```

[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4529 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 4529

 To provide for the reform of health care, the Social Security system, 
the tax code for individuals and business, job training, and the budget 
                                process.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 27, 2010

 Mr. Ryan of Wisconsin (for himself, Mr. Bartlett, Mrs. Blackburn, Mr. 
  Burgess, Mr. Campbell, Mr. Hensarling, Mr. Nunes, and Mr. Price of 
   Georgia) introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
 Energy and Commerce, Education and Labor, Rules, the Budget, and the 
 Judiciary, for a period to be subsequently determined by the Speaker, 
 in each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

 
 To provide for the reform of health care, the Social Security system, 
the tax code for individuals and business, job training, and the budget 
                                process.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Roadmap for 
America's Future Act of 2010''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purpose.
                      TITLE I--HEALTH CARE REFORM

          Subtitle A--Expanding Patient's Health Care Choices

               Part 1--State-Based Health Care Exchanges

Sec. 101. State-based health care exchanges.
Sec. 102. Requirements.
Sec. 103. State Exchange incentives.
   Part 2--Fair Tax Treatment for All Americans to Afford Health Care

Sec. 111. Reference.
    subpart a--refundable and advanceable credit for certain health 
                           insurance coverage

Sec. 112. Refundable and advanceable credit for certain health 
                            insurance coverage.
Sec. 113. Requiring employer transparency about employee benefits.
Sec. 114. Changes to existing tax preferences for medical coverage, 
                            etc., for individuals eligible for 
                            qualified health insurance credit.
                   subpart b--health savings accounts

Sec. 121. Improvements to health savings accounts.
Sec. 122. Exception to requirement for employers to make comparable 
                            health savings account contributions.
  Subtitle B--Health Plan Choice; Small Business Health Fairness; Tax 
                               Amendments

Sec. 131. Cooperative governing of individual health insurance 
                            coverage.
Sec. 132. Small business health fairness.
Sec. 133. Repeal of certain tax exemptions for health insurance 
                            payments.
              Subtitle C--Health Care Services Commission

                Part I--Establishment and General Duties

Sec. 141. Establishment.
Sec. 142. General authorities and duties.
Sec. 143. Dissemination.
      Part II--Forum for Quality and Effectiveness in Health Care

Sec. 151. Establishment of office.
Sec. 152. Membership.
Sec. 153. Duties.
Sec. 154. Adoption and enforcement of guidelines and standards.
Sec. 155. Additional requirements.
                      Part III--General Provisions

Sec. 161. Certain administrative authorities.
Sec. 162. Funding.
Sec. 163. Definitions.
                  Part IV--Terminations and Transition

Sec. 171. Termination of Agency for Healthcare Research and Quality.
Sec. 172. Transition.
                Part V--Independent Health Record Trust

Sec. 181. Short title of part.
Sec. 182. Purpose.
Sec. 183. Definitions.
Sec. 184. Establishment, certification, and membership of independent 
                            health record trusts.
Sec. 185. Duties of IHRT to IHRT participants.
Sec. 186. Availability and use of information from records in IHRT 
                            consistent with privacy protections and 
                            agreements.
Sec. 187. Voluntary nature of trust participation and information 
                            sharing.
Sec. 188. Financing of activities.
Sec. 189. Regulatory oversight.
             TITLE II--FAIRNESS FOR EVERY AMERICAN PATIENT

                   Subtitle A--Medicaid Modernization

Sec. 201. Medicaid modernization.
Sec. 202. Outreach.
Sec. 203. Transition rules; miscellaneous provisions.
Subtitle B--Supplemental Health Care Assistance for Low-Income Families

Sec. 211. Supplemental health care assistance for low-income families.
                       TITLE III--MEDICARE REFORM

                    Subtitle A--New Medicare Program

Sec. 301. Benefit changes.
Sec. 302. Increase in Medicare eligibility age.
Sec. 303. Unified Medicare Trust Fund.
            Subtitle B--Changes in Current Medicare Program

Sec. 311. Income-related reduction in part D premium subsidy.
Sec. 312. Reduction in hospital marketbasket increases.
Sec. 313. Elimination of indexing of income thresholds for part B 
                            income-related premiums.
Sec. 314. Reinstatement of the Medicare trigger.
Sec. 315. Eliminating inefficiencies and increasing choice in Medicare 
                            Advantage.
                  Subtitle C--Medical Liability Reform

             Part 1--Enacting Real Medical Liability Reform

Sec. 321. Encouraging speedy resolution of claims.
Sec. 322. Compensating patient injury.
Sec. 323. Maximizing patient recovery.
Sec. 324. Additional health benefits.
Sec. 325. Punitive damages.
Sec. 326. Authorization of payment of future damages to claimants in 
                            health care lawsuits.
Sec. 327. Definitions.
Sec. 328. Effect on other laws.
Sec. 329. State flexibility and protection of States' rights.
Sec. 330. Applicability; effective date.
                      Part 2--Ending Lawsuit Abuse

Sec. 331. State grants to create health court solutions.
                    TITLE IV--SOCIAL SECURITY REFORM

Sec. 401. Short title.
Sec. 402. Establishment of Personal Social Security Savings Program.
Sec. 403. Monthly insurance benefits for participating individuals.
Sec. 404. Tax treatment of accounts.
Sec. 405. Self-Liquidating Social Security Transition Fund.
Sec. 406. Budgetary treatment of Social Security.
Sec. 407. Accounting for the Old-Age, Survivors, and Disability 
                            Insurance Program and the Personal Social 
                            Security Savings Program.
Sec. 408. Progressive indexing of benefits for old-age, wife's, and 
                            husband's insurance benefits.
Sec. 409. Adjustments to schedule for increases in normal retirement 
                            age.
                     TITLE V--SIMPLIFIED INCOME TAX

Sec. 501. Short title.
Sec. 502. Repeal of alternative minimum tax for noncorporate taxpayers.
Sec. 503. Simplified income tax system.
Sec. 504. Exclusion for capital gains, dividends, and interest.
Sec. 505. Repeal of estate and gift taxes.
                   TITLE VI--BUSINESS CONSUMPTION TAX

Sec. 601. Short title.
Sec. 602. Repeal of corporate income tax; new tax paid by corporations 
                            and other businesses.
Sec. 603. Repeal of chapter 6.
              TITLE VII--JOB TRAINING RESULTS ACT OF 2010

Sec. 701. Short title.
Sec. 702. Purpose.
Sec. 703. Improvement of job training programs; performance metrics for 
                            WIA job training programs.
Sec. 704. Other job training programs.
Sec. 705. Transparency.
Sec. 706. Evaluations.
Sec. 707. Encouraging innovation.
Sec. 708. Making WIA Training Vouchers more accessible and flexible.
Sec. 709. Life long learning awareness campaigns.
Sec. 710. GAO reports.
            TITLE VIII--SPENDING LIMITS AND DEFICIT CONTROL

Sec. 800. Short title.
            Subtitle A--Spending Limits and Deficit Control

Sec. 801. Discretionary spending limits.
Sec. 802. Total spending limits.
                     Subtitle B--Reports and Orders

Sec. 811. Reports and orders.
Sec. 812. Spending limits enforcement.
Sec. 813. Spending reduction orders.
Sec. 814. Alternate spending reduction legislation in the House of 
                            Representatives.
Sec. 815. Alternate spending reduction legislation in the Senate.
                    Subtitle C--Long-Term Budgeting

Sec. 821. CBO and OMB projections.
Sec. 822. GAO and OMB statements of the Federal Government's financial 
                            condition.
Sec. 823. Five-year fiscal sustainability review.
Sec. 824. Long-term reconciliation.
Sec. 825. Long-term spending increase point of order.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds as follows:
            (1) The Congressional Budget Office, the Government 
        Accountability Office, and the Federal Reserve have all found 
        that Social Security, Medicare, and Medicaid, as currently 
        structured, will result in unsustainable levels of spending, 
        deficits, and debt.
            (2) Although Americans remain committed to the missions of 
        these initiatives, the goals can no longer be met on models 
        created nearly 80 years ago--with large, centralized 
        institutions, especially government, serving as sole providers 
        for an increasingly dependent population.
            (3) The continuing failure to enact solutions makes these 
        problems more intractable with each succeeding year.
            (4) Among the inescapable signs are the following: an 
        unsustainable path of Government spending; levels of projected 
        debt that threaten to bankrupt the country; trillions of 
        dollars of unfunded liabilities in the Government's major 
        benefit programs; and the erosion of Americans' security and 
        confidence in health care and retirement.
            (5) These conditions pose significant potential burdens not 
        only for the Government, but for the United States economy as 
        well, threatening its ability to continue raising standards of 
        living, and its leadership in an increasingly international 
        marketplace.
            (6) A comprehensive plan is needed, and this legislation 
        aims to gain control of Federal spending, deficits, and debt 
        while energizing the productive capacities of Americans to 
        generate sustained economic growth.
    (b) Purpose.--The purpose of this Act is as follows:
            (1) Health care reform.--To provide access to health care 
        coverage for uninsured Americans by establishing a new tax 
        credit; to reform health insurance markets, high-risk pools, 
        and electronic health records; and to create a new agency to 
        promote the dissemination of industry-defined health care price 
        and quality data.
            (2) Medicaid and schip reform.--To ensure health care 
        coverage for those who need it most and can be sustained, 
        reforms the Medicaid and SCHIP to expand coverage options for 
        beneficiaries, gives greater flexibility, and slows the growth 
        in spending.
            (3) Medicare reform.--To ensure the Medicare benefit 
        continues to provide health care coverage for seniors by 
        establishing modernizing the program to slowly phase in reforms 
        for those younger than 55 years of age, and to make the program 
        permanently solvent and fiscally sustainable.
            (4) Social security reform.--To reform Social Security to 
        ensure retirement security for future generations and to make 
        it solvent for the foreseeable future; to address inequities in 
        the system and provide millions of Americans with the 
        opportunity to build a retirement nest egg that they can pass 
        on to their heirs.
            (5) Individual income tax reform.--To offer taxpayers a 
        choice in paying their Federal income taxes; to allow 
        individuals to choose between the current tax code or a highly 
        simplified tax system with virtually no deductions or credits 
        (apart from an individual health care credit), two low tax 
        rates and a generous standard deduction and personal exemption; 
        to fully repeal the alternative minimum tax (AMT), eliminate 
        the tax on interest, capital gains and dividends in order to 
        promote saving; and to repeal the estate tax.
            (6) Business tax reform.--To eliminate the United States 
        corporate income tax and establishes a border-adjustable 
        business consumption tax in its place; to provide a new method 
        of business taxation that will level the playing field for 
        United States businesses to compete with foreign businesses and 
        will promote sustained economic growth, investment and job 
        creation in America.
            (7) Job training.--To assist working Americans in an 
        increasingly global economy, reforms 49 job training programs 
        across eight agencies to enhance transparency, accountability, 
        and performance.
            (8) Budget process.--To keep total spending of the 
        Government under control, nondefense discretionary spending 
        limits are set forth, a limit on total outlays as a percentage 
        of the gross domestic produce is established, and the process 
        is reformed to put a greater focus on long-term budgetary 
        trends.

                      TITLE I--HEALTH CARE REFORM

          Subtitle A--Expanding Patient's Health Care Choices

               PART 1--STATE-BASED HEALTH CARE EXCHANGES

SEC. 101. STATE-BASED HEALTH CARE EXCHANGES.

    (a) State-Based Health Care Exchanges.--
            (1) In general.--The Secretary of Health and Human Services 
        (referred to in this part as the ``Secretary'') shall establish 
        a process for the review of applications submitted by States 
        for the establishment and implementation of State-based health 
        care Exchanges (referred to in this part as a ``State 
        Exchange'') and for the certification of such Exchanges. The 
        Secretary shall certify a State Exchange if the Secretary 
        determines that such Exchange meets the requirements of this 
        part.
            (2) Continued certification.--The certification of a State 
        Exchange under subsection (a) shall remain in effect until the 
        Secretary determines that the Exchange has failed to meet any 
        of the requirements under this part.

SEC. 102. REQUIREMENTS.

    (a) General Requirements for Certification.--An application for 
certification under section 101(a) shall demonstrate compliance with 
the following:
            (1) Purpose.--The primary purpose of a State Exchange shall 
        be the facilitation of the individual purchase of innovative 
        private health insurance and the creation of a market where 
        private health plans compete for enrollees based on price and 
        quality.
            (2) Administration.--A State shall ensure the operation of 
        the State Exchange through direct contracts with the health 
        insurance plans that are participating in the State Exchange or 
        through a contract with a third party administrator for the 
        operation of the Exchange.
            (3) Plan participation.--A State shall not restrict or 
        otherwise limit the ability of a health insurance plan to 
        participate in, and offer health insurance coverage through, 
        the State Exchange, so long as the health insurance issuers 
        involved are duly licensed under State insurance laws 
        applicable to all health insurance issuers in the State and 
        otherwise comply with the requirements of this part.
            (4) Premiums.--
                    (A) Amount.--A State shall not determine premium or 
                cost sharing amounts for health insurance coverage 
                offered through the State Exchange.
                    (B) Collection method.--A State shall ensure the 
                existence of an effective and efficient method for the 
                collection of premiums for health insurance coverage 
                offered through the State Exchange.
    (b) Benefit Parity With Members of Congress.--With respect to 
health insurance issuers offering health insurance coverage through the 
State Exchange, the State shall not impose any requirement that such 
issuers provide coverage that includes benefits different than 
requirements on plans offered to Members of Congress under chapter 89 
of title 5, United States Code.
    (c) Facilitating Universal Coverage for Americans.--
            (1) Automatic enrollment.--The State Exchange shall ensure 
        that health insurance coverage offered through the Exchange 
        provides for the application of uniform mechanisms that are 
        designed to encourage and facilitate the enrollment of all 
        eligible individuals in Exchange-based health insurance 
        coverage. Such mechanisms shall include automatic enrollment 
        through various venues, which may include emergency rooms, the 
        submission of State tax forms, places of employment in the 
        State, and State departments of motor vehicles.
            (2) Other enrollment opportunities.--
                    (A) In general.--The State Exchange shall ensure 
                that health insurance coverage offered through the 
                Exchange permits enrollment, and changes in enrollment, 
                of individuals at the time such individuals become 
                eligible individuals in the State.
                    (B) Annual open enrollment periods.--The State 
                Exchange shall ensure that health insurance coverage 
                offered through the Exchange permits eligible 
                individuals to annually change enrollment among the 
                coverage offered through the Exchange, subject to 
                subparagraph (A).
                    (C) Incentives for continuous annual coverage.--The 
                State Exchange shall include an incentive for eligible 
                individuals to remain insured from plan year to plan 
                year, and may include incentives such as State tax 
                incentives or premium-based incentives.
            (3) Guaranteed access for individuals.--The State Exchange 
        shall ensure that, with respect to health insurance coverage 
        offered through the Exchange, all eligible individuals are able 
        to enroll in the coverage of their choice provided that such 
        individuals agree to make applicable premium and cost sharing 
        payments.
            (4) Limitation on pre-existing condition exclusions.--The 
        State Exchange shall ensure that health insurance coverage 
        offered through the Exchange meets the requirements of section 
        9801 of the Internal Revenue Code of 1986 in the same manner as 
        if such coverage was a group health plan.
            (5) Opt-out.--Nothing in this part shall be construed to 
        require that an individual be enrolled in health insurance 
        coverage.
    (d) Limitation on Exorbitant Premiums.--
            (1) Establishment of mechanism.--With respect to health 
        insurance coverage offered through the State Exchange, the 
        Exchange shall establish a mechanisms to protect enrollees from 
        the imposition of excessive premiums, to reduce adverse 
        selection, and to share risk.
            (2) Mechanism options.--The mechanisms referred to in 
        paragraph (1) may include the following:
                    (A) Independent risk adjustment.--The 
                implementation of risk-adjustment among health 
                insurance coverage offered through the State Exchange 
                through a contract entered into with a private, 
                independent board. Such board shall include 
                representation of health insurance issuers and State 
                officials but shall be independently controlled. The 
                State Exchange shall ensure that risk-adjustment 
                implemented under this subparagraph shall be based on a 
                blend of patient diagnoses and estimated costs.
                    (B) Health security pools.--The establishment (or 
                continued operation under section 2745 of the Public 
                Health Service Act) of a health security pool to 
                guarantee high-risk individuals access to affordable, 
                quality health care.
                    (C) Reinsurance.--The implementation of a 
                successful reinsurance mechanisms to guarantee high-
                risk individuals access to affordable, quality health 
                care.
    (e) Medicaid and SCHIP Beneficiaries.--The State Exchange shall 
include procedures to permit eligible individuals who are receiving (or 
who are eligible to receive) health care under title XIX or XXI of the 
Social Security Act to enroll in health insurance coverage offered 
through the Exchange.
    (f) Dissemination of Coverage Information.--The State Exchange 
shall ensure that each health insurance issuer that provides health 
insurance coverage through the Exchange disseminate to eligible 
individuals and employers within the State information concerning 
health insurance coverage options, including the plans offered and 
premiums and benefits for such plans.
    (g) Regional Options.--
            (1) Interstate compacts.--Two or more States that establish 
        a State Exchange may enter into interstate compacts providing 
        for the regulations of health insurance coverage offered within 
        such States.
            (2) Model legislation.--States adopting model legislation 
        as developed by the National Association of Insurance 
        Commissioners shall be eligible to enter into an interstate 
        compact as provided for in this section.
            (3) Multi-state pooling arrangements.--State Exchanges may 
        implement a multi-state health care coverage pooling 
        arrangement under this part.
    (h) Eligible Individual.--In this part, the term ``eligible 
individual'' means an individual who is--
            (1) a citizen or national of the United States or an alien 
        lawfully admitted to the United States for permanent residence 
        or otherwise residing in the United States under color of law;
            (2) a resident of the State involved;
            (3) not incarcerated; and
            (4) not eligible for coverage under parts A and B (or C) of 
        the Medicare program under title XVIII of the Social Security 
        Act.

SEC. 103. STATE EXCHANGE INCENTIVES.

    (a) Grants.--The Secretary may award grants, pursuant to subsection 
(b), to States for the development, implementation, and evaluation of 
certified State Exchanges and to provide more options and choice for 
individuals purchasing health insurance coverage.
    (b) One-Time Increase in Medicaid Payment.--In the case of a State 
awarded a grant to carry out this section, the total amount of the 
Federal payment determined for the State under section 1913 of the 
Social Security Act (as amended by section 201 of this Act) for fiscal 
year 2011 shall be increased by an amount equal to 1 percent of the 
total amount of payments made to the State for fiscal year 2010 under 
section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) for 
purposes of carrying out a grant awarded under this section. Amounts 
paid to a State pursuant to this subsection shall remain available 
until expended.

   PART 2--FAIR TAX TREATMENT FOR ALL AMERICANS TO AFFORD HEALTH CARE

SEC. 111. REFERENCE.

    Except as otherwise expressly provided, whenever in this part an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

    Subpart A--Refundable and Advanceable Credit for Certain Health 
                           Insurance Coverage

SEC. 112. REFUNDABLE AND ADVANCEABLE CREDIT FOR CERTAIN HEALTH 
              INSURANCE COVERAGE.

    (a) Advanceable Credit.--Subpart A of part IV of subchapter A of 
chapter 1 (relating to nonrefundable personal credits) is amended by 
adding at the end the following new section:

``SEC. 25E. QUALIFIED HEALTH INSURANCE CREDIT.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year the sum of the monthly limitations determined 
under subsection (b) for the taxpayer and the taxpayer's spouse and 
dependents.
    ``(b) Monthly Limitation.--
            ``(1) In general.--The monthly limitation for each month 
        during the taxable year for an eligible individual is \1/12\th 
        of--
                    ``(A) the applicable adult amount, in the case that 
                the eligible individual is the taxpayer or the 
                taxpayer's spouse,
                    ``(B) the applicable adult amount, in the case that 
                the eligible individual is an adult dependent, and
                    ``(C) the applicable child amount, in the case that 
                the eligible individual is a child dependent.
            ``(2) Limitation on aggregate amount.--Notwithstanding 
        paragraph (1), the aggregate monthly limitations for the 
        taxpayer and the taxpayer's spouse and dependents for any month 
        shall not exceed \1/12\th of the applicable aggregate amount.
            ``(3) No credit for ineligible months.--With respect to any 
        individual, the monthly limitation shall be zero for any month 
        for which such individual is not an eligible individual.
            ``(4) Applicable amount.--
                    ``(A) In general.--For purposes of this section--
                            ``(i) Applicable adult amount.--The 
                        applicable adult amount is $2,300.
                            ``(ii) Applicable child amount.--The 
                        applicable child amount is $1,700.
                            ``(iii) Applicable aggregate amount.--The 
                        applicable aggregate amount is $5,700.
                    ``(B) Cost-of-living adjustments.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2011, each dollar amount contained in 
                        subparagraph (A) shall be increased by an 
                        amount equal to such dollar amount multiplied 
                        by the blended cost-of-living adjustment.
                            ``(ii) Blended cost-of-living adjustment.--
                        For purposes of clause (i), the blended cost-
                        of-living adjustment means one-half of the sum 
                        of--
                                    ``(I) the cost-of-living adjustment 
                                determined under section 1(f)(3) for 
                                the calendar year in which the taxable 
                                year begins by substituting `calendar 
                                year 2010' for `calendar year 1992' in 
                                subparagraph (B) thereof, plus
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                213(d)(10)(B)(ii) for the calendar year 
                                in which the taxable year begins by 
                                substituting `2010' for `1996' in 
                                subclause (II) thereof.
                            ``(iii) Rounding.--Any increase determined 
                        under clause (i) shall be rounded to the 
                        nearest multiple of $10.
                    ``(C) Revenue neutrality adjustments.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2011, each dollar amount contained in 
                        subparagraph (A), as adjusted under 
                        subparagraph (B), shall be further adjusted (if 
                        necessary) such that the aggregate of such 
                        dollar amounts allowed as credits under this 
                        section for such taxable year equals but does 
                        not exceed the total increase in revenues in 
                        the Treasury resulting from the amendments made 
                        by sections 124 and 201 of the Roadmap for 
                        America's Future Act of 2010 for such taxable 
                        year as estimated by the Secretary.
                            ``(ii) Date of adjustment.--The Secretary 
                        shall announce the adjustments for any taxable 
                        year under this subparagraph not later than the 
                        preceding October 1.
    ``(c) Limitation Based on Amount of Tax.--In the case of a taxable 
year to which section 26(a)(2) does not apply, the credit allowed under 
subsection (a) for the taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this subpart 
        (other than this section) and section 27 for the taxable year.
    ``(d) Excess Credit Refundable to Certain Tax-Favored Accounts.--
If--
            ``(1) the credit which would be allowable under subsection 
        (a) if only qualified refund eligible health insurance were 
        taken into account under this section, exceeds
            ``(2) the limitation imposed by section 26 or subsection 
        (c) for the taxable year,
such excess shall be paid by the Secretary into the designated account 
of the taxpayer.
    ``(e) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means, 
        with respect to any month, an individual who--
                    ``(A) is the taxpayer, the taxpayer's spouse, or 
                the taxpayer's dependent, and
                    ``(B) is covered under qualified health insurance 
                as of the 1st day of such month.
            ``(2) Medicare coverage, medicaid disability coverage, and 
        military coverage.--The term `eligible individual' shall not 
        include any individual who for any month is--
                    ``(A) entitled to benefits under part A of title 
                XVIII of the Social Security Act or enrolled under part 
                B of such title, and the individual is not a 
                participant or beneficiary in a group health plan or 
                large group health plan that is a primary plan (as 
                defined in section 1862(b)(2)(A) of such Act),
                    ``(B) enrolled by reason of disability in the 
                program under title XIX of such Act, or
                    ``(C) entitled to benefits under chapter 55 of 
                title 10, United States Code, including under the 
                TRICARE program (as defined in section 1072(7) of such 
                title).
            ``(3) Identification requirements.--The term `eligible 
        individual' shall not include any individual for any month 
        unless the policy number associated with the qualified health 
        insurance and the TIN of each eligible individual covered under 
        such health insurance for such month are included on the return 
        of tax for the taxable year in which such month occurs.
            ``(4) Prisoners.--The term `eligible individual' shall not 
        include any individual for a month if, as of the first day of 
        such month, such individual is imprisoned under Federal, State, 
        or local authority.
            ``(5) Aliens.--The term `eligible individual' shall not 
        include any alien individual who is not a lawful permanent 
        resident of the United States.
    ``(f) Health Insurance.--For purposes of this section--
            ``(1) Qualified health insurance.--The term `qualified 
        health insurance' means any insurance constituting medical care 
        which (as determined under regulations prescribed by the 
        Secretary)--
                    ``(A) has a reasonable annual and lifetime benefit 
                maximum, and
                    ``(B) provides coverage for inpatient and 
                outpatient care, emergency benefits, and physician 
                care.
        Such term does not include any insurance substantially all of 
        the coverage of which is coverage described in section 
        223(c)(1)(B).
            ``(2) Qualified refund eligible health insurance.--The term 
        `qualified refund eligible health insurance' means any 
        qualified health insurance which is coverage under a group 
        health plan (as defined in section 5000(b)(1)).
    ``(g) Designated Accounts.--
            ``(1) Designated account.--For purposes of this section, 
        the term `designated account' means any specified account 
        established and maintained by the provider of the taxpayer's 
        qualified refund eligible health insurance--
                    ``(A) which is designated by the taxpayer (in such 
                form and manner as the Secretary may provide) on the 
                return of tax for the taxable year,
                    ``(B) which, under the terms of the account, 
                accepts the payment described in subsection (d) on 
                behalf of the taxpayer, and
                    ``(C) which, under such terms, provides for the 
                payment of expenses by the taxpayer or on behalf of 
                such taxpayer by the trustee or custodian of such 
                account, including payment to such provider.
            ``(2) Specified account.--For purposes of this paragraph, 
        the term `specified account' means--
                    ``(A) any health savings account under section 223 
                or Archer MSA under section 220, or
                    ``(B) any health insurance reserve account.
            ``(3) Health insurance reserve account.--For purposes of 
        this subsection, the term `health insurance reserve account' 
        means a trust created or organized in the United States as a 
        health insurance reserve account exclusively for the purpose of 
        paying the qualified medical expenses (within the meaning of 
        section 223(d)(2)) of the account beneficiary (as defined in 
        section 223(d)(3)), but only if the written governing 
        instrument creating the trust meets the requirements described 
        in subparagraphs (B), (C), (D), and (E) of section 223(d)(1). 
        Rules similar to the rules under subsections (g) and (h) of 
        section 408 shall apply for purposes of this subparagraph.
            ``(4) Treatment of payment.--Any payment under subsection 
        (d) to a designated account shall not be taken into account 
        with respect to any dollar limitation which applies with 
        respect to contributions to such account (or to tax benefits 
        with respect to such contributions).
    ``(h) Other Definitions.--For purposes of this section--
            ``(1) Dependent.--The term `dependent' has the meaning 
        given such term by section 152 (determined without regard to 
        subsections (b)(1), (b)(2), and (d)(1)(B) thereof). An 
        individual who is a child to whom section 152(e) applies shall 
        be treated as a dependent of the custodial parent for a 
        coverage month unless the custodial and noncustodial parent 
        provide otherwise.
            ``(2) Adult.--The term `adult' means an individual who is 
        not a child.
            ``(3) Child.--The term `child' means a qualifying child (as 
        defined in section 152(c)).
    ``(i) Special Rules.--
            ``(1) Coordination with medical deduction.--Any amount paid 
        by a taxpayer for insurance which is taken into account for 
        purposes of determining the credit allowable to the taxpayer 
        under subsection (a) shall not be taken into account in 
        computing the amount allowable to the taxpayer as a deduction 
        under section 213(a) or 162(l).
            ``(2) Coordination with health care tax credit.--No credit 
        shall be allowed under subsection (a) for any taxable year to 
        any taxpayer and qualifying family members with respect to whom 
        a credit under section 35 is allowed for such taxable year.
            ``(3) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(4) Married couples must file joint return.--
                    ``(A) In general.--If the taxpayer is married at 
                the close of the taxable year, the credit shall be 
                allowed under subsection (a) only if the taxpayer and 
                his spouse file a joint return for the taxable year.
                    ``(B) Marital status; certain married individuals 
                living apart.--Rules similar to the rules of paragraphs 
                (3) and (4) of section 21(e) shall apply for purposes 
                of this paragraph.
            ``(5) Verification of coverage, etc.--No credit shall be 
        allowed under this section with respect to any individual 
        unless such individual's coverage (and such related information 
        as the Secretary may require) is verified in such manner as the 
        Secretary may prescribe.
            ``(6) Insurance which covers other individuals; treatment 
        of payments.--Rules similar to the rules of paragraphs (7) and 
        (8) of section 35(g) shall apply for purposes of this section.
    ``(j) Coordination With Advance Payments.--
            ``(1) Reduction in credit for advance payments.--With 
        respect to any taxable year, the amount which would (but for 
        this subsection) be allowed as a credit to the taxpayer under 
        subsection (a) shall be reduced (but not below zero) by the 
        aggregate amount paid on behalf of such taxpayer under section 
        7527A for months beginning in such taxable year.
            ``(2) Recapture of excess advance payments.--If the 
        aggregate amount paid on behalf of the taxpayer under section 
        7527A for months beginning in the taxable year exceeds the sum 
        of the monthly limitations determined under subsection (b) for 
        the taxpayer and the taxpayer's spouse and dependents for such 
        months, then the tax imposed by this chapter for such taxable 
        year shall be increased by the sum of--
                    ``(A) such excess, plus
                    ``(B) interest on such excess determined at the 
                underpayment rate established under section 6621 for 
                the period from the date of the payment under section 
                7527A to the date such excess is paid.
        For purposes of subparagraph (B), an equal part of the 
        aggregate amount of the excess shall be deemed to be 
        attributable to payments made under section 7527A on the first 
        day of each month beginning in such taxable year, unless the 
        taxpayer establishes the date on which each such payment giving 
        rise to such excess occurred, in which case subparagraph (B) 
        shall be applied with respect to each date so established. The 
        Secretary may rescind or waive all or any portion of any amount 
        imposed by reason of subparagraph (B) if such excess was not 
        the result of the actions of the taxpayer.''.
    (b) Advance Payment of Credit.--Chapter 77 (relating to 
miscellaneous provisions) is amended by inserting after section 7527 
the following new section:

``SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR QUALIFIED REFUND ELIGIBLE 
              HEALTH INSURANCE.

    ``(a) In General.--The Secretary shall establish a program for 
making payments on behalf of individuals to providers of qualified 
refund eligible health insurance (as defined in section 25E(f)(2)) for 
such individuals.
    ``(b) Limitation.--The Secretary may make payments under subsection 
(a) only to the extent that the Secretary determines that the amount of 
such payments made on behalf of any taxpayer for any month does not 
exceed the sum of the monthly limitations determined under section 
25E(b) for the taxpayer and taxpayer's spouse and dependents for such 
month.''.
    (c) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 (relating to information concerning transactions 
        with other persons) is amended by inserting after section 6050W 
        the following new section:

``SEC. 6050X. RETURNS RELATING TO CREDIT FOR QUALIFIED REFUND ELIGIBLE 
              HEALTH INSURANCE.

    ``(a) Requirement of Reporting.--Every person who is entitled to 
receive payments for any month of any calendar year under section 7527A 
(relating to advance payment of credit for qualified refund eligible 
health insurance) with respect to any individual shall, at such time as 
the Secretary may prescribe, make the return described in subsection 
(b) with respect to each such individual.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains, with respect to each individual referred to 
        in subsection (a)--
                    ``(A) the name, address, and TIN of each such 
                individual,
                    ``(B) the months for which amounts payments under 
                section 7527A were received,
                    ``(C) the amount of each such payment,
                    ``(D) the type of insurance coverage provided by 
                such person with respect to such individual and the 
                policy number associated with such coverage,
                    ``(E) the name, address, and TIN of the spouse and 
                each dependent covered under such coverage, and
                    ``(F) such other information as the Secretary may 
                prescribe.
    ``(c) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required to be set forth in such return a written statement showing--
            ``(1) the contact information of the person required to 
        make such return, and
            ``(2) the information required to be shown on the return 
        with respect to such individual.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be made.
    ``(d) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) 
                (relating to definitions) is amended by striking ``or'' 
                at the end of clause (xxii), by striking ``and'' at the 
                end of clause (xxiii) and inserting ``or'', and by 
                inserting after clause (xxiii) the following new 
                clause:
                            ``(xxiv) section 6050X (relating to returns 
                        relating to credit for qualified refund 
                        eligible health insurance), and''.
                    (B) Paragraph (2) of section 6724(d) is amended by 
                striking ``or'' at the end of subparagraph (EE), by 
                striking the period at the end of subparagraph (FF) and 
                inserting ``, or'' and by inserting after subparagraph 
                (FF) the following new subparagraph:
                    ``(GG) section 6050X (relating to returns relating 
                to credit for qualified refund eligible health 
                insurance).''.
    (d) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``25E,'' before ``35,''.
            (2)(A) Section 24(b)(3)(B) is amended by inserting ``, 
        25E,'' after ``25D''.
            (B) Section 25(e)(1)(C)(ii) is amended by inserting 
        ``25E,'' after ``25D,''.
            (C) Section 25B(g)(2) is amended by inserting ``25E,'' 
        after ``25D,''.
            (D) Section 26(a)(1) is amended by inserting ``25E,'' after 
        ``25D,''.
            (E) Section 30(c)(2)(B)(ii) is amended by inserting 
        ``25E,'' after ``25D,''.
            (F) Section 30D(c)(2)(B)(ii) is amended by striking ``and 
        25D'' and inserting ``, 25D, and 25E''.
            (G) Section 904(i) is amended by inserting ``25E,'' after 
        ``25B,''.
            (H) Section 1400C(d)(2) is amended by inserting ``25E,'' 
        after ``25D,''.
            (3) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 25D the following new item:

``Sec. 25E. Qualified health insurance credit.''.
            (4) The table of sections for chapter 77 is amended by 
        inserting after the item relating to section 7527 the following 
        new item:

``Sec. 7527A. Advance payment of credit for qualified refund eligible 
                            health insurance.''.
            (5) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 is amended by adding at the end the 
        following new item:

``Sec. 6050X. Returns relating to credit for qualified refund eligible 
                            health insurance.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

SEC. 113. REQUIRING EMPLOYER TRANSPARENCY ABOUT EMPLOYEE BENEFITS.

    (a) In General.--Section 6051(a) (relating to W-2 requirement) is 
amended by striking ``and'' at the end of paragraph (12), by striking 
the period at the end of paragraph (13) and inserting ``, and'' and by 
inserting after paragraph (13) the following new paragraph:
            ``(14) the aggregate cost (within the meaning of section 
        4980B(f)(4)) for coverage of the employee under an accident or 
        health plan which is excludable from the gross income of the 
        employee under section 106(a) (other than coverage under a 
        health flexible spending arrangement).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to statements for calendar years beginning after 2010.

SEC. 114. CHANGES TO EXISTING TAX PREFERENCES FOR MEDICAL COVERAGE, 
              ETC., FOR INDIVIDUALS ELIGIBLE FOR QUALIFIED HEALTH 
              INSURANCE CREDIT.

    (a) Exclusion for Contributions by Employer to Accident and Health 
Plans.--
            (1) In general.--Section 106 (relating to contributions by 
        employer to accident and health plans) is amended by adding at 
        the end the following new subsection:
    ``(f) No Exclusion for Individuals Eligible for Qualified Health 
Insurance Credit.--Subsection (a) shall not apply with respect to any 
employer-provided coverage under an accident or health plan for any 
individual for any month unless such individual is described in 
paragraph (2) or (5) of section 25E(e) for such month. The amount 
includible in gross income by reason of this subsection shall be 
determined under rules similar to the rules of section 4980B(f)(4).''.
            (2) Conforming amendments.--
                    (A) Section 106(b)(1) is amended--
                            (i) by inserting ``gross income does not 
                        include'' before ``amounts contributed'', and
                            (ii) by striking ``shall be treated as 
                        employer-provided coverage for medical expenses 
                        under an accident or health plan''.
                    (B) Section 106(d)(1) is amended--
                            (i) by inserting ``gross income does not 
                        include'' before ``amounts contributed'', and
                            (ii) by striking ``shall be treated as 
                        employer-provided coverage for medical expenses 
                        under an accident or health plan''.
    (b) Amounts Received Under Accident and Health Plans.--Section 105 
(relating to amounts received under accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(k) No Exclusion for Individuals Eligible for Qualified Health 
Insurance Credit.--Subsection (b) shall not apply with respect to any 
employer-provided coverage under an accident or health plan for any 
individual for any month unless such individual is described in 
paragraph (2) or (5) of section 25E(e) for such month.''.
    (c) Special Rules for Health Insurance Costs of Self-employed 
Individuals.--Subsection (l) of section 162 (relating to special rules 
for health insurance costs of self-employed individuals) is amended by 
adding at the end the following new paragraph:
            ``(6) No deduction to individuals eligible for qualified 
        health insurance.--Paragraph (1) shall not apply for any 
        individual for any month unless such individual is described in 
        paragraph (2) or (5) of section 25E(e) for such month.''.
