I

103D CONGRESS

1ST SESSION H. R. 1246

To amend the Internal Revenue Code of 1986 to increase excise taxes on

cigarettes and other tobacco and tobacco-related products and to use

the increased revenues to expand Medicaid eligibility, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 8, 1993

Mr. ANDREWS of Texas (for himself, Mr. STARK, Mr. LEVIN, Mr.

MCDERMOTT, Mr. SYNAR, and Mr. HUFFINGTON) introduced the following bill; which was referred jointly to the Committees on Ways and

Means, Energy and Commerce, and Agriculture

A BILL

To amend the Internal Revenue Code of 1986 to increase

excise taxes on cigarettes and other tobacco and tobaccorelated products and to use the increased revenues to

expand Medicaid eligibility, and for other purposes.

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

3 SECTION 1. SHORT TITLE.

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

5 ‘‘Tobacco Health Tax Act of 1993’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend-
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1 ment or repeal is expressed in terms of an amendment

2 to, or repeal of, a section or other provision, the reference

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 SEC. 2. INCREASE IN EXCISE TAXES ON TOBACCO PROD6 UCTS.

7 (a) CIGARS.—Subsection (a) of section 5701 is

8 amended—

9 (1) by striking ‘‘$1.125 cents per thousand

10 (93.75 cents per thousand on cigars removed during

11 1991 or 1992)’’ in paragraph (1) and inserting

12 ‘‘$4.69 per thousand’’, and

13 (2) by striking ‘‘equal to’’ and all that follows

14 in paragraph (2) and inserting ‘‘equal to 53.17 per15 cent of the price for which sold but not more than

16 $120 per thousand.’’

17 (b) CIGARETTES.—Subsection (b) of section 5701 is

18 amended—

19 (1) by striking ‘‘$12 per thousand ($10 per

20 thousand on cigarettes removed during 1991 or

21 1992)’’ in paragraph (1) and inserting ‘‘$50.00 per

22 thousand’’,

23 (2) by striking ‘‘$25.20 per thousand ($21 per

24 thousand on cigarettes removed during 1991 or

25 1992)’’ in paragraph (2) and inserting ‘‘$105 per
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1 thousand’’, and by adding at the end thereof the fol2 lowing new paragraph:

3 ‘‘(3) ADDITIONAL TAX ON PACKS CONTAINING

4 FEWER THAN 20 CIGARETTES.—On any pack of

5 cigarettes containing fewer than 20 cigarettes, the

6 excess of $1 over the tax imposed by paragraphs (1)

7 and (2) on the cigarettes in such pack.’’

8 (c) CIGARETTE PAPERS.—Subsection (c) of section

9 5701 is amended by striking ‘‘0.75 cent (0.625 cent on

10 cigarette papers removed during 1991 or 1992)’’ and in11 serting ‘‘3.18 cents’’.

12 (d) CIGARETTE TUBES.—Subsection (d) of section

13 5701 is amended by striking ‘‘1.5 cents (1.25 cents on

14 cigarette tubes removed during 1991 or 1992)’’ and in15 serting ‘‘6.25 cents’’.

16 (e) SMOKELESS TOBACCO.—Subsection (e) of section

17 5701 is amended—

18 (1) by striking ‘‘36 cents (30 cents on snuff re19 moved during 1991 or 1992)’’ in paragraph (1) and

20 inserting ‘‘$10’’, and

21 (2) by striking ‘‘12 cents (10 cents on chewing

22 tobacco removed during 1991 or 1992)’’ in para23 graph (2) and inserting ‘‘$4.80’’.

24 (f) PIPE TOBACCO.—Subsection (f) of section 5701

25 is amended by striking ‘‘67.5 cents (56.25 cents on pipe
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1 tobacco removed during 1991 or 1992)’’ and inserting

2 ‘‘$2.82’’.

3 (g) IMPOSITION OF TAX ON CIGARETTE TOBACCO.—

4 (1) IN GENERAL.—Section 5701 of such Code

5 is amended by redesignating subsection (g) as sub6 section (h) and by inserting after subsection (f) the

7 following new subsection:

8 ‘‘(g) CIGARETTE TOBACCO.—On cigarette tobacco,

9 manufactured in or imported into the United States, there

10 shall be imposed a tax of $22.40 per pound (and a propor11 tionate tax at the like rate on all fractional parts of a

12 pound).’’

13 (2) CIGARETTE TOBACCO DEFINED.—Section

14 5702 of such Code is amended by adding at the end

15 thereof the following new subsection:

16 ‘‘(p) CIGARETTE TOBACCO.—The term ‘cigarette to17 bacco’ means any tobacco which, because of its appear18 ance, type, packaging, or labeling, is suitable for use and

19 likely to offered to, or purchased by, consumers as tobacco

20 to be rolled into a cigarette.’’

