARATE APPLICATION OF LIMITATIONS ON

21 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN22 COME.—

23 (1) IN GENERAL.—Paragraph (1) of section

24 904(d) (relating to separate application of section

25 with respect to certain categories of income) is
178

•HR 1200 SC4

1 amended by striking ‘‘and’’ at the end of subpara2 graph (H), by redesignating subparagraph (I) as

3 subparagraph (J), and by inserting after subpara4 graph (H) the following new subparagraph:

5 ‘‘(I) imported property income, and’’.

6 (2) IMPORTED PROPERTY INCOME DEFINED.—

7 Paragraph (2) of section 904(d) is amended by re8 designating subparagraphs (H) and (I) as subpara9 graphs (I) and (J), respectively, and by inserting

10 after subparagraph (G) the following new subpara11 graph:

12 ‘‘(H) IMPORTED PROPERTY INCOME.—The

13 term ‘imported property income’ means any in14 come received or accrued by any person which

15 is of a kind which would be imported property

16 income (as defined in section 954(h)).’’

17 (3) LOOK-THRU RULES TO APPLY.—Subpara18 graph (F) of section 904(d)(3) is amended by strik19 ing ‘‘or (E)’’ and inserting ‘‘(E), or (H)’’.

20 (d) TECHNICAL AMENDMENTS.—

21 (1) Clause (iii) of section 952(c)(1)(B) (relating

22 to certain prior year deficits may be taken into ac23 count) is amended by inserting the following

24 subclause after subclause (II) (and by redesignating

25 the following subclauses accordingly):
179

•HR 1200 SC4

1 ‘‘(III) imported property income,’’.

2 (2) Paragraph (5) of section 954(b) (relating to

3 deductions to be taken into account) is amended by

4 striking ‘‘and the foreign base company oil related

5 income’’ and inserting ‘‘the foreign base company oil

6 related income, and the imported property income’’.

7 (e) EFFECTIVE DATE.—

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by this section

10 shall apply to taxable years of foreign corporations

11 beginning after December 31, 1994, and to taxable

12 years of United States shareholders within which or

13 with which such taxable years of such foreign cor14 porations end.

15 (2) SUBSECTION (c).—The amendments made

16 by subsection (c) shall apply to taxable years begin17 ning after December 31, 1994.

18 SEC. 844. REPEAL OF DEDUCTION FOR INTANGIBLE DRILL19 ING AND DEVELOPMENT COSTS.

20 (a) IN GENERAL.—Subsection (c) of section 263 (re21 lating to capital expenditures) is hereby repealed.

22 (b) CONFORMING AMENDMENT.—Section 57 (relat23 ing to items of tax preference) is amended by striking sub24 sections (a)(2) and (b).
180

•HR 1200 SC4

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

2 this section shall apply to costs paid or incurred after De3 cember 31, 1994, in taxable years ending after such date.

4 SEC. 845. REPEAL OF PERCENTAGE DEPLETION FOR OIL

5 AND GAS WELLS.

6 (a) IN GENERAL.—Section 613A is hereby repealed.

7 (b) CONFORMING AMENDMENTS.—

8 (1) Subsection (d) of section 613 (relating to

9 percentage depletion) is amended by striking ‘‘Ex10 cept as provided in section 613A, in’’ and inserting

11 ‘‘In’’.

12 (2) Paragraph (1) of section 57(a) is amended

13 by striking the last sentence.

14 (3) The table of sections for part I of sub15 chapter I of chapter 1 is amended by striking the

16 item relating to section 613A.

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

18 this section shall apply to taxable years beginning after

19 December 31, 1994.

20 SEC. 846. REPEAL OF APPLICATION OF LIKE-KIND EX21 CHANGE RULES TO REAL PROPERTY.

22 (a) IN GENERAL.—Paragraph (2) of section 1031(a)

23 (relating to exchange of property held for productive use

24 or investment) is amended by striking ‘‘or’’ at the end of

25 subparagraph (E), by striking the period at the end of
181

•HR 1200 SC4

1 subparagraph (F) and inserting ‘‘, or’’, and by adding at

2 the end thereof the following new subparagraph:

3 ‘‘(G) real property.’’