    (d) Earned Income Credit Unaffected by Repealed Exclusions.--
Subparagraph (B) of section 32(c)(2) is amended by redesignating 
clauses (v) and (vi) as clauses (vi) and (vii), respectively, and by 
inserting after clause (iv) the following new clause:
                            ``(v) the earned income of an individual 
                        shall be computed without regard to sections 
                        105(k) and 106(f),''.
    (e) Modification of Deduction for Medical Expenses.--Subsection (d) 
of section 213 is amended by adding at the end the following new 
paragraph:
            ``(12) Premiums for qualified health insurance.--The term 
        `medical care' does not include any amount paid as a premium 
        for coverage of an eligible individual (as defined in section 
        25E(e)) under qualified health insurance (as defined in section 
        25E(f)) for any month.''.
    (f) Reporting Requirement.--Subsection (a) of section 6051 is 
amended by striking ``and'' at the end of paragraph (12), by striking 
the period at the end of paragraph (13) and inserting ``and'', and by 
inserting after paragraph (13) the following new paragraph:
            ``(14) the total amount of employer-provided coverage under 
        an accident or health plan which is includible in gross income 
        by reason of sections 105(k) and 106(f).''.
    (g) Retired Public Safety Officers.--Section 402(l)(4)(D) is 
amended by adding at the end the following: ``Such term shall not 
include any premium for coverage by an accident or health insurance 
plan for any month unless such individual is described in paragraph (2) 
or (5) of section 25E(e) for such month.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.
    (i) No Intent To Encourage State Taxation of Health Benefits.--No 
intent to encourage any State to treat health benefits as taxable 
income for the purpose of increasing State income taxes may be inferred 
from the provisions of, and amendments made by, this section.

                   Subpart B--Health Savings Accounts

SEC. 121. IMPROVEMENTS TO HEALTH SAVINGS ACCOUNTS.

    (a) Increase in Monthly Contribution Limit.--
            (1) In general.--Paragraph (2) of section 223(b) (relating 
        to limitations) is amended to read as follows:
            ``(2) Monthly limitation.--
                    ``(A) In general.--In the case of an eligible 
                individual who has coverage under a high deductible 
                health plan, the monthly limitation for any month of 
                such coverage is \1/12\ of the sum of--
                            ``(i) the greater of--
                                    ``(I) the sum of the annual 
                                deductible and the other annual out-of-
                                pocket expenses (other than for 
                                premiums) required to be paid under the 
                                plan by the eligible individual for 
                                covered benefits, or
                                    ``(II) in the case of an eligible 
                                individual who has--
                                            ``(aa) self-only coverage 
                                        under a high deductible health 
                                        plan as of the first day of 
                                        such month, $3,000, or
                                            ``(bb) family coverage 
                                        under a high deductible health 
                                        plan as of the first day of 
                                        such month, $5,950, and
                            ``(ii) in the case of an eligible 
                        individual who has coverage under a qualified 
                        long-term care insurance contract (as defined 
                        in section 7702B(b)), the lesser of--
                                    ``(I) the annual premium for such 
                                coverage, or
                                    ``(II) $1,000.
                    ``(B) Special rules relating to out-of-pocket 
                expenses.--
                            ``(i) Reduction for separate plan.--The 
                        annual out-of-pocket expenses taken into 
                        account under subparagraph (A)(i)(I) with 
                        respect to any eligible individual shall be 
                        reduced by any out-of-pocket expense payable 
                        under a separate plan covering the individual.
                            ``(ii) Secretarial authority.--The 
                        Secretary may by regulations provide that 
                        annual out-of-pocket expenses will not be taken 
                        into account under subparagraph (A)(i)(I) to 
                        the extent that there is only a remote 
                        likelihood that such amounts will be required 
                        to be paid.''.
            (2) Application of special rules for married individuals.--
        Paragraph (5) of section 223(b) (relating to limitations) is 
        amended to read as follows:
            ``(5) Special rules for married individuals.--
                    ``(A) In general.--In the case of individuals who 
                are married to each other and who are both eligible 
                individuals, the limitation under paragraph (1) for 
                each spouse shall be equal to the spouse's applicable 
                share of the combined marital limit.
                    ``(B) Combined marital limit.--For purposes of 
                subparagraph (A), the combined marital limit is the 
                excess (if any) of--
                            ``(i) the lesser of--
                                    ``(I) subject to subparagraph (C), 
                                the sum of the limitations computed 
                                separately under paragraph (1) for each 
                                spouse (including any additional 
                                contribution amount under paragraph 
                                (3)), or
                                    ``(II) the dollar amount in effect 
                                under subsection (c)(2)(A)(ii)(II), 
                                over
                            ``(ii) the aggregate amount paid to Archer 
                        MSAs of such spouses for the taxable year.
                    ``(C) Special rule where both spouses have family 
                coverage.--For purposes of subparagraph (B)(i)(I), if 
                either spouse has family coverage which covers both 
                spouses, both spouses shall be treated as having only 
                such coverage (and if both spouses each have such 
                coverage under different plans, shall be treated as 
                having only family coverage with the plan with respect 
                to which the lowest amount is determined under 
                paragraph (2)(A)(i)(I)).
                    ``(D) Applicable share.--For purposes of 
                subparagraph (A), a spouse's applicable share is \1/2\ 
                of the combined marital limit unless both spouses agree 
                on a different division.
                    ``(E) Couples not married entire year.--The 
                Secretary shall prescribe rules for the application of 
                this paragraph in the case of any taxable year for 
                which the individuals were not married to each other 
                during all months included in the taxable year, 
                including rules which allow individuals in appropriate 
                cases to take into account coverage prior to marriage 
                in computing the combined marital limit for purposes of 
                this paragraph.''.
            (3) Self-only coverage.--Paragraph (4) of section 223(c) 
        (relating to definitions and special rules) is amended to read 
        as follows:
            ``(4) Coverage.--
                    ``(A) Family coverage.--The term `family coverage' 
                means any coverage other than self-only coverage.
                    ``(B) Self-only coverage.--If more than 1 
                individual is covered by a high deductible health plan 
                but only 1 of the individuals is an eligible 
                individual, the coverage shall be treated as self-only 
                coverage.''.
            (4) Conforming amendments.--
                    (A) Section 223(b)(3)(A) is amended by striking 
                ``subparagraphs (A) and (B) of''.
                    (B) Section 223(c)(2)(A) is amended--
                            (i) by striking ``$1,000'' in clause (i)(I) 
                        and inserting ``$1,150'', and
                            (ii) by striking ``$5,000'' in clause 
                        (ii)(I) and inserting ``$5,800''.
                    (C) Section 223(d)(1)(A)(ii)(I) is amended by 
                striking ``subsection (b)(2)(B)(ii)'' and inserting 
                ``subsection (c)(2)(A)(ii)(II)''.
                    (D) Clause (ii) of section 223(c)(2)(D) is amended 
                to read as follows:
                            ``(ii) Certain items disregarded in 
                        computing monthly limitation.--Such plan's 
                        annual deductible, and such plan's annual out-
                        of-pocket limitation, for services provided 
                        outside of such network shall not be taken into 
                        account for purposes of subsection (b)(2).''
                    (E) Subsection (g) of section 223 is amended to 
                read as follows:
    ``(g) Cost-of-Living Adjustments.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2010, each dollar amount 
        contained in subsections (b)(2)(A) and (c)(2)(A) shall be 
        increased by an amount equal to such dollar amount multiplied 
        by the blended cost-of-living adjustment.
            ``(2) Blended cost-of-living adjustment.--For purposes of 
        paragraph (1), the blended cost-of-living adjustment means one-
        half of the sum of--
                    ``(A) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins by substituting `calendar year 
                2008' for `calendar year 1992' in subparagraph (B) 
                thereof, plus
                    ``(B) the cost-of-living adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins by substituting `2008' 
                for `1996' in subclause (II) thereof.
            ``(3) Rounding.--Any increase determined under paragraph 
        (2) shall be rounded to the nearest multiple of $50.''.
    (b) Use of Account for Individual High Deductible Health Plan 
Premiums.--Section 223(d)(2)(C) (relating to exceptions) is amended by 
striking ``or'' at the end of clause (iii), by striking the period at 
the end of clause (iv) and inserting ``, or'', and by adding at the end 
the following new clause:
                            ``(v) a high deductible health plan, but 
                        only if--
                                    ``(I) the plan is not a group 
                                health plan (as defined in section 
                                5000(b)(1) without regard to section 
                                5000(d)), and
                                    ``(II) the expenses are for 
                                coverage for a month with respect to 
                                which the account beneficiary is an 
                                eligible individual by reason of the 
                                coverage under the plan.
                For purposes of clause (v), an arrangement which 
                constitutes individual health insurance shall not be 
                treated as a group health plan, notwithstanding that an 
                employer or employee organization negotiates the cost 
                of benefits of such arrangement.''.
    (c) Safe Harbor for Absence of Maintenance of Chronic Disease.--
Section 223(c)(2)(C) (safe harbor for absence of preventive care 
deductible) is amended--
            (1) by inserting ``or maintenance of chronic disease, or 
        both'' after ``the Secretary)'', and
            (2) by inserting ``or maintenance of chronic disease'' in 
        the heading after ``preventive care''.
    (d) Clarification of Treatment of Capitated Primary Care Payments 
as Amounts Paid for Medical Care.--Section 213(d) (relating to 
definitions) is amended by adding at the end the following new 
paragraph:
            ``(12) Treatment of capitated primary care payments.--
        Capitated primary care payments shall be treated as amounts 
        paid for medical care.''.
    (e) Special Rule for Individuals Eligible for Veterans or Indian 
Health Benefits.--Section 223(c)(1) (defining eligible individual) is 
amended by adding at the end the following new subparagraph:
                    ``(C) Special rule for individuals eligible for 
                veterans or indian health benefits.--For purposes of 
                subparagraph (A)(ii), an individual shall not be 
                treated as covered under a health plan described in 
                such subparagraph merely because the individual 
                receives periodic hospital care or medical services 
                under any law administered by the Secretary of Veterans 
                Affairs or the Bureau of Indian Affairs.''.
    (f) Certain Physician Fees To Be Treated as Medical Care.--
            (1) In general.--Section 213(d), is amended by adding at 
        the end the following new paragraph:
            ``(12) Pre-paid physician fees.--The term `medical care' 
        shall include amounts paid by patients to their primary 
        physician in advance for the right to receive medical services 
        on an as-needed basis.''.
            (2) Effective date.--The amendment made by this section 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (g) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2010.
            (2) Capitated primary care payments.--The amendment made by 
        subsection (d) shall apply to amounts paid before, on, or after 
        the date of the enactment of this Act.

SEC. 122. EXCEPTION TO REQUIREMENT FOR EMPLOYERS TO MAKE COMPARABLE 
              HEALTH SAVINGS ACCOUNT CONTRIBUTIONS.

    (a) Greater Employer-Provided Contributions to HSAs for Chronically 
Ill Employees Treated as Meeting Comparability Requirements.--
Subsection (b) of section 4980G (relating to failure of employer to 
make comparable health savings account contributions) is amended to 
read as follows:
    ``(b) Rules and Requirements.--
            ``(1) In general.--Except as provided in paragraph (2), 
        rules and requirements similar to the rules and requirements of 
        section 4980E shall apply for purposes of this section.
            ``(2) Treatment of employer-provided contributions to hsas 
        for chronically ill employees.--For purposes of this section--
                    ``(A) In general.--Any contribution by an employer 
                to a health savings account of an employee who is (or 
                the spouse or any dependent of the employee who is) a 
                chronically ill individual in an amount which is 
                greater than a contribution to a health savings account 
                of a comparable participating employee who is not a 
                chronically ill individual shall not fail to be 
                considered a comparable contribution.
                    ``(B) Nondiscrimination requirement.--Subparagraph 
                (A) shall not apply unless the excess employer 
                contributions described in subparagraph (A) are the 
                same for all chronically ill individuals who are 
                similarly situated.
                    ``(C) Chronically ill individual.--For purposes of 
                this paragraph, the term `chronically ill individual' 
                means any individual whose qualified medical expenses 
                for any taxable year are more than 50 percent greater 
                than the average qualified medical expenses of all 
                employees of the employer for such year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2010.

  Subtitle B--Health Plan Choice; Small Business Health Fairness; Tax 
                               Amendments

SEC. 131. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE.

    (a) In General.--Title XXVII of the Public Health Service Act (42 
U.S.C. 300gg et seq.) is amended by adding at the end the following new 
part:

``PART D--COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE

``SEC. 2795. DEFINITIONS.

    ``In this part:
            ``(1) Primary state.--The term `primary State' means, with 
        respect to individual health insurance coverage offered by a 
        health insurance issuer, the State designated by the issuer as 
        the State whose covered laws shall govern the health insurance 
        issuer in the sale of such coverage under this part. An issuer, 
        with respect to a particular policy, may only designate one 
        such State as its primary State with respect to all such 
        coverage it offers. Such an issuer may not change the 
        designated primary State with respect to individual health 
        insurance coverage once the policy is issued, except that such 
        a change may be made upon renewal of the policy. With respect 
        to such designated State, the issuer is deemed to be doing 
        business in that State.
            ``(2) Secondary state.--The term `secondary State' means, 
        with respect to individual health insurance coverage offered by 
        a health insurance issuer, any State that is not the primary 
        State. In the case of a health insurance issuer that is selling 
        a policy in, or to a resident of, a secondary State, the issuer 
        is deemed to be doing business in that secondary State.
            ``(3) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2), 
        except that such an issuer must be licensed in the primary 
        State and be qualified to sell individual health insurance 
        coverage in that State.
            ``(4) Individual health insurance coverage.--The term 
        `individual health insurance coverage' means health insurance 
        coverage offered in the individual market, as defined in 
        section 2791(e)(1).
            ``(5) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of this title for the State with respect to the 
        issuer.
            ``(6) Hazardous financial condition.--The term `hazardous 
        financial condition' means that, based on its present or 
        reasonably anticipated financial condition, a health insurance 
        issuer is unlikely to be able--
                    ``(A) to meet obligations to policyholders with 
                respect to known claims and reasonably anticipated 
                claims; or
                    ``(B) to pay other obligations in the normal course 
                of business.
            ``(7) Covered laws.--
                    ``(A) In general.--The term `covered laws' means 
                the laws, rules, regulations, agreements, and orders 
                governing the insurance business pertaining to--
                            ``(i) individual health insurance coverage 
                        issued by a health insurance issuer;
                            ``(ii) the offer, sale, rating (including 
                        medical underwriting), renewal, and issuance of 
                        individual health insurance coverage to an 
                        individual;
                            ``(iii) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of health care and insurance related 
                        services;
                            ``(iv) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of management, operations, and 
                        investment activities of a health insurance 
                        issuer; and
                            ``(v) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of loss control and claims 
                        administration for a health insurance issuer 
                        with respect to liability for which the issuer 
                        provides insurance.
                    ``(B) Exception.--Such term does not include any 
                law, rule, regulation, agreement, or order governing 
                the use of care or cost management techniques, 
                including any requirement related to provider 
                contracting, network access or adequacy, health care 
                data collection, or quality assurance.
            ``(8) State.--The term `State' means the 50 States and 
        includes the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.
            ``(9) Unfair claims settlement practices.--The term `unfair 
        claims settlement practices' means only the following 
        practices:
                    ``(A) Knowingly misrepresenting to claimants and 
                insured individuals relevant facts or policy provisions 
                relating to coverage at issue.
                    ``(B) Failing to acknowledge with reasonable 
                promptness pertinent communications with respect to 
                claims arising under policies.
                    ``(C) Failing to adopt and implement reasonable 
                standards for the prompt investigation and settlement 
                of claims arising under policies.
                    ``(D) Failing to effectuate prompt, fair, and 
                equitable settlement of claims submitted in which 
                liability has become reasonably clear.
                    ``(E) Refusing to pay claims without conducting a 
                reasonable investigation.
                    ``(F) Failing to affirm or deny coverage of claims 
                within a reasonable period of time after having 
                completed an investigation related to those claims.
                    ``(G) A pattern or practice of compelling insured 
                individuals or their beneficiaries to institute suits 
                to recover amounts due under its policies by offering 
                substantially less than the amounts ultimately 
                recovered in suits brought by them.
                    ``(H) A pattern or practice of attempting to settle 
                or settling claims for less than the amount that a 
                reasonable person would believe the insured individual 
                or his or her beneficiary was entitled by reference to 
                written or printed advertising material accompanying or 
                made part of an application.
                    ``(I) Attempting to settle or settling claims on 
                the basis of an application that was materially altered 
                without notice to, or knowledge or consent of, the 
                insured.
                    ``(J) Failing to provide forms necessary to present 
                claims within 15 calendar days of a requests with 
                reasonable explanations regarding their use.
                    ``(K) Attempting to cancel a policy in less time 
                than that prescribed in the policy or by the law of the 
                primary State.
            ``(10) Fraud and abuse.--The term `fraud and abuse' means 
        an act or omission committed by a person who, knowingly and 
        with intent to defraud, commits, or conceals any material 
        information concerning, one or more of the following:
                    ``(A) Presenting, causing to be presented or 
                preparing with knowledge or belief that it will be 
                presented to or by an insurer, a reinsurer, broker or 
                its agent, false information as part of, in support of 
                or concerning a fact material to one or more of the 
                following:
                            ``(i) An application for the issuance or 
                        renewal of an insurance policy or reinsurance 
                        contract.
                            ``(ii) The rating of an insurance policy or 
                        reinsurance contract.
                            ``(iii) A claim for payment or benefit 
                        pursuant to an insurance policy or reinsurance 
                        contract.
                            ``(iv) Premiums paid on an insurance policy 
                        or reinsurance contract.
                            ``(v) Payments made in accordance with the 
                        terms of an insurance policy or reinsurance 
                        contract.
                            ``(vi) A document filed with the 
                        commissioner or the chief insurance regulatory 
                        official of another jurisdiction.
                            ``(vii) The financial condition of an 
                        insurer or reinsurer.
                            ``(viii) The formation, acquisition, 
                        merger, reconsolidation, dissolution or 
                        withdrawal from one or more lines of insurance 
                        or reinsurance in all or part of a State by an 
                        insurer or reinsurer.
                            ``(ix) The issuance of written evidence of 
                        insurance.
                            ``(x) The reinstatement of an insurance 
                        policy.
                    ``(B) Solicitation or acceptance of new or renewal 
                insurance risks on behalf of an insurer reinsurer or 
                other person engaged in the business of insurance by a 
                person who knows or should know that the insurer or 
                other person responsible for the risk is insolvent at 
                the time of the transaction.
                    ``(C) Transaction of the business of insurance in 
                violation of laws requiring a license, certificate of 
                authority or other legal authority for the transaction 
                of the business of insurance.
                    ``(D) Attempt to commit, aiding or abetting in the 
                commission of, or conspiracy to commit the acts or 
                omissions specified in this paragraph.

``SEC. 2796. APPLICATION OF LAW.

    ``(a) In General.--The covered laws of the primary State shall 
apply to individual health insurance coverage offered by a health 
insurance issuer in the primary State and in any secondary State, but 
only if the coverage and issuer comply with the conditions of this 
section with respect to the offering of coverage in any secondary 
State.
    ``(b) Exemptions From Covered Laws in a Secondary State.--Except as 
provided in this section, a health insurance issuer with respect to its 
offer, sale, rating (including medical underwriting), renewal, and 
issuance of individual health insurance coverage in any secondary State 
is exempt from any covered laws of the secondary State (and any rules, 
regulations, agreements, or orders sought or issued by such State under 
or related to such covered laws) to the extent that such laws would--
            ``(1) make unlawful, or regulate, directly or indirectly, 
        the operation of the health insurance issuer operating in the 
        secondary State, except that any secondary State may require 
        such an issuer--
                    ``(A) to pay, on a nondiscriminatory basis, 
                applicable premium and other taxes (including high risk 
                pool assessments) which are levied on insurers and 
                surplus lines insurers, brokers, or policyholders under 
                the laws of the State;
                    ``(B) to register with and designate the State 
                insurance commissioner as its agent solely for the 
                purpose of receiving service of legal documents or 
                process;
                    ``(C) to submit to an examination of its financial 
                condition by the State insurance commissioner in any 
                State in which the issuer is doing business to 
                determine the issuer's financial condition, if--
                            ``(i) the State insurance commissioner of 
                        the primary State has not done an examination 
                        within the period recommended by the National 
                        Association of Insurance Commissioners; and
                            ``(ii) any such examination is conducted in 
                        accordance with the examiners' handbook of the 
                        National Association of Insurance Commissioners 
                        and is coordinated to avoid unjustified 
                        duplication and unjustified repetition;
                    ``(D) to comply with a lawful order issued--
                            ``(i) in a delinquency proceeding commenced 
                        by the State insurance commissioner if there 
                        has been a finding of financial impairment 
                        under subparagraph (C); or
                            ``(ii) in a voluntary dissolution 
                        proceeding;
                    ``(E) to comply with an injunction issued by a 
                court of competent jurisdiction, upon a petition by the 
                State insurance commissioner alleging that the issuer 
                is in hazardous financial condition;
                    ``(F) to participate, on a nondiscriminatory basis, 
                in any insurance insolvency guaranty association or 
                similar association to which a health insurance issuer 
                in the State is required to belong;
                    ``(G) to comply with any State law regarding fraud 
                and abuse (as defined in section 2795(10)), except that 
                if the State seeks an injunction regarding the conduct 
                described in this subparagraph, such injunction must be 
                obtained from a court of competent jurisdiction;
                    ``(H) to comply with any State law regarding unfair 
                claims settlement practices (as defined in section 
                2795(9)); or
                    ``(I) to comply with the applicable requirements 
                for independent review under section 2798 with respect 
                to coverage offered in the State;
            ``(2) require any individual health insurance coverage 
        issued by the issuer to be countersigned by an insurance agent 
        or broker residing in that Secondary State; or
            ``(3) otherwise discriminate against the issuer issuing 
        insurance in both the primary State and in any secondary State.
    ``(c) Clear and Conspicuous Disclosure.--A health insurance issuer 
shall provide the following notice, in 12-point bold type, in any 
insurance coverage offered in a secondary State under this part by such 
a health insurance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the name of the 
health insurance issuer, the name of primary State, the name of the 
secondary State, the name of the secondary State, and the name of the 
secondary State, respectively, for the coverage concerned:
    ```Notice
    ```This policy is issued by _____ and is governed by the laws and 
regulations of the State of _____, and it has met all the laws of that 
State as determined by that State's Department of Insurance. This 
policy may be less expensive than others because it is not subject to 
all of the insurance laws and regulations of the State of _____, 
including coverage of some services or benefits mandated by the law of 
the State of _____. Additionally, this policy is not subject to all of 
the consumer protection laws or restrictions on rate changes of the 
State of _____. As with all insurance products, before purchasing this 
policy, you should carefully review the policy and determine what 
health care services the policy covers and what benefits it provides, 
including any exclusions, limitations, or conditions for such services 
or benefits.'.
    ``(d) Prohibition on Certain Reclassifications and Premium 
Increases.--
            ``(1) In general.--For purposes of this section, a health 
        insurance issuer that provides individual health insurance 
        coverage to an individual under this part in a primary or 
        secondary State may not upon renewal--
                    ``(A) move or reclassify the individual insured 
                under the health insurance coverage from the class such 
                individual is in at the time of issue of the contract 
                based on the health-status related factors of the 
                individual; or
                    ``(B) increase the premiums assessed the individual 
                for such coverage based on a health status-related 
                factor or change of a health status-related factor or 
                the past or prospective claim experience of the insured 
                individual.
            ``(2) Construction.--Nothing in paragraph (1) shall be 
        construed to prohibit a health insurance issuer--
                    ``(A) from terminating or discontinuing coverage or 
                a class of coverage in accordance with subsections (b) 
                and (c) of section 2742;
                    ``(B) from raising premium rates for all policy 
                holders within a class based on claims experience;
                    ``(C) from changing premiums or offering discounted 
                premiums to individuals who engage in wellness 
                activities at intervals prescribed by the issuer, if 
                such premium changes or incentives--
                            ``(i) are disclosed to the consumer in the 
                        insurance contract;
                            ``(ii) are based on specific wellness 
                        activities that are not applicable to all 
                        individuals; and
                            ``(iii) are not obtainable by all 
                        individuals to whom coverage is offered;
                    ``(D) from reinstating lapsed coverage; or
                    ``(E) from retroactively adjusting the rates 
                charged an insured individual if the initial rates were 
                set based on material misrepresentation by the 
                individual at the time of issue.
    ``(e) Prior Offering of Policy in Primary State.--A health 
insurance issuer may not offer for sale individual health insurance 
coverage in a secondary State unless that coverage is currently offered 
for sale in the primary State.
    ``(f) Licensing of Agents or Brokers for Health Insurance 
Issuers.--Any State may require that a person acting, or offering to 
act, as an agent or broker for a health insurance issuer with respect 
to the offering of individual health insurance coverage obtain a 
license from that State, with commissions or other compensation subject 
to the provisions of the laws of that State, except that a State may 
not impose any qualification or requirement which discriminates against 
a nonresident agent or broker.
    ``(g) Documents for Submission to State Insurance Commissioner.--
Each health insurance issuer issuing individual health insurance 
coverage in both primary and secondary States shall submit--
            ``(1) to the insurance commissioner of each State in which 
        it intends to offer such coverage, before it may offer 
        individual health insurance coverage in such State--
                    ``(A) a copy of the plan of operation or 
                feasibility study or any similar statement of the 
                policy being offered and its coverage (which shall 
                include the name of its primary State and its principal 
                place of business);
                    ``(B) written notice of any change in its 
                designation of its primary State; and
                    ``(C) written notice from the issuer of the 
                issuer's compliance with all the laws of the primary 
                State; and
            ``(2) to the insurance commissioner of each secondary State 
        in which it offers individual health insurance coverage, a copy 
        of the issuer's quarterly financial statement submitted to the 
        primary State, which statement shall be certified by an 
        independent public accountant and contain a statement of 
        opinion on loss and loss adjustment expense reserves made by--
                    ``(A) a member of the American Academy of 
                Actuaries; or
                    ``(B) a qualified loss reserve specialist.
    ``(h) Power of Courts To Enjoin Conduct.--Nothing in this section 
shall be construed to affect the authority of any Federal or State 
court to enjoin--
            ``(1) the solicitation or sale of individual health 
        insurance coverage by a health insurance issuer to any person 
        or group who is not eligible for such insurance; or
            ``(2) the solicitation or sale of individual health 
        insurance coverage that violates the requirements of the law of 
        a secondary State which are described in subparagraphs (A) 
        through (H) of section 2796(b)(1).
    ``(i) Power of Secondary States To Take Administrative Action.--
Nothing in this section shall be construed to affect the authority of 
any State to enjoin conduct in violation of that State's laws described 
in section 2796(b)(1).
    ``(j) State Powers To Enforce State Laws.--
            ``(1) In general.--Subject to the provisions of subsection 
        (b)(1)(G) (relating to injunctions) and paragraph (2), nothing 
        in this section shall be construed to affect the authority of 
        any State to make use of any of its powers to enforce the laws 
        of such State with respect to which a health insurance issuer 
        is not exempt under subsection (b).
            ``(2) Courts of competent jurisdiction.--If a State seeks 
        an injunction regarding the conduct described in paragraphs (1) 
        and (2) of subsection (h), such injunction must be obtained 
        from a Federal or State court of competent jurisdiction.
    ``(k) States' Authority To Sue.--Nothing in this section shall 
affect the authority of any State to bring action in any Federal or 
State court.
    ``(l) Generally Applicable Laws.--Nothing in this section shall be 
construed to affect the applicability of State laws generally 
applicable to persons or corporations.
    ``(m) Guaranteed Availability of Coverage to HIPAA Eligible 
Individuals.--To the extent that a health insurance issuer is offering 
coverage in a primary State that does not accommodate residents of 
secondary States or does not provide a working mechanism for residents 
of a secondary State, and the issuer is offering coverage under this 
part in such secondary State which has not adopted a qualified high 
risk pool as its acceptable alternative mechanism (as defined in 
section 2744(c)(2)), the issuer shall, with respect to any individual 
health insurance coverage offered in a secondary State under this part, 
comply with the guaranteed availability requirements for eligible 
individuals in section 2741.

``SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY 
              SELL INTO SECONDARY STATES.

    ``A health insurance issuer may not offer, sell, or issue 
individual health insurance coverage in a secondary State if the State 
insurance commissioner does not use a risk-based capital formula for 
the determination of capital and surplus requirements for all health 
insurance issuers.

``SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES.

    ``(a) Right to External Appeal.--A health insurance issuer may not 
offer, sell, or issue individual health insurance coverage in a 
secondary State under the provisions of this title unless--
            ``(1) both the secondary State and the primary State have 
        legislation or regulations in place establishing an independent 
        review process for individuals who are covered by individual 
        health insurance coverage, or
            ``(2) in any case in which the requirements of subparagraph 
        (A) are not met with respect to the either of such States, the 
        issuer provides an independent review mechanism substantially 
        identical (as determined by the applicable State authority of 
        such State) to that prescribed in the `Health Carrier External 
        Review Model Act' of the National Association of Insurance 
        Commissioners for all individuals who purchase insurance 
        coverage under the terms of this part, except that, under such 
        mechanism, the review is conducted by an independent medical 
        reviewer, or a panel of such reviewers, with respect to whom 
        the requirements of subsection (b) are met.
    ``(b) Qualifications of Independent Medical Reviewers.--In the case 
of any independent review mechanism referred to in subsection (a)(2)--
            ``(1) In general.--In referring a denial of a claim to an 
        independent medical reviewer, or to any panel of such 
        reviewers, to conduct independent medical review, the issuer 
        shall ensure that--
                    ``(A) each independent medical reviewer meets the 
                qualifications described in paragraphs (2) and (3);
                    ``(B) with respect to each review, each reviewer 
                meets the requirements of paragraph (4) and the 
                reviewer, or at least 1 reviewer on the panel, meets 
                the requirements described in paragraph (5); and
                    ``(C) compensation provided by the issuer to each 
                reviewer is consistent with paragraph (6).
            ``(2) Licensure and expertise.--Each independent medical 
        reviewer shall be a physician (allopathic or osteopathic) or 
        health care professional who--
                    ``(A) is appropriately credentialed or licensed in 
                1 or more States to deliver health care services; and
                    ``(B) typically treats the condition, makes the 
                diagnosis, or provides the type of treatment under 
                review.
            ``(3) Independence.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each independent medical reviewer in a case shall--
                            ``(i) not be a related party (as defined in 
                        paragraph (7));
                            ``(ii) not have a material familial, 
                        financial, or professional relationship with 
                        such a party; and
                            ``(iii) not otherwise have a conflict of 
                        interest with such a party (as determined under 
                        regulations).
                    ``(B) Exception.--Nothing in subparagraph (A) shall 
                be construed to--
                            ``(i) prohibit an individual, solely on the 
                        basis of affiliation with the issuer, from 
                        serving as an independent medical reviewer if--
                                    ``(I) a non-affiliated individual 
                                is not reasonably available;
                                    ``(II) the affiliated individual is 
                                not involved in the provision of items 
                                or services in the case under review;
                                    ``(III) the fact of such an 
                                affiliation is disclosed to the issuer 
                                and the enrollee (or authorized 
                                representative) and neither party 
                                objects; and
                                    ``(IV) the affiliated individual is 
                                not an employee of the issuer and does 
                                not provide services exclusively or 
                                primarily to or on behalf of the 
                                issuer;
                            ``(ii) prohibit an individual who has staff 
                        privileges at the institution where the 
                        treatment involved takes place from serving as 
                        an independent medical reviewer merely on the 
                        basis of such affiliation if the affiliation is 
                        disclosed to the issuer and the enrollee (or 
                        authorized representative), and neither party 
                        objects; or
                            ``(iii) prohibit receipt of compensation by 
                        an independent medical reviewer from an entity 
                        if the compensation is provided consistent with 
                        paragraph (6).
            ``(4) Practicing health care professional in same field.--
                    ``(A) In general.--In a case involving treatment, 
                or the provision of items or services--
                            ``(i) by a physician, a reviewer shall be a 
                        practicing physician (allopathic or 
                        osteopathic) of the same or similar specialty, 
                        as a physician who, acting within the 
                        appropriate scope of practice within the State 
                        in which the service is provided or rendered, 
                        typically treats the condition, makes the 
                        diagnosis, or provides the type of treatment 
                        under review; or
                            ``(ii) by a non-physician health care 
                        professional, the reviewer, or at least 1 
                        member of the review panel, shall be a 
                        practicing non-physician health care 
                        professional of the same or similar specialty 
                        as the non-physician health care professional 
                        who, acting within the appropriate scope of 
                        practice within the State in which the service 
                        is provided or rendered, typically treats the 
                        condition, makes the diagnosis, or provides the 
                        type of treatment under review.
                    ``(B) Practicing defined.--For purposes of this 
                paragraph, the term `practicing' means, with respect to 
                an individual who is a physician or other health care 
                professional, that the individual provides health care 
                services to individual patients on average at least 2 
                days per week.
            ``(5) Pediatric expertise.--In the case of an external 
        review relating to a child, a reviewer shall have expertise 
        under paragraph (2) in pediatrics.
            ``(6) Limitations on reviewer compensation.--Compensation 
        provided by the issuer to an independent medical reviewer in 
        connection with a review under this section shall--
                    ``(A) not exceed a reasonable level; and
                    ``(B) not be contingent on the decision rendered by 
                the reviewer.
            ``(7) Related party defined.--For purposes of this section, 
        the term `related party' means, with respect to a denial of a 
        claim under a coverage relating to an enrollee, any of the 
        following:
                    ``(A) The issuer involved, or any fiduciary, 
                officer, director, or employee of the issuer.
                    ``(B) The enrollee (or authorized representative).
                    ``(C) The health care professional that provides 
                the items or services involved in the denial.
                    ``(D) The institution at which the items or 
                services (or treatment) involved in the denial are 
                provided.
                    ``(E) The manufacturer of any drug or other item 
                that is included in the items or services involved in 
                the denial.
                    ``(F) Any other party determined under any 
                regulations to have a substantial interest in the 
                denial involved.
            ``(8) Definitions.--For purposes of this subsection:
                    ``(A) Enrollee.--The term `enrollee' means, with 
                respect to health insurance coverage offered by a 
                health insurance issuer, an individual enrolled with 
                the issuer to receive such coverage.
                    ``(B) Health care professional.--The term `health 
                care professional' means an individual who is licensed, 
                accredited, or certified under State law to provide 
                specified health care services and who is operating 
                within the scope of such licensure, accreditation, or 
                certification.

``SEC. 2799. ENFORCEMENT.

    ``(a) In General.--Subject to subsection (b), with respect to 
specific individual health insurance coverage the primary State for 
such coverage has sole jurisdiction to enforce the primary State's 
covered laws in the primary State and any secondary State.
    ``(b) Secondary State's Authority.--Nothing in subsection (a) shall 
be construed to affect the authority of a secondary State to enforce 
its laws as set forth in the exception specified in section 2796(b)(1).
    ``(c) Court Interpretation.--In reviewing action initiated by the 
applicable secondary State authority, the court of competent 
jurisdiction shall apply the covered laws of the primary State.
    ``(d) Notice of Compliance Failure.--In the case of individual 
health insurance coverage offered in a secondary State that fails to 
comply with the covered laws of the primary State, the applicable State 
authority of the secondary State may notify the applicable State 
authority of the primary State.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individual health insurance coverage offered, issued, or sold 
after the date that is one year after the date of the enactment of this 
Act.
    (c) GAO Ongoing Study and Reports.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct an ongoing study concerning the effect of the 
        amendment made by subsection (a) on--
                    (A) the number of uninsured and under-insured;
                    (B) the availability and cost of health insurance 
                policies for individuals with pre-existing medical 
                conditions;
                    (C) the availability and cost of health insurance 
                policies generally;
                    (D) the elimination or reduction of different types 
                of benefits under health insurance policies offered in 
                different States; and
                    (E) cases of fraud or abuse relating to health 
                insurance coverage offered under such amendment and the 
                resolution of such cases.
            (2) Annual reports.--The Comptroller General shall submit 
        to Congress an annual report, after the end of each of the 5 
        years following the effective date of the amendment made by 
        subsection (a), on the ongoing study conducted under paragraph 
        (1).
    (d) Severability.--If any provision of this subtitle or the 
application of such provision to any person or circumstance is held to 
be unconstitutional, the remainder of this subtitle and the application 
of the provisions of such to any other person or circumstance shall not 
be affected.

SEC. 132. SMALL BUSINESS HEALTH FAIRNESS.

    (a) Rules Governing Association Health Plans.--
            (1) In general.--Subtitle B of title I of the Employee 
        Retirement Income Security Act of 1974 is amended by adding 
        after part 7 the following new part:

           ``PART 8--RULES GOVERNING ASSOCIATION HEALTH PLANS

``SEC. 801. ASSOCIATION HEALTH PLANS.

    ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan whose sponsor is (or is deemed 
under this part to be) described in subsection (b).
    ``(b) Sponsorship.--The sponsor of a group health plan is described 
in this subsection if such sponsor--
            ``(1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its purpose and 
        providing for periodic meetings on at least an annual basis, as 
        a bona fide trade association, a bona fide industry association 
        (including a rural electric cooperative association or a rural 
        telephone cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or similar 
        bona fide business association, including a corporation or 
        similar organization that operates on a cooperative basis 
        (within the meaning of section 1381 of the Internal Revenue 
        Code of 1986)), for substantial purposes other than that of 
        obtaining or providing medical care;
            ``(2) is established as a permanent entity which receives 
        the active support of its members and requires for membership 
        payment on a periodic basis of dues or payments necessary to 
        maintain eligibility for membership in the sponsor; and
            ``(3) does not condition membership, such dues or payments, 
        or coverage under the plan on the basis of health status-
        related factors with respect to the employees of its members 
        (or affiliated members), or the dependents of such employees, 
        and does not condition such dues or payments on the basis of 
        group health plan participation.