21 (3) CONFORMING AMENDMENTS.—

22 (A) Subsection (c) of section 5702 of such

23 Code is amended by striking ‘‘and pipe to24 bacco’’ and inserting ‘‘pipe tobacco, and ciga25 rette tobacco’’.
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1 (B) Subsection (d) of section 5702 of such

2 Code is amended by striking ‘‘or pipe tobacco’’

3 and inserting ‘‘pipe tobacco, or cigarette to4 bacco’’.

5 (h) INFLATION ADJUSTMENT OF TOBACCO TAX

6 RATES.—Section 5701 is amended by adding at the end

7 thereof the following new subsection:

8 ‘‘(i) INFLATION ADJUSTMENT.—In the case of arti9 cles removed in any calendar year after 1993, each dollar

10 amount contained in this subsection shall be increased by

11 an amount equal to—

12 ‘‘(1) such dollar amount, multiplied by

13 ‘‘(2) the greater of—

14 ‘‘(A) the cost-of-living adjustment deter15 mined under section 1(f)(3) for the calendar

16 year in which the removal occurs by substitut17 ing ‘calendar year 1992’ for ‘calendar year

18 1989’ in subparagraph (B) thereof, or

19 ‘‘(B) the cost-of-living adjustment which

20 would be determined under subparagraph (A) if

21 only changes in the tobacco and smoking prod22 ucts component of the Consumer Price Index

23 (as defined in section 1(f)(5)) were taken into

24 account.
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1 If any increase determined under this subsection is not

a multiple of 1 2 ⁄4 cent, such increase shall be rounded to

the nearest 1 3 ⁄4 cent.’’

4 (i) EFFECTIVE DATE.—The amendments made by

5 this section shall apply with respect to articles removed

6 after December 31, 1993.

7 (j) FLOOR STOCK TAXES.—

8 (1) IMPOSITION OF TAX.—On tax-increased ar9 ticles manufactured in or imported into the United

10 States which are removed before January 1, 1994,

11 and held on such date for sale by any person, there

12 shall be imposed the following taxes:

13 (A) SMALL CIGARS.—On cigars, weighing

14 not more than 3 pounds per thousand, $3.565

15 per thousand.

16 (B) LARGE CIGARS.—On cigars weighing

17 more than 3 pounds per thousand, 40.42 per18 cent of the wholesale price, but not more than

19 $120 per thousand.

20 (C) SMALL CIGARETTES.—On cigarettes,

21 weighing not more than 3 pounds per thousand,

22 $38 per thousand.

23 (D) LARGE CIGARETTES.—On cigarettes

24 weighing more than 3 pounds per thousand,

25 $79.80 per thousand; except that, if more than
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61 1 ⁄2 inches in length, they shall be taxable at

2 the rate prescribed for cigarettes weighing not

3 more than 3 pounds per thousand, counting

each 23 4 ⁄4 inches, or fraction thereof, of the

5 length of each as one cigarette.

6 (E) CIGARETTE PACKS CONTAINING

7 FEWER THAN 20 CIGARETTES.—On any pack of

8 cigarettes containing fewer than 20 cigarettes,

9 the excess of $1 over the sum of—

10 (i) the tax imposed by paragraphs (1)

11 and (2) of section 5701(a) of the Internal

12 Revenue Code of 1986, plus

13 (ii) the tax imposed by this sub14 section,

15 on the cigarettes in such pack.

16 (F) CIGARETTE PAPERS.—On each book or

17 set of cigarette papers containing more than 25

18 papers, 2.43 cents for each 50 papers or frac19 tional part thereof; except that, if cigarette papers measure more than 61 20 ⁄2 inches in length,

21 they shall be taxable at the rate prescribed,

counting each 23 22 ⁄4 inches, or fraction thereof, of

23 the length of each as one cigarette paper.

24 (G) CIGARETTE TUBES.—On cigarette

25 tubes, 4.75 cents for each 50 tubes or fractional
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1 part thereof; except that, if cigarette tubes

measure more than 61 2 ⁄2 inches in length, they

3 shall be taxable at the rate prescribed, counting

each 23 4 ⁄4 inches, or fraction thereof, of the

5 length of each as one cigarette tube.

6 (H) SNUFF.—On snuff, $9.64 per pound

7 (and a proportionate tax at the like rate on all

8 fractional parts of a pound).

9 (I) CHEWING TOBACCO.—On chewing to10 bacco, $4.68 per pound (and a proportionate

11 tax at the like rate on all fractional parts of a

12 pound).

13 (J) PIPE TOBACCO.—On pipe tobacco,

14 $2.145 per pound (and a proportionate tax at

15 the like rate on all fractional parts of a pound).

16 (K) CIGARETTE TOBACCO.—On cigarette

17 tobacco, $22.40 per pound (and a proportionate

18 tax at the like rate on all fractional parts of a

19 pound).

