I 

115TH CONGRESS 

1ST SESSION H. R. 1307 

To amend the Patient Protection and Affordable Care Act to establish a 

public health insurance option. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 2, 2017 

Mr. DEFAZIO (for himself and Mr. COHEN) introduced the following bill; 

which was referred to the Committee on Energy and Commerce 

A BILL 

To amend the Patient Protection and Affordable Care Act 

to establish a public health insurance option. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Public Option Deficit 

5 Reduction Act’’. 

6 SEC. 2. PUBLIC HEALTH INSURANCE OPTION. 

7 (a) IN GENERAL.—Part 3 of subtitle D of title I of 

8 the Patient Protection and Affordable Care Act (Public 

9 Law 111–148) is amended by adding at the end the fol10 lowing new section: 


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1 ‘‘SEC. 1325. PUBLIC HEALTH INSURANCE OPTION. 

2 ‘‘(a) ESTABLISHMENT AND ADMINISTRATION OF A

3 PUBLIC HEALTH INSURANCE OPTION.— 

4 ‘‘(1) ESTABLISHMENT.—For years beginning 

5 with 2018, the Secretary of Health and Human 

6 Services (in this subtitle referred to as the ‘Sec7 retary’) shall provide for the offering through Ex8 changes established under this title of a health bene9 fits plan (in this Act referred to as the ‘public health 

10 insurance option’) that ensures choice, competition, 

11 and stability of affordable, high-quality coverage 

12 throughout the United States in accordance with 

13 this section. In designing the option, the Secretary’s 

14 primary responsibility is to create a low-cost plan 

15 without compromising quality or access to care. 

16 ‘‘(2) OFFERING THROUGH EXCHANGES.— 

17 ‘‘(A) EXCLUSIVE TO EXCHANGES.—The 

18 public health insurance option shall only be 

19 made available through Exchanges established 

20 under this title. 

21 ‘‘(B) ENSURING A LEVEL PLAYING

22 FIELD.—Consistent with this section, the public 

23 health insurance option shall comply with re24 quirements that are applicable under this title 

25 to health benefits plans offered through such 

26 Exchanges, including requirements related to 


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1 benefits, benefit levels, provider networks, no2 tices, consumer protections, and cost sharing. 

3 ‘‘(C) PROVISION OF BENEFIT LEVELS.— 

4 The public health insurance option— 

5 ‘‘(i) shall offer bronze, silver, and gold 

6 plans; and 

7 ‘‘(ii) may offer platinum plans. 

8 ‘‘(3) ADMINISTRATIVE CONTRACTING.—The 

9 Secretary may enter into contracts for the purpose 

10 of performing administrative functions (including 

11 functions described in subsection (a)(4) of section 

12 1874A of the Social Security Act) with respect to 

13 the public health insurance option in the same man14 ner as the Secretary may enter into contracts under 

15 subsection (a)(1) of such section. The Secretary has 

16 the same authority with respect to the public health 

17 insurance option as the Secretary has under sub18 sections (a)(1) and (b) of section 1874A of the So19 cial Security Act with respect to title XVIII of such 

20 Act. Contracts under this subsection shall not in21 volve the transfer of insurance risk to such entity. 

22 ‘‘(4) OMBUDSMAN.—The Secretary shall estab23 lish an office of the ombudsman for the public 

24 health insurance option which shall have duties with 

25 respect to the public health insurance option similar 


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1 to the duties of the Medicare Beneficiary Ombuds2 man under section 1808(c)(2) of the Social Security 

3 Act. In addition, such office shall work with States 

4 to ensure that information and notice is provided 

5 that the public health insurance option is one of the 

6 health plans available through an Exchange. 

7 ‘‘(5) DATA COLLECTION.—The Secretary shall 

8 collect such data as may be required to establish 

9 premiums and payment rates for the public health 

10 insurance option and for other purposes under this 

11 section, including to improve quality and to reduce 

12 racial, ethnic, and other disparities in health and 

13 health care. 

14 ‘‘(6) ACCESS TO FEDERAL COURTS.—The provi15 sions of Medicare (and related provisions of title II 

16 of the Social Security Act) relating to access of 

17 Medicare beneficiaries to Federal courts for the en18 forcement of rights under Medicare, including with 

19 respect to amounts in controversy, shall apply to the 

20 public health insurance option and individuals en21 rolled under such option under this title in the same 

22 manner as such provisions apply to Medicare and 

23 Medicare beneficiaries. 

24 ‘‘(b) PREMIUMS AND FINANCING.— 

25 ‘‘(1) ESTABLISHMENT OF PREMIUMS.— 


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1 ‘‘(A) IN GENERAL.—The Secretary shall 

2 establish geographically adjusted premium rates 

3 for the public health insurance option— 

4 ‘‘(i) in a manner that complies with 

5 the premium rules under paragraph (3); 

6 and 

7 ‘‘(ii) at a level sufficient to fully fi8 nance the costs of— 

9 ‘‘(I) health benefits provided by 

10 the public health insurance option; 

11 and 

12 ‘‘(II) administrative costs related 

13 to operating the public health insur14 ance option. 