Any sponsor consisting of an association of entities which meet the 
requirements of paragraphs (1), (2), and (3) shall be deemed to be a 
sponsor described in this subsection.

``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

    ``(a) In General.--The applicable authority shall prescribe by 
regulation a procedure under which, subject to subsection (b), the 
applicable authority shall certify association health plans which apply 
for certification as meeting the requirements of this part.
    ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), in the case of an association health plan that provides 
at least one benefit option which does not consist of health insurance 
coverage, the applicable authority shall certify such plan as meeting 
the requirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are met (or, 
upon the date on which the plan is to commence operations, will be met) 
with respect to the plan.
    ``(c) Requirements Applicable to Certified Plans.--An association 
health plan with respect to which certification under this part is in 
effect shall meet the applicable requirements of this part, effective 
on the date of certification (or, if later, on the date on which the 
plan is to commence operations).
    ``(d) Requirements for Continued Certification.--The applicable 
authority may provide by regulation for continued certification of 
association health plans under this part.
    ``(e) Class Certification for Fully Insured Plans.--The applicable 
authority shall establish a class certification procedure for 
association health plans under which all benefits consist of health 
insurance coverage. Under such procedure, the applicable authority 
shall provide for the granting of certification under this part to the 
plans in each class of such association health plans upon appropriate 
filing under such procedure in connection with plans in such class and 
payment of the prescribed fee under section 807(a).
    ``(f) Certification of Self-Insured Association Health Plans.--An 
association health plan which offers one or more benefit options which 
do not consist of health insurance coverage may be certified under this 
part only if such plan consists of any of the following:
            ``(1) a plan which offered such coverage on the date of the 
        enactment of this part,
            ``(2) a plan under which the sponsor does not restrict 
        membership to one or more trades and businesses or industries 
        and whose eligible participating employers represent a broad 
        cross-section of trades and businesses or industries, or
            ``(3) a plan whose eligible participating employers 
        represent one or more trades or businesses, or one or more 
        industries, consisting of any of the following: agriculture; 
        equipment and automobile dealerships; barbering and 
        cosmetology; certified public accounting practices; child care; 
        construction; dance, theatrical and orchestra productions; 
        disinfecting and pest control; financial services; fishing; 
        food service establishments; hospitals; labor organizations; 
        logging; manufacturing (metals); mining; medical and dental 
        practices; medical laboratories; professional consulting 
        services; sanitary services; transportation (local and 
        freight); warehousing; wholesaling/distributing; or any other 
        trade or business or industry which has been indicated as 
        having average or above-average risk or health claims 
        experience by reason of State rate filings, denials of 
        coverage, proposed premium rate levels, or other means 
        demonstrated by such plan in accordance with regulations.

``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.

    ``(a) Sponsor.--The requirements of this subsection are met with 
respect to an association health plan if the sponsor has met (or is 
deemed under this part to have met) the requirements of section 801(b) 
for a continuous period of not less than 3 years ending with the date 
of the application for certification under this part.
    ``(b) Board of Trustees.--The requirements of this subsection are 
met with respect to an association health plan if the following 
requirements are met:
            ``(1) Fiscal control.--The plan is operated, pursuant to a 
        trust agreement, by a board of trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
            ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
            ``(3) Rules governing relationship to participating 
        employers and to contractors.--
                    ``(A) Board membership.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), the members of the 
                        board of trustees are individuals selected from 
                        individuals who are the owners, officers, 
                        directors, or employees of the participating 
                        employers or who are partners in the 
                        participating employers and actively 
                        participate in the business.
                            ``(ii) Limitation.--
                                    ``(I) General rule.--Except as 
                                provided in subclauses (II) and (III), 
                                no such member is an owner, officer, 
                                director, or employee of, or partner 
                                in, a contract administrator or other 
                                service provider to the plan.
                                    ``(II) Limited exception for 
                                providers of services solely on behalf 
                                of the sponsor.--Officers or employees 
                                of a sponsor which is a service 
                                provider (other than a contract 
                                administrator) to the plan may be 
                                members of the board if they constitute 
                                not more than 25 percent of the 
                                membership of the board and they do not 
                                provide services to the plan other than 
                                on behalf of the sponsor.
                                    ``(III) Treatment of providers of 
                                medical care.--In the case of a sponsor 
                                which is an association whose 
                                membership consists primarily of 
                                providers of medical care, subclause 
                                (I) shall not apply in the case of any 
                                service provider described in subclause 
                                (I) who is a provider of medical care 
                                under the plan.
                            ``(iii) Certain plans excluded.--Clause (i) 
                        shall not apply to an association health plan 
                        which is in existence on the date of the 
                        enactment of this part.
                    ``(B) Sole authority.--The board has sole authority 
                under the plan to approve applications for 
                participation in the plan and to contract with a 
                service provider to administer the day-to-day affairs 
                of the plan.
    ``(c) Treatment of Franchise Networks.--In the case of a group 
health plan which is established and maintained by a franchiser for a 
franchise network consisting of its franchisees--
            ``(1) the requirements of subsection (a) and section 801(a) 
        shall be deemed met if such requirements would otherwise be met 
        if the franchiser were deemed to be the sponsor referred to in 
        section 801(b), such network were deemed to be an association 
        described in section 801(b), and each franchisee were deemed to 
        be a member (of the association and the sponsor) referred to in 
        section 801(b); and
            ``(2) the requirements of section 804(a)(1) shall be deemed 
        met.
The Secretary may by regulation define for purposes of this subsection 
the terms `franchiser', `franchise network', and `franchisee'.

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

    ``(a) Covered Employers and Individuals.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan--
            ``(1) each participating employer must be--
                    ``(A) a member of the sponsor,
                    ``(B) the sponsor, or
                    ``(C) an affiliated member of the sponsor with 
                respect to which the requirements of subsection (b) are 
                met,
        except that, in the case of a sponsor which is a professional 
        association or other individual-based association, if at least 
        one of the officers, directors, or employees of an employer, or 
        at least one of the individuals who are partners in an employer 
        and who actively participates in the business, is a member or 
        such an affiliated member of the sponsor, participating 
        employers may also include such employer; and
            ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                    ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers; 
                or
                    ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
    ``(b) Coverage of Previously Uninsured Employees.--In the case of 
an association health plan in existence on the date of the enactment of 
this part, an affiliated member of the sponsor of the plan may be 
offered coverage under the plan as a participating employer only if--
            ``(1) the affiliated member was an affiliated member on the 
        date of certification under this part; or
            ``(2) during the 12-month period preceding the date of the 
        offering of such coverage, the affiliated member has not 
        maintained or contributed to a group health plan with respect 
        to any of its employees who would otherwise be eligible to 
        participate in such association health plan.
    ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage under the plan is based 
on a health status-related factor with respect to the employee and such 
employee would, but for such exclusion on such basis, be eligible for 
coverage under the plan.
    ``(d) Prohibition of Discrimination Against Employers and Employees 
Eligible To Participate.--The requirements of this subsection are met 
with respect to an association health plan if--
            ``(1) under the terms of the plan, all employers meeting 
        the preceding requirements of this section are eligible to 
        qualify as participating employers for all geographically 
        available coverage options, unless, in the case of any such 
        employer, participation or contribution requirements of the 
        type referred to in section 2711 of the Public Health Service 
        Act are not met;
            ``(2) upon request, any employer eligible to participate is 
        furnished information regarding all coverage options available 
        under the plan; and
            ``(3) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan.

``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION 
              RATES, AND BENEFIT OPTIONS.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
            ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements of an instrument required under section 402(a)(1), 
        which--
                    ``(A) provides that the board of trustees serves as 
                the named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A));
                    ``(B) provides that the sponsor of the plan is to 
                serve as plan sponsor (referred to in section 
                3(16)(B)); and
                    ``(C) incorporates the requirements of section 806.
            ``(2) Contribution rates must be nondiscriminatory.--
                    ``(A) The contribution rates for any participating 
                small employer do not vary on the basis of any health 
                status-related factor in relation to employees of such 
                employer or their beneficiaries and do not vary on the 
                basis of the type of business or industry in which such 
                employer is engaged.
                    ``(B) Nothing in this title or any other provision 
                of law shall be construed to preclude an association 
                health plan, or a health insurance issuer offering 
                health insurance coverage in connection with an 
                association health plan, from--
                            ``(i) setting contribution rates based on 
                        the claims experience of the plan; or
                            ``(ii) varying contribution rates for small 
                        employers in a State to the extent that such 
                        rates could vary using the same methodology 
                        employed in such State for regulating premium 
                        rates in the small group market with respect to 
                        health insurance coverage offered in connection 
                        with bona fide associations (within the meaning 
                        of section 2791(d)(3) of the Public Health 
                        Service Act),
                subject to the requirements of section 702(b) relating 
                to contribution rates.
            ``(3) Floor for number of covered individuals with respect 
        to certain plans.--If any benefit option under the plan does 
        not consist of health insurance coverage, the plan has as of 
        the beginning of the plan year not fewer than 1,000 
        participants and beneficiaries.
            ``(4) Marketing requirements.--
                    ``(A) In general.--If a benefit option which 
                consists of health insurance coverage is offered under 
                the plan, State-licensed insurance agents shall be used 
                to distribute to small employers coverage which does 
                not consist of health insurance coverage in a manner 
                comparable to the manner in which such agents are used 
                to distribute health insurance coverage.
                    ``(B) State-licensed insurance agents.--For 
                purposes of subparagraph (A), the term `State-licensed 
                insurance agents' means one or more agents who are 
                licensed in a State and are subject to the laws of such 
                State relating to licensure, qualification, testing, 
                examination, and continuing education of persons 
                authorized to offer, sell, or solicit health insurance 
                coverage in such State.
            ``(5) Regulatory requirements.--Such other requirements as 
        the applicable authority determines are necessary to carry out 
        the purposes of this part, which shall be prescribed by the 
        applicable authority by regulation.
    ``(b) Ability of Association Health Plans To Design Benefit 
Options.--Subject to section 514(d), nothing in this part or any 
provision of State law (as defined in section 514(c)(1)) shall be 
construed to preclude an association health plan, or a health insurance 
issuer offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion in 
selecting the specific items and services consisting of medical care to 
be included as benefits under such plan or coverage, except (subject to 
section 514) in the case of (1) any law to the extent that it is not 
preempted under section 731(a)(1) with respect to matters governed by 
section 711, 712, or 713, or (2) any law of the State with which filing 
and approval of a policy type offered by the plan was initially 
obtained to the extent that such law prohibits an exclusion of a 
specific disease from such coverage.

``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR 
              PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH 
              INSURANCE COVERAGE.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if--
            ``(1) the benefits under the plan consist solely of health 
        insurance coverage; or
            ``(2) if the plan provides any additional benefit options 
        which do not consist of health insurance coverage, the plan--
                    ``(A) establishes and maintains reserves with 
                respect to such additional benefit options, in amounts 
                recommended by the qualified actuary, consisting of--
                            ``(i) a reserve sufficient for unearned 
                        contributions;
                            ``(ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, which 
                        have not been satisfied, and for which risk of 
                        loss has not yet been transferred, and for 
                        expected administrative costs with respect to 
                        such benefit liabilities;
                            ``(iii) a reserve sufficient for any other 
                        obligations of the plan; and
                            ``(iv) a reserve sufficient for a margin of 
                        error and other fluctuations, taking into 
                        account the specific circumstances of the plan; 
                        and
                    ``(B) establishes and maintains aggregate and 
                specific excess/stop loss insurance and solvency 
                indemnification, with respect to such additional 
                benefit options for which risk of loss has not yet been 
                transferred, as follows:
                            ``(i) The plan shall secure aggregate 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is not greater than 125 
                        percent of expected gross annual claims. The 
                        applicable authority may by regulation provide 
                        for upward adjustments in the amount of such 
                        percentage in specified circumstances in which 
                        the plan specifically provides for and 
                        maintains reserves in excess of the amounts 
                        required under subparagraph (A).
                            ``(ii) The plan shall secure specific 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is at least equal to an 
                        amount recommended by the plan's qualified 
                        actuary. The applicable authority may by 
                        regulation provide for adjustments in the 
                        amount of such insurance in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                            ``(iii) The plan shall secure 
                        indemnification insurance for any claims which 
                        the plan is unable to satisfy by reason of a 
                        plan termination.
Any person issuing to a plan insurance described in clause (i), (ii), 
or (iii) of subparagraph (B) shall notify the Secretary of any failure 
of premium payment meriting cancellation of the policy prior to 
undertaking such a cancellation. Any regulations prescribed by the 
applicable authority pursuant to clause (i) or (ii) of subparagraph (B) 
may allow for such adjustments in the required levels of excess/stop 
loss insurance as the qualified actuary may recommend, taking into 
account the specific circumstances of the plan.
    ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case 
of any association health plan described in subsection (a)(2), the 
requirements of this subsection are met if the plan establishes and 
maintains surplus in an amount at least equal to--
            ``(1) $500,000, or
            ``(2) such greater amount (but not greater than $2,000,000) 
        as may be set forth in regulations prescribed by the applicable 
        authority, considering the level of aggregate and specific 
        excess/stop loss insurance provided with respect to such plan 
        and other factors related to solvency risk, such as the plan's 
        projected levels of participation or claims, the nature of the 
        plan's liabilities, and the types of assets available to assure 
        that such liabilities are met.
    ``(c) Additional Requirements.--In the case of any association 
health plan described in subsection (a)(2), the applicable authority 
may provide such additional requirements relating to reserves, excess/
stop loss insurance, and indemnification insurance as the applicable 
authority considers appropriate. Such requirements may be provided by 
regulation with respect to any such plan or any class of such plans.
    ``(d) Adjustments for Excess/Stop Loss Insurance.--The applicable 
authority may provide for adjustments to the levels of reserves 
otherwise required under subsections (a) and (b) with respect to any 
plan or class of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans.
    ``(e) Alternative Means of Compliance.--The applicable authority 
may permit an association health plan described in subsection (a)(2) to 
substitute, for all or part of the requirements of this section (except 
subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable authority 
determines to be adequate to enable the plan to fully meet all its 
financial obligations on a timely basis and is otherwise no less 
protective of the interests of participants and beneficiaries than the 
requirements for which it is substituted. The applicable authority may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter of 
credit, recourse under applicable terms of the plan in the form of 
assessments of participating employers, security, or other financial 
arrangement.
    ``(f) Measures To Ensure Continued Payment of Benefits by Certain 
Plans in Distress.--
            ``(1) Payments by certain plans to association health plan 
        fund.--
                    ``(A) In general.--In the case of an association 
                health plan described in subsection (a)(2), the 
                requirements of this subsection are met if the plan 
                makes payments into the Association Health Plan Fund 
                under this subparagraph when they are due. Such 
                payments shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual payments, 
                such supplemental payments as the Secretary may 
                determine to be necessary under paragraph (2). Payments 
                under this paragraph are payable to the Fund at the 
                time determined by the Secretary. Initial payments are 
                due in advance of certification under this part. 
                Payments shall continue to accrue until a plan's assets 
                are distributed pursuant to a termination procedure.
                    ``(B) Penalties for failure to make payments.--If 
                any payment is not made by a plan when it is due, a 
                late payment charge of not more than 100 percent of the 
                payment which was not timely paid shall be payable by 
                the plan to the Fund.
                    ``(C) Continued duty of the secretary.--The 
                Secretary shall not cease to carry out the provisions 
                of paragraph (2) on account of the failure of a plan to 
                pay any payment when due.
            ``(2) Payments by secretary to continue excess/stop loss 
        insurance coverage and indemnification insurance coverage for 
        certain plans.--In any case in which the applicable authority 
        determines that there is, or that there is reason to believe 
        that there will be: (A) a failure to take necessary corrective 
        actions under section 809(a) with respect to an association 
        health plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 810(b)(8) 
        (and, if the applicable authority is not the Secretary, 
        certifies such determination to the Secretary), the Secretary 
        shall determine the amounts necessary to make payments to an 
        insurer (designated by the Secretary) to maintain in force 
        excess/stop loss insurance coverage or indemnification 
        insurance coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without such 
        payments, claims would not be satisfied by reason of 
        termination of such coverage. The Secretary shall, to the 
        extent provided in advance in appropriation Acts, pay such 
        amounts so determined to the insurer designated by the 
        Secretary.
            ``(3) Association health plan fund.--
                    ``(A) In general.--There is established on the 
                books of the Treasury a fund to be known as the 
                `Association Health Plan Fund'. The Fund shall be 
                available for making payments pursuant to paragraph 
                (2). The Fund shall be credited with payments received 
                pursuant to paragraph (1)(A), penalties received 
                pursuant to paragraph (1)(B); and earnings on 
                investments of amounts of the Fund under subparagraph 
                (B).
                    ``(B) Investment.--Whenever the Secretary 
                determines that the moneys of the fund are in excess of 
                current needs, the Secretary may request the investment 
                of such amounts as the Secretary determines advisable 
                by the Secretary of the Treasury in obligations issued 
                or guaranteed by the United States.
    ``(g) Excess/Stop Loss Insurance.--For purposes of this section--
            ``(1) Aggregate excess/stop loss insurance.--The term 
        `aggregate excess/stop loss insurance' means, in connection 
        with an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to aggregate claims under the plan in excess of 
                an amount or amounts specified in such contract;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
            ``(2) Specific excess/stop loss insurance.--The term 
        `specific excess/stop loss insurance' means, in connection with 
        an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to claims under the plan in connection with a 
                covered individual in excess of an amount or amounts 
                specified in such contract in connection with such 
                covered individual;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
    ``(h) Indemnification Insurance.--For purposes of this section, the 
term `indemnification insurance' means, in connection with an 
association health plan, a contract--
            ``(1) under which an insurer (meeting such minimum 
        standards as the applicable authority may prescribe by 
        regulation) provides for payment to the plan with respect to 
        claims under the plan which the plan is unable to satisfy by 
        reason of a termination pursuant to section 809(b) (relating to 
        mandatory termination);
            ``(2) which is guaranteed renewable and noncancellable for 
        any reason (except as the applicable authority may prescribe by 
        regulation); and
            ``(3) which allows for payment of premiums by any third 
        party on behalf of the insured plan.
    ``(i) Reserves.--For purposes of this section, the term `reserves' 
means, in connection with an association health plan, plan assets which 
meet the fiduciary standards under part 4 and such additional 
requirements regarding liquidity as the applicable authority may 
prescribe by regulation.
    ``(j) Solvency Standards Working Group.--
            ``(1) In general.--Within 90 days after the date of the 
        enactment of this part, the applicable authority shall 
        establish a Solvency Standards Working Group. In prescribing 
        the initial regulations under this section, the applicable 
        authority shall take into account the recommendations of such 
        Working Group.
            ``(2) Membership.--The Working Group shall consist of not 
        more than 15 members appointed by the applicable authority. The 
        applicable authority shall include among persons invited to 
        membership on the Working Group at least one of each of the 
        following:
                    ``(A) a representative of the National Association 
                of Insurance Commissioners;
                    ``(B) a representative of the American Academy of 
                Actuaries;
                    ``(C) a representative of the State governments, or 
                their interests;
                    ``(D) a representative of existing self-insured 
                arrangements, or their interests;
                    ``(E) a representative of associations of the type 
                referred to in section 801(b)(1), or their interests; 
                and
                    ``(F) a representative of multiemployer plans that 
                are group health plans, or their interests.

``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

    ``(a) Filing Fee.--Under the procedure prescribed pursuant to 
section 802(a), an association health plan shall pay to the applicable 
authority at the time of filing an application for certification under 
this part a filing fee in the amount of $5,000, which shall be 
available in the case of the Secretary, to the extent provided in 
appropriation Acts, for the sole purpose of administering the 
certification procedures applicable with respect to association health 
plans.
    ``(b) Information To Be Included in Application for 
Certification.--An application for certification under this part meets 
the requirements of this section only if it includes, in a manner and 
form which shall be prescribed by the applicable authority by 
regulation, at least the following information:
            ``(1) Identifying information.--The names and addresses 
        of--
                    ``(A) the sponsor; and
                    ``(B) the members of the board of trustees of the 
                plan.
            ``(2) States in which plan intends to do business.--The 
        States in which participants and beneficiaries under the plan 
        are to be located and the number of them expected to be located 
        in each such State.
            ``(3) Bonding requirements.--Evidence provided by the board 
        of trustees that the bonding requirements of section 412 will 
        be met as of the date of the application or (if later) 
        commencement of operations.
            ``(4) Plan documents.--A copy of the documents governing 
        the plan (including any bylaws and trust agreements), the 
        summary plan description, and other material describing the 
        benefits that will be provided to participants and 
        beneficiaries under the plan.
            ``(5) Agreements with service providers.--A copy of any 
        agreements between the plan and contract administrators and 
        other service providers.
            ``(6) Funding report.--In the case of association health 
        plans providing benefits options in addition to health 
        insurance coverage, a report setting forth information with 
        respect to such additional benefit options determined as of a 
        date within the 120-day period ending with the date of the 
        application, including the following:
                    ``(A) Reserves.--A statement, certified by the 
                board of trustees of the plan, and a statement of 
                actuarial opinion, signed by a qualified actuary, that 
                all applicable requirements of section 806 are or will 
                be met in accordance with regulations which the 
                applicable authority shall prescribe.
                    ``(B) Adequacy of contribution rates.--A statement 
                of actuarial opinion, signed by a qualified actuary, 
                which sets forth a description of the extent to which 
                contribution rates are adequate to provide for the 
                payment of all obligations and the maintenance of 
                required reserves under the plan for the 12-month 
                period beginning with such date within such 120-day 
                period, taking into account the expected coverage and 
                experience of the plan. If the contribution rates are 
                not fully adequate, the statement of actuarial opinion 
                shall indicate the extent to which the rates are 
                inadequate and the changes needed to ensure adequacy.
                    ``(C) Current and projected value of assets and 
                liabilities.--A statement of actuarial opinion signed 
                by a qualified actuary, which sets forth the current 
                value of the assets and liabilities accumulated under 
                the plan and a projection of the assets, liabilities, 
                income, and expenses of the plan for the 12-month 
                period referred to in subparagraph (B). The income 
                statement shall identify separately the plan's 
                administrative expenses and claims.
                    ``(D) Costs of coverage to be charged and other 
                expenses.--A statement of the costs of coverage to be 
                charged, including an itemization of amounts for 
                administration, reserves, and other expenses associated 
                with the operation of the plan.
                    ``(E) Other information.--Any other information as 
                may be determined by the applicable authority, by 
                regulation, as necessary to carry out the purposes of 
                this part.
    ``(c) Filing Notice of Certification With States.--A certification 
granted under this part to an association health plan shall not be 
effective unless written notice of such certification is filed with the 
applicable State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are located. For 
purposes of this subsection, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed.
    ``(d) Notice of Material Changes.--In the case of any association 
health plan certified under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the certification under this part shall be filed in 
such form and manner as shall be prescribed by the applicable authority 
by regulation. The applicable authority may require by regulation prior 
notice of material changes with respect to specified matters which 
might serve as the basis for suspension or revocation of the 
certification.
    ``(e) Reporting Requirements for Certain Association Health 
Plans.--An association health plan certified under this part which 
provides benefit options in addition to health insurance coverage for 
such plan year shall meet the requirements of section 103 by filing an 
annual report under such section which shall include information 
described in subsection (b)(6) with respect to the plan year and, 
notwithstanding section 104(a)(1)(A), shall be filed with the 
applicable authority not later than 90 days after the close of the plan 
year (or on such later date as may be prescribed by the applicable 
authority). The applicable authority may require by regulation such 
interim reports as it considers appropriate.
    ``(f) Engagement of Qualified Actuary.--The board of trustees of 
each association health plan which provides benefits options in 
addition to health insurance coverage and which is applying for 
certification under this part or is certified under this part shall 
engage, on behalf of all participants and beneficiaries, a qualified 
actuary who shall be responsible for the preparation of the materials 
comprising information necessary to be submitted by a qualified actuary 
under this part. The qualified actuary shall utilize such assumptions 
and techniques as are necessary to enable such actuary to form an 
opinion as to whether the contents of the matters reported under this 
part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the plan and to reasonable expectations; and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the plan.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.

``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees, not less than 60 days before the proposed 
termination date--
            ``(1) provides to the participants and beneficiaries a 
        written notice of intent to terminate stating that such 
        termination is intended and the proposed termination date;
            ``(2) develops a plan for winding up the affairs of the 
        plan in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated; and
            ``(3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form and 
manner as may be prescribed by the applicable authority by regulation.

``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--An association 
health plan which is certified under this part and which provides 
benefits other than health insurance coverage shall continue to meet 
the requirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of such plan 
shall determine quarterly whether the requirements of section 806 are 
met. In any case in which the board determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the applicable authority makes such a determination and so notifies 
the board, the board shall immediately notify the qualified actuary 
engaged by the plan, and such actuary shall, not later than the end of 
the next following month, make such recommendations to the board for 
corrective action as the actuary determines necessary to ensure 
compliance with section 806. Not later than 30 days after receiving 
from the actuary recommendations for corrective actions, the board 
shall notify the applicable authority (in such form and manner as the 
applicable authority may prescribe by regulation) of such 
recommendations of the actuary for corrective action, together with a 
description of the actions (if any) that the board has taken or plans 
to take in response to such recommendations. The board shall thereafter 
report to the applicable authority, in such form and frequency as the 
applicable authority may specify to the board, regarding corrective 
action taken by the board until the requirements of section 806 are 
met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the applicable authority has been notified under 
        subsection (a) (or by an issuer of excess/stop loss insurance 
        or indemnity insurance pursuant to section 806(a)) of a failure 
        of an association health plan which is or has been certified 
        under this part and is described in section 806(a)(2) to meet 
        the requirements of section 806 and has not been notified by 
        the board of trustees of the plan that corrective action has 
        restored compliance with such requirements; and
            ``(2) the applicable authority determines that there is a 
        reasonable expectation that the plan will continue to fail to 
        meet the requirements of section 806,
the board of trustees of the plan shall, at the direction of the 
applicable authority, terminate the plan and, in the course of the 
termination, take such actions as the applicable authority may require, 
including satisfying any claims referred to in section 
806(a)(2)(B)(iii) and recovering for the plan any liability under 
subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent possible, 
wound up in a manner which will result in timely provision of all 
benefits for which the plan is obligated.

``SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION 
              HEALTH PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO 
              HEALTH INSURANCE COVERAGE.

    ``(a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary determines that an association health plan which 
is or has been certified under this part and which is described in 
section 806(a)(2) will be unable to provide benefits when due or is 
otherwise in a financially hazardous condition, as shall be defined by 
the Secretary by regulation, the Secretary shall, upon notice to the 
plan, apply to the appropriate United States district court for 
appointment of the Secretary as trustee to administer the plan for the 
duration of the insolvency. The plan may appear as a party and other 
interested persons may intervene in the proceedings at the discretion 
of the court. The court shall appoint such Secretary trustee if the 
court determines that the trusteeship is necessary to protect the 
interests of the participants and beneficiaries or providers of medical 
care or to avoid any unreasonable deterioration of the financial 
condition of the plan. The trusteeship of such Secretary shall continue 
until the conditions described in the first sentence of this subsection 
are remedied or the plan is terminated.
    ``(b) Powers as Trustee.--The Secretary, upon appointment as 
trustee under subsection (a), shall have the power--
            ``(1) to do any act authorized by the plan, this title, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan;
            ``(2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee;
            ``(3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations prescribed by the Secretary, and applicable 
        provisions of law;
            ``(4) to require the sponsor, the plan administrator, any 
        participating employer, and any employee organization 
        representing plan participants to furnish any information with 
        respect to the plan which the Secretary as trustee may 
        reasonably need in order to administer the plan;
            ``(5) to collect for the plan any amounts due the plan and 
        to recover reasonable expenses of the trusteeship;
            ``(6) to commence, prosecute, or defend on behalf of the 
        plan any suit or proceeding involving the plan;
            ``(7) to issue, publish, or file such notices, statements, 
        and reports as may be required by the Secretary by regulation 
        or required by any order of the court;
            ``(8) to terminate the plan (or provide for its termination 
        in accordance with section 809(b)) and liquidate the plan 
        assets, to restore the plan to the responsibility of the 
        sponsor, or to continue the trusteeship;
            ``(9) to provide for the enrollment of plan participants 
        and beneficiaries under appropriate coverage options; and
            ``(10) to do such other acts as may be necessary to comply 
        with this title or any order of the court and to protect the 
        interests of plan participants and beneficiaries and providers 
        of medical care.
    ``(c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
            ``(1) the sponsor and plan administrator;
            ``(2) each participant;
            ``(3) each participating employer; and
            ``(4) if applicable, each employee organization which, for 
        purposes of collective bargaining, represents plan 
        participants.
    ``(d) Additional Duties.--Except to the extent inconsistent with 
the provisions of this title, or as may be otherwise ordered by the 
court, the Secretary, upon appointment as trustee under this section, 
shall be subject to the same duties as those of a trustee under section 
704 of title 11, United States Code, and shall have the duties of a 
fiduciary for purposes of this title.
    ``(e) Other Proceedings.--An application by the Secretary under 
this subsection may be filed notwithstanding the pendency in the same 
or any other court of any bankruptcy, mortgage foreclosure, or equity 
receivership proceeding, or any proceeding to reorganize, conserve, or 
liquidate such plan or its property, or any proceeding to enforce a 
lien against property of the plan.
    ``(f) Jurisdiction of Court.--
            ``(1) In general.--Upon the filing of an application for 
        the appointment as trustee or the issuance of a decree under 
        this section, the court to which the application is made shall 
        have exclusive jurisdiction of the plan involved and its 
        property wherever located with the powers, to the extent 
        consistent with the purposes of this section, of a court of the 
        United States having jurisdiction over cases under chapter 11 
        of title 11, United States Code. Pending an adjudication under 
        this section such court shall stay, and upon appointment by it 
        of the Secretary as trustee, such court shall continue the stay 
        of, any pending mortgage foreclosure, equity receivership, or 
        other proceeding to reorganize, conserve, or liquidate the 
        plan, the sponsor, or property of such plan or sponsor, and any 
        other suit against any receiver, conservator, or trustee of the 
        plan, the sponsor, or property of the plan or sponsor. Pending 
        such adjudication and upon the appointment by it of the 
        Secretary as trustee, the court may stay any proceeding to 
        enforce a lien against property of the plan or the sponsor or 
        any other suit against the plan or the sponsor.
            ``(2) Venue.--An action under this section may be brought 
        in the judicial district where the sponsor or the plan 
        administrator resides or does business or where any asset of 
        the plan is situated. A district court in which such action is 
        brought may issue process with respect to such action in any 
        other judicial district.
    ``(g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary, the Secretary shall appoint, retain, and 
compensate accountants, actuaries, and other professional service 
personnel as may be necessary in connection with the Secretary's 
service as trustee under this section.

``SEC. 811. STATE ASSESSMENT AUTHORITY.

    ``(a) In General.--Notwithstanding section 514, a State may impose 
by law a contribution tax on an association health plan described in 
section 806(a)(2), if the plan commenced operations in such State after 
the date of the enactment of this part.
    ``(b) Contribution Tax.--For purposes of this section, the term 
`contribution tax' imposed by a State on an association health plan 
means any tax imposed by such State if--
            ``(1) such tax is computed by applying a rate to the amount 
        of premiums or contributions, with respect to individuals 
        covered under the plan who are residents of such State, which 
        are received by the plan from participating employers located 
        in such State or from such individuals;
            ``(2) the rate of such tax does not exceed the rate of any 
        tax imposed by such State on premiums or contributions received 
        by insurers or health maintenance organizations for health 
        insurance coverage offered in such State in connection with a 
        group health plan;
            ``(3) such tax is otherwise nondiscriminatory; and
            ``(4) the amount of any such tax assessed on the plan is 
        reduced by the amount of any tax or assessment otherwise 
        imposed by the State on premiums, contributions, or both 
        received by insurers or health maintenance organizations for 
        health insurance coverage, aggregate excess/stop loss insurance 
        (as defined in section 806(g)(1)), specific excess/stop loss 
        insurance (as defined in section 806(g)(2)), other insurance 
        related to the provision of medical care under the plan, or any 
        combination thereof provided by such insurers or health 
        maintenance organizations in such State in connection with such 
        plan.

``SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.

    ``(a) Definitions.--For purposes of this part--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Applicable authority.--The term `applicable 
        authority' means the Secretary, except that, in connection with 
        any exercise of the Secretary's authority regarding which the 
        Secretary is required under section 506(d) to consult with a 
        State, such term means the Secretary, in consultation with such 
        State.
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(7) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (i) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act) is regulated by such State.
            ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(9) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        for the State involved with respect to such issuer.
            ``(10) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries.
            ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                    ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                    ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                    ``(C) in the case of an association health plan in 
                existence on the date of the enactment of this part, a 
                person eligible to be a member of the sponsor or one of 
                its member associations.
            ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
            ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                    ``(A) in the case of a partnership, the term 
                `employer' (as defined in section 3(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section 3(6)) includes any 
                partner in relation to the partnership; and
                    ``(B) in the case of a self-employed individual, 
                the term `employer' (as defined in section 3(5)) and 
                the term `employee' (as defined in section 3(6)) shall 
                include such individual.
            ``(2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, or 
        program which was established or is maintained for the purpose 
        of providing medical care (through the purchase of insurance or 
        otherwise) for employees (or their dependents) covered 
        thereunder and which demonstrates to the Secretary that all 
        requirements for certification under this part would be met 
        with respect to such plan, fund, or program if such plan, fund, 
        or program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as an 
        employee welfare benefit plan on and after the date of such 
        demonstration.''.
            (2) Conforming amendments to preemption rules.--
                    (A) Section 514(b)(6) of such Act (29 U.S.C. 
                1144(b)(6)) is amended by adding at the end the 
                following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
                    (B) Section 514 of such Act (29 U.S.C. 1144) is 
                amended--
                            (i) in subsection (b)(4), by striking 
                        ``Subsection (a)'' and inserting ``Subsections 
                        (a) and (d)'';
                            (ii) in subsection (b)(5), by striking 
                        ``subsection (a)'' in subparagraph (A) and 
                        inserting ``subsection (a) of this section and 
                        subsections (a)(2)(B) and (b) of section 805'', 
                        and by striking ``subsection (a)'' in 
                        subparagraph (B) and inserting ``subsection (a) 
                        of this section or subsection (a)(2)(B) or (b) 
                        of section 805'';
                            (iii) by redesignating subsection (d) as 
                        subsection (e); and
                            (iv) by inserting after subsection (c) the 
                        following new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude, or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered in a State under an association health 
        plan certified under part 8 and the filing, with the applicable 
        State authority (as defined in section 812(a)(9)), of the 
        policy form in connection with such policy type is approved by 
        such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) Nothing in subsection (b)(6)(E) or the preceding provisions 
of this subsection shall be construed, with respect to health insurance 
issuers or health insurance coverage, to supersede or impair the law of 
any State--
            ``(A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, reserves, 
        or contributions, or
            ``(B) relating to prompt payment of claims.
    ``(4) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(5) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 812, 
respectively.''.
                    (C) Section 514(b)(6)(A) of such Act (29 U.S.C. 
                1144(b)(6)(A)) is amended--
                            (i) in clause (i)(II), by striking ``and'' 
                        at the end;
                            (ii) in clause (ii), by inserting ``and 
                        which does not provide medical care (within the 
                        meaning of section 733(a)(2)),'' after 
                        ``arrangement,'', and by striking ``title.'' 
                        and inserting ``title, and''; and
                            (iii) by adding at the end the following 
                        new clause:
            ``(iii) subject to subparagraph (E), in the case of any 
        other employee welfare benefit plan which is a multiple 
        employer welfare arrangement and which provides medical care 
        (within the meaning of section 733(a)(2)), any law of any State 
        which regulates insurance may apply.''.
                    (D) Section 514(e) of such Act (as redesignated by 
                subparagraph (B)(iii)) is amended--
                            (i) by striking ``Nothing'' and inserting 
                        ``(1) Except as provided in paragraph (2), 
                        nothing''; and
                            (ii) by adding at the end the following new 
                        paragraph:
    ``(2) Nothing in any other provision of law enacted on or after the 
date of the enactment of part 8 shall be construed to alter, amend, 
modify, invalidate, impair, or supersede any provision of this title, 
except by specific cross-reference to the affected section.''.
            (3) Plan sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
        102(16)(B)) is amended by adding at the end the following new 
        sentence: ``Such term also includes a person serving as the 
        sponsor of an association health plan under part 8.''.
            (4) Disclosure of solvency protections related to self-
        insured and fully insured options under association health 
        plans.--Section 102(b) of such Act (29 U.S.C. 102(b)) is 
        amended by adding at the end the following: ``An association 
        health plan shall include in its summary plan description, in 
        connection with each benefit option, a description of the form 
        of solvency or guarantee fund protection secured pursuant to 
        this Act or applicable State law, if any.''.
            (5) Savings clause.--Section 731(c) of such Act is amended 
        by inserting ``or part 8'' after ``this part''.