20 (2) LIABILITY FOR TAX AND METHOD OF PAY21 MENT.—

22 (A) LIABILITY FOR TAX.—A person hold23 ing tax-increased articles on January 1, 1994,

24 to which any tax imposed by paragraph (1) ap25 plies shall be liable for such tax.
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1 (B) METHOD OF PAYMENT.—The tax im2 posed by paragraph (1) shall be paid in such

3 manner as the Secretary shall prescribe by reg4 ulations.

5 (C) TIME FOR PAYMENT.—The tax im6 posed by paragraph (1) shall be paid on or be7 fore June 30, 1994.

8 (3) TAX-INCREASED ARTICLES.—For purposes

9 of this subsection, the term ‘‘tax-increased articles’’

10 means tobacco products (as defined by section

11 5702(c) of the Internal Revenue Code of 1986, as

12 amended by this Act), cigarette papers (as defined

13 by section 5702(f) of such Code), cigarette tubes (as

14 defined by section 5702(g) of such Code), and packs

15 of cigarettes containing fewer than 20 cigarettes.

16 (4) OTHER LAWS APPLICABLE.—All provisions

17 of law, including penalties, applicable with respect to

18 the taxes imposed by section 5701 of such Code

19 shall, insofar as applicable and not inconsistent with

20 the provisions of this subsection, apply to the floor

21 stocks taxes imposed by paragraph (1), to the same

22 extent as if such taxes were imposed by such section

23 5701.
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1 SEC. 3. ESTABLISHMENT OF TOBACCO HEALTH TAX TRUST

2 FUND.

3 (a) IN GENERAL.—Subchapter A of chapter 98 (re4 lating to trust fund code) is amended by adding at the

5 end thereof the following new section:

6 ‘‘SEC. 9512. TOBACCO HEALTH TAX TRUST FUND.

7 ‘‘(a) CREATION OF TRUST FUND.—There is estab8 lished in the Treasury of the United States a trust fund

9 to be known as the ‘Tobacco Health Tax Trust Fund’,

10 consisting of such amounts as may be appropriated or

11 credited to such Trust Fund as provided in this section

12 or section 9602(b).

13 ‘‘(b) TRANSFERS TO TRUST FUND.—

14 ‘‘(1) IN GENERAL.—There is hereby appro15 priated to the Tobacco Health Tax Trust Fund

16 amounts equivalent to the increase in net revenues

17 received in the Treasury from the Tobacco Health

18 Tax Act of 1993 taxes.

19 ‘‘(2) NET REVENUES.—For purposes of para20 graph (1), the term ‘net revenues’ means the

21 amount estimated by the Secretary based on the ex22 cess of—

23 ‘‘(A) the Tobacco Health Tax Act of 1993

24 taxes received in the Treasury, over

25 ‘‘(B) the decrease in the tax imposed by

26 chapter 1 resulting from such taxes.
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1 ‘‘(3) TOBACCO HEALTH TAX ACT OF 1993

2 TAXES.—For purposes of this subsection, the term

3 ‘Tobacco Health Tax Act of 1993 taxes’ means the

4 taxes imposed by section 5701 which are attrib5 utable to the amendments made by the Tobacco

6 Health Tax Act of 1993 and the taxes imposed by

7 section 2(j) of such Act.

8 ‘‘(c) EXPENDITURES FROM TRUST FUND.—The fol9 lowing percentages of the amounts appropriated or cred10 ited to the Tobacco Health Tax Trust Fund shall be avail11 able, as provided in appropriation Acts, for the following

12 purposes:

13 ‘‘(1) 80 percent shall be available to make Fed14 eral payments to States to carry out section 4 of the

15 Tobacco Health Tax Act of 1993;

16 ‘‘(2) 10 percent shall be available to make

17 grants under section 5 of such Act;

18 ‘‘(3) 4.5 percent shall be available for additional

19 funding under section 6 of such Act (relating to gen20 eral health prevention and health care);

21 ‘‘(4) 2.5 percent shall be available to provide

22 for counter advertising and tobacco preventive activi23 ties under section 7 of such Act; and

24 ‘‘(5) 3 percent shall be available under section

25 8 of such Act to assist tobacco producers experienc-
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1 ing financial hardship caused by increased excise

2 taxes on tobacco products.’’

3 (b) CLERICAL AMENDMENT.—The table of sections

4 for such subchapter A is amended by adding at the end

5 thereof the following new item:

‘‘Sec. 9512. Tobacco Health Tax Trust Fund.’’