15 ‘‘(B) CONTINGENCY MARGIN.—In estab16 lishing premium rates under subparagraph (A), 

17 the Secretary shall include an appropriate 

18 amount for a contingency margin. 

19 ‘‘(2) ACCOUNT.— 

20 ‘‘(A) ESTABLISHMENT.—There is estab21 lished in the Treasury of the United States an 

22 account for the receipts and disbursements at23 tributable to the operation of the public health 

24 insurance option, including the start-up funding 

25 under subparagraph (B). Section 1854(g) of 


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1 the Social Security Act shall apply to receipts 

2 described in the previous sentence in the same 

3 manner as such section applies to payments or 

4 premiums described in such section. 

5 ‘‘(B) START-UP FUNDING.— 

6 ‘‘(i) IN GENERAL.—In order to pro7 vide for the establishment of the public 

8 health insurance option there is hereby ap9 propriated to the Secretary, out of any 

10 funds in the Treasury not otherwise appro11 priated, $2,000,000,000. In order to pro12 vide for initial claims reserves before the 

13 collection of premiums, there is hereby ap14 propriated to the Secretary, out of any 

15 funds in the Treasury not otherwise appro16 priated, such sums as necessary to cover 

17 90 days worth of claims reserves based on 

18 projected enrollment. 

19 ‘‘(ii) AMORTIZATION OF START-UP

20 FUNDING.—The Secretary shall provide for 

21 the repayment of the startup funding pro22 vided under clause (i) to the Treasury in 

23 an amortized manner over the 10-year pe24 riod beginning with 2018. 


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1 ‘‘(iii) LIMITATION ON FUNDING.— 

2 Nothing in this subsection shall be con3 strued as authorizing any additional appro4 priations to the account, other than such 

5 amounts as are otherwise provided with re6 spect to other health benefits plans partici7 pating under the Exchange involved. 

8 ‘‘(3) INSURANCE RATING RULES.—The pre9 mium rate charged for the public health insurance 

10 option may not vary except as provided under sec11 tion 2701 of the Public Health Service Act. 

12 ‘‘(c) PAYMENT RATES FOR ITEMS AND SERVICES.— 

13 ‘‘(1) RATES ESTABLISHED BY SECRETARY.— 

14 ‘‘(A) IN GENERAL.—The Secretary shall 

15 establish payment rates for the public health in16 surance option for services and health care pro17 viders consistent with this subsection and may 

18 change such payment rates in accordance with 

19 subsection (d). 

20 ‘‘(B) INITIAL PAYMENT RULES.— 

21 ‘‘(i) IN GENERAL.—During 2018, 

22 2019, and 2020, the Secretary shall set 

23 the payment rates under this subsection 

24 for services and providers described in sub25 paragraph (A) equal to the payment rates 


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1 for equivalent services and providers under 

2 parts A and B of Medicare, subject to 

3 clause (ii), paragraphs (2)(A) and (4), and 

4 subsection (d). 

5 ‘‘(ii) EXCEPTIONS.— 

6 ‘‘(I) PRACTITIONERS’ SERV7 ICES.—Payment rates for practi8 tioners’ services otherwise established 

9 under the fee schedule under section 

10 1848 of the Social Security Act shall 

11 be applied without regard to the pro12 visions under subsection (f) of such 

13 section and the update under sub14 section (d)(4) under such section for a 

15 year as applied under this paragraph 

16 shall be not less than 1 percent. 

17 ‘‘(II) ADJUSTMENTS.—The Sec18 retary may determine the extent to 

19 which Medicare adjustments applica20 ble to base payment rates under parts 

21 A and B of Medicare for graduate 

22 medical education and dispropor23 tionate share hospitals shall apply 

24 under this section. 


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1 ‘‘(C) FOR NEW SERVICES.—The Secretary 

2 shall modify payment rates described in sub3 paragraph (B) in order to accommodate pay4 ments for services, such as well-child visits, that 

5 are not otherwise covered under Medicare. 

6 ‘‘(D) PRESCRIPTION DRUGS.—Payment 

7 rates under this subsection for prescription 

8 drugs that are not paid for under part A or 

9 part B of Medicare shall be at rates negotiated 

10 by the Secretary. 