            (6) Report to the congress regarding certification of self-
        insured association health plans.--Not later than January 1, 
        2012, the Secretary of Labor shall report to the Committee on 
        Education and the Workforce of the House of Representatives and 
        the Committee on Health, Education, Labor, and Pensions of the 
        Senate the effect association health plans have had, if any, on 
        reducing the number of uninsured individuals.
            (7) Clerical amendment.--The table of contents in section 1 
        of the Employee Retirement Income Security Act of 1974 is 
        amended by inserting after the item relating to section 734 the 
        following new items:

           ``Part 8--Rules Governing Association Health Plans

``801. Association health plans.
``802. Certification of association health plans.
``803. Requirements relating to sponsors and boards of trustees.
``804. Participation and coverage requirements.
``805. Other requirements relating to plan documents, contribution 
                            rates, and benefit options.
``806. Maintenance of reserves and provisions for solvency for plans 
                            providing health benefits in addition to 
                            health insurance coverage.
``807. Requirements for application and related requirements.
``808. Notice requirements for voluntary termination.
``809. Corrective actions and mandatory termination.
``810. Trusteeship by the Secretary of insolvent association health 
                            plans providing health benefits in addition 
                            to health insurance coverage.
``811. State assessment authority.
``812. Definitions and rules of construction.''.
    (b) Clarification of Treatment of Single Employer Arrangements.--
Section 3(40)(B) of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting after ``control group,'' 
        the following: ``except that, in any case in which the benefit 
        referred to in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), two or more trades or 
        businesses, whether or not incorporated, shall be deemed a 
        single employer for any plan year of such plan, or any fiscal 
        year of such other arrangement, if such trades or businesses 
        are within the same control group during such year or at any 
        time during the preceding 1-year period,'';
            (2) in clause (iii), by striking ``(iii) the 
        determination'' and inserting the following:
            ``(iii)(I) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), the determination of whether a trade or 
        business is under `common control' with another trade or 
        business shall be determined under regulations of the Secretary 
        applying principles consistent and coextensive with the 
        principles applied in determining whether employees of two or 
        more trades or businesses are treated as employed by a single 
        employer under section 4001(b), except that, for purposes of 
        this paragraph, an interest of greater than 25 percent may not 
        be required as the minimum interest necessary for common 
        control, or
            ``(II) in any other case, the determination'';
            (3) by redesignating clauses (iv) and (v) as clauses (v) 
        and (vi), respectively; and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), in determining, after the application of 
        clause (i), whether benefits are provided to employees of two 
        or more employers, the arrangement shall be treated as having 
        only one participating employer if, after the application of 
        clause (i), the number of individuals who are employees and 
        former employees of any one participating employer and who are 
        covered under the arrangement is greater than 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement,''.
    (c) Enforcement Provisions Relating to Association Health Plans.--
            (1) Criminal penalties for certain willful 
        misrepresentations.--Section 501 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1131) is amended--
                    (A) by inserting ``(a)'' after ``Sec. 501.''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(b) Any person who willfully falsely represents, to any employee, 
any employee's beneficiary, any employer, the Secretary, or any State, 
a plan or other arrangement established or maintained for the purpose 
of offering or providing any benefit described in section 3(1) to 
employees or their beneficiaries as--
            ``(1) being an association health plan which has been 
        certified under part 8;
            ``(2) having been established or maintained under or 
        pursuant to one or more collective bargaining agreements which 
        are reached pursuant to collective bargaining described in 
        section 8(d) of the National Labor Relations Act (29 U.S.C. 
        158(d)) or paragraph Fourth of section 2 of the Railway Labor 
        Act (45 U.S.C. 152, paragraph Fourth) or which are reached 
        pursuant to labor-management negotiations under similar 
        provisions of State public employee relations laws; or
            ``(3) being a plan or arrangement described in section 
        3(40)(A)(i),
shall, upon conviction, be imprisoned not more than 5 years, be fined 
under title 18, United States Code, or both.''.
            (2) Cease activities orders.--Section 502 of such Act (29 
        U.S.C. 1132) is amended by adding at the end the following new 
        subsection:
    ``(n) Association Health Plan Cease and Desist Orders.--
            ``(1) In general.--Subject to paragraph (2), upon 
        application by the Secretary showing the operation, promotion, 
        or marketing of an association health plan (or similar 
        arrangement providing benefits consisting of medical care (as 
        defined in section 733(a)(2))) that--
                    ``(A) is not certified under part 8, is subject 
                under section 514(b)(6) to the insurance laws of any 
                State in which the plan or arrangement offers or 
                provides benefits, and is not licensed, registered, or 
                otherwise approved under the insurance laws of such 
                State; or
                    ``(B) is an association health plan certified under 
                part 8 and is not operating in accordance with the 
                requirements under part 8 for such certification,
        a district court of the United States shall enter an order 
        requiring that the plan or arrangement cease activities.
            ``(2) Exception.--Paragraph (1) shall not apply in the case 
        of an association health plan or other arrangement if the plan 
        or arrangement shows that--
                    ``(A) all benefits under it referred to in 
                paragraph (1) consist of health insurance coverage; and
                    ``(B) with respect to each State in which the plan 
                or arrangement offers or provides benefits, the plan or 
                arrangement is operating in accordance with applicable 
                State laws that are not superseded under section 514.
            ``(3) Additional equitable relief.--The court may grant 
        such additional equitable relief, including any relief 
        available under this title, as it deems necessary to protect 
        the interests of the public and of persons having claims for 
        benefits against the plan.''.
            (3) Responsibility for claims procedure.--Section 503 of 
        such Act (29 U.S.C. 1133) is amended by inserting ``(a) In 
        General.--'' before ``In accordance'', and by adding at the end 
        the following new subsection:
    ``(b) Association Health Plans.--The terms of each association 
health plan which is or has been certified under part 8 shall require 
the board of trustees or the named fiduciary (as applicable) to ensure 
that the requirements of this section are met in connection with claims 
filed under the plan.''.
    (d) Cooperation Between Federal and State Authorities.--Section 506 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1136) 
is amended by adding at the end the following new subsection:
    ``(d) Consultation With States With Respect to Association Health 
Plans.--
            ``(1) Agreements with states.--The Secretary shall consult 
        with the State recognized under paragraph (2) with respect to 
        an association health plan regarding the exercise of--
                    ``(A) the Secretary's authority under sections 502 
                and 504 to enforce the requirements for certification 
                under part 8; and
                    ``(B) the Secretary's authority to certify 
                association health plans under part 8 in accordance 
                with regulations of the Secretary applicable to 
                certification under part 8.
            ``(2) Recognition of primary domicile state.--In carrying 
        out paragraph (1), the Secretary shall ensure that only one 
        State will be recognized, with respect to any particular 
        association health plan, as the State with which consultation 
        is required. In carrying out this paragraph--
                    ``(A) in the case of a plan which provides health 
                insurance coverage (as defined in section 812(a)(3)), 
                such State shall be the State with which filing and 
                approval of a policy type offered by the plan was 
                initially obtained, and
                    ``(B) in any other case, the Secretary shall take 
                into account the places of residence of the 
                participants and beneficiaries under the plan and the 
                State in which the trust is maintained.''.
    (e) Effective Date and Transitional and Other Rules.--
            (1) Effective date.--The amendments made by this section 
        shall take effect 1 year after the date of the enactment of 
        this Act. The Secretary of Labor shall first issue all 
        regulations necessary to carry out such amendments within 1 
        year after the date of the enactment of this Act.
            (2) Treatment of certain existing health benefits 
        programs.--
                    (A) In general.--In any case in which, as of the 
                date of the enactment of this Act, an arrangement is 
                maintained in a State for the purpose of providing 
                benefits consisting of medical care for the employees 
                and beneficiaries of its participating employers, at 
                least 200 participating employers make contributions to 
                such arrangement, such arrangement has been in 
                existence for at least 10 years, and such arrangement 
                is licensed under the laws of one or more States to 
                provide such benefits to its participating employers, 
                upon the filing with the applicable authority (as 
                defined in section 812(a)(5) of the Employee Retirement 
                Income Security Act of 1974 (as amended by this 
                subtitle)) by the arrangement of an application for 
                certification of the arrangement under part 8 of 
                subtitle B of title I of such Act--
                            (i) such arrangement shall be deemed to be 
                        a group health plan for purposes of title I of 
                        such Act;
                            (ii) the requirements of sections 801(a) 
                        and 803(a) of the Employee Retirement Income 
                        Security Act of 1974 shall be deemed met with 
                        respect to such arrangement;
                            (iii) the requirements of section 803(b) of 
                        such Act shall be deemed met, if the 
                        arrangement is operated by a board of directors 
                        which--
                                    (I) is elected by the participating 
                                employers, with each employer having 
                                one vote; and
                                    (II) has complete fiscal control 
                                over the arrangement and which is 
                                responsible for all operations of the 
                                arrangement;
                            (iv) the requirements of section 804(a) of 
                        such Act shall be deemed met with respect to 
                        such arrangement; and
                            (v) the arrangement may be certified by any 
                        applicable authority with respect to its 
                        operations in any State only if it operates in 
                        such State on the date of certification.
                The provisions of this subparagraph shall cease to 
                apply with respect to any such arrangement at such time 
                after the date of the enactment of this Act as the 
                applicable requirements of this subparagraph are not 
                met with respect to such arrangement.
                    (B) Definitions.--For purposes of this paragraph, 
                the terms ``group health plan'', ``medical care'', and 
                ``participating employer'' shall have the meanings 
                provided in section 812 of the Employee Retirement 
                Income Security Act of 1974, except that the reference 
                in paragraph (7) of such section to an ``association 
                health plan'' shall be deemed a reference to an 
                arrangement referred to in this paragraph.

SEC. 133. REPEAL OF CERTAIN TAX EXEMPTIONS FOR HEALTH INSURANCE 
              PAYMENTS.

    (a) FICA Definition of Wages.--Paragraphs (2) and (4) of sections 
3121(a)of the Internal Revenue Code of 1986 (relating to tax on 
employers and employees) are hereby repealed.
    (b) Conforming Amendments.--Section 3401 of the Internal Revenue 
Code of 1986 (relating to the collection of wages at source) is amended 
by striking paragraph (20) and redesignating paragraphs (21), (22), and 
(23)as paragraphs (20), (21), and (22), respectively.
    (c) Applicable Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

              Subtitle C--Health Care Services Commission

                PART I--ESTABLISHMENT AND GENERAL DUTIES

SEC. 141. ESTABLISHMENT.

    (a) In General.--There is hereby established a Health Care Services 
Commission (in this subtitle referred to as the ``Commission'') to be 
composed of five commissioners (in this subtitle referred to as the 
``Commissioners'') to be appointed by the President by and with the 
advice and consent of the Senate. Not more than three of such 
commissioners shall be members of the same political party, and in 
making appointments members of different political parties shall be 
appointed alternately as nearly as may be practicable. No commissioner 
shall engage in any other business, vocation, or employment than that 
of serving as commissioner. Each commissioner shall hold office for a 
term of five years and until his successor is appointed and has 
qualified, except that he shall not so continue to serve beyond the 
expiration of the next session of Congress subsequent to the expiration 
of said fixed term of office, and except (1) any commissioner appointed 
to fill a vacancy occurring prior to the expiration of the term for 
which his predecessor was appointed shall be appointed for the 
remainder of such term, and (2) the terms of office of the 
commissioners first taking office after the enactment of this subtitle 
shall expire as designated by the President at the time of nomination, 
one at the end of one year, one at the end of two years, one at the end 
of three years, one at the end of four years, and one at the end of 
five years, after the date of the enactment of this Act.
    (b) Purpose.--The purpose of the Commission is to enhance the 
quality, appropriateness, and effectiveness of health care services, 
and access to such services, through the establishment of a broad base 
of scientific research and through the promotion of improvements in 
clinical practice and in the organization, financing, and delivery of 
health care services.
    (c) Appointment of Chairman.--The President shall, from among the 
Commissioners appointed under subsection (a), designate an individual 
to serve as the Chairman of the Commission.

SEC. 142. GENERAL AUTHORITIES AND DUTIES.

    (a) In General.--In carrying out section 141(b), the Commissioners 
shall conduct and support research, demonstration projects, 
evaluations, training, guideline development, and the dissemination of 
information, on health care services and on systems for the delivery of 
such services, including activities with respect to--
            (1) the effectiveness, efficiency, and quality of health 
        care services;
            (2) subject to subsection (b), the outcomes of health care 
        services and procedures;
            (3) clinical practice, including primary care and practice-
        oriented research;
            (4) health care technologies, facilities, and equipment;
            (5) health care costs, productivity, and market forces;
            (6) health promotion and disease prevention;
            (7) health statistics and epidemiology; and
            (8) medical liability.
    (b) Requirements With Respect to Rural Areas and Underserved 
Populations.--In carrying out subsection (a), the Commissioners shall 
undertake and support research, demonstration projects, and evaluations 
with respect to--
            (1) the delivery of health care services in rural areas 
        (including frontier areas); and
            (2) the health of low-income groups, minority groups, and 
        the elderly.

SEC. 143. DISSEMINATION.

    (a) In General.--The Commissioners shall--
            (1) promptly publish, make available, and otherwise 
        disseminate, in a form understandable and on as broad a basis 
        as practicable so as to maximize its use, the results of 
        research, demonstration projects, and evaluations conducted or 
        supported under this subtitle and the guidelines, standards, 
        and review criteria developed under this subtitle;
            (2) promptly make available to the public data developed in 
        such research, demonstration projects, and evaluations; and
            (3) as appropriate, provide technical assistance to State 
        and local government and health agencies and conduct liaison 
        activities to such agencies to foster dissemination.
    (b) Prohibition Against Restrictions.--Except as provided in 
subsection (c), the Commissioners may not restrict the publication or 
dissemination of data from, or the results of, projects conducted or 
supported under this subtitle.
    (c) Limitation on Use of Certain Information.--No information, if 
an establishment or person supplying the information or described in it 
is identifiable, obtained in the course of activities undertaken or 
supported under this subtitle may be used for any purpose other than 
the purpose for which it was supplied unless such establishment or 
person has consented (as determined under regulations of the Secretary) 
to its use for such other purpose. Such information may not be 
published or released in other form if the person who supplied the 
information or who is described in it is identifiable unless such 
person has consented (as determined under regulations of the Secretary) 
to its publication or release in other form.
    (d) Certain Interagency Agreement.--The Commissioners and the 
Director of the National Library of Medicine shall enter into an 
agreement providing for the implementation of subsection (a)(1).

      PART II--FORUM FOR QUALITY AND EFFECTIVENESS IN HEALTH CARE

SEC. 151. ESTABLISHMENT OF OFFICE.

    There is established within the Commission an office to be known as 
the Office of the Forum for Quality and Effectiveness in Health Care. 
The office shall be headed by a director (referred to in this subtitle 
as the ``Director''), who shall be appointed by the Commissioners.

SEC. 152. MEMBERSHIP.

    (a) In General.--The Office of the Forum for Quality and 
Effectiveness in Health Care shall be composed of 15 individuals 
nominated by private sector health care organizations and appointed by 
the Commission and shall include representation from at least the 
following:
            (1) Health insurance industry.
            (2) Health care provider groups.
            (3) Non-profit organizations.
            (4) Rural health organizations.
    (b) Terms.--
            (1) In general.--Except as provided in subparagraph (B), 
        members of the Office of the Forum for Quality and 
        Effectiveness in Health Care shall serve for a term of 5 years.
            (2) Staggered rotation.--Of the members first appointed to 
        the Office of the Forum for Quality and Effectiveness in Health 
        Care, the Commission shall appoint 5 members to serve for a 
        term of 2 years, 5 members to serve for a term of 3 years, and 
        5 members to serve for a term of 4 years.
    (c) Treatment of Other Employment.--Each member of the Office of 
the Forum for Quality and Effectiveness in Health Care shall serve the 
Office independently from any other position of employment.

SEC. 153. DUTIES.

    (a) Establishment of Forum Program.--The Commissioners, acting 
through the Director, shall establish a program to be known as the 
Forum for Quality and Effectiveness in Health Care. For the purpose of 
promoting transparency in price, quality, appropriateness, and 
effectiveness of health care, the Director, using the process set forth 
in section 154, shall arrange for the development and periodic review 
and updating of standards of quality, performance measures, and medical 
review criteria through which health care providers and other 
appropriate entities may assess or review the provision of health care 
and assure the quality of such care.
    (b) Certain Requirements.--Guidelines, standards, performance 
measures, and review criteria under subsection (a) shall--
            (1) be based on the best available research and 
        professional judgment regarding the effectiveness and 
        appropriateness of health care services and procedures; and
            (2) be presented in formats appropriate for use by 
        physicians, health care practitioners, providers, medical 
        educators, and medical review organizations and in formats 
        appropriate for use by consumers of health care.
    (c) Authority for Contracts.--In carrying out this part, the 
Director may enter into contracts with public or nonprofit private 
entities.
    (d) Public Disclosure of Recommendations.--For each fiscal year 
beginning with 2010, the Director shall make publicly available the 
following:
            (1) quarterly reports for public comment that include 
        proposed recommendations for guidelines, standards, performance 
        measures, and review criteria under subsection (a) and any 
        updates to such guidelines, standards, performance measures, 
        and review criteria; and
            (2) after consideration of such comments, a final report 
        that contains final recommendations for such guidelines, 
        standards, performance measures, review criteria, and updates.
    (e) Date Certain for Initial Guidelines and Standards.--The 
Commissioners, by not later than January 1, 2012, shall assure the 
development of an initial set of guidelines, standards, performance 
measures, and review criteria under subsection (a).

SEC. 154. ADOPTION AND ENFORCEMENT OF GUIDELINES AND STANDARDS.

    (a) Adoption of Recommendations of Forum for Quality and 
Effectiveness in Health Care.--For each fiscal year, the Commissioners 
shall adopt the recommendations made for such year in the final report 
under subsection (d)(2) of section 153 for guidelines, standards, 
performance measures, and review criteria described in subsection (a) 
of such section.
    (b) Enforcement Authority.--The Commissioners , in consultation 
with the Secretary of Health and Human Services, have the authority to 
make recommendations to the Secretary to enforce compliance of health 
care providers with the guidelines, standards, performance measures, 
and review criteria adopted under subsection (a). Such recommendations 
may include the following, with respect to a health care provider who 
is not in compliance with such guidelines, standards, measures, and 
criteria:
            (1) Exclusion from participation in Federal health care 
        programs (as defined in section 1128B(f) of the Social Security 
        Act).
            (2) Imposition of a civil money penalty on such provider.

SEC. 155. ADDITIONAL REQUIREMENTS.

    (a) Program Agenda.--The Commissioners shall provide for an agenda 
for the development of the guidelines, standards, performance measures, 
and review criteria described in section 153(a), including with respect 
to the standards, performance measures, and review criteria, 
identifying specific aspects of health care for which the standards, 
performance measures, and review criteria are to be developed and those 
that are to be given priority in the development of the standards, 
performance measures, and review criteria.

                      PART III--GENERAL PROVISIONS

SEC. 161. CERTAIN ADMINISTRATIVE AUTHORITIES.

    The Commissioners, in carrying out this subtitle, may accept 
voluntary and uncompensated services.

SEC. 162. FUNDING.

    For the purpose of carrying out this subtitle, there are authorized 
to be appropriated such sums as may be necessary for fiscal years 2011 
through 2015.

SEC. 163. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``Commissioners'' means the Commissioners of 
        the Health Care Services Commission.
            (2) The term ``Commission'' means the Health Care Services 
        Commission.
            (3) The term ``Director'' means the Director of the Office 
        of the Forum for Quality and Effectiveness in Health Care.
            (4) The term ``Secretary'' means the Secretary of Health 
        and Human Services.

                  PART IV--TERMINATIONS AND TRANSITION

SEC. 171. TERMINATION OF AGENCY FOR HEALTHCARE RESEARCH AND QUALITY.

    As of the date of the enactment of this Act, the Agency for 
Healthcare Research and Quality is terminated, and title IX of the 
Public Health Service Act is repealed.

SEC. 172. TRANSITION.

    All orders, grants, contracts, privileges, and other determinations 
or actions of the Agency for Healthcare Research and Quality that are 
effective as of the date before the date of the enactment of this Act, 
shall be transferred to the Secretary and shall continue in effect 
according to their terms unless changed pursuant to law.

                PART V--INDEPENDENT HEALTH RECORD TRUST

SEC. 181. SHORT TITLE OF PART.

    This part may be cited as the ``Independent Health Record Trust Act 
of 2008''.

SEC. 182. PURPOSE.

    It is the purpose of this part to provide for the establishment of 
a nationwide health information technology network that--
            (1) improves health care quality, reduces medical errors, 
        increases the efficiency of care, and advances the delivery of 
        appropriate, evidence-based health care services;
            (2) promotes wellness, disease prevention, and the 
        management of chronic illnesses by increasing the availability 
        and transparency of information related to the health care 
        needs of an individual;
            (3) ensures that appropriate information necessary to make 
        medical decisions is available in a usable form at the time and 
        in the location that the medical service involved is provided;
            (4) produces greater value for health care expenditures by 
        reducing health care costs that result from inefficiency, 
        medical errors, inappropriate care, and incomplete information;
            (5) promotes a more effective marketplace, greater 
        competition, greater systems analysis, increased choice, 
        enhanced quality, and improved outcomes in health care 
        services;
            (6) improves the coordination of information and the 
        provision of such services through an effective infrastructure 
        for the secure and authorized exchange and use of health 
        information; and
            (7) ensures that the health information privacy, security, 
        and confidentiality of individually identifiable health 
        information is protected.

SEC. 183. DEFINITIONS.

    In this part:
            (1) Access.--The term ``access'' means, with respect to an 
        electronic health record, entering information into such 
        account as well as retrieving information from such account.
            (2) Account.--The term ``account'' means an electronic 
        health record of an individual contained in an independent 
        health record trust.
            (3) Affirmative consent.--The term ``affirmative consent'' 
        means, with respect to an electronic health record of an 
        individual contained in an IHRT, express consent given by the 
        individual for the use of such record in response to a clear 
        and conspicuous request for such consent or at the individual's 
        own initiative.
            (4) Authorized ehr data user.--The term ``authorized EHR 
        data user'' means, with respect to an electronic health record 
        of an IHRT participant contained as part of an IHRT, any entity 
        (other than the participant) authorized (in the form of 
        affirmative consent) by the participant to access the 
        electronic health record.
            (5) Confidentiality.--The term ``confidentiality'' means, 
        with respect to individually identifiable health information of 
        an individual, the obligation of those who receive such 
        information to respect the health information privacy of the 
        individual.
            (6) Electronic health record.--The term ``electronic health 
        record'' means a longitudinal collection of information 
        concerning a single individual, including medical records and 
        personal health information, that is stored electronically.
            (7) Health information privacy.--The term ``health 
        information privacy'' means, with respect to individually 
        identifiable health information of an individual, the right of 
        such individual to control the acquisition, uses, or 
        disclosures of such information.
            (8) Health plan.--The term ``health plan'' means a group 
        health plan (as defined in section 2208(1) of the Public Health 
        Service Act (42 U.S.C. 300bb-8(1))) as well as a plan that 
        offers health insurance coverage in the individual market.
            (9) HIPAA privacy regulations.--The term ``HIPAA privacy 
        regulations'' means the regulations promulgated under section 
        264(c) of the Health Insurance Portability and Accountability 
        Act of 1996 (42 U.S.C. 1320d-2 note).
            (10) Independent health record trust; ihrt.--The terms 
        ``independent health record trust'' and ``IHRT'' mean a legal 
        arrangement under the administration of an IHRT operator that 
        meets the requirements of this part with respect to electronic 
        health records of individuals participating in the trust or 
        IHRT.
            (11) IHRT operator.--The term ``IHRT operator'' means, with 
        respect to an IHRT, the organization that is responsible for 
        the administration and operation of the IHRT in accordance with 
        this part.
            (12) IHRT participant.--The term ``IHRT participant'' 
        means, with respect to an IHRT, an individual who has a 
        participation agreement in effect with respect to the 
        maintenance of the individual's electronic health record by the 
        IHRT.
            (13) Individually identifiable health information.--The 
        term ``individually identifiable health information'' has the 
        meaning given such term in section 1171(6) of the Social 
        Security Act (42 U.S.C. 1320d(6)).
            (14) Security.--The term ``security'' means, with respect 
        to individually identifiable health information of an 
        individual, the physical, technological, or administrative 
        safeguards or tools used to protect such information from 
        unwarranted access or disclosure.

SEC. 184. ESTABLISHMENT, CERTIFICATION, AND MEMBERSHIP OF INDEPENDENT 
              HEALTH RECORD TRUSTS.

    (a) Establishment.--Not later than one year after the date of the 
enactment of this Act, the Federal Trade Commission, in consultation 
with the National Committee on Vital and Health Statistics, shall 
prescribe standards for the establishment, certification, operation, 
and interoperability of IHRTs to carry out the purposes described in 
section 182 in accordance with the provisions of this part.
    (b) Certification.--
            (1) Certification by ftc.--The Federal Trade Commission 
        shall provide for the certification of IHRTs. No IHRT may be 
        certified unless the IHRT is determined to meet the standards 
        for certification established under subsection (a).
            (2) Decertification.--The Federal Trade Commission shall 
        establish a process for the revocation of certification of an 
        IHRT under this section in the case that the IHRT violates the 
        standards established under subsection (a).
    (c) Membership.--
            (1) In general.--To be eligible to be a participant in an 
        IHRT, an individual shall--
                    (A) submit to the IHRT information as required by 
                the IHRT to establish an electronic health record with 
                the IHRT; and
                    (B) enter into a privacy protection agreement 
                described in section 186(b)(1) with the IHRT.
        The process to determine eligibility of an individual under 
        this subsection shall allow for the establishment by such 
        individual of an electronic health record as expeditiously as 
        possible if such individual is determined so eligible.
            (2) No limitation on membership.--Nothing in this 
        subsection shall be construed to permit an IHRT to restrict 
        membership, including on the basis of health condition.

SEC. 185. DUTIES OF IHRT TO IHRT PARTICIPANTS.

    (a) Fiduciary Duty of IHRT; Penalties for Violations of Fiduciary 
Duty.--
            (1) Fiduciary duty.--With respect to the electronic health 
        record of an IHRT participant maintained by an IHRT, the IHRT 
        shall have a fiduciary duty to act for the benefit and in the 
        interests of such participant and of the IHRT as a whole. Such 
        duty shall include obtaining the affirmative consent of such 
        participant prior to the release of information in such 
        participant's electronic health record in accordance with the 
        requirements of this part.
            (2) Penalties.--If the IHRT knowingly or recklessly 
        breaches the fiduciary duty described in paragraph (1), the 
        IHRT shall be subject to the following penalties:
                    (A) Loss of certification of the IHRT.
                    (B) A fine that is not in excess of $50,000.
                    (C) A term of imprisonment for the individuals 
                involved of not more than 5 years.
    (b) Electronic Health Record Deemed To Be Held in Trust by IHRT.--
With respect to an individual, an electronic health record maintained 
by an IHRT shall be deemed to be held in trust by the IHRT for the 
benefit of the individual and the IHRT shall have no legal or equitable 
interest in such electronic health record.

SEC. 186. AVAILABILITY AND USE OF INFORMATION FROM RECORDS IN IHRT 
              CONSISTENT WITH PRIVACY PROTECTIONS AND AGREEMENTS.

    (a) Protected Electronic Health Records Use and Access.--
            (1) General rights regarding uses of information.--
                    (A) In general.--With respect to the electronic 
                health record of an IHRT participant maintained by an 
                IHRT, subject to paragraph (2)(C), primary uses and 
                secondary uses (described in subparagraphs (B) and (C), 
                respectively) of information within such record (other 
                than by such participant) shall be permitted only upon 
                the authorization of such use, prior to such use, by 
                such participant.
                    (B) Primary uses.--For purposes of subparagraph (A) 
                and with respect to an electronic health record of an 
                individual, a primary use is a use for purposes of the 
                individual's self-care or care by health care 
                professionals.
                    (C) Secondary uses.--For purposes of subparagraph 
                (B) and with respect to an electronic health record of 
                an individual, a secondary use is any use not described 
                in subparagraph (B) and includes a use for purposes of 
                public health research or other related activities. 
                Additional authorization is required for a secondary 
                use extending beyond the original purpose of the 
                secondary use authorized by the IHRT participant 
                involved. Nothing in this paragraph shall be construed 
                as requiring authorization for every secondary use that 
                is within the authorized original purpose.
            (2) Rules for primary use of records for health care 
        purposes.--With respect to the electronic health record of an 
        IHRT participant (or specified parts of such electronic health 
        record) maintained by an IHRT standards for access to such 
        record shall provide for the following:
                    (A) Access by ihrt participants to their electronic 
                health records.--
                            (i) Ownership.--The participant maintains 
                        ownership over the entire electronic health 
                        record (and all portions of such record) and 
                        shall have the right to electronically access 
                        and review the contents of the entire record 
                        (and any portion of such record) at any time, 
                        in accordance with this subparagraph.
                            (ii) Addition of personal information.--The 
                        participant may add personal health information 
                        to the health record of that participant, 
                        except that such participant shall not alter 
                        information that is entered into the electronic 
                        health record by any authorized EHR data user. 
                        Such participant shall have the right to 
                        propose an amendment to information that is 
                        entered by an authorized EHR data user pursuant 
                        to standards prescribed by the Federal Trade 
                        Commission for purposes of amending such 
                        information.
                            (iii) Identification of information entered 
                        by participant.--Any additions or amendments 
                        made by the participant to the health record 
                        shall be identified and disclosed within such 
                        record as being made by such participant.
                    (B) Access by entities other than ihrt 
                participant.--
                            (i) Authorized access only.--Except as 
                        provided under subparagraph (C) and paragraph 
                        (4), access to the electronic health record (or 
                        any portion of the record)--
                                    (I) may be made only by authorized 
                                EHR data users and only to such 
                                portions of the record as specified by 
                                the participant; and
                                    (II) may be limited by the 
                                participant for purposes of entering 
                                information into such record, 
                                retrieving information from such 
                                record, or both.
                            (ii) Identification of entity that enters 
                        information.--Any information that is added by 
                        an authorized EHR data user to the health 
                        record shall be identified and disclosed within 
                        such record as being made by such user.
                            (iii) Satisfaction of hipaa privacy 
                        regulations.--In the case of a record of a 
                        covered entity (as defined for purposes of 
                        HIPAA privacy regulations), with respect to an 
                        individual, if such individual is an IHRT 
                        participant with an independent health record 
                        trust and such covered entity is an authorized 
                        EHR data user, the requirement under the HIPAA 
                        privacy regulations for such entity to provide 
                        the record to the participant shall be deemed 
                        met if such entity, without charge to the IHRT 
                        or the participant--
                                    (I) forwards to the trust an 
                                appropriately formatted electronic copy 
                                of the record (and updates to such 
                                records) for inclusion in the 
                                electronic health record of the 
                                participant maintained by the trust;
                                    (II) enters such record into the 
                                electronic health record of the 
                                participant so maintained; or
                                    (III) otherwise makes such record 
                                available for electronic access by the 
                                IHRT or the individual in a manner that 
                                permits such record to be included in 
                                the account of the individual contained 
                                in the IHRT.
                            (iv) Notification of sensitive 
                        information.--Any information, with respect to 
                        the participant, that is sensitive information, 
                        as specified by the Federal Trade Commission, 
                        shall not be forwarded or entered by an 
                        authorized EHR data user into the electronic 
                        health record of the participant maintained by 
                        the trust unless the user certifies that the 
                        participant has been notified of such 
                        information.
                    (C) Deemed authorization for access for emergency 
                health care.--
                            (i) Findings.--Congress finds that--
                                    (I) given the size and nature of 
                                visits to emergency departments in the 
                                United States, readily available health 
                                information could make the difference 
                                between life and death; and
                                    (II) because of the case mix and 
                                volume of patients treated, emergency 
                                departments are well positioned to 
                                provide information for public health 
                                surveillance, community risk 
                                assessment, research, education, 
                                training, quality improvement, and 
                                other uses.
                            (ii) Use of information.--With respect to 
                        the electronic health record of an IHRT 
                        participant (or specified parts of such 
                        electronic health record) maintained by an 
                        IHRT, the participant shall be deemed as 
                        providing authorization (in the form of 
                        affirmative consent) for health care providers 
                        to access, in connection with providing 
                        emergency care services to the participant, a 
                        limited, authenticated information set 
                        concerning the participant for emergency 
                        response purposes, unless the participant 
                        specifies that such information set (or any 
                        portion of such information set) may not be so 
                        accessed. Such limited information set may 
                        include information--
                                    (I) patient identification data, as 
                                determined appropriate by the 
                                participant;
                                    (II) provider identification that 
                                includes the use of unique provider 
                                identifiers;
                                    (III) payment information;
                                    (IV) information related to the 
                                individual's vitals, allergies, and 
                                medication history;
                                    (V) information related to existing 
                                chronic problems and active clinical 
                                conditions of the participant; and
                                    (VI) information concerning 
                                physical examinations, procedures, 
                                results, and diagnosis data.
            (3) Rules for secondary uses of records for research and 
        other purposes.--
                    (A) In general.--With respect to the electronic 
                health record of an IHRT participant (or specified 
                parts of such electronic health record) maintained by 
                an IHRT, the IHRT may sell such record (or specified 
                parts of such record) only if--
                            (i) the transfer is authorized by the 
                        participant pursuant to an agreement between 
                        the participant and the IHRT and is in 
                        accordance with the privacy protection 
                        agreement described in subsection (b)(1) 
                        entered into between such participant and such 
                        IHRT;
                            (ii) such agreement includes parameters 
                        with respect to the disclosure of information 
                        involved and a process for the authorization of 
                        the further disclosure of information in such 
                        record;
                            (iii) the information involved is to be 
                        used for research or other activities only as 
                        provided for in the agreement;
                            (iv) the recipient of the information 
                        provides assurances that the information will 
                        not be further transferred or reused in 
                        violation of such agreement; and
                            (v) the transfer otherwise meets the 
                        requirements and standards prescribed by the 
                        Federal Trade Commission.
                    (B) Treatment of public health reporting.--Nothing 
                in this paragraph shall be construed as prohibiting or 
                limiting the use of health care information of an 
                individual, including an individual who is an IHRT 
                participant, for public health reporting (or other 
                research) purposes prior to the inclusion of such 
                information in an electronic health record maintained 
                by an IHRT.
            (4) Law enforcement clarification.--Nothing in this part 
        shall prevent an IHRT from disclosing information contained in 
        an electronic health record maintained by the IHRT when 
        required for purposes of a lawful investigation or official 
        proceeding inquiring into a violation of, or failure to comply 
        with, any criminal or civil statute or any regulation, rule, or 
        order issued pursuant to such a statute.
            (5) Rule of construction.--Nothing in this section shall be 
        construed to require a health care provider that does not 
        utilize electronic methods or appropriate levels of health 
        information technology on the date of the enactment of this Act 
        to adopt such electronic methods or technology as a requirement 
        for participation or compliance under this part.
    (b) Privacy Protection Agreement; Treatment of State Privacy and 
Security Laws.--
            (1) Privacy protection agreement.--A privacy protection 
        agreement described in this subsection is an agreement, with 
        respect to an electronic health record of an IHRT participant 
        to be maintained by an independent health record trust, between 
        the participant and the trust--
                    (A) that is consistent with the standards described 
                in subsection (a)(2);
                    (B) under which the participant specifies the 
                portions of the record that may be accessed, under what 
                circumstances such portions may be accessed, any 
                authorizations for indicated authorized EHR data users 
                to access information contained in the record, and the 
                purposes for which the information (or portions of the 
                information) in the record may be used;
                    (C) which provides a process for the authorization 
                of the transfer of information contained in the record 
                to a third party, including for the sale of such 
                information for purposes of research, by an authorized 
                EHR data user and reuse of such information by such 
                third party, including a provision requiring that such 
                transfer and reuse is not in violation of any privacy 
                or transfer restrictions placed by the participant on 
                the independent health record of such participant; and
                    (D) under which the trust provides assurances that 
                the trust will not transfer, disclose, or provide 
                access to the record (or any portion of the record) in 
                violation of the parameters established in the 
                agreement or to any person or entity who has not agreed 
                to use and transfer such record (or portion of such 
                record) in accordance with such agreement.
            (2) Treatment of state laws.--
                    (A) In general.--Except as provided under 
                subparagraph (B), the provisions of a privacy 
                protection agreement entered into between an IHRT and 
                an IHRT participant shall preempt any provision of 
                State law (or any State regulation) relating to the 
                privacy and confidentiality of individually 
                identifiable health information or to the security of 
                such health information.
                    (B) Exception for privileged information.--The 
                provisions of a privacy protection agreement shall not 
                preempt any provision of State law (or any State 
                regulation) that recognizes privileged communications 
                between physicians, health care practitioners, and 
                patients of such physicians or health care 
                practitioners, respectively.
                    (C) State defined.--For purposes of this section, 
                the term ``State'' has the meaning given such term when 
                used in title XI of the Social Security Act, as 
                provided under section 1101(a) of such Act (42 U.S.C. 
                1301(a)).

SEC. 187. VOLUNTARY NATURE OF TRUST PARTICIPATION AND INFORMATION 
              SHARING.

    (a) In General.--Participation in an independent health record 
trust, or authorizing access to information from such a trust, is 
voluntary. No employer, health insurance issuer, group health plan, 
health care provider, or other person may require, as a condition of 
employment, issuance of a health insurance policy, coverage under a 
group health plan, the provision of health care services, payment for 
such services, or otherwise, that an individual participate in, or 
authorize access to information from, an independent health record 
trust.