6 SEC. 4. MEDICAID ELIGIBILITY AND PAYMENT EXPAN7 SIONS.

8 (a) EXPANSION OF MEDICAID ELIGIBILITY.—Subject

9 to subsection (c)—

10 (1) the Secretary of Health and Human Serv11 ices (in this subsection referred to as the ‘‘Sec12 retary’’) shall specify—

13 (A) a percentage (not to exceed 200 per14 cent) that shall apply under section

15 1902(z)(2)(A) of the Social Security Act, and

16 (B) a maximum age (not to exceed 19

17 years) that shall apply under section

18 1902(z)(2)(B) of such Act for a fiscal year; and

19 (2) if the percentage specified under paragraph

20 (1)(A) is 200 percent and the maximum age speci21 fied under paragraph (1)(B) is 19 years of age, the

22 Secretary shall specify a percentage (not to exceed

23 200 percent) that shall apply under section

24 1902(a)(2)(B) of such Act for the fiscal year.
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1 (b) AUTHORITY TO REQUIRE INCREASE IN MEDIC2 AID PAYMENT RATES TO HOSPITALS AND PHYSICIANS.—

3 Subject to subsection (c), the Secretary may, in addition

4 to specifying a percentages and a maximum age under

5 subsection (a)—

6 (1) specify a percent that shall apply for pur7 poses of subsection (e)(1)(A)(i), and

8 (2) specify a percent that shall apply for pur9 poses of section 1902(aa)(1) of the Social Security

10 Act (as added by subsection (e)(2)(A) of this sec11 tion).

12 (c) LIMITATION ON TOTAL INCREASE.—The percent13 ages and percents under subsections (a) and (b) for a fis14 cal year shall be specified in a manner so that the total

15 amount of additional Federal expenditures in a fiscal year

16 resulting from this section (and the amendments made by

17 this section) does not exceed the amounts made available

18 to carry out this section under section 9512(c)(1) of the

19 Internal Revenue Code of 1986 for the fiscal year.

20 (d) CONFORMING AMENDMENTS FOR MEDICAID ELI21 GIBILITY EXPANSION.—

22 (1) BENEFITS FOR LOW-INCOME INDIVID23 UALS.—Section 1902(a)(10)(A)(i) of the Social Se24 curity Act (42 U.S.C. 1396a(a)(10)(A)(i)) is amend25 ed—
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1 (A) by striking ‘‘or’’ at the end of

2 subclause (VI);

3 (B) by striking the semicolon at the end of

4 subclause (VII) and inserting ‘‘, or’’; and

5 (C) by adding at the end the following new

6 subclause:

7 ‘‘(VIII) who are described in sub8 section (z)(1);’’.

9 (2) INDIVIDUALS DESCRIBED.—

10 (A) IN GENERAL.—Section 1902 of such

11 Act (42 U.S.C. 1396a) is amended by adding at

12 the end the following new subsection:

13 ‘‘(z)(1) Individuals described in this paragraph are—

14 ‘‘(A) women during pregnancy (and during the

15 60-day period beginning on the last day of the preg16 nancy) or individuals who have not attained the age

17 specified by the Secretary under section 4(a)(1)(B)

18 of the Tobacco Health Tax Act of 1993, who are not

19 described in any of subclauses (I) through (VII) of

20 subsection (a)(10)(A)(i), and whose family income

21 does not exceed the income level described in para22 graph (2)(A) for a family of the size of the family;

23 and

24 ‘‘(B) individuals not described in subparagraph

25 (A) who have not attained 65 years of age, who are
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1 not described in any of subclauses (I) through (VII)

2 of subsection (a)(10)(A)(i), and whose family income

3 does not exceed the income level described in para4 graph (2)(B) for a family of the size of the family.

5 ‘‘(2)(A) The income level described in this subpara6 graph is the percent, specified under section 4(a)(1)(A)

7 of the Tobacco Health Tax Act of 1993, of the official

8 poverty line (as defined by the Office of Management and

9 Budget, and revised annually in accordance with section

10 673(2) of the Omnibus Budget Reconciliation Act of

11 1981) applicable to a family of the size involved.

12 ‘‘(B) The income level described in this subparagraph

13 is the percent (if any), specified under section 4(a)(2) of

14 the Tobacco Health Tax Act of 1993, of the official pov15 erty line (as defined by the Office of Management and

16 Budget, and revised annually in accordance with section

17 673(2) of the Omnibus Budget Reconciliation Act of

18 1981) applicable to a family of the size involved.

19 ‘‘(3) Notwithstanding subsection (a)(17), for individ20 uals who are eligible for medical assistance because of sub21 section (a)(10)(A)(i)(VIII)—

22 ‘‘(A) no resource standard shall be applied;

23 ‘‘(B) the income standard to be applied is the

24 appropriate income standard established under para25 graph (2); and
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1 ‘‘(C) family income shall be determined in ac2 cordance with the methodology that is not more re3 strictive than the methodology employed under the

4 State plan under part A or E of title IV (except to

5 the extent such methodology is inconsistent with

6 clause (D) of subsection (a)(17)), and costs incurred

7 for medical care or for any other type of remedial

8 care shall not be taken into account.