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

5 subsection (a) shall apply to transfers after December 31,

6 1994.

7 SEC. 847. AMORTIZATION OF PORTION OF ADVERTISING

8 EXPENSES.

9 (a) IN GENERAL.—Part IX of subchapter B of chap10 ter 1 (relating to items not deductible) is amended by in11 serting after section 263A the following new section:

12 ‘‘SEC. 263B. CAPITALIZATION OF PORTION OF ADVERTISING

13 EXPENSES.

14 ‘‘(a) 20 PERCENT OF ADVERTISING EXPENSES RE15 QUIRED TO BE CAPITALIZED.—

16 ‘‘(1) DISALLOWANCE.—Expect as provided in

17 paragraph (2), no deduction shall be allowed for 20

18 percent of the advertising expenses paid or incurred

19 by the taxpayer during the taxable year.

20 ‘‘(2) AMORTIZATION OF DISALLOWED

21 AMOUNT.—The amount not allowed as a deduction

22 under paragraph (1) for any taxable year—

23 ‘‘(A) shall be treated as chargeable to cap24 ital account with respect to the trade or busi-
182

•HR 1200 SC4

1 ness (or activity described in section 212) in

2 which incurred, and

3 ‘‘(B) shall be allowed as a deduction rat4 ably over the 48-month period beginning with

5 the 1st month of the following taxable year.

6 ‘‘(b) ADVERTISING EXPENSES.—For purposes of this

7 section—

8 ‘‘(1) IN GENERAL.—The term ‘advertising ex9 pense’ means any amount—

10 ‘‘(A) which (without regard to this section)

11 is allowable as a deduction under section 162

12 or 212 for the taxable year in which paid or

13 incurred, and

14 ‘‘(B) which is paid or incurred in connec15 tion with an attempt to encourage the purchase

16 or sale, lease, or use of any product or service

17 for the benefit of the taxpayer or a related

18 person by means of any media.

19 ‘‘(2) AMOUNTS DEDUCTIBLE AS DEPRECIATION

20 OR AMORTIZATION TREATED AS EXPENSES.—The

21 amount allowable as a deduction under this chapter

22 for the taxable year for depreciation or amortization

23 shall be treated for purposes of this section as an ex24 pense paid or incurred during such year which is de25 scribed in paragraph (1).’’
183

•HR 1200 SC4

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

2 for such part IX is amended by inserting after the item

3 relating to section 263A the following new item:

‘‘Sec. 263B. Capitalization of portion of advertising expenses.’’

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

5 this section shall apply to amounts paid or incurred after

6 December 31, 1994, in taxable years ending after such

7 date.

8 Subtitle F—Estimated Tax

9 Provisions

10 SEC. 851. INDIVIDUAL ESTIMATED TAX PROVISIONS.

11 (a) GENERAL RULE.—Paragraph (1) of section

12 6654(d) (relating to amount of required installment) is

13 amended—

14 (1) by striking ‘‘100 percent’’ in subparagraph

15 (B)(ii) and inserting ‘‘120 percent’’, and

16 (2) by striking subparagraphs (C), (D), (E),

17 and (F).

18 (b) CONFORMING AMENDMENTS.—

19 (1) Subparagraph (C) of section 6654(i)(1) is

20 amended by striking ‘‘and without regard to sub21 paragraph (C) of subsection (d)(1)’’.

22 (2) Subparagraph (A) of section 6654(j)(3) is

23 amended by striking ‘‘and subsection (d)(1)(C)(iii)

24 shall not apply’’.
184

•HR 1200 SC4

1 (3) Paragraph (4) of section 6654(l) is amend2 ed by striking ‘‘paragraphs (1)(C)(iv) and (2)(B)(i)

3 of subsection (d)’’ and inserting ‘‘subsection

4 (d)(2)(B)(i)’’.