11 ‘‘(2) INCENTIVES FOR PARTICIPATING PRO12 VIDERS.— 

13 ‘‘(A) INITIAL INCENTIVE PERIOD.— 

14 ‘‘(i) IN GENERAL.—The Secretary 

15 shall provide, in the case of services de16 scribed in clause (ii) furnished during 

17 2018, 2019, and 2020, for payment rates 

18 that are 5 percent greater than the rates 

19 established under paragraph (1). 

20 ‘‘(ii) SERVICES DESCRIBED.—The 

21 services described in this clause are items 

22 and professional services, under the public 

23 health insurance option by a physician or 

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1 pates in both Medicare and the public 

2 health insurance option. 

3 ‘‘(iii) SPECIAL RULES.—A pediatrician 

4 and any other health care practitioner who 

5 is a type of practitioner that does not typi6 cally participate in Medicare (as deter7 mined by the Secretary) shall also be eligi8 ble for the increased payment rates under 

9 clause (i). 

10 ‘‘(B) SUBSEQUENT PERIODS.—Beginning 

11 with 2021 and for subsequent years, the Sec12 retary shall continue to use an administrative 

13 process to set such rates in order to promote 

14 payment accuracy, to ensure adequate bene15 ficiary access to providers, and to promote af16 fordability and the efficient delivery of medical 

17 care consistent with subsection (a)(1). Such 

18 rates shall not be set at levels expected to in19 crease average medical costs per enrollee cov20 ered under the public health insurance option 

21 beyond what would be expected if the process 

22 under paragraph (1)(B) and subparagraph (A) 

23 were continued, as certified by the Office of the 

24 Actuary of the Centers for Medicare & Medicaid 

25 Services. 


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1 ‘‘(C) ESTABLISHMENT OF A PROVIDER

2 NETWORK.—Health care providers participating 

3 under Medicare are participating providers in 

4 the public health insurance option unless they 

5 opt out in a process established by the Sec6 retary. 

7 ‘‘(3) ADMINISTRATIVE PROCESS FOR SETTING

8 RATES.—Chapter 5 of title 5, United States Code, 

9 shall apply to the process for the initial establish10 ment of payment rates under this subsection but not 

11 to the specific methodology for establishing such 

12 rates or the calculation of such rates. 

13 ‘‘(4) CONSTRUCTION.—Nothing in this section 

14 shall be construed as limiting the Secretary’s author15 ity to correct for payments that are excessive or defi16 cient, taking into account the provisions of sub17 section (a)(1) and any appropriate adjustments 

18 based on the demographic characteristics of enrollees 

19 covered under the public health insurance option, 

20 but in no case shall the correction of payments 

21 under this paragraph result in a level of expendi22 tures per enrollee that exceeds the level of expendi23 tures that would have occurred under paragraphs 

24 (1)(B) and (2)(A), as certified by the Office of the 


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1 Actuary of the Centers for Medicare & Medicaid 

2 Services. 

3 ‘‘(5) CONSTRUCTION.—Nothing in this section 

4 shall be construed as affecting the authority of the 

5 Secretary to establish payment rates, including pay6 ments to provide for the more efficient delivery of 

7 services, such as the initiatives provided for under 

8 subsection (d). 

9 ‘‘(6) LIMITATIONS ON REVIEW.—There shall be 

10 no administrative or judicial review of a payment 

11 rate or methodology established under this sub12 section or under subsection (d). 

13 ‘‘(d) MODERNIZED PAYMENT INITIATIVES AND DE14 LIVERY SYSTEM REFORM.— 

15 ‘‘(1) IN GENERAL.—For plan years beginning 

16 with 2018, the Secretary may utilize innovative pay17 ment mechanisms and policies to determine pay18 ments for items and services under the public health 

19 insurance option. The payment mechanisms and 

20 policies under this subsection may include patient21 centered medical home and other care management 

22 payments, accountable care organizations, value23 based purchasing, bundling of services, differential 

24 payment rates, performance or utilization based pay25 ments, partial capitation, and direct contracting with 


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1 providers. Payment rates under such payment mech2 anisms and policies shall not be set at levels ex3 pected to increase average medical costs per enrollee 

4 covered under the public health insurance option be5 yond what would be expected if the process under 

6 paragraphs (1)(B) and (2)(A) of subsection (c) were 

7 continued, as certified by the Office of the Actuary 

8 of the Centers for Medicare & Medicaid Services. 