9 Any different treatment provided under this paragraph for

10 such individuals shall not, because of subsection (a)(17),

11 require or permit such treatment for other individuals.

12 ‘‘(4)(A) In the case of any State which is providing

13 medical assistance to its residents under a waiver granted

14 under section 1115, the Secretary shall require the State

15 to provide medical assistance for individuals described in

16 paragraph (1) in the same manner as the State would be

17 required to provide such assistance for such individuals

18 if the State had in effect a plan approved under this title.

19 ‘‘(B) In the case of a State which is not one of the

20 50 States or the District of Columbia, the State need not

21 meet the requirement of subsection (a)(10)(A)(i)(VIII)

22 and, for purposes of paragraph (2)(A), the State may sub23 stitute for the percentages provided under such paragraph

24 any percentages that are less than such percentages.
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1 ‘‘(5) The Secretary may not require that an individ2 ual apply for eligibility under subclauses (I) through (VII)

3 of subsection (a)(10)(A)(i) as a condition of being deter4 mined to be eligible for medical assistance under this title

5 as an individual described in paragraph (1).’’.

6 (B) CONFORMING AMENDMENT.—Section

7 1905(a) of such Act (42 U.S.C. 1396d(a)) is

8 amended—

9 (i) by striking ‘‘or’’ at the end of

10 clause (ix),

11 (ii) by adding ‘‘or’’ at the end of

12 clause (x), and

13 (iii) by inserting after clause (x) the

14 following new clause:

15 ‘‘(xi) individuals described in section

16 1902(z)(1),’’.

17 (3) RESTRICTIONS ON BENEFITS PROVIDED.—

18 Section 1902(a)(10) of such Act (42 U.S.C.

19 1396a(a)(10)) is amended in the matter following

20 subparagraph (F)—

21 (A) by striking ‘‘; and (XI) the making’’

22 and inserting ‘‘, (XI) the making’’;

23 (B) by striking ‘‘and (XI) the medical’’

24 and inserting ‘‘(XII) the medical’’; and
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1 (C) by striking the semicolon at the end

2 and inserting the following: ‘‘ and (XIII) the

3 medical assistance required to be made avail4 able to an individual described in subsection

5 (z)(1) shall not include nursing facility services,

6 home and community-based services (as defined

7 in section 1915(d)(5)(C)(i)), services in an in8 termediate care facility for the mentally re9 tarded, and community supported living ar10 rangements services;’’.

11 (e) CONFORMING PROVISIONS IMPOSING A FLOOR ON

12 MEDICAID PAYMENT LEVELS FOR INPATIENT HOSPITAL

13 SERVICES AND PHYSICIANS’ SERVICES.—

14 (1) INPATIENT HOSPITAL SERVICES.—

15 (A) IN GENERAL.—(i) A State plan under

16 title XIX of the Social Security Act shall not be

17 considered to meet the requirement of section

18 1902(a)(13)(A) of such Act (insofar as it re19 quires payments to hospitals for inpatient hos20 pital services that are reasonable and adequate

21 to meet the costs which must be incurred by ef22 ficiently and economically operated facilities),

23 as of a calendar quarter, unless the State has

24 submitted to the Secretary of Health and

25 Human Services, by not later than the first
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1 date of such quarter, an amendment to such

2 plan that assures that, in the aggregate, the

3 amount of payments for inpatient hospital serv4 ices provided in subsection (d) hospitals (as de5 fined in section 1886(d)(1)(B) of such Act)

6 under the plan is not less than—

7 (I) in the case of services furnished

8 during fiscal year 1997, such percent as

9 may be specified under section 4(b)(1) of

10 the Tobacco Health Tax Act of 1993 (but

11 not to exceed 80 percent, or, if greater, the

12 percent specified in clause (ii)) of the

13 amount of payments for such services that

14 would be made under title XVIII of such

15 Act (without regard to any deductible im16 posed under section 1813(a) of such Act or

17 any limitation on the coverage of inpatient

18 hospital services under such title) for such

19 services if covered under such title;

20 (II) in the case of services furnished

21 during fiscal year 1998, such percent spec22 ified under section 4(b)(1) of the Tobacco

23 Health Tax Act of 1993 (not to exceed 85

24 percent or, if greater, the percent specified

25 in clause (ii)) of the amount of payments
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1 for such services that would be made under

2 title XVIII of such Act (without regard to

3 any deductible imposed under section

4 1813(a) of such Act or any limitation on

5 the coverage of inpatient hospital services

6 under such title) for such services if cov7 ered under such title; and

8 (III) in the case of services furnished

9 during any succeeding fiscal year, such

10 percent specified under section 4(b)(1) of

11 the Tobacco Health Tax Act of 1993 (not

12 to exceed 90 percent) of the amount of

13 payments for such services that would be

14 made under title XVIII of such Act (with15 out regard to any deductible imposed

16 under section 1813(a) of such Act or any

17 limitation on the coverage of inpatient hos18 pital services under such title) for such

19 services if covered under such title.