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

6 this subsection shall apply to taxable years beginning after

7 December 31, 1994.

8 SEC. 852. CORPORATE ESTIMATED TAX PROVISIONS.

9 (a) INCREASE IN ESTIMATED TAX.—

10 (1) IN GENERAL.—Subsection (d) of section

11 6655 (relating to amount of required installments) is

12 amended—

13 (A) by striking ‘‘91 percent’’ each place it

14 appears in paragraph (1)(B)(i) and inserting

15 ‘‘100 percent’’,

16 (B) by striking ‘‘91 PERCENT’’ in the head17 ing of paragraph (2) and inserting ‘‘100 PER18 CENT’’, and

19 (C) by striking paragraph (3).

20 (2) CONFORMING AMENDMENTS.—

21 (A) Clause (ii) of section 6655(e)(2)(B) is

22 amended by striking the table contained therein

23 and inserting the following new table:

The

‘‘In the case of the following applicable

required installments: percentage is:

1st .............................................................. 25

2nd ............................................................. 50
185

•HR 1200 SC4

3rd ............................................................. 75

4th .............................................................. 100.’’

1 (B) Clause (i) of section 6655(e)(3)(A) is

2 amended by striking ‘‘91 percent’’ and inserting

3 ‘‘100 percent’’.

4 (b) MODIFICATION OF PERIODS FOR APPLYING

5 ANNUALIZATION.—

6 (1) Clause (i) of section 6655(e)(2)(A) is

7 amended—

8 (A) by striking ‘‘or for the first 5 months’’

9 in subclause (II),

10 (B) by striking ‘‘or for the first 8 months’’

11 in subclause (III), and

12 (C) by striking ‘‘or for the first 11

13 months’’ in subclause (IV).

14 (2) Paragraph (2) of section 6655(e) is amend15 ed by adding at the end thereof the following new

16 subparagraph:

17 ‘‘(C) ELECTION FOR DIFFERENT

18 ANNUALIZATION PERIODS.—

19 ‘‘(i) If the taxpayer makes an election

20 under this clause—

21 ‘‘(I) subclause (II) of subpara22 graph (A)(i) shall be applied by sub23 stituting ‘4 months’ for ‘3 months’,
186

•HR 1200 SC4

1 ‘‘(II) subclause (III) of subpara2 graph (A)(i) shall be applied by sub3 stituting ‘7 months’ for ‘6 months’,

4 and

5 ‘‘(III) subclause (IV) of subpara6 graph (A)(i) shall be applied by sub7 stituting ‘10 months’ for ‘9 months’.

8 ‘‘(ii) If the taxpayer makes an election

9 under this clause—

10 ‘‘(I) subclause (II) of subpara11 graph (A)(i) shall be applied by sub12 stituting ‘5 months’ for ‘3 months’,

13 ‘‘(II) subclause (III) of subpara14 graph (A)(i) shall be applied by sub15 stituting ‘8 months’ for ‘6 months’,

16 and

17 ‘‘(III) subclause (IV) of subpara18 graph (A)(i) shall be applied by sub19 stituting ‘11 months’ for ‘9 months’.

20 ‘‘(iii) An election under clause (i) or

21 (ii) shall apply to the taxable year for

22 which made and such an election shall be

23 effective only if made on or before the date

24 required for the payment of the second re25 quired installment for such taxable year.’’
187

•HR 1200 SC4

1 (3) The last sentence of section 6655(f)(3)(A)

2 is amended by striking ‘‘and subsection (e)(2)(A)’’

3 and inserting ‘‘and, except in the case of an election

4 under subsection (e)(2)(C), subsection (e)(2)(A)’’.