    (b) Enforcement.--The penalties provided for in subsection (a) of 
section 1177 of the Social Security Act (42 U.S.C. 1320d-6) shall apply 
to a violation of subsection (a) in the same manner as such penalties 
apply to a person in violation of subsection (a) of such section.

SEC. 188. FINANCING OF ACTIVITIES.

    (a) In General.--Except as provided in subsection (b), an IHRT may 
generate revenue to pay for the operations of the IHRT through--
            (1) charging IHRT participants account fees for use of the 
        trust;
            (2) charging authorized EHR data users for accessing 
        electronic health records maintained in the trust;
            (3) the sale of information contained in the trust (as 
        provided for in section 186(a)(3)(A)); and
            (4) any other activity determined appropriate by the 
        Federal Trade Commission.
    (b) Prohibition Against Access Fees for Health Care Providers.--For 
purposes of providing incentives to health care providers to access 
information maintained in an IHRT, as authorized by the IHRT 
participants involved, the IHRT may not charge a fee for services 
specified by the IHRT. Such services shall include the transmittal of 
information from a health care provider to be included in an 
independent electronic health record maintained by the IHRT (or 
permitting such provider to input such information into the record), 
including the transmission of or access to information described in 
section 186(a)(2)(C)(ii) by appropriate emergency responders.
    (c) Required Disclosures.--The sources and amounts of revenue 
derived under subsection (a) for the operations of an IHRT shall be 
fully disclosed to each IHRT participant of such IHRT and to the 
public.
    (d) Treatment of Income.--For purposes of the Internal Revenue Code 
of 1986, any revenue described in subsection (a) shall not be included 
in gross income of any IHRT, IHRT participant, or authorized EHR data 
user.

SEC. 189. REGULATORY OVERSIGHT.

    (a) In General.--In carrying out this part, the Federal Trade 
Commission shall promulgate regulations for independent health record 
trusts.
    (b) Establishment of Interagency Steering Committee.--
            (1) In general.--The Secretary of Health and Human Services 
        shall establish an Interagency Steering Committee in accordance 
        with this subsection.
            (2) Chairperson.--The Secretary of Health and Human 
        Services shall serve as the chairperson of the Interagency 
        Steering Committee.
            (3) Membership.--The members of the Interagency Steering 
        Committee shall consist of the Attorney General, the 
        Chairperson of the Federal Trade Commission, the Chairperson 
        for the National Committee for Vital and Health Statistics, a 
        representative of the Federal Reserve, and other Federal 
        officials determined appropriate by the Secretary of Health and 
        Human Services.
            (4) Duties.--The Interagency Steering Committee shall 
        coordinate the implementation of this part, including the 
        implementation of policies described in subsection (d) based 
        upon the recommendations provided under such subsection, and 
        regulations promulgated under this part.
    (c) Federal Advisory Committee.--
            (1) In general.--The National Committee for Vital and 
        Health Statistics shall serve as an advisory committee for the 
        IHRTs. The membership of such advisory committee shall include 
        a representative from the Federal Trade Commission and the 
        chairperson of the Interagency Steering Committee. Not less 
        than 60 percent of such membership shall consist of 
        representatives of nongovernment entities, at least one of whom 
        shall be a representative from an organization representing 
        health care consumers.
            (2) Duties.--The National Committee for Vital and Health 
        Statistics shall issue periodic reports and review policies 
        concerning IHRTs based on each of the following factors:
                    (A) Privacy and security policies.
                    (B) Economic progress.
                    (C) Interoperability standards.
    (d) Policies Recommended by Federal Trade Commission.--The Federal 
Trade Commission, in consultation with the National Committee for Vital 
and Health Statistics, shall recommend policies to--
            (1) provide assistance to encourage the growth of 
        independent health record trusts;
            (2) track economic progress as it pertains to operators of 
        independent health records trusts and individuals receiving 
        nontaxable income with respect to accounts;
            (3) conduct public education activities regarding the 
        creation and usage of the independent health records trusts;
            (4) establish standards for the interoperability of health 
        information technology to ensure that information contained in 
        such record may be shared between the trust involved, the 
        participant, and authorized EHR data users, including for the 
        standardized collection and transmission of individual health 
        records (or portions of such records) to authorized EHR data 
        users through a common interface and for the portability of 
        such records among independent health record trusts; and
            (5) carry out any other activities determined appropriate 
        by the Federal Trade Commission.
    (e) Regulations Promulgated by Federal Trade Commission.--The 
Federal Trade Commission shall promulgate regulations based on, at a 
minimum, the following factors:
            (1) Requiring that an IHRT participant, who has an 
        electronic health record that is maintained by an IHRT, be 
        notified of a security breech with respect to such record, and 
        any corrective action taken on behalf of the participant.
            (2) Requiring that information sent to, or received from, 
        an IHRT that has been designated as high-risk should be 
        authenticated through the use of methods such as the periodic 
        changing of passwords, the use of biometrics, the use of tokens 
        or other technology as determined appropriate by the council.
            (3) Requiring a delay in releasing sensitive health care 
        test results and other similar information to patients directly 
        in order to give physicians time to contact the patient.
            (4) Recommendations for entities operating IHRTs, including 
        requiring analysis of the potential risk of health transaction 
        security breeches based on set criteria.
            (5) The conduct of audits of IHRTs to ensure that they are 
        in compliance with the requirements and standards established 
        under this part.
            (6) Disclosure to IHRT participants of the means by which 
        such trusts are financed, including revenue from the sale of 
        patient data.
            (7) Prevention of certification of an entity seeking 
        independent heath record trust certification based on--
                    (A) the potential for conflicts between the 
                interests of such entity and the security of the health 
                information involved; and
                    (B) the involvement of the entity in any activity 
                that is contrary to the best interests of a patient.
            (8) Prevention of the use of revenue sources that are 
        contrary to a patient's interests.
            (9) Public disclosure of audits in a manner similar to 
        financial audits required for publicly traded stock companies.
            (10) Requiring notification to a participating entity that 
        the information contained in such record may not be 
        representative of the complete or accurate electronic health 
        record of such account holder.
    (f) Compliance Report.--Not later than 1 year after the date of the 
enactment of this Act, and annually thereafter, the Commission shall 
submit to the Committee on Health, Education, Labor, and Pensions and 
the Committee on Finance of the Senate and the Committee on Energy and 
Commerce and the Committee on Ways and Means of the House of 
Representatives, a report on compliance by and progress of independent 
health record trusts with this part. Such report shall describe the 
following:
            (1) The number of complaints submitted about independent 
        health record trusts, which shall be divided by complaints 
        related to security breaches, and complaints not related to 
        security breaches, and may include other categories as the 
        Interagency Steering Committee established under subsection (b) 
        determines appropriate.
            (2) The number of enforcement actions undertaken by the 
        Commission against independent health record trusts in response 
        to complaints under paragraph (1), which shall be divided by 
        enforcement actions related to security breaches and 
        enforcement actions not related to security breaches and may 
        include other categories as the Interagency Steering Committee 
        established under subsection (b) determines appropriate.
            (3) The economic progress of the individual owner or 
        institution operator as achieved through independent health 
        record trust usage and existing barriers to such usage.
            (4) The progress in security auditing as provided for by 
        the Interagency Steering Committee council under subsection 
        (b).
            (5) The other core responsibilities of the Commission as 
        described in subsection (a).
    (g) Interagency Memorandum of Understanding.--The Interagency 
Steering Committee shall ensure, through the execution of an 
interagency memorandum of understanding, that--
            (1) regulations, rulings, and interpretations issued by 
        Federal officials relating to the same matter over which 2 or 
        more such officials have responsibility under this part are 
        administered so as to have the same effect at all times; and
            (2) the memorandum provides for the coordination of 
        policies related to enforcing the same requirements through 
        such officials in order to have coordinated enforcement 
        strategy that avoids duplication of enforcement efforts and 
        assigns priorities in enforcement.

             TITLE II--FAIRNESS FOR EVERY AMERICAN PATIENT

                   Subtitle A--Medicaid Modernization

SEC. 201. MEDICAID MODERNIZATION.

    (a) In General.--Effective January 1, 2011, title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) is amended to read as follows:

     ``TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

                      ``TABLE OF CONTENTS OF TITLE

``Sec. 1900. References to pre-modernized Medicaid provisions; 
                            continuity for commonwealths and 
                            territories.
    ``Part A--Grants to States for Acute Care for Individuals With 
            Disabilities and Certain Low-Income Individuals

``Sec. 1901. Purpose; appropriation.
``Sec. 1902. Payments to States for acute care medical assistance.
``Sec. 1903. Definitions of eligible individuals and acute care medical 
                            assistance.
``Sec. 1904. State plan requirements for acute care medical assistance.
``Sec. 1905. Definitions.
``Sec. 1906. Enrollment of individuals under group health plans and 
                            other arrangements.
``Sec. 1907. Drug rebates.
``Sec. 1908. Managed care.
``Sec. 1909. Annual reports.
  ``Part B--Grants to States for Long-Term Care Services and Supports

``Sec. 1911. Purpose.
``Sec. 1912. State plan.
``Sec. 1913. State allotments.
``Sec. 1914. Use of grants.
``Sec. 1915. Administrative provisions.
``Sec. 1916. Definition of long-term care services and supports.
``Sec. 1917. Provision requirements for long-term care services and 
                            supports, including option for self-
                            directed services and supports.
``Sec. 1918. Treatment of income and resources for certain 
                            institutionalized spouses.
``Sec. 1919. Annual reports.
  ``Part C--Grants to States for Survey and Certification of Medical 
                   Facilities and Other Requirements

``Sec. 1931. Authorization of appropriations.
``Sec. 1932. Application of certain requirements under pre-modernized 
                            Medicaid.
            ``Part D--Grants to States for Program Integrity

``Sec. 1941. Authorization of appropriations.
``Sec. 1942. Application of certain requirements under pre-modernized 
                            Medicaid.
             ``Part E--Grants to States for Administration

``Sec. 1951. Authorization of appropriations; payments to states.
``Sec. 1952. Cost-sharing protections.
``Sec. 1953. Application of certain requirements under pre-modernized 
                            Medicaid.
                       ``Part F--Other Provisions

``Sec. 1961. Application of certain requirements under pre-modernized 
                            Medicaid.

``SEC. 1900. REFERENCES TO PRE-MODERNIZED MEDICAID PROVISIONS; 
              CONTINUITY FOR COMMONWEALTHS AND TERRITORIES.

    ``(a) In General.--In this title, if a reference to this title or 
to a provision of this title is prefaced by the term `old', such 
reference is to this title or a provision of this title as in effect on 
December 31, 2010.
    ``(b) Regulations.--The Secretary shall promulgate regulations to 
bring requirements imposed under an old provision of this title that 
applies under this title after December 31, 2010, into conformity with 
the policies embodied in this title as in effect on and after January 
1, 2011.
    ``(c) Continuity for Commonwealths and Territories.--In the case of 
Puerto Rico, the United States Virgin Islands, Guam, the Northen 
Mariana Islands, and American Samoa, this title as in effect on and 
after January 1, 2011, shall not apply to such commonwealths and 
territories, and old title XIX shall apply to a Medicaid program 
operated by such commonwealths or territories on and after that date.

    ``PART A--GRANTS TO STATES FOR ACUTE CARE FOR INDIVIDUALS WITH 
            DISABILITIES AND CERTAIN LOW-INCOME INDIVIDUALS

``SEC. 1901. PURPOSE; APPROPRIATION.

    ``(a) Purpose.--It is the purpose of this part to enable each 
State, as far as practicable under the conditions in the State, to 
provide acute care medical assistance to eligible individuals described 
in section 1903 whose income and resources are insufficient to meet the 
costs of necessary medical services, and (2) rehabilitation and other 
services to help such individuals attain or retain capability for 
independence or self-care.
    ``(b) Appropriation.--For the purpose of making payments to States 
under this part, there is appropriated out of any money in the Treasury 
not otherwise appropriated, such sums as are necessary for fiscal year 
2011 and each fiscal year thereafter.

``SEC. 1902. PAYMENTS TO STATES FOR ACUTE CARE MEDICAL ASSISTANCE.

    ``(a) In General.--From the amounts appropriated under section 1901 
for a fiscal year, the Secretary shall pay to each State which has a 
plan approved under this part, for each quarter, beginning with the 
quarter commencing January 1, 2011, an amount equal to the Federal 
medical assistance percentage (as defined in section 1905(b)) of the 
total amount expended during such quarter as acute care medical 
assistance under the State plan under this part.
    ``(b) Administrative Expenses.--Each State with a plan approved 
under this part shall receive a payment determined in accordance with 
part E for administrative expenses incurred in carrying out the plan 
under this part and part B (if the State has a plan approved under that 
part).

``SEC. 1903. DEFINITIONS OF ELIGIBLE INDIVIDUALS AND ACUTE CARE MEDICAL 
              ASSISTANCE.

    ``(a) Eligible Individuals.--
            ``(1) In general.--In this part, the term `eligible 
        individual' means an individual--
                    ``(A) who is--
                            ``(i) a blind or disabled individual; or
                            ``(ii) an individual described in paragraph 
                        (2); and
                    ``(B) who the State determines satisfies--
                            ``(i) the income and resources eligibility 
                        requirements established by the State under the 
                        State plan under this part; and
                            ``(ii) such other requirements for 
                        assistance as are imposed under this title, 
                        including documentation of citizenship or 
                        status as a qualified alien under title IV of 
                        the Personal Responsibility and Work 
                        Opportunity Reconciliation Act of 1996.
            ``(2) Individuals described.--For purposes of paragraph 
        (1)(A)(ii), the following individuals are described in this 
        paragraph:
                    ``(A) A child in foster care under the 
                responsibility of the State.
                    ``(B) A low-income woman with breast or cervical 
                cancer described in old section 1902(aa).
                    ``(C) Certain TB-infected individuals described in 
                old section 1902(z)(1).
            ``(3) Grandfathered individuals.--An individual shall be an 
        eligible individual under the State plan under this part if--
                    ``(A) the individual is described in paragraph 
                (1)(A);
                    ``(B) the individual satisfies the documentation 
                requirements referred to in paragraph (1)(B)(ii); and
                    ``(C) the State would have provided medical 
                assistance under the State plan under old title XIX to 
                the individual, but only so long as the individual 
                continues to satisfy such old eligibility requirements.
            ``(4) Concurrent eligibility for part b.--An eligible 
        individual under this part may be eligible under part B, but 
        only if the individual satisfies the eligibility requirements 
        of part B in addition to satisfying the requirements for 
        eligibility under this part.
            ``(5) Presumptive eligibility for certain breast or 
        cervical cancer patients.--Old section 1920B (relating to 
        presumptive eligibility for certain breast or cervical cancer 
        patients) shall apply under this part.
    ``(b) Benefits.--Subject to paragraph (3), in this part, the term 
`acute care medical assistance' means the following:
            ``(1) Mandatory benefits.--The care and services listed in 
        paragraphs (1) through (5), (17), and (21) of old section 
        1905(a) (but, in the case of paragraph (4)(A) of such section, 
        without regard to any limitation based on age or services in an 
        institution for mental diseases).
            ``(2) Optional benefits.--Any care or services listed in a 
        paragraph of old section 1905(a) (other than paragraph (16)).
            ``(3) Exceptions.--
                    ``(A) Certain services limited to part b.--Services 
                described in paragraphs (15), (22), (23), (24), and 
                (26) of old section 1905(a) shall only be provided 
                under the State plan under part B.
                    ``(B) Limit on provision of long-term care services 
                and supports.--A care or service that the Secretary 
                determines is a long-term care service and support 
                (including nursing facility services described in old 
                section 1905(a)(4)(A)) shall not be provided to an 
                individual under the State plan under this part for 
                more than 30 days within any 12-month period.
                    ``(C) Exclusions.--Such term shall not include any 
                payments with respect to care or services for any 
                individual who is an inmate of a public institution or 
                a patient in an institution for mental diseases 
                (regardless of age).

``SEC. 1904. STATE PLAN REQUIREMENTS FOR ACUTE CARE MEDICAL ASSISTANCE.

    ``(a) In General.--In order to receive payments under this part, a 
State shall have an approved State plan for acute care medical 
assistance. For purposes of this part, such assistance includes 
payments for preventive care, primary care, diagnosis and treatment of 
acute and chronic health conditions, emergency care, diagnosis and 
treatment of mental illnesses and related conditions, and 
rehabilitation and other services to help eligible individuals attain 
or retain capability for independence or self-care. A State medical 
assistance plan shall include a description, consistent with the 
requirements of this part of--
            ``(1) eligibility standards, including income and asset 
        standards;
            ``(2) benefits, including the amount, duration, and scope 
        of covered items and services;
            ``(3) strategies for improving access and quality of care; 
        and
            ``(4) methods of service delivery.
    ``(b) Public Availability of State Plan.--The State shall make 
available to the public the State plan under this part and any 
amendments submitted by the State to the plan.
    ``(c) Amount, Duration, and Scope.--The State plan shall provide 
that the acute care medical assistance made available to any eligible 
individual shall not be less in amount, duration, or scope than the 
acute care medical assistance made available to any other eligible 
individual.
    ``(d) Application of Certain Pre-Modernized Medicaid 
Requirements.--
            ``(1) Old state plan requirements.--The following 
        provisions of old section 1902 shall apply to the State plans 
        under this part:
                    ``(A) Old section 1902(a)(10)(C) (relating to 
                certain eligibility and other requirements).
                    ``(B) Old section 1902(a)(10)(D) (relating to home 
                health services).
                    ``(C) Old section 1902(a)(10)(G) (relating to 
                nonapplication of certain supplemental security income 
                eligibility criteria).
                    ``(D) The subclauses in the flush matter following 
                old section 1902(a)(10)(G) (relating to the provision 
                of certain services) other than subclauses (V), (VII), 
                (VIII), and (IX).
                    ``(E) Old section 1902(a)(17) (relating to 
                reasonable standards for determining eligibility).
                    ``(F) Old section 1902(a)(19) (relating to 
                eligibility safeguards).
                    ``(G) Old section 1902(a)(34) (relating to 
                eligibility beginning with the third month prior to the 
                month of application).
                    ``(H) Subparagraphs (A), (B), and (C) of old 
                section 1902(a)(43) (relating to early and periodic 
                screening, diagnostic, and treatment services).
                    ``(I) Old section 1902(a)(46)(A) (relating to 
                compliance with section 1137 requirements).
                    ``(J) The fourth and sixth sentences of old section 
                1902(a) (relating to eligibility for certain 
                individuals).
            ``(2) Other old title xix requirements.--
                    ``(A) Old section 1902(e)(3) (relating to optional 
                eligibility for certain disabled individuals).
                    ``(B) Old section 1902(e)(9) (relating to optional 
                respiratory care services).
                    ``(C) Old section 1902(f) (relating to eligibility 
                of certain aged, blind, or disabled individuals).
                    ``(D) Old section 1902(m) (relating to eligibility 
                of certain aged or disabled individuals), other than 
                paragraph (4).
                    ``(E) Old section 1902(o) (relating to disregard of 
                certain supplemental security income benefits).
                    ``(F) Old section 1902(v) (relating to eligibility 
                determinations of blind or disabled individuals).
    ``(e) Other Requirements.--The State plan under this part shall--
            ``(1) comply with the requirements of the other parts of 
        this title; and
            ``(2) provide that the State will make the contributions 
        specified under section 340A-1(e) of the Public Health Service 
        Act .

``SEC. 1905. DEFINITIONS.

    ``(a) In General.--The definitions specified in this section shall 
apply for purposes of this part and, to the extent applicable and 
consistent with the policy embodied in such part, parts B, C, D, E, and 
F.
    ``(b) Federal Medical Assistance Percentage.--The term `Federal 
medical assistance percentage' for any State shall be 100 percent less 
the State percentage; and the State percentage shall be that percentage 
which bears the same ratio to 45 percent as the square of the per 
capita income of such State bears to the square of the per capita 
income of the continental United States (including Alaska) and Hawaii, 
except that the Federal medical assistance percentage shall in no case 
be less than 50 percent or more than 83 percent. The Federal medical 
assistance percentage for any State shall be determined and promulgated 
in accordance with the provisions of section 1101(a)(8)(B).
    ``(c) Application of Certain Pre-Modernized Medicaid Provisions.--
The following old provisions shall apply under this part:
            ``(1) Old section 1905 provisions.--The following 
        provisions of old section 1905:
                    ``(A) Old section 1905(d) (relating to the 
                definition of an intermediate care facility for the 
                mentally retarded).
                    ``(B) Old section 1905(e) (relating to the 
                definition of physicians services).
                    ``(C) Old section 1905(f) (relating to the 
                definition of nursing facility services).
                    ``(D) Old section 1905(g) (relating to the 
                provision of chiropractors' services).
                    ``(E) Old section 1905(j) (relating to State 
                supplementary payments).
                    ``(F) Old section 1905(k) (relating to supplemental 
                security income benefits payable pursuant to section 
                211 of Public Law 93-66).
                    ``(G) Old section 1905(l)(1) (relating to rural 
                health clinic services).
                    ``(H) Old section 1905(o) (relating to hospice 
                care).
                    ``(I) Old section 1905(q) (relating to the 
                definition of a qualified severely impaired 
                individual).
                    ``(J) Old section 1905(r) (relating to the 
                definition of early and periodic screening, diagnostic, 
                and treatment services).
                    ``(K) Old section 1905(s) (relating to the 
                definition of a qualified disabled and working 
                individual).
                    ``(L) Old section 1905(t) (relating to the 
                definition of primary care case management services).
                    ``(M) Old section 1905(v) (relating to the 
                definition of an employed individual with a medically 
                improved disability).
                    ``(N) Paragraphs (1) and (3) of old section 1905(w) 
                (relating to the definition of an independent foster 
                care adolescent).
                    ``(O) Old section 1905(x) (relating to strategies, 
                treatment, and services for individuals with Sickle 
                Cell Disease).
            ``(2) Other old provisions.--
                    ``(A) Old section 1903(m) (relating to the 
                definition of a medicaid managed care organization).

``SEC. 1906. ENROLLMENT OF INDIVIDUALS UNDER GROUP HEALTH PLANS AND 
              OTHER ARRANGEMENTS.

    ``The following old provisions shall apply under this part:
            ``(1) Old section 1906 (relating to enrollment of 
        individuals under group health plans).
            ``(2) Old section 1902(a)(70) (relating to State option to 
        establish a non-emergency medical transportation brokerage 
        program).
            ``(3) Paragraphs (2) and (11) of old section 1902(e) 
        (relating to eligibility for individuals enrolled with a group 
        health plan or under a managed care arrangement during a 
        minimum enrollment period).

``SEC. 1907. DRUG REBATES.

    ``Old sections 1902(a)(54) and 1927 (relating to payment for 
covered outpatient drugs and rebates) shall apply under this part.

``SEC. 1908. MANAGED CARE.

    ``The following old provisions shall apply under this part:
            ``(1) Old section 1932 (relating to managed care), other 
        than subsection (a)(2) of such section.
            ``(2) Old section 1903(k) (relating to technical and 
        actuarial assistance for States).

``SEC. 1909. ANNUAL REPORTS.

    ``(a) In General.--Each State that receives payments under this 
part shall submit an annual report to the Secretary, in such form and 
manner as the Secretary shall specify.
    ``(b) Application of Old EPSDT Reporting Requirements.--Each annual 
report shall include the information required to be reported under old 
section 1902(a)(43)(D)(iv).

  ``PART B--GRANTS TO STATES FOR LONG-TERM CARE SERVICES AND SUPPORTS

``SEC. 1911. PURPOSE.

    ``(a) In General.--The purpose of this part is to increase the 
flexibility of States in operating a system of long-term care services 
and supports designed to--
            ``(1) provide assistance to needy families so that 
        individuals with disabilities and low-income senior citizens 
        may be served and supported in their own homes and communities;
            ``(2) emphasize the independence and dignity of the person 
        served by public programs;
            ``(3) end the institutional bias that existed under the 
        Medicaid program prior to January 1, 2011;
            ``(4) provide stable and predictable funding for States as 
        they rebalance their long-term care systems from institutions 
        to communities;
            ``(5) provide flexibility to States to adopt new and 
        innovative service delivery methods; and
            ``(6) promote independence and support activities that will 
        enable individuals to return or maintain ties to the community, 
        including through employment.
    ``(b) No Individual Entitlement.--No individual determined eligible 
for long-term care services and supports under this part shall be 
entitled to a specific service or type of delivery of service.

``SEC. 1912. STATE PLAN.

    ``(a) In General.--In order to receive payments under this part, a 
State must have an approved State plan for long-term care services and 
supports. A State long term care services and supports plan shall 
include a description, consistent with the requirements of this part, 
of--
            ``(1) income and assets eligibility standards and spousal 
        impoverishment protections consistent with subsection (b);
            ``(2) the standardized assessments tools used to determine 
        eligibility for specific long-term care services and supports;
            ``(3) the person-centered plans used to provide such 
        services and supports;
            ``(4) the proposed uses of funding, if applicable, to 
        provide targeted methods to meet individual level of support 
        needs including tiering (preventive, emergency, low, medium, 
        high); and
            ``(5) the long-term care services and supports to be 
        available under the plan based on individual assessment of need 
        in accordance with sections 1916 and 1917.
    ``(b) Minimum Eligibility Standards.--
            ``(1) Populations covered.--The State plan shall specify 
        the disabled and elderly populations who are eligible for long-
        term care services and supports.
            ``(2) Needs-based criteria.--The plan shall include a 
        description of the needs-based criteria the State will use to 
        assess an individual's need for specific services and supports 
        available under the State plan.
            ``(3) Other eligibility requirements.--
                    ``(A) Income and assets.--A State may use different 
                income and asset standards and methodologies for 
                determining eligibility than those used for determining 
                eligibility for acute care medical assistance under 
                part A. A State may not make eligibility standards 
                related to income, asset, and spousal impoverishment 
                protection more restrictive than the Federal minimum 
                requirements of December 31, 2008.
                    ``(B) Application of spousal impoverishment 
                protections.--The State plan shall provide that the 
                State shall comply with the requirements of section 
                1918 (relating to spousal impoverishment protections).
                    ``(C) Statewideness.--The State plan shall provide 
                that, except with respect to methods used for 
                determining homestead exemptions, the income and asset 
                standards and methodologies shall be in effect in all 
                political subdivisions of the State.
            ``(4) Transition assistance.--The State plan shall specify 
        how the State will provide transition assistance for 
        individuals who, on December 31, 2010, are enrolled under the 
        State plan under old title XIX (or under a waiver of that plan) 
        and receiving long-term care services or supports on that date. 
        The State shall provide such assistance to individuals who are 
        and are not likely to be determined eligible for long-term care 
        services and supports under the State plan under this part, as 
        in effect on January 1, 2011 (or the first day on which the 
        State plan is in effect under this part).
    ``(c) Payment Methodologies to Providers.--
            ``(1) In general.--The State plan shall describe the 
        methodologies used to determine payments to providers. Such 
        methodologies--
                    ``(A) may be varied to assist in transitioning from 
                facilities-based to community-based care; and
                    ``(B) shall not be subject to Secretarial approval.
            ``(2) Transparency.--The State plan shall provide that the 
        State shall make publicly available--
                    ``(A) the payment methodologies applicable under 
                the plan; and
                    ``(B) the name of any provider that receives 
                $1,000,000 or more in any 12-month period and the 
                actual amount paid to the provider during that period.
    ``(d) Coordination of Effort With Other Related Public and Private 
Programs.--The plan shall include a description of the State's efforts 
to coordinate the delivery of services and supports under the plan with 
other related public and private programs that serve individuals with 
disabilities or aged populations that need or may be at risk of needing 
long term care.
    ``(e) Public Availability of State Plan.--The State shall make 
available to the public the State plan under this part and any 
amendments submitted by the State to the plan.
    ``(f) Application of Old Title XIX Requirements.--The following old 
title XIX provisions shall apply to a State plan under this part:
            ``(1) Subsections (a)(50) and (q) of old section 1902 
        (relating to a monthly personal needs allowance for certain 
        institutionalized individuals and couples).
            ``(2) Old section 1902(a)(67) (relating to payment for 
        certain services furnished to a PACE program eligible 
        individual).
            ``(3) Paragraph (1) of old section 1902(r) (relating to the 
        post-eligibility treatment of income for certain individuals) 
        and paragraph (2) of such section (relating to methodologies 
        for determining income and resource eligibility for 
        individuals, but only with respect to individuals who are 
        eligible under this part on or after January 1, 2011).
            ``(4) Old section 1905(i) (relating to the definition of an 
        institution for mental diseases).
    ``(g) Other Requirements of Other Parts.--The State plan under this 
part shall--
            ``(1) comply with the requirements of the other parts of 
        this title; and
            ``(2) provide that the State will make the contributions 
        specified under section 340A-1(e) of the Public Health Service 
        Act.

``SEC. 1913. STATE ALLOTMENTS.

    ``(a) Appropriation.--For the purpose of providing allotments to 
States under this section, there is appropriated out of any money in 
the Treasury not otherwise appropriated--
            ``(1) for fiscal year 2011, $65,274,560,000;
            ``(2) for fiscal year 2012, $67,885,540,000;
            ``(3) for fiscal year 2013, $70,600,964,100;
            ``(4) for fiscal year 2014, $73,425,000,000;
            ``(5) for fiscal year 2015, $76,362,000,000;
            ``(6) for fiscal year 2016, $79,416,480,000;
            ``(7) for fiscal year 2017, $82,593,140,000;
            ``(8) for fiscal year 2018, $85,896,870,000; and
            ``(9) for fiscal year 2019, $89,332,743,000.
    ``(b) Allotments to 50 States and the District of Columbia.--
            ``(1) Fiscal year 2011 allotments.--Subject to subsection 
        (e), the Secretary shall allot to each State with a long term 
        care plan approved under this title an amount in fiscal year 
        2011 equal to the Federal expenditures made by the State for 
        long-term care as defined in section 1916 in fiscal year 2008, 
        increased by 8 percent.
            ``(2) Subsequent fiscal year allotments.--For fiscal year 
        2012 and each subsequent fiscal year through fiscal year 2019, 
        the allotment for a State under this section is equal to the 
        allotment for the State determined for the preceding fiscal 
        year, increased by 4 percent.
    ``(c) Limitation.--
            ``(1) In general.--Except as provided in paragraph (2), no 
        other Federal funds are available under this title for 
        expenditures incurred for long-term care services and supports 
        after December 31, 2010, except as provided under a State plan 
        approved under this part.
            ``(2) Exception.--
                    ``(A) In general.--If a State does not have an 
                approved State plan by October 1, 2010, the Secretary 
                may make payments equal to 85 percent of the State's 
                estimated quarterly allotment until June 30, 2011.
                    ``(B) Full funding.--A State shall receive 100 
                percent of its allotment for fiscal year 2011 if the 
                State has a plan approved under this part by June 30, 
                2011.
    ``(d) Maintenance of Effort.--In order to qualify for the grant 
payable under this section, the State must demonstrate in each fiscal 
year that it made long-term care service and supports expenditures 
(including funding from local government sources) equal to the amount 
of not less than 95 percent of the nonfederal share amount spent in 
fiscal year 2009 under the State plan under old title XIX on long term 
care services and supports (as defined in section 1916). Expenditures 
not made under this part shall not be recognized by the Secretary for 
purposes of this requirement.
    ``(e) Grants Reduced if Insufficient Appropriations.--
            ``(1) In general.--If the amount appropriated for fiscal 
        year 2011 under subsection (a)(1) is less than the amount 
        necessary to fund each State's allotment for that fiscal year, 
        the Secretary shall reduce the allotment for each State for 
        that fiscal year based on the applicable percentage determined 
        for the State under paragraph (2) provide a reduced percentage 
        basis as follows: Each state shall receive a percentage of its 
        allotment based on the ratio of non-institutional spending to 
        total long term care spending in FY 2009.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage determined with respect to a 
        State is as follows:

``If the ratio of the State's non-       The applicable percentage is:
 institutional spending to total long-
 term care spending for fiscal year
 2009 is:
  50 percent or greater................  100
  at least 46, but less than 50 percent  99
  at least 40, but less than 46 percent  98
  at least 36, but less than 40........  97
  at least 30, but less than 36........  96
  less than 30 percent.................  95.
 

    ``(f) Administrative Expenses.--
            ``(1) In general.--Each State with a plan approved under 
        this part shall receive a payment determined in accordance with 
        amounts appropriated for part E for administrative expenses 
        incurred in carrying out the plan under this part and part A.
            ``(2) Assessment-related costs.--Costs attributable to 
        providing an individualized needs-based assessment for purposes 
        of identifying the long-term care services and supports to be 
        provided under the State plan to an individual shall be 
        considered a long-term care service and support and shall not 
        be treated as an administrative expense.

``SEC. 1914. USE OF GRANTS.

    ``(a) In General.--A State shall use funds for long-term care 
services and supports as defined in section 1916.
    ``(b) Self-Direction.--A State shall offer individuals the 
opportunity to self-direct their long-term care services and supports.

``SEC. 1915. ADMINISTRATIVE PROVISIONS.

    ``(a) Funding on a Quarterly Basis.--The Secretary shall make 
payments to States in equal amounts of a State's annual allotment on a 
quarterly basis. Each quarterly payment shall remain available for use 
by the State for twelve succeeding fiscal year quarters.
    ``(b) Publication.--The Secretary shall public each State's 
applicable allotment.

``SEC. 1916. DEFINITION OF LONG-TERM CARE SERVICES AND SUPPORTS.

    ``(a) Definition.--
            ``(1) In general.--Subject to subsection (e), in this part, 
        the term `long-term care services and supports' means any of 
        the services or supports specified in paragraphs (2) or (3) 
        that may be provided in a nursing facility, an institution, a 
        home, or other setting.
            ``(2) Services and supports described.--For purposes of 
        paragraph (1), the services and supports described in this 
        paragraph include assistive technology, adaptive equipment, 
        remote monitoring equipment, case management for the aged, case 
        management for individuals with disabilities, nursing home 
        services, long-term rehabilitative services necessary to 
        restore functional abilities, services provided in intermediate 
        care facilities for people with disabilities, habilitation 
        services (including adult day care programs), community 
        treatment teams for individuals with mental illness, home 
        health services, services provided in an institution for mental 
        disease, a Program of All-Inclusive Care for the Elderly 
        (PACE), personal care (including personal assistance services), 
        recovery support including peer counseling, supportive 
        employment, training skills necessary to assist the individual 
        in achieving or maintaining independence, training of family 
        members including foster parents in supportive and behavioral 
        modification skills, ongoing and periodic training to maintain 
        life skills, transitional care including room and board not to 
        exceed 60 days within a 12-month period.
            ``(3) Inclusion of certain benefits under old title xix.--
        Such services and supports may include any of the following 
        services:
                    ``(A) Old section 1905(a)(15) (relating to services 
                in an intermediate care facility for the mentally 
                retarded).
                    ``(B) Services described in subsections (a)(16) and 
                (h) of old section 1905, but without regard to any 
                restriction on such services on the basis of age 
                (relating to inpatient psychiatric hospital services).
                    ``(C) Old section 1905(a)(22) (relating to home and 
                community care (to the extent allowed and as defined in 
                old section 1929) for functionally disabled elderly 
                individuals).
                    ``(D) Old section 1905(a)(23) (relating to 
                community supported living arrangements services (to 
                the extent allowed and as defined in old section 
                1930)).
                    ``(E) Subject to subsection (e), old section 
                1905(a)(24) but without regard to any restriction on 
                furnishing services to patients or residents of 
                facilities or institutions (relating to personal care 
                services).
                    ``(F) Old sections 1905(a)(26) and 1934 (relating 
                to services furnished under a PACE program under old 
                section 1934 to PACE program eligible individuals 
                enrolled under the program under such old section).
                    ``(G) Old section 1915(c)(5) (relating to the 
                definition of habilitation services).
            ``(4) Limitation.--Long-term care services and supports 
        cannot be used for services and administrative costs provided 
        through the foster care (with the exception of training of 
        foster care parents), child welfare, adult protective services, 
        juvenile justice, public guardianship, or correctional systems.
    ``(b) Rehabilitative Care.--For purposes of rehabilitation due to 
acute care medical needs, a State may claim rehabilitative services 
provided in an institutional setting, nursing home, or as part of home 
health expenditures as acute care benefits under the State plan under 
part A rather than under the State plan under this part for a 
cumulative period of 30 days within a 12-month period if such care is 
directly related to the onset of an acute care need. A State shall 
demonstrate the services were provided as a direct result of an acute 
care need.
    ``(c) Managed Care.--If a State provides long-term care services 
and supports through managed care, the State shall submit a methodology 
for determining the level of expenditures attributed to long term care 
for approval by the Secretary.
    ``(d) Application of Part A Definitions.--A definition specified in 
section 1905 shall apply to the same term used in this part, unless the 
Secretary determines that the application of such definition would be 
inconsistent with the purpose of this part.
    ``(e) Exclusion.--No payments shall be made under the State plan 
under this part with respect to long-term care supports and services 
provided for any individual who is an inmate of a public institution. 
Nothing in the preceding sentence shall be construed as precluding the 
provision of long-term care services and supports under the State plan 
under this part to an individual who is a patient in an institution for 
mental diseases.