9 ‘‘(2) REQUIREMENTS FOR INNOVATIVE PAY10 MENTS.—The Secretary shall design and implement 

11 the payment mechanisms and policies under this 

12 subsection in a manner that— 

13 ‘‘(A) seeks to— 

14 ‘‘(i) improve health outcomes; 

15 ‘‘(ii) reduce health disparities (includ16 ing racial, ethnic, and other disparities); 

17 ‘‘(iii) provide efficient and affordable 

18 care; 

19 ‘‘(iv) address geographic variation in 

20 the provision of health services; or 

21 ‘‘(v) prevent or manage chronic ill22 ness; and 

23 ‘‘(B) promotes care that is integrated, pa24 tient-centered, high-quality, and efficient. 


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1 ‘‘(3) ENCOURAGING THE USE OF HIGH VALUE

2 SERVICES.—To the extent allowed by the benefit 

3 standards applied to all health benefits plans partici4 pating under the Exchange involved, the public 

5 health insurance option may modify cost sharing and 

6 payment rates to encourage the use of services that 

7 promote health and value. 

8 ‘‘(4) NON-UNIFORMITY PERMITTED.—Nothing 

9 in this subtitle shall prevent the Secretary from 

10 varying payments based on different payment struc11 ture models (such as accountable care organizations 

12 and medical homes) under the public health insur13 ance option for different geographic areas. 

14 ‘‘(e) PROVIDER PARTICIPATION.— 

15 ‘‘(1) IN GENERAL.—The Secretary shall estab16 lish conditions of participation for health care pro17 viders under the public health insurance option. 

18 ‘‘(2) LICENSURE OR CERTIFICATION.—The Sec19 retary shall not allow a health care provider to par20 ticipate in the public health insurance option unless 

21 such provider is appropriately licensed or certified 

22 under State law. 

23 ‘‘(3) PAYMENT TERMS FOR PROVIDERS.— 

24 ‘‘(A) PHYSICIANS.—The Secretary shall 

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1 cians under the public health insurance option, 

2 for which payment may be made for services 

3 furnished during the year, in one of 2 classes: 

4 ‘‘(i) PREFERRED PHYSICIANS.—Those 

5 physicians who agree to accept the pay6 ment rate established under this section 

7 (without regard to cost sharing) as the 

8 payment in full. 

9 ‘‘(ii) PARTICIPATING, NON-PRE10 FERRED PHYSICIANS.—Those physicians 

11 who agree not to impose charges (in rela12 tion to the payment rate described in sub13 section (c) for such physicians) that exceed 

14 the ratio permitted under section 

15 1848(g)(2)(C) of the Social Security Act. 

16 ‘‘(B) OTHER PROVIDERS.—The Secretary 

17 shall provide for the participation (on an annual 

18 or other basis specified by the Secretary) of 

19 health care providers (other than physicians) 

20 under the public health insurance option under 

21 which payment shall only be available if the 

22 provider agrees to accept the payment rate es23 tablished under subsection (c) (without regard 

24 to cost sharing) as the payment in full. 


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1 ‘‘(4) EXCLUSION OF CERTAIN PROVIDERS.— 

2 The Secretary shall exclude from participation under 

3 the public health insurance option a health care pro4 vider that is excluded from participation in a Fed5 eral health care program (as defined in section 

6 1128B(f) of the Social Security Act). 

7 ‘‘(f) APPLICATION OF FRAUD AND ABUSE PROVI8 SIONS.—Provisions of law (other than criminal law provi9 sions) identified by the Secretary by regulation, in con10 sultation with the Inspector General of the Department 

11 of Health and Human Services, that impose sanctions 

12 with respect to waste, fraud, and abuse under Medicare, 

13 such as the False Claims Act (31 U.S.C. 3729 et seq.), 

14 shall also apply to the public health insurance option. 

15 ‘‘(g) MEDICARE DEFINED.—For purposes of this sec16 tion, the term ‘Medicare’ means the health insurance pro17 grams under title XVIII of the Social Security Act.’’. 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) TREATMENT AS QUALIFIED HEALTH

20 PLAN.—Section 1301(a)(2) of the Patient Protection 

21 and Affordable Care Act is amended— 

22 (A) in the heading, by inserting ‘‘, THE

23 PUBLIC HEALTH INSURANCE OPTION,’’ before 

24 ‘‘AND’’; and 


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1 (B) by inserting ‘‘the public health insur2 ance option under section 1325,’’ before ‘‘and a 

3 multi-State plan’’. 

4 (2) LEVEL PLAYING FIELD.—Section 1324(a) 

5 of such Act is amended by inserting ‘‘the public 

6 health insurance option under section 1325,’’ before 

7 ‘‘or a multi-State qualified health plan’’. 

Æ 


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