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

6 this section shall apply to taxable years beginning after

7 December 31, 1994.

8 Subtitle G—Alternative Taxable

9 Years

10 SEC. 861. ELECTION OF TAXABLE YEAR OTHER THAN RE11 QUIRED TAXABLE YEAR.

12 (a) LIMITATIONS ON TAXABLE YEARS WHICH MAY

13 BE ELECTED.—Subsection (b) of section 444 (relating to

14 limitations on taxable years which may be elected) is

15 amended to read as follows:

16 ‘‘(b) TAXABLE YEAR MUST BE SAME AS REPORTING

17 PERIOD.—If an entity has annual reports or statements—

18 ‘‘(1) which ascertain income, profit, or loss of

19 the entity, and

20 ‘‘(2) which are—

21 ‘‘(A) provided to shareholders, partners, or

22 other proprietors, or

23 ‘‘(B) used for credit purposes,
188

•HR 1200 SC4

1 the entity may make an election under subsection (a) only

2 if the taxable year elected covers the same period as such

3 reports or statements.’’

4 (b) PERIOD OF ELECTION.—Section 444(d)(2) (re5 lating to period of election) is amended to read as follows:

6 ‘‘(2) PERIOD OF ELECTION.—

7 ‘‘(A) IN GENERAL.—An election under

8 subsection (a) shall remain in effect until the

9 partnership, S corporation, or personal service

10 corporation terminates the election and adopts

11 the required taxable year.

12 ‘‘(B) CHANGE NOT TREATED AS TERMI13 NATION.—For purposes of subparagraph (A), a

14 change from a taxable year which is not a re15 quired taxable year to another such taxable

16 year shall not be treated as a termination.’’

17 (c) EXCEPTION FOR TRUSTS.—Section 444(d)(3)

18 (relating to tiered structures) is amended by adding at the

19 end thereof the following new subparagraph:

20 ‘‘(C) EXCEPTION FOR CERTAIN STRUC21 TURES THAT INCLUDE TRUSTS.—An entity

22 shall not be considered to be part of a tiered

23 structure to which subparagraph (A) applies

24 solely because a trust owning an interest in

25 such entity is a trust all of the beneficiaries of
189

•HR 1200 SC4

1 which use a calendar year for their taxable

2 year.’’

3 (d) REGULATIONS.—Subsection (g) of section 444

4 (relating to regulations) is amended to read as follows:

5 ‘‘(g) REGULATIONS.—The Secretary shall prescribe

6 such regulations as may be necessary to carry out the pro7 visions of this section, including regulations—

8 ‘‘(1) to prevent the avoidance of the provisions

9 of this section through a change in entity or form

10 of an entity,

11 ‘‘(2) to prevent the carryback to any preceding

12 taxable year of a net operating loss (or similar item)

13 arising in any short taxable year created pursuant to

14 an election or termination of an election under this

15 section, and

16 ‘‘(3) to provide for the termination of an elec17 tion under subsection (a) if an entity does not con18 tinue to meet the requirements of subsection (b).’’

19 SEC. 862. REQUIRED PAYMENTS FOR ENTITIES ELECTING

20 NOT TO HAVE REQUIRED TAXABLE YEAR.

21 (a) ADDITIONAL REQUIRED PAYMENT.—

22 (1) IN GENERAL.—Section 7519(b) (defining

23 required payment) is amended to read as follows:

24 ‘‘(b) REQUIRED PAYMENT.—For purposes of this

25 section—
190

•HR 1200 SC4

1 ‘‘(1) IN GENERAL.—The term ‘required pay2 ment’ means, with respect to any applicable election

3 year of a partnership or S corporation, an amount

4 equal to the excess (if any) of—

5 ‘‘(A) the adjusted highest section 1 rate,

6 multiplied by the net base year income of the

7 entity, over

8 ‘‘(B) the net required payment balance.

9 For purposes of paragraph (1)(A), the term ‘ad10 justed highest section 1 rate’ means the highest rate

11 of tax in effect under section 1 as of the close of the

12 first required taxable year ending within such year,

13 plus 2 percentage points.