``SEC. 1917. PROVISION REQUIREMENTS FOR LONG-TERM CARE SERVICES AND 
              SUPPORT, INCLUDING OPTION FOR SELF-DIRECTED SERVICES AND 
              SUPPORTS.

    ``(a) Requirements for the Provision of Long-term Care Services and 
Supports.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, a State may provide through a State plan 
        amendment for the provision of long-term care services and 
        supports for individuals eligible under the State plan under 
        this part, subject to the following requirements:
                    ``(A) Needs-based criteria for eligibility for, and 
                receipt of, long-term care services and supports.--The 
                State establishes needs-based criteria for determining 
                an individual's eligibility under the State plan for 
                medical assistance for such long-term care services and 
                supports, and if the individual is eligible for such 
                services and supports, the specific services and 
                supports that will be available under the State plan to 
                the individual.
                    ``(B) Criteria for institutionalized versus non-
                institutionalized services.--In establishing needs-
                based criteria, the State may establish criteria for 
                determining eligibility for, and receipt of, services 
                and supports provided in a facility or institution that 
                are more stringent that the criteria established for 
                eligibility and receipt of services and supports in a 
                non-facility or non-institutionalized setting.
                    ``(C) Authority to limit number of eligible 
                individuals.--A State may limit the number of 
                individuals who are eligible for such services and 
                supports and may establish waiting lists for the 
                receipt of such services and supports.
                    ``(D) Criteria based on individual assessment.--
                            ``(i) In general.--The criteria established 
                        by the State shall require an assessment of an 
                        individual's support needs and capabilities, 
                        and may take into account the inability of the 
                        individual to perform 2 or more activities of 
                        daily living (as defined in section 
                        7702B(c)(2)(B) of the Internal Revenue Code of 
                        1986) or the need for significant assistance to 
                        perform such activities, and such other risk 
                        factors as the State determines to be 
                        appropriate.
                            ``(ii) Adjustment authority.--The State 
                        plan amendment provides the State with the 
                        option to modify the criteria established under 
                        subparagraph (A) (without having to obtain 
                        prior approval from the Secretary) in the event 
                        that the enrollment of individuals eligible for 
                        services exceeds the projected enrollment, but 
                        only if--
                                    ``(I) the State provides at least 
                                60 days notice to the Secretary and the 
                                public of the proposed modification;
                                    ``(II) the State deems an 
                                individual receiving long-term care 
                                services and supports on the basis of 
                                the most recent version of the criteria 
                                in effect prior to the effective date 
                                of the modification to be eligible for 
                                such services and supports for a period 
                                of at least 12 months beginning on the 
                                date the individual first received 
                                medical assistance for such services 
                                and supports; and
                                    ``(III) after the effective date of 
                                such modification, the State, at a 
                                minimum, applies the criteria for 
                                determining whether an individual 
                                requires the level of care provided in 
                                a facility or institutionalized setting 
                                which applied under the State plan 
                                immediately prior to the application of 
                                the modified criteria.
                    ``(E) Independent evaluation and assessment.--
                            ``(i) Eligibility determination.--The State 
                        uses an independent evaluation for making the 
                        determinations described in subparagraph (A).
                            ``(ii) Assessment.--In the case of an 
                        individual who is determined to be eligible for 
                        long-term care services and supports, the State 
                        uses an independent assessment, based on the 
                        needs of the individual to--
                                    ``(I) determine a necessary level 
                                of services and supports to be 
                                provided, consistent with an 
                                individual's physical and mental 
                                capacity;
                                    ``(II) prevent the provision of 
                                unnecessary or inappropriate care; and
                                    ``(III) establish an individualized 
                                care plan for the individual in 
                                accordance with subparagraph (G).
                    ``(F) Assessment.--The independent assessment 
                required under subparagraph (E)(ii) shall include the 
                following:
                            ``(i) An objective evaluation of an 
                        individual's inability to perform 2 or more 
                        activities of daily living (as defined in 
                        section 7702B(c)(2)(B) of the Internal Revenue 
                        Code of 1986) or the need for significant 
                        assistance to perform such activities.
                            ``(ii) A face-to-face evaluation of the 
                        individual by an individual trained in the 
                        assessment and evaluation of individuals whose 
                        physical or mental conditions trigger a 
                        potential need for long-term care services and 
                        supports.
                            ``(iii) Where appropriate, consultation 
                        with the individual's family, spouse, guardian, 
                        or other responsible individual.
                            ``(iv) Consultation with appropriate 
                        treating and consulting health and support 
                        professionals caring for the individual.
                            ``(v) An examination of the individual's 
                        relevant history, medical records, and care and 
                        support needs, guided by best practices and 
                        research on effective strategies that result in 
                        improved health and quality of life outcomes.
                            ``(vi) An evaluation of the ability of the 
                        individual or the individual's representative 
                        to self-direct the purchase of, or control the 
                        receipt of, such services and supports if the 
                        individual so elects.
                    ``(G) Individualized care plan.--
                            ``(i) In general.--In the case of an 
                        individual who is determined to be eligible for 
                        long-term care services and supports, the State 
                        uses the independent assessment required under 
                        subparagraph (E)(ii) to establish a written 
                        individualized care plan for the individual.
                            ``(ii) Plan requirements.--The State 
                        ensures that the individualized care plan for 
                        an individual--
                                    ``(I) is developed--
                                            ``(aa) in consultation with 
                                        the individual, the 
                                        individual's treating 
                                        physician, health care or 
                                        support professional, or other 
                                        appropriate individuals, as 
                                        defined by the State, and, 
                                        where appropriate the 
                                        individual's family, caregiver, 
                                        or representative; and
                                            ``(bb) taking into account 
                                        the extent of, and need for, 
                                        any family or other supports 
                                        for the individual;
                                    ``(II) identifies the long-term 
                                care services and supports to be 
                                furnished to the individual (or, if the 
                                individual elects to self-direct the 
                                purchase of, or control the receipt of, 
                                such services and supports, funded for 
                                the individual); and
                                    ``(III) is reviewed at least 
                                annually and as needed when there is a 
                                significant change in the individual's 
                                circumstances.
                            ``(iii) State requirement to offer election 
                        for self-directed services and supports.--
                                    ``(I) Individual choice.--The State 
                                shall allow an individual or the 
                                individual's representative the 
                                opportunity to elect to receive self-
                                directed long-term care services and 
                                supports in a manner which gives them 
                                the most control over such services and 
                                supports consistent with the 
                                individual's abilities and the 
                                requirements of subclauses (II) and 
                                (III).
                                    ``(II) Self-directed.--The term 
                                `self-directed' means, with respect to 
                                the long-term care services and 
                                supports offered under the State plan 
                                amendment, such services and supports 
                                for the individual which are planned 
                                and purchased under the direction and 
                                control of such individual or the 
                                individual's authorized representative, 
                                including the amount, duration, scope, 
                                provider, and location of such services 
                                and supports, under the State plan 
                                consistent with the following 
                                requirements:
                                            ``(aa) Assessment.--There 
                                        is an assessment of the needs, 
                                        capabilities, and preferences 
                                        of the individual with respect 
                                        to such services and supports.
                                            ``(bb) Service plan.--Based 
                                        on such assessment, there is 
                                        developed jointly with such 
                                        individual or the individual's 
                                        authorized representative a 
                                        plan for such services and 
                                        supports for such individual 
                                        that is approved by the State 
                                        and that satisfies the 
                                        requirements of subclause 
                                        (III).
                                    ``(III) Plan requirements.--For 
                                purposes of subclause (II)(bb), the 
                                requirements of this subclause are that 
                                the plan--
                                            ``(aa) specifies those 
                                        services and supports which the 
                                        individual or the individual's 
                                        authorized representative would 
                                        be responsible for directing;
                                            ``(bb) identifies the 
                                        methods by which the individual 
                                        or the individual's authorized 
                                        representative will select, 
                                        manage, and dismiss providers 
                                        of such services and supports;
                                            ``(cc) specifies the role 
                                        of family members and others 
                                        whose participation is sought 
                                        by the individual or the 
                                        individual's authorized 
                                        representative with respect to 
                                        such services and supports;
                                            ``(dd) is developed through 
                                        a person-centered process that 
                                        is directed by the individual 
                                        or the individual's authorized 
                                        representative, builds upon the 
                                        individual's capacity to engage 
                                        in activities that promote 
                                        community life and that 
                                        respects the individual's 
                                        preferences, choices, and 
                                        abilities, and involves 
                                        families, friends, and 
                                        professionals as desired or 
                                        required by the individual or 
                                        the individual's authorized 
                                        representative;
                                            ``(ee) includes appropriate 
                                        risk management techniques that 
                                        recognize the roles and sharing 
                                        of responsibilities in 
                                        obtaining services and supports 
                                        in a self-directed manner and 
                                        assure the appropriateness of 
                                        such plan based upon the 
                                        resources and capabilities of 
                                        the individual or the 
                                        individual's authorized 
                                        representative; and
                                            ``(ff) may include an 
                                        individualized budget which 
                                        identifies the dollar value of 
                                        the services and supports under 
                                        the control and direction of 
                                        the individual or the 
                                        individual's authorized 
                                        representative.
                                    ``(IV) Budget process.--With 
                                respect to individualized budgets 
                                described in subclause (III)(ff), the 
                                State plan amendment--
                                            ``(aa) describes the method 
                                        for calculating the dollar 
                                        values in such budgets based on 
                                        reliable costs and service 
                                        utilization;
                                            ``(bb) defines a process 
                                        for making adjustments in such 
                                        dollar values to reflect 
                                        changes in individual 
                                        assessments and service plans; 
                                        and
                                            ``(cc) provides a procedure 
                                        to evaluate expenditures under 
                                        such budgets.
                    ``(H) Quality assurance; conflict of interest 
                standards.--
                            ``(i) Quality assurance.--The State ensures 
                        that the provision of long-term care services 
                        and supports meets Federal and State guidelines 
                        for quality assurance.
                            ``(ii) Conflict of interest standards.--The 
                        State establishes standards for the conduct of 
                        the independent evaluation and the independent 
                        assessment to safeguard against conflicts of 
                        interest.
                    ``(I) Redeterminations and appeals.--The State 
                allows for at least annual redeterminations of 
                eligibility, and appeals in accordance with the 
                frequency of, and manner in which, redeterminations and 
                appeals of eligibility are made under the State plan.
                    ``(J) Presumptive eligibility for assessment.--The 
                State, at its option, elects to provide for a period of 
                presumptive eligibility (not to exceed a period of 60 
                days) only for those individuals that the State has 
                reason to believe may be eligible for long-term care 
                services and supports. Such presumptive eligibility 
                shall be limited to medical assistance for carrying out 
                the independent evaluation and assessment under 
                subparagraph (E) to determine an individual's 
                eligibility for such services and if the individual is 
                so eligible, the specific long-term care services and 
                supports that the individual will receive.
            ``(2) Definition of individual's representative.--In this 
        section, the term `individual's representative' means, with 
        respect to an individual, a parent, a family member, or a 
        guardian of the individual, an advocate for the individual, or 
        any other individual who is authorized to represent the 
        individual.
    ``(b) Self-Directed Personal Assistance Services.--If a State 
includes personal care or personal assistance services in the long-term 
care services and supports available under the State plan, the State 
shall comply with the requirements of old section 1915(j) in the case 
of an individual who elects to self-direct the receipt of such care or 
services.

``SEC. 1918. TREATMENT OF INCOME AND RESOURCES FOR CERTAIN 
              INSTITUTIONALIZED SPOUSES.

    ``Old section 1924 (relating to treatment of income and resources 
for certain institutionalized spouses), other than paragraphs (2) and 
(4)(A) of subsection (a) of such section, shall apply under this part.

``SEC. 1919. ANNUAL REPORTS.

    ``(a) In General.--Each State that receives payments under this 
part shall submit an annual report to the Secretary, in such form and 
manner as the Secretary shall specify.
    ``(b) Requirements.--The report shall include the following with 
respect to the most recent fiscal year ended:
            ``(1) The number of individuals served under the plan.
            ``(2) The number of individuals served by tier (preventive, 
        emergency, low, medium, and high needs).
            ``(3) The number of individuals known to the State on 
        waiting list for services (if any) and type of disability 
        (physical, developmental, mental health) or aged.
            ``(4) Expenditures by service category.

  ``PART C--GRANTS TO STATES FOR SURVEY AND CERTIFICATION OF MEDICAL 
                   FACILITIES AND OTHER REQUIREMENTS

``SEC. 1931. AUTHORIZATION OF APPROPRIATIONS.

    ``For the purpose of carrying our Federal activities and providing 
grants to States for expenses necessary to carry out this part, there 
is authorized to be appropriated--
            ``(1) for fiscal year 2011, $300,000,000; and
            ``(2) for each succeeding fiscal year, the amount 
        authorized under this section for the preceding fiscal year, 
        increased by 5 percent.

``SEC. 1932. APPLICATION OF CERTAIN REQUIREMENTS UNDER PRE-MODERNIZED 
              MEDICAID.

    ``The following old provisions shall apply under this part:
            ``(1) Old section 1902(a)(9) (relating to health standards 
        and applicable requirements for laboratory services).
            ``(2) Old section 1902(a)(28) (relating to nursing 
        facilities and nursing facility services).
            ``(3) Old sections 1902(a)(29) and 1908 (relating to a 
        State program for the licensing of administrators of nursing 
        homes).
            ``(4) Old section 1902(a)(33)(B) (relating to licensing 
        health institutions).
            ``(5) Old section 1902(d) (relating to medical or 
        utilization review functions).
            ``(6) Old section 1902(i) (relating to intermediate care 
        facilities for the mentally retarded).
            ``(7) Old section 1902(y) (relating to psychiatric 
        hospitals).
            ``(8) Paragraphs (2) and (6) of old section 1903(g) 
        (relating to the Secretarial requirement to conduct sample 
        onsite surveys of private and public institutions and 
        recertifications for the need for certain services).
            ``(9) Old section 1903(q)(4)(B) (relating to the definition 
        of a board and care facility).
            ``(10) Old section 1910 (relating to certification and 
        approval of rural health clinics and intermediate care 
        facilities for the mentally retarded).
            ``(11) Old section 1911 (relating to Indian Health Service 
        facilities).
            ``(12) Old section 1913 (relating to hospital providers of 
        nursing facility services).
            ``(13) Old section 1919 (relating to requirements for 
        nursing facilities).

            ``PART D--GRANTS TO STATES FOR PROGRAM INTEGRITY

``SEC. 1941. AUTHORIZATION OF APPROPRIATIONS.

    ``(a) In General.--For the purpose of carrying out Federal 
activities under this part and providing grants to States for expenses 
necessary to carry out this part, there is authorized to be 
appropriated--
            ``(1) for fiscal year 2011, $100,000,000; and
            ``(2) for each succeeding fiscal year, the amount 
        authorized under this section for the preceding fiscal year, 
        increased by 5 percent.
    ``(b) Availability; Authority for Use of Funds.--
            ``(1) Availability.--Amounts appropriated pursuant to 
        subsection (a) shall remain available until expended.
            ``(2) Authority for use of funds for transportation and 
        travel expenses for attendees at education, training, or 
        consultative activities.--
                    ``(A) In general.--The Secretary may use amounts 
                appropriated pursuant to subsection (a) to pay for 
                transportation and the travel expenses, including per 
                diem in lieu of subsistence, at rates authorized for 
                employees of agencies under subchapter I of chapter 57 
                of title 5, United States Code, while away from their 
                homes or regular places of business, of individuals 
                described in subsection (b)(4) who attend education, 
                training, or consultative activities conducted under 
                the authority of that subsection.
                    ``(B) Public disclosure.--The Secretary shall make 
                available on a website of the Centers for Medicare & 
                Medicaid Services that is accessible to the public--
                            ``(i) the total amount of funds expended 
                        for each conference conducted under the 
                        authority of subsection (b)(4); and
                            ``(ii) the amount of funds expended for 
                        each such conference that were for 
                        transportation and for travel expenses.
    ``(c) Annual Report.--Not later than 180 days after the end of each 
fiscal year, the Secretary shall submit a report to Congress which 
identifies--
            ``(1) the use of funds appropriated pursuant to subsection 
        (a); and
            ``(2) the effectiveness of the use of such funds.

``SEC. 1942. APPLICATION OF CERTAIN REQUIREMENTS UNDER PRE-MODERNIZED 
              MEDICAID.

    ``The following old provisions shall apply under this part:
            ``(1) Old subsections (a)(25) (other than subparagraph (E)) 
        and (g) of section 1902 and section 1903(o) (relating to third 
        party liability).
            ``(2) Old section 1902(a)(30)(B) (relating to hospital, 
        intermediate care facility for the mentally retarded, or 
        hospital for mental diseases admission screening and review 
        requirements).
            ``(3) Old section 1902(a)(32) (relating to certain payment 
        requirements).
            ``(4) Old section 1902(a)(35) (relating to disclosing 
        entities under section 1124).
            ``(5) Old section 1902(a)(37) and the fifth sentence 
        (relating to claims payment procedures).
            ``(6) Old section 1902(a)(44) (relating to payment for 
        inpatient hospital services, services in an intermediate care 
        facility for the mentally retarded, or inpatient mental 
        hospital services).
            ``(7) Old sections 1902(a)(45) and 1912 (relating to 
        assignment of rights of payment).
            ``(8) Old sections 1902(a)(49) and 1921 (relating to 
        information and access to information concerning sanctions 
        taken by State licensing authorities against health care 
        practitioners and providers).
            ``(9) Old sections 1902(a)(61) and 1903(q) (relating to 
        requirements for a medicaid fraud and abuse control unit).
            ``(10) Old section 1902(a)(64) (relating to reports from 
        beneficiaries and others and data compilation requirements 
        concerning alleged instances of waste, fraud, and abuse).
            ``(11) Old section 1902(a)(65) (relating to provider number 
        and surety bond requirement for suppliers of durable medical 
        equipment).
            ``(12) Old section 1902(a)(68) (relating to requirements 
        for certain entities).
            ``(13) Old sections 1902(a)(69) and 1936 (relating to the 
        Medicaid Integrity Program) other than paragraphs (1), (2)(A), 
        and (3) of old section 1936(e).
            ``(14) Old section 1902(a)(70)(B)(iv) (relating to 
        prohibitions on referrals and conflict of interest for certain 
        brokers of non-emergency medical transportation).
            ``(15) Old sections 1902(a)(71) and 1940 (relating to a 
        required asset verification program).
            ``(16) Old section 1902(p) (relating to exclusion of 
        certain individuals or entities).
            ``(17) Old section 1902(x) (relating to unique identifiers 
        for physicians).
            ``(18) Old section 1903(p) (relating to interstate 
        collection of rights of support).
            ``(19) Old section 1903(r)(2) (relating to requirements for 
        mechanized claims processing and information retrieval 
        systems).
            ``(20) Old section 1903(u) (relating to erroneous excess 
        payments), other than clause (v) of paragraph (1)(D).
            ``(21) Old section 1903(v) and the seventh sentence of old 
        section 1902(a) (relating to limitations on payments for 
        services furnished to aliens), other than subparagraphs (A) and 
        (B) of paragraph (4).
            ``(22) Old section 1903(x) (relating to citizenship 
        documentation).
            ``(23) Old section 1909 (relating to State false claims act 
        requirements for increased State share of recoveries).
            ``(24) Old section 1914 (relating to withholding of Federal 
        share of payments for certain Medicare providers).
            ``(25) Old section 1917 (relating to liens, adjustments and 
        recoveries, and transfers of assets).
            ``(26) Old section 1922 (relating to correction and 
        reduction plans for intermediate care facilities for the 
        mentally retarded).

             ``PART E--GRANTS TO STATES FOR ADMINISTRATION

``SEC. 1951. AUTHORIZATION OF APPROPRIATIONS; PAYMENTS TO STATES.

    ``(a) In General.--For the purpose of providing grants to States 
for administrative expenses necessary to carry out parts A and B, there 
is authorized to be appropriated--
            ``(1) for fiscal year 2011, $7,000,000,000; and
            ``(2) for each succeeding fiscal year, the amount 
        authorized under this subsection for the preceding fiscal year, 
        increased by 3 percent.
    ``(b) Payments to States.--
            ``(1) In general.--From the amount appropriated pursuant to 
        subsection (a) for a fiscal year, the Secretary shall pay each 
        State with approved plans under parts A and B for the fiscal 
        year an amount equal to the product of the amount appropriated 
        for the fiscal year and the ratio of the total amount of 
        payments made to the State under paragraphs (2) through (7) of 
        section 1903(a) for fiscal year 2008 (as such section was in 
        effect for that fiscal year) to the total amount of such 
        payments made to all States for such fiscal year.
            ``(2) Pro rata adjustment.--The Secretary shall make pro 
        rata adjustments to the amounts determined under paragraph (1) 
        for a fiscal year as necessary so as to not exceed the amount 
        appropriated pursuant to subsection (a) for the fiscal year.

``SEC. 1952. COST-SHARING PROTECTIONS.

    ``(a) In General.--A State may impose cost-sharing for individuals 
provided acute care medical assistance under a State plan under part A 
or long-term care services and supports under a State plan under part B 
consistent with the following:
            ``(1) The State may (in a uniform manner) require payment 
        of monthly premiums or other cost-sharing set on a sliding 
        scale based on family income.
            ``(2) A premium or other cost-sharing requirement imposed 
        under paragraph (1) may only apply to the extent that, in the 
        case of an individual whose family income--
                    ``(A) exceeds 150 percent of the poverty line, the 
                aggregate annual amount of such premium and other cost-
                sharing charges imposed under the plan does not exceed 
                5 percent of the individual's annual income; and
                    ``(B) exceeds 250 percent of the poverty line, the 
                aggregate annual amount of such premium and other cost-
                sharing charges do not exceed 7.5 percent of the 
                individual's annual income.
            ``(3) A State shall not require prepayment of any premium 
        or cost-sharing imposed pursuant to paragraph (1) and shall not 
        terminate eligibility of an individual under the State plan on 
        the basis of failure to pay any such premium or cost-sharing 
        until such failure continues for a period of at least 60 days 
        from the date on which the premium or cost-sharing became past 
        due. The State may waive payment of any such premium or cost-
        sharing in any case where the State determines that requiring 
        such payment would create an undue hardship.
    ``(b) Application to Institutionalized Individuals.--A State may 
impose cost-sharing consistent with subsection (a) to individuals who 
are patients in, or residents of, a medical institution or nursing 
facility except that rules relating to the post-eligibility treatment 
of income (including a minium monthly personal needs allowance) 
applicable to institutionalized individuals under old title XIX shall 
apply in the same manner to individuals eligible for long-term care 
services and supports under a State plan under part B.
    ``(c) Poverty Line Defined.--In this section, the term `poverty 
line' has the meaning given such term in section 673(2) of the 
Community Services Block Grant Act (42 U.S.C. 9902(2)), including any 
revision required by such section.

``SEC. 1953. APPLICATION OF CERTAIN REQUIREMENTS UNDER PRE-MODERNIZED 
              MEDICAID.

    ``The following old provisions shall apply to the State plans under 
this title:
            ``(1) Old state plan requirements.--
                    ``(A) Old section 1902(a)(1) (relating to the 
                requirement for plans to be in effect in all political 
                subdivisions of the State).
                    ``(B) Old section 1902(a)(2) (relating to State 
                financial participation).
                    ``(C) Old section 1902(a)(3) (relating to 
                opportunity for a fair hearing).
                    ``(D) Old section 1902(a)(4) (relating to 
                administration).
                    ``(E) Old section 1902(a)(5) (relating to 
                designation of a single State agency).
                    ``(F) Old section 1902(a)(6) (relating to reporting 
                requirements).
                    ``(G) Old section 1902(a)(7) (relating to 
                restrictions on the use or disclosure of information).
                    ``(H) Old section 1902(a)(8) (relating to 
                applications for assistance).
                    ``(I) Old section 1902(a)(11) (relating to 
                cooperative agreements with other State agencies).
                    ``(J) Old section 1902(a)(12) (relating to 
                determinations of blindness).
                    ``(K) Old section 1902(a)(13) (relating to 
                determination of rates of payment for certain 
                services), other than clause (iv) of subparagraph (A).
                    ``(L) Subsections (a)(15) and (bb) of old section 
                1902(a) (relating to payment for services provided by 
                rural health clinics and federally qualified health 
                centers).
                    ``(M) Old section 1902(a)(16) (relating to 
                furnishing services to individuals when absent from the 
                State).
                    ``(N) Old section 1902(a)(22) (relating to certain 
                administrative provisions).
                    ``(O) Paragraphs (23) and (25)(D) of old section 
                1902(a) (relating to any willing provider 
                requirements).
                    ``(P) Old section 1902(a)(24) (relating to 
                consultative services by other agencies).
                    ``(Q) Old section 1902(a)(26) (relating to review 
                of need for inpatient mental hospital services and 
                written plan of care requirements).
                    ``(R) Old section 1902(a)(27) (relating to provider 
                record keeping requirements).
                    ``(S) Old section 1902(a)(30)(A) (relating to 
                utilization review).
                    ``(T) Old section 1902(a)(31) (relating to written 
                plan of care for services and review for intermediate 
                care facility for the mentally retarded services).
                    ``(U) Old section 1902(a)(33)(A) (relating to 
                quality review requirements).
                    ``(V) Old section 1902(a)(36) (relating to public 
                availability of facility surveys).
                    ``(W) Old section 1902(a)(38) (relating to the 
                provision of information described in section 
                1128(b)(9) by certain entities).
                    ``(X) Old section 1902(a)(39) (relating to the 
                exclusion of certain entities).
                    ``(Y) Old section 1902(a)(40) (relating to 
                requirement for uniform reporting systems).
                    ``(Z) Old section 1902(a)(41) (relating to notice 
                to State medical licensing boards).
                    ``(AA) Old section 1902(a)(42) (relating to certain 
                audit requirements).
                    ``(BB) Old section 1902(a)(48) (relating to 
                eligibility cards).
                    ``(CC) Old section 1902(a)(55) (relating to the 
                receipt and initial processing of applications, but 
                only to the extent such section is consistent with the 
                policy embodied in the State plans under parts A and 
                B).
                    ``(DD) Subsections (a)(56) and (s) of old section 
                1902 (relating to adjusted payments for certain 
                inpatient hospital services).
                    ``(EE) Old section 1902(a)(59) (relating to 
                maintenance of list of participating physicians).
                    ``(FF) The second sentence of old section 1902 
                (relating to designation of certain State agencies).
                    ``(GG) Old section 1902(b) (relating to limitations 
                on approval of plans).
                    ``(HH) Old section 1902(j) (relating to application 
                of requirements to American Samoa and the Northern 
                Mariana Islands).
            ``(2) Other old title xix requirements.--
                    ``(A) Old section 1903(b)(4) (relating to 
                limitations on payments to enrollment brokers).
                    ``(B) Old section 1903(c) (relating to furnishing 
                of services included in a program or plan under part B 
                or C of the Individuals with Disabilities Education 
                Act).
                    ``(C) Old section 1903(d) (relating to payments).
                    ``(D) Old section 1903(e) (relating to costs with 
                respect to certain hospital services).
                    ``(E) Old section 1903(i) (relating to limitations 
                on payments).
                    ``(F) Old section 1903(r) (relating to requirements 
                for mechanized claims processing and information 
                retrieval systems).
                    ``(G) Subsections (b)(5) and (w) of old section 
                1903 (relating to limitations on payments related to 
                provider taxes).
                    ``(H) Old section 1904 (relating to operation of 
                State plans).
                    ``(I) Old sections 1902(a)(60) and 1908A (relating 
                to medical child support).
                    ``(J) Paragraphs (32)(D) and (62) of old section 
                1902(a) and section 1928 (relating to program for 
                distribution of pediatric vaccines).

                       ``PART F--OTHER PROVISIONS

``SEC. 1961. APPLICATION OF CERTAIN REQUIREMENTS UNDER PRE-MODERNIZED 
              MEDICAID.

    ``The following old provisions shall apply under this part:
            ``(1) The third sentence of old section 1902 (relating to 
        nonapplication of certain old provisions to a religious 
        nonmedical health care institution).
            ``(2) Old section 1918 (relating to application of 
        provisions of title II relating to subpoenas).
            ``(3) Old section 1939 (relating to references to laws 
        directly affecting the Medicaid program.''.
    (b) Repeal of Title XXI.--Effective January 1, 2011, title XXI of 
the Social Security Act (42 U.S.C. 1397aa et seq.) is repealed.

SEC. 202. OUTREACH.

    (a) Authorization of Appropriations.--The following amounts are 
authorized to be appropriated to the Secretary of Health and Human 
Services:
            (1) For fiscal year 2010, $100,000,000 for the design and 
        implementation of a public outreach campaign to inform the 
        public about the changes to the programs under such titles that 
        take effect on January 1, 2011, as a result of the amendment 
        made by section 201.
            (2) For each of fiscal years 2011and 2012, $200,000,000 to 
        carry out such public outreach campaign.
            (3) For fiscal year 2013, $50,000,000 to carry out such 
        public outreach campaign.
    (b) Availability.--Funds appropriated under subsection (a) shall 
remain available for expenditure through September 30, 2012.
    (c) Authority for Use of Funds.--The Secretary may use funds made 
available under paragraphs (2) and (3) of subsection (a) to award 
grants to, or enter into contracts with, public or private entities, 
including States, local governments, schools, churches, and community 
groups.

SEC. 203. TRANSITION RULES; MISCELLANEOUS PROVISIONS.

    (a) In General.--
            (1) Not later than June 30, 2011, a State that is one of 
        the 50 States or the District of Columbia shall inform all 
        individuals enrolled in a State plan under title XIX or XXI of 
        the Social Security Act on such date (and any new enrollees 
        after such date) of the changes to the programs under such 
        titles that take effect on January 1, 2012, as a result of the 
        amendment made by section 201.
            (2) No State that is one of the 50 States or the District 
        of Columbia shall approve any applications for medical 
        assistance or child health assistance under a State plan under 
        title XIX or XXI (as in effect for fiscal year 2011) after 
        December 31, 2011.
    (b) Submission of Legislative Proposal for Technical and Conforming 
Amendments.--Not later than 6 months after the date of enactment of 
this Act, the Secretary of Health and Human Services shall submit to 
Congress a legislative proposal for such technical and conforming 
amendments as are necessary to carry out the amendments made by this 
Act.

Subtitle B--Supplemental Health Care Assistance for Low-Income Families

SEC. 211. SUPPLEMENTAL HEALTH CARE ASSISTANCE FOR LOW-INCOME FAMILIES.

    Part D of title III of the Public Health Service Act (42 U.S.C. 
254b et seq.) is amended by adding at the end the following:

      ``Subpart XI--Health Care Assistance to Low-income Families

``SEC. 340A-1. FINANCIAL ASSISTANCE TO LOW-INCOME FAMILIES.

    ``(a) In General.--The Secretary shall supplement the costs of 
private health insurance for eligible low-income families through the 
distribution of supplemental debit cards to eligible families, which 
may be used to pay for costs associated with health care for the 
members of such eligible families and provide direct support to such 
families in accessing health care.
    ``(b) Eligibility.--
            ``(1) Eligible families.--To be eligible for financial 
        assistance under this section--
                    ``(A) a family shall--
                            ``(i) consist of 2 or more individuals 
                        living together who are related by marriage, 
                        birth, adoption, or guardianship;
                            ``(ii) have a gross income that does not 
                        exceed 200 percent of the poverty line, as 
                        applicable to a family of the size involved; 
                        and
                            ``(iii) include at least 1 individual who 
                        is a dependent under the age of 19; and
                    ``(B) no member of the family shall be covered by 
                private health insurance.
            ``(2) Determination of gross income.--The gross income of a 
        family shall be determined by taking the sum of the income of 
        each family member who is at least age 21 but not older than 
        age 65, except that the income of any member of the family who 
        qualifies for coverage under Medicaid Part A or B shall not be 
        counted.
            ``(3) Limitation on individual eligibility; assistance.--
                    ``(A) In general.--No individual who is a member of 
                an eligible family under paragraph (1) is eligible to 
                qualify separately for financial assistance under this 
                section.
                    ``(B) Aliens.--The Secretary shall ensure that 
                financial assistance under this section is not provided 
                for costs associated with health care for any member of 
                an eligible family who is an alien individual who is 
                not a lawful permanent resident of the United States.
    ``(c) Supplemental Debit Card for Health Care Expenditures.--
            ``(1) In general.--The Secretary shall issue to each 
        eligible family that enrolls in the program in accordance with 
        subsection (f) a supplemental debit card with a dollar-amount 
        value, in accordance with subsection (d), that may be used to 
        pay for qualifying health care expenses.
            ``(2) Use of the debit card.--
                    ``(A) Qualifying health care expenses.--A 
                supplemental debit card issued under this section may 
                be used by members of the eligible family to pay for--
                            ``(i) the purchase of health care insurance 
                        for any member of the family;
                            ``(ii) cost sharing expenses related to 
                        health care, including deductibles, copayments, 
                        and coinsurance, for any member of the family; 
                        and
                            ``(iii) the direct purchase of health care 
                        services and supplies for any member of the 
                        family.
                    ``(B) Geographic range.--Each supplemental debit 
                card may be used to pay for qualifying health care 
                expenses incurred anywhere in the 50 States or the 
                District of Columbia.
                    ``(C) Limitations.--No supplemental debit card 
                shall be used to make a payment for any cost--
                            ``(i) incurred prior to the determination 
                        of the family's eligibility for assistance 
                        under this section; or
                            ``(ii) that is not a health-related 
                        expense.
            ``(3) Rollover of unused amounts.--Not more than one-
        quarter of the annual dollar amount of a supplemental debit 
        card that is unexpended at the end of each 12-month period may 
        rollover--
                    ``(A) to the family's supplemental debit card for 
                expenditure during the subsequent 12-month period, 
                provided that the family to which the supplemental 
                debit card was issued in the previous 12-month period 
                is eligible to receive a supplemental debit card in the 
                subsequent 12-month period; or
                    ``(B) to the family's health savings account (as 
                defined in section 223(g)(2) of the Internal Revenue 
                Code of 1986).
            ``(4) Monthly statements.--The Secretary shall issue a 
        monthly statement to each family to which a supplemental debit 
        card has been issued under this section, which shall state each 
        payment made with the family's supplemental debit card during 
        the month covered by the statement, the dollar amount of each 
        such payment, and the provider to which each such payment was 
        made.
    ``(d) Amount of Financial Assistance.--
            ``(1) Amounts for calendar year 2011.--Subject to paragraph 
        (5), the amount of financial assistance available to each 
        eligible family during the calendar year 2011 shall be 
        determined as follows:
                    ``(A) Each family whose annual income does not 
                exceed 100 percent of the poverty level, as applicable 
                to a family of the size involved, shall receive $5,000.
                    ``(B) Each family whose annual income exceeds 100 
                percent, but does not exceed 200 percent, of the 
                poverty level, as applicable to a family of the size 
                involved, shall receive an amount as follows:
                            ``(i) For families whose annual income 
                        exceeds 100 percent but does not exceed 120 
                        percent, of the poverty level, $4,000.
                            ``(ii) For families whose annual income 
                        exceeds 120 percent but does not exceed 140 
                        percent, of the poverty level, $3,500.
                            ``(iii) For families whose annual income 
                        exceeds 140 percent but does not exceed 160 
                        percent, of the poverty level, $3,000.
                            ``(iv) For families whose annual income 
                        exceeds 160 percent but does not exceed 180 
                        percent, of the poverty level, $2,500.
                            ``(v) For families whose annual income 
                        exceeds 180 percent but does not exceed 200 
                        percent, of the poverty level, $2,000.
            ``(2) Additional amounts.--In addition to the amounts under 
        paragraph (1), subject to paragraph (5), the following amounts 
        shall be added to the supplemental debit cards of qualifying 
        families:
                    ``(A) For each pregnancy during which a pregnant 
                woman's family is eligible for assistance under this 
                section, an additional amount of $1,000 shall be added 
                to the family's supplemental debit card, except that no 
                family shall receive such additional $1,000 for any 
                pregnancy for which the family received such amount in 
                the previous 12-month period.
                    ``(B) For each member of an eligible family who is 
                less than 1 year old on any day within the calendar 
                year in which the family is eligible for assistance, an 
                additional amount of $500 shall be added to the 
                family's supplemental debit card.
            ``(3) Cost of living adjustments.--In the case of any 
        taxable year beginning in a calendar year after 2011, each 
        dollar amount contained in paragraphs (1) and (2) shall be 
        increased in the same manner as the dollar amounts specified in 
        section 25E(b)(3) of the Internal Revenue Code of 1986 are 
        increased by the blended cost-of-living adjustment determined 
        under subsection (k)(2) of section 25E of the Internal Revenue 
        Code for the taxable year involved.
            ``(4) State option to increase amounts.--At the option of 
        each State, amounts in excess of the annual dollar amounts 
        under paragraphs (1) and (2) may be provided through the 
        supplemental debit card to eligible families in that State, but 
        no Federal funds shall be paid to any State for any amount 
        provided in excess of such annual dollar amount.
            ``(5) Risk adjustment.--The Secretary may adjust the amount 
        of financial assistance available to an eligible family for a 
        calendar year under this section based on age, health 
        indicators, and other factors that represent distinct patterns 
        of health care services utilization and costs.