20 (ii) The percent specified in this clause is

21 the quotient of—

22 (I) the total payments made under the

23 State plan under title XIX of the Social

24 Security Act in fiscal year 1993 with re-
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1 spect to inpatient hospital services, divided

2 by

3 (II) the amount of payments for such

4 services that would be made under title

5 XVIII of such Act (without regard to any

6 deductible imposed under section 1813(a)

7 of such Act or any limitation on the cov8 erage of inpatient hospital services under

9 such title) for such services in such fiscal

10 year if covered under such title,

11 expressed as a percentage, or, if less, 90 per12 cent.

13 (iii) In computing amounts under clause

14 (i), the Secretary shall adjust for differences in

15 case mix, volume, the age and disability of the

16 populations covered by the two programs, and

17 other relevant factors identified by the Sec18 retary.

19 (B) REVIEW.—The Secretary, by not later

20 than 90 days after the date of submission of a

21 plan amendment under subparagraph (A),

22 shall—

23 (i) review each such amendment for

24 compliance with the requirement of section
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1 1902(a)(13)(A) of the Social Security Act;

2 and

3 (ii) approve or disapprove each such

4 amendment.

5 If the Secretary disapproves such an amend6 ment, the State shall immediately submit a re7 vised amendment which meets such require8 ment.

9 (C) COLLECTION OF DATA.—The Sec10 retary may provide for such collection of data

11 on payment for inpatient hospital services as

12 may be necessary to carry out this paragraph.

13 (D) NONWAIVABILITY.—The provisions of

14 this paragraph may not be waived by the Sec15 retary.

16 (2) PHYSICIANS’ SERVICES.—

17 (A) IN GENERAL.—Section 1902 of the So18 cial Security Act (42 U.S.C. 1396a) is amend19 ed—

20 (i) in subsection (a)(13)—

21 (I) by striking ‘‘and’’ at the end

22 of subparagraph (E);

23 (II) by striking the semicolon at

24 the end of subparagraph (F) and in25 serting ‘‘; and’’; and
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1 (III) by adding at the end the

2 following new subparagraph:

3 ‘‘(G) for payment for physicians’ services

4 through a methodology under which the amount

5 of payment for such services furnished during a

6 calendar quarter is not less than the amount

7 specified in subsection (aa);’’; and

8 (ii) by adding at the end the following

9 new subsection:

10 ‘‘(aa)(1) For purposes of subsection (a)(13)(G), the

11 amount specified in this subsection is—

12 ‘‘(A) for physicians’ services furnished during a

13 calendar quarter in fiscal year 1997, a percent speci14 fied under section 4(b)(2) of the Tobacco Health

15 Tax Act of 1993 (not to exceed 60 percent or, if

16 greater, the percent specified in paragraph (2)) of

17 the applicable fee schedule amount established under

18 section 1848 for services furnished in such year,

19 ‘‘(B) for physicians’ services furnished during a

20 calendar quarter in fiscal year 1998, a percent speci21 fied under section 4(b)(2) of the Tobacco Health

22 Tax Act of 1993 (but not to exceed 70 percent or,

23 if greater, the percent specified in paragraph (2)) of

24 the applicable fee schedule amount established under

25 section 1848 for services furnished in such year, and
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1 ‘‘(C) for physicians’ services furnished during a

2 calendar quarter in a succeeding fiscal year, a per3 cent specified under section 4(b)(2) of the Tobacco

4 Health Tax Act of 1993 (but not to exceed 90 per5 cent) of the applicable fee schedule amount estab6 lished under section 1848 for services furnished in

7 such year.

8 ‘‘(2) The percent specified in this paragraph is the

9 quotient of—

10 ‘‘(A) the total payments made under the State

11 plan under title XIX of the Social Security Act in

12 fiscal year 1993 for physicians’ services, divided by

13 ‘‘(B) the amount of payments for such services

14 that would be made under title XVIII of such Act

15 (without regard to any deductible or coinsurance)

16 for such services in such fiscal year if covered under

17 such title,

18 expressed as a percentage, or, if less, 90 percent.’’.