14 ‘‘(2) ADDITIONAL PAYMENT FOR NEW APPLICA15 BLE ELECTION YEARS.—

16 ‘‘(A) IN GENERAL.—In the case of a new

17 applicable election year, the required payment

18 shall include, in addition to any amount deter19 mined under paragraph (1), the amount deter20 mined under subparagraph (C).

21 ‘‘(B) NEW APPLICABLE ELECTION YEAR.—

22 For purposes of this section, the term ‘new ap23 plicable election year’ means any applicable

24 election year—
191

•HR 1200 SC4

1 ‘‘(i) with respect to which the preced2 ing taxable year was not an applicable elec3 tion year, or

4 ‘‘(ii) which covers a different period

5 than the preceding taxable year by reason

6 of a change described in section

7 444(d)(2)(B).

8 If any year described in the preceding sentence

9 is a short taxable year which does not include

10 the last day of the required taxable year, the

11 new applicable election year shall be the taxable

12 year following the short taxable year.

13 ‘‘(C) ADDITIONAL AMOUNT.—For purposes

14 of subparagraph (A), the amount determined

15 under this subparagraph shall be—

16 ‘‘(i) in the case of a year described in

17 subparagraph (B)(i), 75 percent of the re18 quired payment for the year, and

19 ‘‘(ii) in the case of a year described in

20 subparagraph (B)(ii), 75 percent of the ex21 cess (if any) of—

22 ‘‘(I) the required payment for the

23 year, over

24 ‘‘(II) the required payment for

25 the year which would have been com-
192

•HR 1200 SC4

1 puted if the change described in sub2 paragraph (B)(ii) had not occurred.

3 ‘‘(D) REQUIRED PAYMENT.—For purposes

4 of this paragraph, the term ‘required payment’

5 means the payment required by this section (de6 termined without regard to this paragraph).’’

7 (2) DUE DATE.—Paragraph (2) of section

8 7519(f) (defining due date) is amended to read as

9 follows:

10 ‘‘(2) DUE DATE.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 subparagraph (B), the amount of any required

13 payment for any applicable election year shall

14 be paid on or before May 15 of the calendar

15 year following the calendar year in which the

16 applicable election year begins.

17 ‘‘(B) SPECIAL RULE WHERE NEW APPLICA18 BLE ELECTION YEAR ADOPTED.—In the case of

19 a new applicable election year, the portion of

20 any required payment determined under sub21 section (b)(2) shall be paid on or before Sep22 tember 15 of the calendar year in which the

23 applicable election year begins.’’

24 (3) PENALTIES.—
193

•HR 1200 SC4

1 (A) IN GENERAL.—Section 7519(f)(4) (re2 lating to penalties) is amended by adding at the

3 end thereof the following new subparagraph:

4 ‘‘(D) FAILURE TO PAY ADDITIONAL

5 AMOUNT.—In the case of any failure by any en6 tity to pay on the date prescribed therefore the

7 portion of any required payment described in

8 subsection (b)(2) for any applicable election

9 year—

10 ‘‘(i) subparagraph (A) shall not apply,

11 but

12 ‘‘(ii) the entity shall, for purposes of

13 this title, be treated as having terminated

14 the election under section 444 for such

15 year and changed to the required taxable

16 year.’’

17 (B) CONFORMING AMENDMENT.—Section

18 7519(f)(4)(A) is amended by striking ‘‘In’’ and

19 inserting ‘‘Except as provided in subparagraph

20 (D), in’’.

21 (4) REFUNDS.—Section 7519(c)(2)(A) (relating

22 to refund of payments) is amended to read as

23 follows:
194

•HR 1200 SC4

1 ‘‘(A) an election under section 444 is not

2 in effect for any year but was in effect for the

3 preceding year, or’’.

4 (5) CONFORMING AMENDMENTS.—

5 (A) Paragraph (1) of section 7519(c) is

6 amended—

7 (i) by striking ‘‘subsection (b)(2)’’ and

8 inserting ‘‘subsection (b)(1)(B)’’, and

9 (ii) by striking ‘‘subsection (b)(1)’’

10 and inserting ‘‘subsection (b)(1)(A)’’.