    ``(e) Contributions of States.--
            ``(1) In general.--As a condition for receiving Federal 
        funds under Part A or Part B of Medicaid, each State shall 
        contribute 50 percent of the total amount expended under the 
        supplemental debit card program by the participating families 
        that reside within the State during the time that the family 
        resides in that State. For purposes of this section, the 
        residency of a family is determined by the residency the 
        legally responsible head of the household.
            ``(2) Payments from states.--
                    ``(A) Billing notification.--
                            ``(i) Timing.--On June 30th and December 
                        31st of each year, the Secretary shall send 
                        written notification to each State of that 
                        State's 50 percent share of expenses, as 
                        described in paragraph (1), for the 6-month 
                        period ending on the last day of the month 
                        previous to such notification.
                            ``(ii) Contents.--Each such notification to 
                        a State shall clearly state--
                                    ``(I) the payment amount due from 
                                the State;
                                    ``(II) the name of each individual 
                                for whom payment was made through the 
                                supplemental debit card program;
                                    ``(III) the health care provider to 
                                whom each payment was made;
                                    ``(IV) the amount of each payment; 
                                and
                                    ``(V) any other information, as the 
                                Secretary requires.
                    ``(B) Payments.--Each State shall make a payment to 
                the Secretary, in the amount billed, not later than 30 
                days after the billing notification date, in accordance 
                with subparagraph (A)(i).
                    ``(C) Penalties.--If a State fails to pay to the 
                Secretary an amount required under subparagraph (B), 
                interest shall accrue on such amount at the rate 
                provided under old section 1903(d)(5) of the Social 
                Security Act. The amount so owed and applicable 
                interest shall be immediately offset against amounts 
                otherwise payable to the State under this section, in 
                accordance with the Federal Claims Collection Act of 
                1996 and applicable regulations.
    ``(f) Enrollment.--
            ``(1) In general.--The Secretary shall establish procedures 
        and times for enrollment in the supplemental debit card 
        program. Open enrollment shall be available not less than 4 
        times per calendar year.
            ``(2) Transition of individuals enrolled in medicaid or the 
        state children's health insurance program.--
                    ``(A) Information from the states.--Each State 
                shall--
                            ``(i) not later than June 30, 2011, inform 
                        all individuals then enrolled in Medicaid or 
                        the State Children's Health Insurance Program 
                        (SCHIP), of the changes in effect beginning on 
                        January 1, 2012; and
                            ``(ii) not later than October 31, 2011, 
                        redetermine the eligibility of each individual 
                        enrolled in Medicaid or SCHIP, other than those 
                        individuals who qualify for Medicaid or SCHIP 
                        as disabled, elderly, or a special population, 
                        for the supplemental debit card program, 
                        according to the eligibility criteria under 
                        subsection (b).
                    ``(B) Automatic enrollment.--The Secretary shall 
                provide for the automatic enrollment in the 
                supplemental debit card program of all individuals who 
                are enrolled in Medicaid or SCHIP and who have been 
                redetermined by a State under subparagraph (A) to be 
                eligible for Medicaid or SCHIP. Any individual who is 
                determined by a State not to qualify for the 
                supplemental debit card program may retain coverage 
                under Medicaid or SCHIP until June 30, 2012.
            ``(3) Assistance with qualified health insurance credit.--
        Each State shall, to the extent practicable, provide 
        individuals residing within the State with information 
        regarding the qualified health insurance credit described in 
        section 25E of the Internal Revenue Code of 1986, including 
        information regarding eligibility for, and how to claim, such 
        credit.
    ``(g) Administration.--
            ``(1) National system.--The Secretary may enter into 
        contracts or agreements with a State, a consortium of States, 
        or a private entity, including a bank, enrollment broker, or 
        similar entity, to establish and maintain a unified national 
        system to support the processes and transactions necessary to 
        administer this section.
            ``(2) Automated system.--The Secretary shall establish an 
        automated means, such as an electronic benefit transfer system, 
        by which the benefits under this section shall be transferred 
        to eligible families.
            ``(3) Verification of applicant information.--The Secretary 
        may verify information provided by applicants with the 
        appropriate Federal, State, and local agencies, including the 
        Internal Revenue Service, the Social Security Administration, 
        the Department of Labor, and child support enforcement 
        agencies.
            ``(4) Choice counseling.--The Secretary may enter into 
        contracts or agreements with a State, a consortium of a State, 
        or a private entity, including an enrollment broker or 
        community organization or other organization, to educate 
        eligible families about their options and to assist in their 
        enrollment in the supplemental debit card plan.
            ``(5) Appeals.--The Secretary shall establish an 
        independent appeals process, to be administered by an entity 
        separate from the entity that makes initial eligibility 
        determinations, which shall be available to individuals who are 
        denied benefits under the supplemental debit card program.
            ``(6) Resolution of errors.--The Secretary shall provide 
        for a reconciliation process with the States to resolve any 
        errors and adjudicate disputes due to incomplete or false 
        information in a family's application or in the billing process 
        described in subsection (e).
            ``(7) Penalties for false information.--Any person who 
        provides false information to qualify for the supplemental 
        debit card program shall pay a penalty in the amount of 110 
        percent of the amount of assistance paid on behalf of such 
        person and all members of such person's family.
    ``(h) Implementation Plan.--Not later than 6 months after the date 
of enactment of this section, the Secretary shall submit to Congress a 
plan for implementing this program.
    ``(i) Authorization of Appropriations.--
            ``(1) Administration of the supplemental debit card 
        program.--To administer the program under this section, there 
        are authorized to be appropriated--
                    ``(A) for fiscal year 2009, $300,000,000, for the 
                design of a unified, national system of conducting the 
                supplemental debit card program;
                    ``(B) for fiscal year 2010, $1,000,000,000 for 
                start-up costs, including, contracting, hiring and 
                training employees, and testing the program; and
                    ``(C) for fiscal year 2011 and each subsequent 
                fiscal year, $3,000,000,000.
            ``(2) Authorization of benefits under the supplemental 
        debit card program.--To provide the supplemental debit card 
        benefits described in this section, there are authorized to be 
        appropriated--
                    ``(A) for fiscal year 2011, $24,020,000,000;
                    ``(B) for fiscal year 2012, $25,220,000,000;
                    ``(C) for fiscal year 2013, $26,480,000,000;
                    ``(D) for fiscal year 2014, $27,810,000,000; and
                    ``(E) for fiscal year 2015, $29,200,000,000.''.

                       TITLE III--MEDICARE REFORM

                    Subtitle A--New Medicare Program

SEC. 301. BENEFIT CHANGES.

    Title XVIII of the Social Security Act is amended by inserting 
after section 1808 the following new section:

       ``program for new medicare beneficiaries beginning in 2021

    ``Sec. 1810.  (a) Application.--
            ``(1) In general.--Notwithstanding any other provision of 
        law (including sections 226 and 226A), the provisions of this 
        section shall apply to individuals (other than individuals 
        entitled to benefits only because of the application of section 
        1881(d)) who first become entitled to benefits under part A, or 
        whose coverage period under part B begins, on or after January 
        1, 2021.
            ``(2) No impact on fica/seca tax revenues.--Nothing in this 
        section shall be construed as affecting revenues through the 
        payment of hospital insurance taxes under sections 1401(b), 
        3101(b), and 3111(b) of the Internal Revenue Code of 1986.
            ``(3) No impact on other beneficiaries.--
                    ``(A) In general.--This section shall not apply to 
                individuals not described in paragraph (1).
                    ``(B) No impact on computation of medicare premiums 
                for older medicare beneficiaries.--Premiums under parts 
                A, B, and D shall be computed for individuals not 
                described in paragraph (1) based on the average costs 
                that the Secretary estimates would have been applicable 
                if this section did not apply.
    ``(b) Alternative Benefits.--
            ``(1) In general.--An individual described in subsection 
        (a)(1) is only entitled to benefits under this title in 
        accordance with this section. In the case of such an individual 
        who has qualified health insurance coverage, the individual is 
        entitled under this section--
                    ``(A) to an income-related payment under subsection 
                (c); and
                    ``(B) in the case of a low-income individual (as 
                defined in paragraph (3) of subsection (d)), to a 
                contribution to a medical savings account of the 
                individual in the amount specified in such subsection.
            ``(2) Alternative premium obligations.--An individual 
        described in subsection (a)(1)--
                    ``(A) is not responsible for payment of any premium 
                otherwise applicable under part B or D; but
                    ``(B) is responsible for payment of the premium for 
                qualified health insurance coverage referred to in 
                paragraph (1) and may apply the income-related payment 
                under subsection (c) toward such premium.
            ``(3) Qualified health insurance coverage.--
                    ``(A) Publication of list.--The Secretary of Health 
                and Human Services shall publish an annual list of 
                health insurance plans that meet the definition of 
                qualified health insurance coverage, as described in 
                subparagraph (B) below, at least one of such plans must 
                address the special needs of Medicare's highest-cost 
                seniors, as determined by the Secretary.
                    ``(B) Qualified health insurance coverage 
                defined.--In this subsection, the term `qualified 
                health insurance coverage' means health benefits 
                coverage, whether under a group health plan, health 
                insurance coverage or otherwise, but does not include 
                coverage under a health plan if substantially all of 
                its coverage is coverage described in section 
                223(c)(1)(B) of the Internal Revenue Code of 1986.
    ``(c) Income-Related Payment.--
            ``(1) In general.--The amount of the income-related payment 
        under this subsection for an individual for a year is equal 
        to--
                    ``(A) the annual amount specified for the year in 
                paragraph (2);
                    ``(B) subject to reduction under paragraph (3) 
                (relating to higher income individuals);
                    ``(C) further subject to adjustment under paragraph 
                (4); and
                    ``(D) subject to pro-ration under paragraph (5).
            ``(2) Annual amount.--
                    ``(A) In general.--The annual amount specified in 
                this paragraph--
                            ``(i) for 2011 is the average nominal 
                        dollar value of the Medicare benefit; and
                            ``(ii) for any subsequent year is the 
                        annual amount specified in this paragraph for 
                        the preceding year increased by the annual 
                        inflation adjustment described in subparagraph 
                        (B) for such subsequent year.
                Any amount computed under clause (ii) that is not a 
                multiple of $12 shall be rounded to the nearest 
                multiple of $12.
                    ``(B) Annual inflation adjustment.--The annual 
                inflation adjustment under this subparagraph for a year 
                is equal to the average of--
                            ``(i) the annual rate of increase in the 
                        consumer price index for urban consumers (all 
                        items; U.S. city average) for the year, as 
                        projected by the Secretary in consultation with 
                        the Bureau of Labor Statistics before the 
                        beginning of the year; and
                            ``(ii) the annual rate of increase in the 
                        medical care component of the consumer price 
                        index for all urban consumers (U.S. city 
                        average) for the year, as projected by the 
                        Secretary in consultation with the Bureau of 
                        Labor Statistics before the beginning of the 
                        year.
            ``(3) Reduction for higher-income individuals.--
                    ``(A) In general.--In the case of an individual 
                whose modified adjusted gross income exceeds the 
                threshold amount specified in paragraph (2) of section 
                1839(i), as adjusted under paragraph (5) of such 
                section, the annual amount under paragraph (2) shall be 
                reduced by the adjustment percentage specified in 
                subparagraph (B).
                    ``(B) Adjustment percentage.--In the case of an 
                individual for whom the applicable percentage specified 
                in section 1839(i)(3)(C)--
                            ``(i) is less than 80 percent, the 
                        adjustment percentage under this subparagraph 
                        shall be 50 percent; or
                            ``(ii) is equal to 80 percent, the 
                        adjustment percentage under this subparagraph 
                        shall be 70 percent.
                    ``(C) Application of certain provisions.--The 
                provisions of paragraphs (4) through (6) of section 
                1839(i) shall apply under this paragraph in the same 
                manner as they apply for purposes of such section.
            ``(4) Risk, geographic area, and other adjustments.--
                    ``(A) Risk adjustment.--The payment amount under 
                this subsection for an individual shall be adjusted, 
                using a methodology specified by the Secretary, in a 
                manner that takes into account the relative risk 
                factors (such as those described in section 
                1853(a)(1)(C)(i)) associated with such individual. Such 
                adjustment shall be made in such a manner as not to 
                change the total amount of payments made under this 
                subsection as a result of such adjustment.
                    ``(B) Partial geographic area adjustment.--Such 
                payment amount for an individual also shall be 
                adjusted, using a methodology specified by the 
                Secretary, in a manner that takes into account the 
                relative differences in area health care costs for the 
                area in which the individual resides compared to other 
                areas. Such adjustment shall be made in such a manner 
                as not to change the total amount of payments made 
                under this subsection as a result of such adjustment. 
                The Secretary shall provide for a decrease over time in 
                the adjustment made under this subparagraph.
                    ``(C) Certain part a buy-in individuals.--Such 
                payment amount for an individual who is not eligible 
                for benefits under part A pursuant to section 226 or 
                226A shall be adjusted by such proportion or amount as 
                the Secretary determines appropriate to take into 
                account premiums that would otherwise be payable under 
                section 1818 or 1818A for benefits under part A.
            ``(5) Pro-ratio for partial year of eligibility.--In the 
        case of an individual whose entitlement under this section is 
        for less than an entire year, the payment amount under this 
        subsection shall be pro-rated to reflect the portion of the 
        year included in such entitlement.
            ``(6) Payment on periodic basis.--The Secretary shall 
        provide for the payment under this subsection on an appropriate 
        monthly or other periodic basis.
    ``(d) Contribution to a Medical Savings Account (MSA) for Low-
Income Individuals.--
            ``(1) In general.--The amount of the contribution under 
        subsection (b)(1)(B) to a medical savings account of a low-
        income individual is equal--
                    ``(A) in the case of an individual described in 
                clause (i) or (ii) of paragraph (4)(A), to the full MSA 
                contribution amount (as defined in paragraph (2)); or
                    ``(B) in the case of any other individual, to 75 
                percent of the full MSA contribution amount.
            ``(2) Full msa contribution amount.--For purposes of this 
        subsection, the term `full MSA contribution amount' means, for 
        a year for an individual, an amount to be equivalent to the 
        full amount of the average deductible of a high-deductible 
        health plan (as defined in section 223(c)(2) of the Internal 
        Revenue Code of 1986) as determined by the Secretary.
            ``(3) No medicaid coverage for medicare-covered services.--
                    ``(A) In general.--In the case of an individual who 
                is eligible to be provided a contribution to a medical 
                savings account under this subsection, the individual 
                is not entitled to any payment under a State plan under 
                title XIX with respect to any benefits relating to 
                items and services for which coverage is provided under 
                this title.
                    ``(B) Construction.--Subparagraph (A) shall not 
                affect the continued provision of medical assistance 
                under title XIX for items and services, such as dental, 
                vision, or long-term care facility services, for which 
                benefits are not provided under this title regardless 
                of medical necessity.
            ``(4) Periodic payment.--The Secretary shall provide for 
        the contribution into medical savings accounts of amounts under 
        this subsection on an appropriate monthly or other periodic 
        basis.
            ``(5) Low-income individual defined.--
                    ``(A) In general.--For purposes of this section, 
                the term `low-income individual' means an individual 
                described in subsection (a)(1)--
                            ``(i) who meets the requirement of section 
                        1936(c)(6)(A)(ii) (relating to a full-benefit 
                        dual eligible individual);
                            ``(ii) whose income (as determined under 
                        section 1612 for purposes of the supplemental 
                        security income program, except as provided in 
                        subparagraph (B)) does not exceed 100 percent 
                        of the official income poverty line (referred 
                        to in section 1905(p)(1)) applicable to a 
                        family of the size involved; or
                            ``(iii) whose income (as so determined) 
                        exceeds 100 percent, but does not exceed 150 
                        percent, of such official income poverty line 
                        applicable to a family of the size involved.
                    ``(B) Application of special rule regarding 
                application of social security increases.--The 
                provisions of subparagraph (D) of section 1905(p)(2) 
                shall apply to determinations of income under 
                subparagraph (A) in the same manner they apply under 
                such section.
                    ``(C) Determination process.--The Secretary shall 
                specify a process for the determination of whether 
                individuals are low-income individuals.''.

SEC. 302. INCREASE IN MEDICARE ELIGIBILITY AGE.

    Section 226 of the Social Security Act (42 U.S.C. 426) is amended 
by adding at the end the following new subsection:
    ``(k) Increasing Medicare Qualifying Age.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any reference in this section or title XVIII (or title XIX 
        insofar as it refers to title XVIII) to `age 65' shall be 
        deemed a reference to the medicare qualifying age specified in 
        paragraph (2).
            ``(2) Medicare qualifying age specified.--The medicare 
        qualifying age specified in this paragraph is determined as 
        follows:
                    ``(A) In the case of an individual who attains 65 
                years of age before January 1, 2021, the medicare 
                qualifying age is 65 years of age.
                    ``(B) In the case of an individual who attains 65 
                years of age in a year after 2018 and before 2027, the 
                medicare qualifying age is the medicare qualifying age 
                specified in this paragraph for the previous year 
                increased by 2 months.
                    ``(C) In the case of an individual who attains 65 
                years of age--
                            ``(i) in the 2-year period beginning on 
                        January 1, 2027, the medicare qualifying age is 
                        67 years and 1 month; or
                            ``(ii) in a subsequent 2-year period 
                        beginning before 2087, the medicare qualifying 
                        age is the medicare qualifying age specified in 
                        this paragraph for the previous 2-year period 
                        (or, in the case of the first 2-year period, 
                        specified for 2026) increased by 1 month.
                    ``(D) In the case of an individual who attains 65 
                years of age on or after January 1, 2086, the medicare 
                qualifying age is the medicare qualifying age specified 
                in this paragraph is 69 years and 6 months.''.

SEC. 303. UNIFIED MEDICARE TRUST FUND.

    (a) In General.--The Federal Hospital Insurance Trust Fund 
(established under section 1817 of the Social Security Act) and the 
Federal Supplementary Medical Insurance Trust Fund (established under 
section 1841 of such Act) are hereby consolidated into a unified 
Medicare trust fund. Such trust fund shall have separate accounts for 
parts A, B, and D of such title and shall be administered by the same 
board of trustees that administers the current Trust Funds.
    (b) Construction.--Nothing in this section shall be construed as 
affecting the actual transfer of funds or computations of amounts of 
premiums under any part of the Medicare program.
    (c) Solvency.--The Medicare trustee shall establish a measure of 
program solvency for the Medicare program of total outlays as a measure 
of gross domestic product.

            Subtitle B--Changes in Current Medicare Program

SEC. 311. INCOME-RELATED REDUCTION IN PART D PREMIUM SUBSIDY.

    (a) Income-Related Reduction in Part D Premium Subsidy.--
            (1) In general.--Section 1860D-13(a) of the Social Security 
        Act (42 U.S.C. 1395w-113(a)) is amended by adding at the end 
        the following new paragraph:
            ``(7) Reduction in premium subsidy based on income.--
                    ``(A) In general.--In the case of an individual 
                whose modified adjusted gross income exceeds the 
                threshold amount applicable under paragraph (2) of 
                section 1839(i) (including application of paragraph (5) 
                of such section) for the calendar year, the monthly 
                amount of the premium subsidy applicable to the premium 
                under this section for a month after December 2010 
                shall be reduced (and the monthly beneficiary premium 
                shall be increased) by the monthly adjustment amount 
                specified in subparagraph (B).
                    ``(B) Monthly adjustment amount.--The monthly 
                adjustment amount specified in this subparagraph for an 
                individual for a month in a year is equal to the 
                product of--
                            ``(i) the quotient obtained by dividing--
                                    ``(I) the applicable percentage 
                                determined under paragraph (3)(C) of 
                                section 1839(i) (including application 
                                of paragraph (5) of such section) for 
                                the individual for the calendar year 
                                reduced by 25.5 percent; by
                                    ``(II) 25.5 percent; and
                            ``(ii) the base beneficiary premium (as 
                        computed under paragraph (2)).
                    ``(C) Modified adjusted gross income.--For purposes 
                of this paragraph, the term `modified adjusted gross 
                income' has the meaning given such term in subparagraph 
                (A) of section 1839(i)(4), determined for the taxable 
                year applicable under subparagraphs (B) and (C) of such 
                section.
                    ``(D) Determination by commissioner of social 
                security.--The Commissioner of Social Security shall 
                make any determination necessary to carry out the 
                income-related reduction in premium subsidy under this 
                paragraph.
                    ``(E) Procedures to assure correct income-related 
                reduction in premium subsidy.--
                            ``(i) Disclosure of base beneficiary 
                        premium.--Not later than September 15 of each 
                        year beginning with 2011, the Secretary shall 
                        disclose to the Commissioner of Social Security 
                        the amount of the base beneficiary premium (as 
                        computed under paragraph (2)) for the purpose 
                        of carrying out the income-related reduction in 
                        premium subsidy under this paragraph with 
                        respect to the following year.
                            ``(ii) Additional disclosure.--Not later 
                        than October 15 of each year beginning with 
                        2010, the Secretary shall disclose to the 
                        Commissioner of Social Security the following 
                        information for the purpose of carrying out the 
                        income-related reduction in premium subsidy 
                        under this paragraph with respect to the 
                        following year:
                                    ``(I) The modified adjusted gross 
                                income threshold applicable under 
                                paragraph (2) of section 1839(i) 
                                (including application of paragraph (5) 
                                of such section).
                                    ``(II) The applicable percentage 
                                determined under paragraph (3)(C) of 
                                section 1839(i) (including application 
                                of paragraph (5) of such section).
                                    ``(III) The monthly adjustment 
                                amount specified in subparagraph (B).
                                    ``(IV) Any other information the 
                                Commissioner of Social Security 
                                determines necessary to carry out the 
                                income-related reduction in premium 
                                subsidy under this paragraph.
                    ``(F) Rule of construction.--The formula used to 
                determine the monthly adjustment amount specified under 
                subparagraph (B) shall only be used for the purpose of 
                determining such monthly adjustment amount under such 
                subparagraph.''.
            (2) Collection of monthly adjustment amount.--Section 
        1860D-13(c) of the Social Security Act (42 U.S.C. 1395w-113(c)) 
        is amended--
                    (A) in paragraph (1), by striking ``(2) and (3)'' 
                and inserting ``(2), (3), and (4)''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Collection of monthly adjustment amount.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection or section 1854(d)(2), 
                subject to subparagraph (B), the amount of the income-
                related reduction in premium subsidy for an individual 
                for a month (as determined under subsection (a)(7)) 
                shall be paid through withholding from benefit payments 
                in the manner provided under section 1840.
                    ``(B) Agreements.--In the case where the monthly 
                benefit payments of an individual that are withheld 
                under subparagraph (A) are insufficient to pay the 
                amount described in such subparagraph, the Commissioner 
                of Social Security shall enter into agreements with the 
                Secretary, the Director of the Office of Personnel 
                Management, and the Railroad Retirement Board as 
                necessary in order to allow other agencies to collect 
                the amount described in subparagraph (A) that was not 
                withheld under such subparagraph.''.
    (b) Conforming Amendments.--
            (1) Medicare.--Part D of title XVIII of the Social Security 
        Act (42 U.S.C. 1395w-101 et seq.) is amended--
                    (A) in section 1860D-13(a)(1)--
                            (i) by redesignating subparagraph (F) as 
                        subparagraph (G);
                            (ii) in subparagraph (G), as redesignated 
                        by clause (i), by striking ``(D) and (E)'' and 
                        inserting ``(D), (E), and (F)''; and
                            (iii) by inserting after subparagraph (E) 
                        the following new subparagraph:
                    ``(F) Increase based on income.--The monthly 
                beneficiary premium shall be increased pursuant to 
                paragraph (7).''; and
                    (B) in section 1860D-15(a)(1)(B), by striking 
                ``paragraph (1)(B)'' and inserting ``paragraphs (1)(B) 
                and (1)(F)''.
            (2) Internal revenue code.--Section 6103(l)(20) of the 
        Internal Revenue Code of 1986 (relating to disclosure of return 
        information to carry out Medicare part B premium subsidy 
        adjustment) is amended--
                    (A) in the heading, by striking ``part b premium 
                subsidy adjustment'' and inserting ``parts b and d 
                premium subsidy adjustments'';
                    (B) in subparagraph (A)--
                            (i) in the matter preceding clause (i), by 
                        inserting ``or 1860D-13(a)(7)'' after 
                        ``1839(i)''; and
                            (ii) in clause (vii), by inserting after 
                        ``subsection (i) of such section'' the 
                        following: ``or under section 1860D-13(a)(7) of 
                        such Act''; and
                    (C) in subparagraph (B)--
                            (i) by inserting ``or such section 1860D-
                        13(a)(7)'' before the period at the end;
                            (ii) as amended by clause (i), by inserting 
                        ``or for the purpose of resolving tax payer 
                        appeals with respect to any such premium 
                        adjustment'' before the period at the end; and
                            (iii) by adding at the end the following 
                        new sentence: ``Officers, employees, and 
                        contractors of the Social Security 
                        Administration may disclose such return 
                        information to officers, employees, and 
                        contractors of the Department of Health and 
                        Human Services, the Office of Personnel 
                        Management, the Railroad Retirement Board, the 
                        Department of Justice, and the courts of the 
                        United States to the extent necessary to carry 
                        out the purposes described in the preceding 
                        sentence.''; and
                    (D) by adding at the end the following new 
                subparagraph:
                    ``(C) Timing of disclosure.--Return information 
                shall be disclosed to officers, employees, and 
                contractors of the Social Security Administration under 
                subparagraph (A) not later than the date that is 90 
                days prior to the date on which the taxpayer first 
                becomes entitled to benefits under part A of title 
                XVIII of the Social Security Act or eligible to enroll 
                for benefits under part B of such title.''.

SEC. 312. REDUCTION IN HOSPITAL MARKETBASKET INCREASES.

    Notwithstanding any other provision of law:
            (1) Outpatient hospital services.--For 2010 and each 
        succeeding year, the OPD fee schedule increase factor otherwise 
        computed under section 1833(t)(3)(C)(iv) of the Social Security 
        Act (42 U.S.C. 1395l(t)(3)(C)(iv)) shall be reduced by .4 
        percentage points.
            (2) Inpatient hospital services.--For fiscal year 2010 and 
        each succeeding fiscal year, the applicable percentage increase 
        otherwise computed under clauses (i) and (ii) of section 
        1886(b)(3)(B) of such Act (42 U.S.C. 1395ww(b)(3)(B)) shall be 
        reduced by .4 percentage points.

SEC. 313. ELIMINATION OF INDEXING OF INCOME THRESHOLDS FOR PART B 
              INCOME-RELATED PREMIUMS.

    (a) In General.--Section 1839(i) of the Social Security Act (42 
U.S.C. 1395r(i)) is amended by striking paragraph (5).
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to premiums for years beginning with 2010.

SEC. 314. REINSTATEMENT OF THE MEDICARE TRIGGER.

    (a) Reinstatement of the Medicare Trigger.--
            (1) Determinations of excess general revenue medicare 
        funding.--
                    (A) In general.--The Board of Trustees of each 
                medicare trust fund shall include in the annual reports 
                submitted under subsection (b)(2) of sections 1817 and 
                1841 of the Social Security Act (42 U.S.C. 1395i and 
                1395t)--
                            (i) the information described in paragraph 
                        (2); and
                            (ii) a determination as to whether there is 
                        projected to be excess general revenue medicare 
                        funding (as defined in paragraph (3)) for the 
                        fiscal year in which the report is submitted or 
                        for the previous fiscal year.
                    (B) Medicare funding warning.--For purposes of 
                section 1105(h) of title 31, United States Code, and 
                this subsection, an affirmative determination under 
                subparagraph (A)(i) in 2 consecutive annual reports 
                shall be treated as a medicare funding warning in the 
                year in which the second such report is made.
            (2) Information.--The information described in this 
        subsection for an annual report in a year is as follows:
                    (A) Projections of growth of general revenue 
                spending.--A statement of the general revenue medicare 
                funding as a percentage of the total medicare outlays 
                for each of the following:
                            (i) The previous fiscal year.
                            (ii) Previous fiscal years and as of 10, 
                        50, and 75 years after such year.
                    (B) Comparison with other growth trends.--A 
                comparison of the trend of such percentages with the 
                annual growth rate in the following:
                            (i) The gross domestic product.
                            (ii) Private health costs.
                            (iii) National health expenditures.
                            (iv) Other appropriate measures.
                    (C) Part d spending.--Expenditures, including 
                trends in expenditures, under part D of title XVIII of 
                the Social Security Act, as added by section 101 of the 
                Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173).
                    (D) Combined medicare trust fund analysis.--A 
                financial analysis of the combined medicare trust funds 
                if general revenue medicare funding were limited to the 
                percentage specified in paragraph (3)(A)(ii) of total 
                medicare outlays.
            (3) Definitions.--For purposes of this section:
                    (A) Excess general revenue medicare funding.--The 
                term ``excess general revenue medicare funding'' means, 
                with respect to a fiscal year, that--
                            (i) general revenue medicare funding (as 
                        defined in subparagraph (B)), expressed as a 
                        percentage of total medicare outlays (as 
                        defined in subparagraph (D)) for the fiscal 
                        year; exceeds
                            (ii) 45 percent.
                    (B) General revenue medicare funding.--The term 
                ``general revenue medicare funding'' means for a year--
                            (i) the total medicare outlays (as defined 
                        in subparagraph (D)) for the year; minus
                            (ii) the dedicated medicare financing 
                        sources (as defined in subparagraph (C)) for 
                        the year.
                    (C) Dedicated medicare financing sources.--The term 
                ``dedicated medicare financing sources'' means the 
                following:
                            (i) Hospital insurance tax.--Amounts 
                        appropriated to the Hospital Insurance Trust 
                        Fund under the third sentence of section 
                        1817(a) of the Social Security Act (42 U.S.C. 
                        1395i(a)) and amounts transferred to such Trust 
                        Fund under section 7(c)(2) of the Railroad 
                        Retirement Act of 1974 (45 U.S.C. 231f(c)(2)).
                            (ii) Taxation of certain oasdi benefits.--
                        Amounts appropriated to the Hospital Insurance 
                        Trust Fund under section 121(e)(1)(B) of the 
                        Social Security Amendments of 1983 (Public Law 
                        98-21), as inserted by section 13215(c) of the 
                        Omnibus Budget Reconciliation Act of 1993 
                        (Public Law 103-66).
                            (iii) State transfers.--The State share of 
                        amounts paid to the Federal Government by a 
                        State under section 1843 of the Social Security 
                        Act (42 U.S.C. 1395v) or pursuant to section 
                        1935(c) of such Act.
                            (iv) Premiums.--The following premiums:
                                    (I) Part a.--Premiums paid by non-
                                Federal sources under sections 1818 and 
                                section 1818A (42 U.S.C. 1395i-2 and 
                                1395i-2a) of such Act.
                                    (II) Part b.--Premiums paid by non-
                                Federal sources under section 1839 of 
                                such Act (42 U.S.C. 1395r), including 
                                any adjustments in premiums under such 
                                section.
                                    (III) Part d.--Monthly beneficiary 
                                premiums paid under part D of title 
                                XVIII of such Act, as added by section 
                                101 of the Medicare Prescription Drug, 
                                Improvement, and Modernization Act of 
                                2003 (Public Law 108-173), and MA 
                                monthly prescription drug beneficiary 
                                premiums paid under part C of such 
                                title insofar as they are attributable 
                                to basic prescription drug coverage.
                                    (IV) Description.--Premiums under 
                                subclauses (II) and (III) shall be 
                                determined without regard to any 
                                reduction in such premiums attributable 
                                to a beneficiary rebate under section 
                                1854(b)(1)(C) of such title, as amended 
                                by section 222(b)(1) of the Medicare 
                                Prescription Drug, Improvement, and 
                                Modernization Act of 2003 (Public Law 
                                108-173), and premiums under clause 
                                (iii) are deemed to include any amounts 
                                paid under section 1860D-13(b) of such 
                                title, as added by section 101 of the 
                                Medicare Prescription Drug, 
                                Improvement, and Modernization Act of 
                                2003 (Public Law 108-173).
                            (v) Gifts.--Amounts received by the 
                        medicare trust funds under section 201(i) of 
                        the Social Security Act (42 U.S.C. 401(i)).
                    (D) Total medicare outlays.--The term ``total 
                medicare outlays'' means total outlays from the 
                medicare trust funds and shall--
                            (i) include payments made to plans under 
                        part C of title XVIII of the Social Security 
                        Act that are attributable to any rebates under 
                        section 1854(b)(1)(C) of such Act (42 U.S.C. 
                        1395w-24(b)(1)(C)), as amended by section 
                        222(b)(1) of the Medicare Prescription Drug, 
                        Improvement, and Modernization Act of 2003 
                        (Public Law 108-173);
                            (ii) include administrative expenditures 
                        made in carrying out title XVIII of the Social 
                        Security Act and Federal outlays under section 
                        1935(b) of such Act, as added by section 
                        103(a)(2) of the Medicare Prescription Drug, 
                        Improvement, and Modernization Act of 2003 
                        (Public Law 108-173); and
                            (iii) offset outlays by the amount of fraud 
                        and abuse collections insofar as they are 
                        applied or deposited into a medicare trust 
                        fund.
                    (E) Medicare trust fund.--The term ``medicare trust 
                fund'' means--
                            (i) the Federal Hospital Insurance Trust 
                        Fund established under section 1817 of the 
                        Social Security Act (42 U.S.C. 1395i); and
                            (ii) the Federal Supplementary Medical 
                        Insurance Trust Fund established under section 
                        1841 of such Act (42 U.S.C. 1395t), including 
                        the Medicare Prescription Drug Account under 
                        such Trust Fund.
            (4) Conforming amendments.--
                    (A) Federal hospital insurance trust fund.--The 
                last sentence of section 1817(b)(2) (42 U.S.C. 
                1395i(b)(2)) is amended to read as follows: ``Each 
                report provided under paragraph (2) beginning with the 
                report in 2010 shall include the information specified 
                in section 314 of the Roadmap for America's Future Act 
                of 2010.''.
                    (B) Federal supplementary medical insurance trust 
                fund.--The last sentence of section 1841(b)(2) (42 
                U.S.C. 1395t(b)(2)) is amended to read as follows: 
                ``Each report provided under paragraph (2) beginning 
                with the report in 2010 shall include the information 
                specified in section 314 of the Roadmap for America's 
                Future Act of 2010.''.
            (5) Notice of medicare funding warning.--Whenever any 
        report described in subsection (a) contains a determination 
        that for the previous fiscal year reporting period there will 
        be excess general revenue medicare funding, Congress and the 
        President should address the matter under existing rules and 
        procedures.
    (b) Presidential Submission of Legislation.--
            (1) In general.--Section 1105(h) of title 31, United States 
        Code, is amended to read as follows:
    ``(h)(1) If there is a medicare funding warning under section 314 
of the Roadmap for America's Future Act of 2010 made in a year, the 
President shall submit to Congress, within the 15-day period beginning 
on the date of the budget submission to Congress under subsection (a) 
for the succeeding year, proposed legislation to respond to such 
warning.
    ``(2) Paragraph (1) does not apply if, during the year in which the 
warning is made, legislation is enacted which eliminates excess general 
revenue medicare funding (as defined in section 314 of the Roadmap for 
America's Future Act of 2010) for the previous fiscal year, as 
certified by the Board of Trustees of each medicare trust fund (as 
defined in section 314 of such Act) not later than 30 days after the 
date of the enactment of such legislation.''.
            (2) Sense of congress.--It is the sense of Congress that 
        legislation submitted pursuant to section 1105(h) of title 31, 
        United States Code, in a year should be designed to reduce 
        payments by 1 percent for services furnished in Medicare's fee-
        for-service sector for the fiscal year that begins in such 
        year.
    (c) Procedures in the House of Representatives.--
            (1) Introduction and referral of president's legislative 
        proposal.--
                    (A) Introduction.--In the case of a legislative 
                proposal submitted by the President pursuant to section 
                1105(h) of title 31, United States Code, within the 15-
                day period specified in paragraph (1) of such section, 
                the majority leader of the House of Representatives (or 
                his designee) and the minority leader of the House of 
                Representatives (or his designee) shall introduce such 
                proposal (by request), the title of which is as 
                follows: ``A bill to respond to a medicare funding 
                warning.''. Such bill shall be introduced within 3 
                legislative days after Congress receives such proposal.
                    (B) Referral.--Any legislation introduced pursuant 
                to paragraph (1) shall be referred to the appropriate 
                committees of the House of Representatives.
            (2) Direction to the appropriate house committees.--
                    (A) In general.--In the House, in any year during 
                which the President is required to submit proposed 
                legislation to Congress under section 1105(h) of title 
                31, United States Code, the appropriate committees 
                shall report medicare funding legislation by not later 
                than June 30 of such year.
                    (B) Medicare funding legislation.--For purposes of 
                this section, the term ``medicare funding legislation'' 
                means--
                            (i) legislation introduced pursuant to 
                        subsection (c)(1), but only if the legislative 
                        proposal upon which the legislation is based 
                        was submitted within the 15-day period referred 
                        to in such subsection; or
                            (ii) any bill the title of which is as 
                        follows: ``A bill to respond to a medicare 
                        funding warning.''.
                    (C) Certification.--With respect to any medicare 
                funding legislation or any amendment to such 
                legislation to respond to a medicare funding warning, 
                the chairman of the Committee on the Budget of the 
                House shall certify--
                            (i) whether or not such legislation 
                        eliminates excess general revenue medicare 
                        funding (as defined in subsection (a)(3)) for 
                        the previous fiscal year; and
                            (ii) with respect to such an amendment, 
                        whether the legislation, as amended, would 
                        reduce payments by 1 percent for services 
                        furnished in Medicare's fee-for-service sector 
                        for the fiscal year that begins in such year.