19 (B) TRANSMITTAL OF PAYMENT INFORMA20 TION TO STATES.—Section 1848(i) of such Act

21 (42 U.S.C. 1395w–4(i)) is amended by adding

22 at the end the following new paragraph:

23 ‘‘(4) TRANSMITTAL OF PHYSICIAN PAYMENT IN24 FORMATION TO STATES.—Not later than August 1

25 of 1996 (and of each year thereafter), the Secretary
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1 shall transmit such information to the States as is

2 necessary to enable the States to carry out the re3 quirements of section 1902(a)(13)(G) of the Social

4 Security Act (as added by section 4(e)(2)(A) of the

5 Tobacco Health Tax Act of 1993).’’.

6 (C) RELATION TO PAYMENTS FOR OBSTET7 RICAL AND PEDIATRIC SERVICES.—Section

8 1926 of such Act (42 U.S.C. 1396r–7) is

9 amended by adding at the end the following

10 new subsection:

11 ‘‘(e) Payment rates established under this section

12 with respect to services shall in no case be less than the

13 minimum payment amounts specified under section

14 1902(aa) with respect to such services. The fact that pay15 ment amounts with respect to such services are consistent

16 with the payment rates required under such section shall

17 not be the basis for a determination that the payment

18 amounts comply with the requirements of this section.’’.

19 (e) FULL FEDERAL PAYMENT FOR INCREASED

20 COSTS.—Section 1903 of the Social Security Act (42

21 U.S.C. 1396b) is amended by adding at the end the follow22 ing new subsection:

23 ‘‘(w)(1) Notwithstanding subsection (a), with respect

24 to new mandated expenditures (as defined in paragraph

25 (2)) in a quarter, instead of the amounts otherwise paid
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1 to a State under subsection (a) for a quarter with respect

2 to such expenditures, there shall be paid to the State an

3 amount equal to 100 percent of the amount of such ex4 penditures.

5 ‘‘(2) In this subsection, the term ‘new mandated ex6 penditures’ means the sum of the following expenditures

7 under the State plan during a quarter:

8 ‘‘(A) The amount by which (i) the minimum

9 amount of expenditures for medical assistance for

10 inpatient hospital services (consistent with section

11 4(e)(1)(A) of the Tobacco Health Tax Act of 1993),

12 exceeds (ii) the amount of expenditures for such as13 sistance which the Secretary determines would have

14 been payable under the plan (as such plan was in ef15 fect as of the date of the enactment of this sub16 section).

17 ‘‘(B) The amount by which (i) the minimum

18 amount of expenditures under the plan for medical

19 assistance for physicians’ services (consistent with

20 section 1902(a)(13)(G)) for the quarter, exceeds (ii)

21 the amount of expenditures under the plan for such

22 assistance which the Secretary determines would

23 have been payable under the plan (as such plan was

24 in effect as of the date of the enactment of this sub25 section) for the quarter.
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1 ‘‘(C) The amount of expenditures for medical

2 assistance attributable to individuals with respect to

3 whom the State plan would not be required to pro4 vide such assistance but for the amendments made

5 by section 4(c) of the Tobacco Health Tax Act of

6 1993.

7 ‘‘(D) The amount of expenses reasonably attrib8 utable to the expenditures described in subpara9 graphs (A) through (C).’’.

10 SEC. 5. STATE GRANTS TO REPLACE STATE AND LOCAL

11 REVENUE LOSS DUE TO FEDERAL TOBACCO

12 TAX INCREASE.

13 With respect to the funds made available under sec14 tion 9512(c)(2) of the Internal Revenue Code of 1986, the

15 Secretary of the Treasury shall, by grant, allocate such

16 funds among State and local governments to compensate

17 for any reduction in revenues to such governments which

18 such Secretary determines is attributable to the reduced

19 consumption of articles subject to tax under section 5701

20 of such Code by reason of the amendments made by sec21 tion 2 of this Act. In determining revenue reduction, such

22 Secretary shall take into account the presence of military

23 bases and international boundaries, among other factors.
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1 SEC. 6. ADDITIONAL FUNDS FOR GENERAL HEALTH PRE2 VENTION AND ACCESS TO HEALTH CARE.

3 With respect to the funds made available under sec4 tion 9512(c)(3) of the Internal Revenue Code of 1986, the

5 Secretary of Health and Human Services shall, for the

6 purpose of providing additional funds to carry out the fol7 lowing programs, make such allocations as the Secretary

8 deems appropriate:

9 (1) LEAD POISONING PREVENTION.—The pro10 gram under section 317A of the Public Health Serv11 ice Act.

12 (2) MINORITY HEALTH PROMOTION.—Programs

13 under section 1707 of such Act.

14 (3) AIDS PREVENTION.—Programs of the Cen15 ters for Disease Control and Prevention under such

16 Act to prevent infection with the human

17 immunodeficiency virus.

18 (4) PREVENTIVE HEALTH AND HEALTH SERV19 ICES BLOCK GRANT.—The program under part A of

20 title XIX of such Act.

21 (5) NATIONAL HEALTH SERVICE CORPS.—The

22 programs of the National Health Service Corps

23 under subparts II and III of part D of title III of

24 such Act.