11 (B) Subsection (d) of section 7519 is

12 amended by striking paragraph (4) and redesig13 nating paragraph (5) as paragraph (4).

14 (b) OTHER DEFINITIONS AND SPECIAL RULES.—

15 (1) REFUND.—Paragraph (3) of section

16 7519(c) (relating to date on which refund is pay17 able) is amended in the matter preceding subpara18 graph (A) by striking ‘‘on the later of’’ and inserting

19 ‘‘by the later of’’.

20 (2) DEFERRAL RATIO.—The last sentence of

21 paragraph (1) of section 7519(d) is amended to read

22 as follows: ‘‘Except as provided in regulations, the

23 term ‘deferral ratio’ means the ratio which the num24 ber of months in the deferral period of the applicable
195

•HR 1200 SC4

1 election year bears to the number of months in the

2 applicable election year.’’

3 (3) NET INCOME.—Paragraph (2) of section

4 7519(d) is amended by adding at the end the follow5 ing new subparagraph:

6 ‘‘(D) EXCESS APPLICABLE PAYMENTS FOR

7 BASE YEAR.—In the case of any new applicable

8 election year, the net income for the base year

9 shall be increased by the excess (if any) of—

10 ‘‘(i) the applicable payments taken

11 into account in determining net income for

12 the base year, over

13 ‘‘(ii) 120 percent of the average

14 amount of applicable payments made dur15 ing the first 3 taxable years preceding the

16 base year.’’

17 (4) DEFERRAL PERIOD.—Paragraph (1) of sec18 tion 7519(e) (defining deferral period) is amended to

19 read as follows:

20 ‘‘(1) DEFERRAL PERIOD.—Except as provided

21 in regulations, the term ‘deferral period’ means, with

22 respect to any taxable year of the entity, the months

23 between—

24 ‘‘(A) the beginning of such year, and
196

•HR 1200 SC4

1 ‘‘(B) the close of the first required taxable

2 year (as defined in section 444(e)) ending with3 in such year.’’

4 (5) BASE YEAR.—

5 (A) IN GENERAL.—Paragraph (2)(A) of

6 section 7519(e) (defining base year) is amended

7 to read as follows:

8 ‘‘(A) BASE YEAR.—The term ‘base year’

9 means, with respect to any applicable election

10 year, the first taxable year of 12 months (or

11 52–53 weeks) of the partnership or S corpora12 tion preceding such applicable election year.’’

13 (B) CONFORMING AMENDMENT.—Para14 graph (2) of subsection (g) of section 7519 is

15 amended to read as follows:

16 ‘‘(2) there is no base year described in sub17 section (e)(2)(A) or no preceding taxable year de18 scribed in section 280H(c)(1)(A)(i).’’

19 (c) INTEREST.—Section 7519(f)(3) (relating to in20 terest) is amended to read as follows:

21 ‘‘(3) INTEREST.—For purposes of determining

22 interest, any payment required by this section shall

23 be treated as a tax, except that interest shall be al24 lowed with respect to any refund of a payment under

25 this section only for the period from the latest date
197

•HR 1200 SC4

1 specified in subsection (c)(3) for such refund to the

2 actual date of payment of such refund.’’

3 Subtitle H—Deduction for Chari4 table Contribution of Appre5 ciated Property Limited To Ad6 justed Basis

7 SEC. 871. DEDUCTION FOR CHARITABLE CONTRIBUTION OF

8 APPRECIATED PROPERTY LIMITED TO AD9 JUSTED BASIS.

10 (a) IN GENERAL.—The first sentence of section

11 170(e) (relating to contributions of ordinary income and

12 capital gain property) is amended to read as follows: ‘‘The

13 amount of any charitable contribution of property other14 wise taken into account under this section shall be reduced

15 by the amount which would have been gain had the prop16 erty been sold by the taxpayer at its fair market value

17 (determined at the time of such contribution).’’