25 (6) COMMUNITY HEALTH PROGRAMS.—The pro26 grams under sections 329 and 330 of such Act.
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1 SEC. 7. ADDITIONAL FUNDS FOR COUNTER ADVERTISING

2 AND TOBACCO PREVENTIVE ACTIVITIES.

3 With respect to the funds made available under sec4 tion 9512(c)(4) of the Internal Revenue Code of 1986, the

5 Secretary of Health and Human Services shall provide for

6 public education and other activities to discourage the use

7 of tobacco products, with special emphasis on discouraging

cigarette smoking by youths. At least 1 8 ⁄2 of such funds

9 shall be made available for counter-advertising to discour10 age the use of such products.

11 SEC. 8. DEPARTMENT OF AGRICULTURE PROGRAMS TO AS12 SIST TOBACCO PRODUCERS EXPERIENCING

13 FINANCIAL HARDSHIP CAUSED BY IN14 CREASED EXCISE TAXES ON TOBACCO PROD15 UCTS.

16 (a) INCOME ASSISTANCE.—

17 (1) ASSISTANCE AUTHORIZED.—If the Sec18 retary of Agriculture determines that the domestic

19 consumption of tobacco for a marketing year is

20 equal to or less than 95 percent of the normal year’s

21 domestic consumption of tobacco calculated in 1993,

22 the Secretary may make payments to a tobacco pro23 ducer in the United States to offset all or a portion

24 of the reduced sales of tobacco made by that pro25 ducer during that marketing year compared to sales
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1 made by that producer during the marketing year

2 ending in 1993.

3 (2) EXCEPTION.—The Secretary may not make

4 a payment under this subsection to a tobacco pro5 ducer if the Secretary determines that the reduction

6 in tobacco sales by the producer—

7 (A) is unrelated to the increase in excise

8 taxes on tobacco products imposed by section 2;

9 or

10 (B) is offset by sales of other crops pro11 duced on lands converted from tobacco produc12 tion.

13 (b) PROMOTION OF ALTERNATIVE CROPS.—The Sec14 retary of Agriculture shall encourage and assist tobacco

15 producers in the United States to convert their farm oper16 ations from the production of tobacco to other crops. As17 sistance provided under this subsection may include—

18 (1) the provision of grants and loans to pur19 chase equipment, seeds or nursery stocks, or fer20 tilizer to produce other crops;

21 (2) the treatment of lands converted from to22 bacco production to the production of another pro23 gram crop as lands considered planted to that crop

24 in the calculation of crop acreage bases under title
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1 V of the Agricultural Act of 1949 (7 U.S.C. 1461

2 et seq.);

3 (3) the provision of technical advice regarding

4 the care and harvesting of other crops; and

5 (4) the undertaking of measures to improve the

6 access of tobacco producers to the markets for other

7 crops.

8 (c) PROCESSING AND MARKETING INITIATIVES.—

9 (1) GRANTS.—The Secretary of Agriculture

10 shall make grants to States in which tobacco is pro11 duced to assist those States—

12 (A) in attracting food processing compa13 nies to establish food processing facilities in

14 those States in order to create a market for to15 bacco producers who convert their farm oper16 ations from the production of tobacco to other

17 crops; and

18 (B) in establishing a cooperative collection

19 and distribution process among tobacco produc20 ers who convert to other crops in order to effi21 ciently supply food processing facilities in those

22 States.

23 (2) APPLICATION AND CONVERSION PLAN.—To

24 receive a grant under this subsection, a State shall

25 submit to the Secretary an application in such form
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1 and containing such information as the Secretary

2 may require. The application shall contain—

3 (A) a description of the extent to which the

4 economy of the State is dependent upon the

5 production of tobacco and the manufacturing of

6 tobacco products; and

7 (B) a specific plan to use the grant to re8 duce the State’s dependence upon the produc9 tion of tobacco and the manufacturing of to10 bacco products.

11 (3) REPORT.—Not later than 15 months after

12 receiving a grant under this subsection, each State

13 receiving such a grant shall submit a report to the

14 Secretary containing—

15 (A) a description of the uses made of the

16 grant by the State, including the amount of the

17 grant expended for each use; and

18 (B) an evaluation of the extent to which

19 the grant assisted the State in reducing its de20 pendence upon the production of tobacco and

21 the manufacturing of tobacco products.

22 (d) FUNDING.—The Secretary of Agriculture shall

23 carry out this section using funds made available to the

24 Secretary from the Tobacco Health Tax Trust Fund
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1 under section 9512(c)(5) of the Internal Revenue Code of

2 1986.

3 (e) DEFINITIONS.—For purposes of this section:

4 (1) The term ‘‘normal year’s domestic con5 sumption’’ has the meaning given that term in sec6 tion 301(b)(11)(B) of the Agricultural Adjustment

7 Act of 1938 (7 U.S.C. 1301(b)(11)(B)).

8 (2) The term ‘‘marketing year’’ has the mean9 ing given that term in section 301(b)(7) of such Act

10 (7 U.S.C. 1301(b)(7)).

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