18 (b) CONFORMING AMENDMENTS.—

19 (1) Subsection (e) of section 170 is amended by

20 striking paragraphs (3), (4), and (5).

21 (2) Subsection (a) of section 57 is amended by

22 striking paragraph (7).

23 (3) Subsection (c) of section 642 is amended by

24 adding at the end thereof the following new para25 graph:
198

•HR 1200 SC4

1 ‘‘(7) LIMITATION ON DEDUCTION FOR CON2 TRIBUTION OF APPRECIATED PROPERTY.—

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

4 this section shall apply to contributions and gifts made

5 after December 31, 1994.

6 Subtitle I—Minimum 5 Percent

7 Rate of Tax on Interest Paid To

8 Foreign Persons

9 SEC. 881. MINIMUM 5 PERCENT RATE OF TAX ON INTEREST

10 PAID TO FOREIGN PERSONS.

11 (a) INDIVIDUALS.—

12 (1) Paragraph (1) of section 871(a) is amended

13 by adding at the end thereof the following new sen14 tence: ‘‘Notwithstanding any treaty obligation of the

15 United States, the rate of tax imposed under para16 graph (1)(A) or (1)(C) shall not be less than 5

17 percent.’’

18 (2)(A) Paragraph (1) of section 871(h) (relat19 ing to repeal of tax on interest of nonresident alien

20 individuals received from certain portfolio debt in21 vestments) is amended by striking ‘‘no tax shall be

22 imposed under paragraph (1)(A) or (1)(C) of sub23 section (a).’’ and inserting ‘‘the rate of tax imposed

24 under paragraph (1)(A) or (1)(C) of subsection (a)

25 shall be 5 percent. The preceding sentence shall
199

•HR 1200 SC4

1 apply notwithstanding any treaty obligation of the

2 United States.’’

3 (B) Paragraph (2) of section 861(h) is amend4 ed by striking ‘‘which would be subject to tax under

5 subsection (a) but for this subsection and’’ and in6 serting ‘‘subject to tax under subsection (a)’’.

7 (C) The heading of section 871(h) is amended

8 by striking ‘‘REPEAL OF TAX’’ and inserting ‘‘5

9 PERCENT RATE OF TAX’’.

10 (b) CORPORATIONS.—

11 (1) Subsection (a) of section 881 is amended by

12 adding at the end thereof the following new sen13 tence: ‘‘Notwithstanding any treaty obligation of the

14 United States, the rate of tax imposed under para15 graph (1) or (2) shall not be less than 5 percent.’’

16 (2)(A) Paragraph (1) of section 881(c) (relating

17 to repeal of tax on interest of foreign corporations

18 received from certain portfolio debt investments) is

19 amended by striking ‘‘no tax shall be imposed under

20 paragraph (1) or (3) of subsection (a).’’ and insert21 ing ‘‘the rate of tax imposed under paragraph (1) or

22 (3) of subsection (a) shall be 5 percent. The preced23 ing sentence shall apply notwithstanding any treaty

24 obligation of the United States.’’
200

•HR 1200 SC4

1 (B) Paragraph (2) of section 881(c) is amended

2 by striking ‘‘which would be subject to tax under

3 subsection (a) but for this subsection and’’ and in4 serting ‘‘subject to tax under subsection (a)’’.

5 (C) The heading of section 881(c) is amended

6 by striking ‘‘REPEAL OF TAX’’ and inserting ‘‘5

7 PERCENT RATE OF TAX’’.

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

9 this section shall apply to interest received after Decem10 ber 31, 1994, in taxable years ending after such date.

Æ

HR 1200 SC4——2

HR 1200 SC4——3

HR 1200 SC4——4

HR 1200 SC4——5

HR 1200 SC4——6

HR 1200 SC4——7

HR 1200 SC4——8

HR 1200 SC4——9

HR 1200 SC4——10

HR 1200 SC4——11

HR 1200 SC4——12

HR 1200 SC4——13