            (3) Fallback procedure for floor consideration if the house 
        fails to vote on final passage by july 30.--
                    (A) After July 30 of any year during which the 
                President is required to submit proposed legislation to 
                Congress under section 1105(h) of title 31, United 
                States Code, unless the House of Representatives has 
                voted on final passage of any medicare funding 
                legislation for which there is an affirmative 
                certification under paragraph (2)(C)(i), then, after 
                the expiration of not less than 30 calendar days (and 
                concurrently 5 legislative days), it is in order to 
                move to discharge any committee to which medicare 
                funding legislation which has such a certification and 
                which has been referred to such committee for 30 
                calendar days from further consideration of the 
                legislation.
                    (B) A motion to discharge may be made only by an 
                individual favoring the legislation, may be made only 
                if supported by one-fifth of the total membership of 
                the House (a quorum being present), and is highly 
                privileged in the House. Debate thereon shall be 
                limited to not more than one hour, the time to be 
                divided in the House equally between those favoring and 
                those opposing the motion. An amendment to the motion 
                is not in order, and it is not in order to move to 
                reconsider the vote by which the motion is agreed to or 
                disagreed to.
                    (C) Only one motion to discharge a particular 
                committee may be adopted under this subsection in any 
                session of a Congress.
                    (D) Notwithstanding subparagraph (A), it shall not 
                be in order to move to discharge a committee from 
                further consideration of medicare funding legislation 
                pursuant to this subsection during a session of a 
                Congress if, during the previous session of the 
                Congress, the House passed medicare funding legislation 
                for which there is an affirmative certification under 
                paragraph (2)(C)(i).
            (4) Floor consideration in the house of discharged 
        legislation.--
                    (A) In the House, not later than 3 legislative days 
                after any committee has been discharged from further 
                consideration of legislation under paragraph (3), the 
                Speaker shall resolve the House into the Committee of 
                the Whole for consideration of the legislation.
                    (B) The first reading of the legislation shall be 
                dispensed with. All points of order against 
                consideration of the legislation are waived. General 
                debate shall be confined to the legislation and shall 
                not exceed five hours, which shall be divided equally 
                between those favoring and those opposing the 
                legislation. After general debate the legislation shall 
                be considered for amendment under the five-minute rule. 
                During consideration of the legislation, no amendments 
                shall be in order in the House or in the Committee of 
                the Whole except those for which there has been an 
                affirmative certification under paragraph (2)(C)(ii). 
                All points of order against consideration of any such 
                amendment in the Committee of the Whole are waived. The 
                legislation, together with any amendments which shall 
                be in order, shall be considered as read. During the 
                consideration of the bill for amendment, the Chairman 
                of the Committee of the Whole may accord priority in 
                recognition on the basis of whether the Member offering 
                an amendment has caused it to be printed in the portion 
                of the Congressional Record designated for that purpose 
                in clause 8 of Rule XVIII of the Rules of the House of 
                Representatives. Debate on any amendment shall not 
                exceed one hour, which shall be divided equally between 
                those favoring and those opposing the amendment, and no 
                pro forma amendments shall be offered during the 
                debate. The total time for debate on all amendments 
                shall not exceed 10 hours. At the conclusion of 
                consideration of the legislation for amendment, the 
                Committee shall rise and report the legislation to the 
                House with such amendments as may have been adopted. 
                The previous question shall be considered as ordered on 
                the legislation and amendments thereto to final passage 
                without intervening motion except one motion to 
                recommit with or without instructions. If the Committee 
                of the Whole rises and reports that it has come to no 
                resolution on the bill, then on the next legislative 
                day the House shall, immediately after the third daily 
                order of business under clause 1 of Rule XIV of the 
                Rules of the House of Representatives, resolve into the 
                Committee of the Whole for further consideration of the 
                bill.
                    (C) All appeals from the decisions of the Chair 
                relating to the application of the Rules of the House 
                of Representatives to the procedure relating to any 
                such legislation shall be decided without debate.
                    (D) Except to the extent specifically provided in 
                the preceding provisions of this subsection, 
                consideration of any such legislation and amendments 
                thereto (or any conference report thereon) shall be 
                governed by the Rules of the House of Representatives 
                applicable to other bills and resolutions, amendments, 
                and conference reports in similar circumstances.
            (5) Legislative day defined.--As used in this section, the 
        term ``legislative day'' means a day on which the House of 
        Representatives is in session.
            (6) Restriction on waiver.--In the House, the provisions of 
        this section may be waived only by a rule or order proposing 
        only to waive such provisions.
            (7) Rulemaking power.--The provisions of this section are 
        enacted by the Congress--
                    (A) as an exercise of the rulemaking power of the 
                House of Representatives and, as such, shall be 
                considered as part of the rules of that House and shall 
                supersede other rules only to the extent that they are 
                inconsistent therewith; and
                    (B) with full recognition of the constitutional 
                right of that House to change the rules (so far as they 
                relate to the procedures of that House) at any time, in 
                the same manner, and to the same extent as in the case 
                of any other rule of that House.
    (d) Procedures in the Senate.--
            (1) Introduction and referral of president's legislative 
        proposal.--
                    (A) Introduction.--In the case of a legislative 
                proposal submitted by the President pursuant to section 
                1105(h) of title 31, United States Code, within the 15-
                day period specified in paragraph (1) of such section, 
                the majority leader and minority leader of the Senate 
                (or their designees) shall introduce such proposal (by 
                request), the title of which is as follows: ``A bill to 
                respond to a medicare funding warning.''. Such bill 
                shall be introduced within 3 days of session after 
                Congress receives such proposal.
                    (B) Referral.--Any legislation introduced pursuant 
                to paragraph (1) shall be referred to the Committee on 
                Finance.
            (2) Medicare funding legislation.--For purposes of this 
        section, the term ``medicare funding legislation'' means--
                    (A) legislation introduced pursuant to subsection 
                (d)(1), but only if the legislative proposal upon which 
                the legislation is based was submitted within the 15-
                day period referred to in such subsection; or
                    (B) any bill the title of which is as follows: ``A 
                bill to respond to a medicare funding warning.''.
            (3) Qualification for special procedures.--
                    (A) In general.--The special procedures set forth 
                in paragraphs (4) and (5) shall apply to medicare 
                funding legislation, as described in paragraph (2), 
                only if the legislation--
                            (i) is medicare funding legislation that is 
                        passed by the House of Representatives; or
                            (ii) contains matter within the 
                        jurisdiction of the Committee on Finance in the 
                        Senate.
                    (B) Failure to qualify for special procedures.--If 
                the medicare funding legislation does not satisfy 
                subparagraph (A), then the legislation shall be 
                considered under the ordinary procedures of the 
                Standing Rules of the Senate.
            (4) Discharge.--
                    (A) In general.--If the Committee on Finance has 
                not reported medicare funding legislation described in 
                subparagraph (3)(A) by June 30 of a year in which the 
                President is required to submit medicare funding 
                legislation to Congress under section 1105(h) of title 
                31, United States Code, then any Senator may move to 
                discharge the Committee of any single medicare funding 
                legislation measure. Only one such motion shall be in 
                order in any session of Congress.
                    (B) Debate limits.--Debate in the Senate on any 
                such motion to discharge, and all appeals in connection 
                therewith, shall be limited to not more than 2 hours. 
                The time shall be equally divided between, and 
                controlled by, the maker of the motion and the majority 
                leader, or their designees, except that in the event 
                the majority leader is in favor of such motion, the 
                time in opposition thereto shall be controlled by the 
                minority leader or the minority leader's designee. A 
                point of order under this subsection may be made at any 
                time. It is not in order to move to proceed to another 
                measure or matter while such motion (or the motion to 
                reconsider such motion) is pending.
                    (C) Amendments.--No amendment to the motion to 
                discharge shall be in order.
                    (D) Exception if certified legislation enacted.--
                Notwithstanding subparagraph (A), it shall not be in 
                order to discharge the Committee from further 
                consideration of medicare funding legislation pursuant 
                to this subsection during a session of a Congress if 
                the chairman of the Committee on the Budget of the 
                Senate certifies that medicare funding legislation has 
                been enacted that reduce payments by 1 percent for 
                services furnished in Medicare's fee-for-service sector 
                for the next fiscal year.
            (5) Consideration.--After the date on which the Committee 
        on Finance has reported medicare funding legislation described 
        in paragraph (3)(A), or has been discharged (under paragraph 
        (4)) from further consideration of, such legislation, it is in 
        order (even though a previous motion to the same effect has 
        been disagreed to) for any Member of the Senate to move to 
        proceed to the consideration of such legislation.
            (6) Rules of the senate.--This section is enacted by the 
        Senate--
                    (A) as an exercise of the rulemaking power of the 
                Senate and as such it is deemed a part of the rules of 
                the Senate, but applicable only with respect to the 
                procedure to be followed in the Senate in the case of a 
                bill described in this paragraph, and it supersedes 
                other rules only to the extent that it is inconsistent 
                with such rules; and
                    (B) with full recognition of the constitutional 
                right of the Senate to change the rules (so far as 
                relating to the procedure of the Senate) at any time, 
                in the same manner, and to the same extent as in the 
                case of any other rule of the Senate.

SEC. 315. ELIMINATING INEFFICIENCIES AND INCREASING CHOICE IN MEDICARE 
              ADVANTAGE.

    (a) Reimbursement Benchmarks.--In implementing section 1853 of the 
Social Security Act (42 U.S.C. 1395w-23)--
            (1) in calculating the benchmark amounts under subsection 
        (k), the Secretary shall use the average amount of local plan 
        bids; and
            (2) in addition to the amounts under subsection (k), the 
        Secretary may provide bonus payments to local plans that 
        implement care coordination programs, as defined by the 
        Secretary.

                  Subtitle C--Medical Liability Reform

             PART 1--ENACTING REAL MEDICAL LIABILITY REFORM

SEC. 321. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    (a) Timing of Lawsuit.--The time for the commencement of a health 
care lawsuit shall be 3 years after the date of manifestation of injury 
or 1 year after the claimant discovers, or through the use of 
reasonable diligence should have discovered, the injury, whichever 
occurs first. In no event shall the time for commencement of a health 
care lawsuit exceed 3 years after the date of manifestation of injury 
unless tolled for any of the following:
            (1) Upon proof of fraud.
            (2) Intentional concealment.
            (3) The presence of a foreign body, which has no 
        therapeutic or diagnostic purpose or effect, in the person of 
        the injured person.
    (b) Actions by Minors.--Actions by a minor shall be commenced 
within 3 years from the date of the alleged manifestation of injury 
except that actions by a minor under the full age of 6 years shall be 
commenced within 3 years of manifestation of injury or prior to the 
minor's 8th birthday, whichever provides a longer period. Such time 
limitation shall be tolled for minors for any period during which a 
parent or guardian and a health care provider or health care 
organization have committed fraud or collusion in the failure to bring 
an action on behalf of the injured minor.

SEC. 322. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses in 
Health Care Lawsuits.--In any health care lawsuit, nothing in this part 
shall limit a claimant's recovery of the full amount of the available 
economic damages, notwithstanding the limitation in subsection (b).
    (b) Additional Noneconomic Damages.--In any health care lawsuit, 
the amount of noneconomic damages, if available, may be as much as 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of separate claims or actions brought with 
respect to the same injury.
    (c) No Discount of Award for Noneconomic Damages.--For purposes of 
applying the limitation in subsection (b), future noneconomic damages 
shall not be discounted to present value. The jury shall not be 
informed about the maximum award for noneconomic damages. An award for 
noneconomic damages in excess of $250,000 shall be reduced either 
before the entry of judgment, or by amendment of the judgment after 
entry of judgment, and such reduction shall be made before accounting 
for any other reduction in damages required by law. If separate awards 
are rendered for past and future noneconomic damages and the combined 
awards exceed $250,000, the future noneconomic damages shall be reduced 
first.
    (d) Fair Share Rule.--In any health care lawsuit, each party shall 
be liable for that party's several share of any damages only and not 
for the share of any other person. Each party shall be liable only for 
the amount of damages allocated to such party in direct proportion to 
such party's percentage of responsibility. Whenever a judgment of 
liability is rendered as to any party, a separate judgment shall be 
rendered against each such party for the amount allocated to such 
party. For purposes of this section, the trier of fact shall determine 
the proportion of responsibility of each party for the claimant's harm.

SEC. 323. MAXIMIZING PATIENT RECOVERY.

    (a) Court Supervision of Share of Damages Actually Paid to 
Claimants.--In any health care lawsuit, the court shall supervise the 
arrangements for payment of damages to protect against conflicts of 
interest that may have the effect of reducing the amount of damages 
awarded that are actually paid to claimants. In particular, in any 
health care lawsuit in which the attorney for a party claims a 
financial stake in the outcome by virtue of a contingent fee, the court 
shall have the power to restrict the payment of a claimant's damage 
recovery to such attorney, and to redirect such damages to the claimant 
based upon the interests of justice and principles of equity. In no 
event shall the total of all contingent fees for representing all 
claimants in a health care lawsuit exceed the following limits:
            (1) 40 percent of the first $50,000 recovered by the 
        claimant(s).
            (2) 33\1/3\ percent of the next $50,000 recovered by the 
        claimant(s).
            (3) 25 percent of the next $500,000 recovered by the 
        claimant(s).
            (4) 15 percent of any amount by which the recovery by the 
        claimant(s) is in excess of $600,000.
    (b) Applicability.--The limitations in this section shall apply 
whether the recovery is by judgment, settlement, mediation, 
arbitration, or any other form of alternative dispute resolution. In a 
health care lawsuit involving a minor or incompetent person, a court 
retains the authority to authorize or approve a fee that is less than 
the maximum permitted under this section. The requirement for court 
supervision in the first two sentences of subsection (a) applies only 
in civil actions.

SEC. 324. ADDITIONAL HEALTH BENEFITS.

    In any health care lawsuit involving injury or wrongful death, any 
party may introduce evidence of collateral source benefits. If a party 
elects to introduce such evidence, any opposing party may introduce 
evidence of any amount paid or contributed or reasonably likely to be 
paid or contributed in the future by or on behalf of the opposing party 
to secure the right to such collateral source benefits. No provider of 
collateral source benefits shall recover any amount against the 
claimant or receive any lien or credit against the claimant's recovery 
or be equitably or legally subrogated to the right of the claimant in a 
health care lawsuit involving injury or wrongful death. This section 
shall apply to any health care lawsuit that is settled as well as a 
health care lawsuit that is resolved by a fact finder. This section 
shall not apply to section 1862(b) (42 U.S.C. 1395y(b)) or section 
1902(a)(25) (42 U.S.C. 1396a(a)(25)) of the Social Security Act.

SEC. 325. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable State or Federal law, be awarded against any person in a 
health care lawsuit only if it is proven by clear and convincing 
evidence that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid unnecessary 
injury that such person knew the claimant was substantially certain to 
suffer. In any health care lawsuit where no judgment for compensatory 
damages is rendered against such person, no punitive damages may be 
awarded with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit as 
initially filed. A court may allow a claimant to file an amended 
pleading for punitive damages only upon a motion by the claimant and 
after a finding by the court, upon review of supporting and opposing 
affidavits or after a hearing, after weighing the evidence, that the 
claimant has established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the request of any 
party in a health care lawsuit, the trier of fact shall consider in a 
separate proceeding--
            (1) whether punitive damages are to be awarded and the 
        amount of such award; and
            (2) the amount of punitive damages following a 
        determination of punitive liability.
    (b) Separate Proceeding.--If a separate proceeding is requested, 
evidence relevant only to the claim for punitive damages, as determined 
by applicable State law, shall be inadmissible in any proceeding to 
determine whether compensatory damages are to be awarded.
    (c) Determining Amount of Punitive Damages.--
            (1) Factors considered.--In determining the amount of 
        punitive damages, if awarded, in a health care lawsuit, the 
        trier of fact shall consider only the following--
                    (A) the severity of the harm caused by the conduct 
                of such party;
                    (B) the duration of the conduct or any concealment 
                of it by such party;
                    (C) the profitability of the conduct to such party;
                    (D) the number of products sold or medical 
                procedures rendered for compensation, as the case may 
                be, by such party, of the kind causing the harm 
                complained of by the claimant;
                    (E) any criminal penalties imposed on such party, 
                as a result of the conduct complained of by the 
                claimant; and
                    (F) the amount of any civil fines assessed against 
                such party as a result of the conduct complained of by 
                the claimant.
            (2) Maximum award.--The amount of punitive damages, if 
        awarded, in a health care lawsuit may be as much as $250,000 or 
        as much as two times the amount of economic damages awarded, 
        whichever is greater. The jury shall not be informed of this 
        limitation.

SEC. 326. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO CLAIMANTS IN 
              HEALTH CARE LAWSUITS.

    (a) In General.--In any health care lawsuit, if an award of future 
damages, without reduction to present value, equaling or exceeding 
$50,000 is made against a party with sufficient insurance or other 
assets to fund a periodic payment of such a judgment, the court shall, 
at the request of any party, enter a judgment ordering that the future 
damages be paid by periodic payments. In any health care lawsuit, the 
court may be guided by the Uniform Periodic Payment of Judgments Act 
promulgated by the National Conference of Commissioners on Uniform 
State Laws.
    (b) Applicability.--This section applies to all actions which have 
not been first set for trial or retrial before the effective date of 
this part.

SEC. 327. DEFINITIONS.

    In this part:
            (1) Alternative dispute resolution; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of health care lawsuits 
        in a manner other than through a civil action brought in a 
        State or Federal court.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care lawsuit, including a person who asserts or 
        claims a right to legal or equitable contribution, indemnity, 
        or subrogation, arising out of a health care liability claim or 
        action, and any person on whose behalf such a claim is asserted 
        or such an action is brought, whether deceased, incompetent, or 
        a minor.
            (3) Collateral source benefits.--The term ``collateral 
        source benefits'' means any amount paid or reasonably likely to 
        be paid in the future to or on behalf of the claimant, or any 
        service, product, or other benefit provided or reasonably 
        likely to be provided in the future to or on behalf of the 
        claimant, as a result of the injury or wrongful death, pursuant 
        to--
                    (A) any State or Federal health, sickness, income-
                disability, accident, or workers' compensation law;
                    (B) any health, sickness, income-disability, or 
                accident insurance that provides health benefits or 
                income-disability coverage;
                    (C) any contract or agreement of any group, 
                organization, partnership, or corporation to provide, 
                pay for, or reimburse the cost of medical, hospital, 
                dental, or income-disability benefits; and
                    (D) any other publicly or privately funded program.
            (4) Compensatory damages.--The term ``compensatory 
        damages'' means objectively verifiable monetary losses incurred 
        as a result of the provision of, use of, or payment for (or 
        failure to provide, use, or pay for) health care services or 
        medical products, such as past and future medical expenses, 
        loss of past and future earnings, cost of obtaining domestic 
        services, loss of employment, and loss of business or 
        employment opportunities, damages for physical and emotional 
        pain, suffering, inconvenience, physical impairment, mental 
        anguish, disfigurement, loss of enjoyment of life, loss of 
        society and companionship, loss of consortium (other than loss 
        of domestic service), hedonic damages, injury to reputation, 
        and all other nonpecuniary losses of any kind or nature. The 
        term ``compensatory damages'' includes economic damages and 
        noneconomic damages, as such terms are defined in this section.
            (5) Contingent fee.--The term ``contingent fee'' includes 
        all compensation to any person or persons which is payable only 
        if a recovery is effected on behalf of one or more claimants.
            (6) Economic damages.--The term ``economic damages'' means 
        objectively verifiable monetary losses incurred as a result of 
        the provision of, use of, or payment for (or failure to 
        provide, use, or pay for) health care services or medical 
        products, such as past and future medical expenses, loss of 
        past and future earnings, cost of obtaining domestic services, 
        loss of employment, and loss of business or employment 
        opportunities.
            (7) Health care lawsuit.--The term ``health care lawsuit'' 
        means any health care liability claim concerning the provision 
        of health care goods or services or any medical product 
        affecting interstate commerce, or any health care liability 
        action concerning the provision of health care goods or 
        services or any medical product affecting interstate commerce, 
        brought in a State or Federal court or pursuant to an 
        alternative dispute resolution system, against a health care 
        provider, a health care organization, or the manufacturer, 
        distributor, supplier, marketer, promoter, or seller of a 
        medical product, regardless of the theory of liability on which 
        the claim is based, or the number of claimants, plaintiffs, 
        defendants, or other parties, or the number of claims or causes 
        of action, in which the claimant alleges a health care 
        liability claim. Such term does not include a claim or action 
        which is based on criminal liability; which seeks civil fines 
        or penalties paid to Federal, State, or local government; or 
        which is grounded in antitrust.
            (8) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought in a State or 
        Federal court or pursuant to an alternative dispute resolution 
        system, against a health care provider, a health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, regardless 
        of the theory of liability on which the claim is based, or the 
        number of plaintiffs, defendants, or other parties, or the 
        number of causes of action, in which the claimant alleges a 
        health care liability claim.
            (9) Health care liability claim.--The term ``health care 
        liability claim'' means a demand by any person, whether or not 
        pursuant to ADR, against a health care provider, health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, including, 
        but not limited to, third-party claims, cross-claims, counter-
        claims, or contribution claims, which are based upon the 
        provision of, use of, or payment for (or the failure to 
        provide, use, or pay for) health care services or medical 
        products, regardless of the theory of liability on which the 
        claim is based, or the number of plaintiffs, defendants, or 
        other parties, or the number of causes of action.
            (10) Health care organization.--The term ``health care 
        organization'' means any person or entity which is obligated to 
        provide or pay for health benefits under any health plan, 
        including any person or entity acting under a contract or 
        arrangement with a health care organization to provide or 
        administer any health benefit.
            (11) Health care provider.--The term ``health care 
        provider'' means any person or entity required by State or 
        Federal laws or regulations to be licensed, registered, or 
        certified to provide health care services, and being either so 
        licensed, registered, or certified, or exempted from such 
        requirement by other statute or regulation.
            (12) Health care goods or services.--The term ``health care 
        goods or services'' means any goods or services provided by a 
        health care organization, provider, or by any individual 
        working under the supervision of a health care provider, that 
        relates to the diagnosis, prevention, or treatment of any human 
        disease or impairment, or the assessment or care of the health 
        of human beings.
            (13) Malicious intent to injure.--The term ``malicious 
        intent to injure'' means intentionally causing or attempting to 
        cause physical injury other than providing health care goods or 
        services.
            (14) Medical product.--The term ``medical product'' means a 
        drug, device, or biological product intended for humans, and 
        the terms ``drug'', ``device'', and ``biological product'' have 
        the meanings given such terms in sections 201(g)(1) and 201(h) 
        of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321(g)(1) 
        and (h)) and section 351(a) of the Public Health Service Act 
        (42 U.S.C. 262(a)), respectively, including any component or 
        raw material used therein, but excluding health care services.
            (15) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages for physical and emotional pain, suffering, 
        inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), hedonic damages, injury to reputation, and all other 
        nonpecuniary losses of any kind or nature.
            (16) Punitive damages.--The term ``punitive damages'' means 
        damages awarded, for the purpose of punishment or deterrence, 
        and not solely for compensatory purposes, against a health care 
        provider, health care organization, or a manufacturer, 
        distributor, or supplier of a medical product. Punitive damages 
        are neither economic nor noneconomic damages.
            (17) Recovery.--The term ``recovery'' means the net sum 
        recovered after deducting any disbursements or costs incurred 
        in connection with prosecution or settlement of the claim, 
        including all costs paid or advanced by any person. Costs of 
        health care incurred by the plaintiff and the attorneys' office 
        overhead costs or charges for legal services are not deductible 
        disbursements or costs for such purpose.
            (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, the Trust Territory of the Pacific Islands, 
        and any other territory or possession of the United States, or 
        any political subdivision thereof.

SEC. 328. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) In general.--To the extent that title XXI of the Public 
        Health Service Act establishes a Federal rule of law applicable 
        to a civil action brought for a vaccine-related injury or 
        death--
                    (A) this part does not affect the application of 
                the rule of law to such an action; and
                    (B) any rule of law prescribed by this part in 
                conflict with a rule of law of such title XXI shall not 
                apply to such action.
            (2) Application.--If there is an aspect of a civil action 
        brought for a vaccine-related injury or death to which a 
        Federal rule of law under title XXI of the Public Health 
        Service Act does not apply, then this part or otherwise 
        applicable law (as determined under this part) will apply to 
        such aspect of such action.
    (b) Other Federal Law.--Except as provided in this section, nothing 
in this part shall be deemed to affect any defense available to a 
defendant in a health care lawsuit or action under any other provision 
of Federal law.

SEC. 329. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health care 
lawsuits set forth in this part preempt, subject to subsections (b) and 
(c), State law to the extent that State law prevents the application of 
any provisions of law established by or under this part. The provisions 
governing health care lawsuits set forth in this part supersede chapter 
171 of title 28, United States Code, to the extent that such chapter--
            (1) provides for a greater amount of damages or contingent 
        fees, a longer period in which a health care lawsuit may be 
        commenced, or a reduced applicability or scope of periodic 
        payment of future damages, than provided in this part; or
            (2) prohibits the introduction of evidence regarding 
        collateral source benefits, or mandates or permits subrogation 
        or a lien on collateral source benefits.
    (b) Protection of States' Rights and Other Laws.--
            (1) In general.--Any issue that is not governed by any 
        provision of law established by or under this part (including 
        State standards of negligence) shall be governed by otherwise 
        applicable State or Federal law.
            (2) Preemption.--This part shall not preempt or supersede 
        any State or Federal law that imposes greater procedural or 
        substantive protections for health care providers and health 
        care organizations from liability, loss, or damages than those 
        provided by this part or create a cause of action.
    (c) State Flexibility.--No provision of this part shall be 
construed to preempt--
            (1) any State law (whether effective before, on, or after 
        the date of the enactment of this Act) that specifies a 
        particular monetary amount of compensatory or punitive damages 
        (or the total amount of damages) that may be awarded in a 
        health care lawsuit, regardless of whether such monetary amount 
        is greater or lesser than is provided for under this part, 
        notwithstanding section 323(a); or
            (2) any defense available to a party in a health care 
        lawsuit under any other provision of State or Federal law.

SEC. 330. APPLICABILITY; EFFECTIVE DATE.

    This part shall apply to any health care lawsuit brought in a 
Federal or State court, or subject to an alternative dispute resolution 
system, that is initiated on or after the date of the enactment of this 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of this Act shall be 
governed by the applicable statute of limitations provisions in effect 
at the time the injury occurred.

                      PART 2--ENDING LAWSUIT ABUSE

SEC. 331. STATE GRANTS TO CREATE HEALTH COURT SOLUTIONS.

    Part P of title III of the Public Health Service Act (42 U.S.C. 
280g et seq.) is amended by adding at the end the following:

``SEC. 399R. STATE GRANTS TO CREATE HEALTH COURT SOLUTIONS.

    ``(a) In General.--The Secretary may award grants to States for the 
development, implementation, and evaluation of alternatives to current 
tort litigation that comply with this section, for the resolution of 
disputes concerning injuries allegedly caused by health care providers 
or health care organizations.
    ``(b) Conditions for Demonstration Grants.--
            ``(1) Application.--To be eligible to receive a grant under 
        this section, a State shall submit to the Secretary an 
        application at such time, in such manner, and containing such 
        information as may be required by the Secretary. A grant shall 
        be awarded under this section on such terms and conditions as 
        the Secretary determines appropriate.
            ``(2) State requirements.--To be eligible to receive a 
        grant under this section, a State shall--
                    ``(A) develop and implement an alternative to 
                current tort litigation for resolving disputes over 
                injuries allegedly caused by health care providers or 
                health care organizations based on one or more of the 
                models described in subsection (d); and
                    ``(B) implement policies that provide for a 
                reduction in health care errors through the collection 
                and analysis by organizations that engage in voluntary 
                efforts to improve patient safety and the quality of 
                health care delivery, of patient safety data related to 
                disputes resolved under the alternatives under 
                subparagraph (A).
            ``(3) Demonstration of effectiveness.--To be eligible to 
        receive a grant under subsection (a), a State shall demonstrate 
        how the proposed alternative to be implemented under paragraph 
        (2)(A) will--
                    ``(A) make the medical liability system of the 
                State more reliable through the prompt and fair 
                resolution of disputes;
                    ``(B) encourage the early disclosure of health care 
                errors;
                    ``(C) enhance patient safety; and
                    ``(D) maintain access to medical liability 
                insurance.
            ``(4) Sources of compensation.--To be eligible to receive a 
        grant under subsection (a), a State shall identify the sources 
        from, and methods by which, compensation would be paid for 
        medical liability claims resolved under the proposed 
        alternative to current tort litigation implemented under 
        paragraph (2)(A). Funding methods shall, to the extent 
        practicable, provide financial incentives for activities that 
        improve patient safety.
            ``(5) Scope.--
                    ``(A) In general.--To be eligible to receive a 
                grant under subsection (a), a State shall utilize the 
                proposed alternative identified under paragraph (2)(A) 
                for the resolution of all types of disputes concerning 
                injuries allegedly caused by health care providers or 
                health care organizations.
                    ``(B) Current state efforts to establish 
                alternative to tort litigation.--
                            ``(i) In general.--Nothing in this section 
                        shall be construed to limit the efforts that 
                        any State has made prior to the date of 
                        enactment of this section to establish any 
                        alternative to tort litigation.
                            ``(ii) Alternative for practice areas or 
                        injuries.--In the case of a State that has 
                        established an alternative to tort litigation 
                        for a certain area of health care practice or a 
                        category of injuries, the alternative selected 
                        as provided for in this section shall 
                        supplement not replace or invalidate such 
                        established alternative unless the State 
                        intends otherwise.
            ``(6) Notification of patients.--To be eligible to receive 
        a grant under subsection (a), the State shall demonstrate how 
        patients will be notified when they are receiving health care 
        services that fall within the scope of the alternative selected 
        under this section by the State to current tort litigation.
    ``(c) Representation by Counsel.--A State that receives a grant 
under this section may not preclude any party to a dispute that falls 
within the jurisdiction of the alternative to current tort litigation 
that is implemented under the grant from obtaining legal representation 
at any point during the consideration of the claim under such 
alternative.
    ``(d) Models.--
            ``(1) In general.--The models in this section are the 
        following:
            ``(2) Expert panel review and early offer guidelines.--
                    ``(A) In general.--A State may use amounts received 
                under a grant under this section to develop and 
                implement an expert panel and early offer review system 
                that meets the requirements of this paragraph.
                    ``(B) Establishment of panel.--Under the system 
                under this paragraph, the State shall establish an 
                expert panel to review any disputes concerning injuries 
                allegedly caused by health care providers or health 
                care organizations according to the guidelines 
                described in this paragraph.
                    ``(C) Composition.--
                            ``(i) In general.--An expert panel under 
                        this paragraph shall be composed of 3 medical 
                        experts (either physicians or health care 
                        professionals) and 3 attorneys to be appointed 
                        by the head of the State agency responsible for 
                        health.
                            ``(ii) Licensure and expertise.--Each 
                        physician or health care professional appointed 
                        to an expert panel under clause (i) shall--
                                    ``(I) be appropriately credentialed 
                                or licensed in the State in which the 
                                dispute takes place to deliver health 
                                care services; and
                                    ``(II) typically treat the 
                                condition, make the diagnosis, or 
                                provide the type of treatment that is 
                                under review.
                            ``(iii) Independence.--
                                    ``(I) In general.--Subject to 
                                subclause (II), each individual 
                                appointed to an expert panel under this 
                                paragraph shall--
                                            ``(aa) not have a material 
                                        familial, financial, or 
                                        professional relationship with 
                                        a party involved in the dispute 
                                        reviewed by the panel; and
                                            ``(bb) not otherwise have a 
                                        conflict of interest with such 
                                        a party.
                                    ``(II) Exception.--Nothing in 
                                subclause (I) shall be construed to 
                                prohibit an individual who has staff 
                                privileges at an institution where the 
                                treatment involved in the dispute was 
                                provided from serving as a member of an 
                                expert panel merely on the basis of 
                                such affiliation, if the affiliation is 
                                disclosed to the parties and neither 
                                party objects.
                            ``(iv) Practicing health care professional 
                        in same field.--
                                    ``(I) In general.--In a dispute 
                                before an expert panel that involves 
                                treatment, or the provision of items or 
                                services--
                                            ``(aa) by a physician, the 
                                        medical experts on the expert 
                                        panel shall be practicing 
                                        physicians (allopathic or 
                                        osteopathic) of the same or 
                                        similar specialty as a 
                                        physician who typically treats 
                                        the condition, makes the 
                                        diagnosis, or provides the type 
                                        of treatment under review; or
                                            ``(bb) by a health care 
                                        professional other than a 
                                        physician, at least two medical 
                                        experts on the expert panel 
                                        shall be practicing physicians 
                                        (allopathic or osteopathic) of 
                                        the same or similar specialty 
                                        as the health care professional 
                                        who typically treats the 
                                        condition, makes the diagnosis, 
                                        or provides the type of 
                                        treatment under review, and, if 
                                        determined appropriate by the 
                                        State agency, the third medical 
                                        expert shall be a practicing 
                                        health care professional (other 
                                        than such a physician) of such 
                                        a same or similar specialty.
                                    ``(II) Practicing defined.--In this 
                                paragraph, the term `practicing' means, 
                                with respect to an individual who is a 
                                physician or other health care 
                                professional, that the individual 
                                provides health care services to 
                                individual patients on average at least 
                                2 days a week.
                            ``(v) Pediatric expertise.--In the case of 
                        dispute relating to a child, at least 1 medical 
                        expert on the expert panel shall have expertise 
                        described in clause (iv)(I) in pediatrics.
                    ``(D) Determination.--After a review, an expert 
                panel shall make a determination as to the liability of 
                the parties involved and compensation based on a 
                schedule of compensation that is developed by the 
                panel. Such a schedule shall at least include--
                            ``(i) payment for the net economic loss 
                        incurred by the patient, on a periodic basis, 
                        reduced by any payments received by the patient 
                        under--
                                    ``(I) any health or accident 
                                insurance;
                                    ``(II) any wage or salary 
                                continuation plan; or
                                    ``(III) any disability income 
                                insurance;
                            ``(ii) payment for the non-economic damages 
                        incurred by the patient, if appropriate for the 
                        injury, based on a defined payment schedule 
                        developed by the State, in consultation with 
                        relevant experts and with the Secretary;
                            ``(iii) reasonable attorney's fees; and
                            ``(iv) regular updates of the schedule 
                        under clause (ii) as necessary.
                    ``(E) Acceptance.--If the parties to a dispute who 
                come before an expert panel under this paragraph accept 
                the determination of the expert panel concerning 
                liability and compensation, such compensation shall be 
                paid to the claimant and the claimant shall agree to 
                forgo any further action against the health care 
                providers or health care organizations involved.
                    ``(F) Failure to accept.--If any party decides not 
                to accept the expert panel's determination under this 
                paragraph, the State may choose whether to allow the 
                panel to review the determination de novo, with 
                deference, or to provide an opportunity for parties to 
                reject the determination of the panel.
                    ``(G) Review by state court after exhaustion of 
                administrative remedies.--
                            ``(i) Right to file.--If the State elects 
                        not to permit the expert panel under this 
                        paragraph to conduct its own reviews of 
                        determinations, or if the State elects to 
                        permit such reviews but a party is not 
                        satisfied with the final decision of the panel 
                        after such a review, the party shall have the 
                        right to file a claim relating to the injury 
                        involved in a State court of competent 
                        jurisdiction.
                            ``(ii) Forfeit of awards.--Any party filing 
                        an action in a State court under clause (i) 
                        shall forfeit any compensation award made under 
                        subparagraph (C).
                            ``(iii) Admissibility.--The determinations 
                        of the expert panel pursuant to a review under 
                        subparagraph (C) shall be admissible into 
                        evidence in any State court proceeding under 
                        this subparagraph.
            ``(3) Administrative health care tribunals.--
                    ``(A) In general.--A State may use amounts received 
                under a grant under this section to develop and 
                implement an administrative health care tribunal system 
                under which the parties involved shall have the right 
                to request a hearing to review any dispute concerning 
                injuries allegedly caused by health care providers or 
                health care organizations before an administrative 
                health care tribunal established by the State involved.
                    ``(B) Requirements.--In establishing an 
                administrative health care tribunal under this 
                paragraph, a State shall--
                            ``(i) ensure that such tribunals are 
                        presided over by special judges with health 
                        care expertise who meet applicable State 
                        standards for judges and who agree to preside 
                        over such court voluntarily;
                            ``(ii) provide authority to such judges to 
                        make binding rulings, rendered in written 
                        decisions, on standards of care, causation, 
                        compensation, and related issues with reliance 
                        on independent expert witnesses commissioned by 
                        the tribunal;
                            ``(iii) establish a legal standard for the 
                        tribunal that shall be the same as the standard 
                        that would apply in the State court of 
                        competent jurisdiction which would otherwise 
                        handle the claim; and
                            ``(iv) provide for an appeals process to 
                        allow for review of decisions by State courts.
                    ``(C) Determination.--After a tribunal conducts a 
                review under this paragraph, the tribunal shall make a 
                determination as to the liability of the parties 
                involved and the amount of compensation that should be 
                paid based on a schedule of compensation developed by 
                the tribunal. Such a schedule shall at a minimum 
                include--
                            ``(i) payment for the net economic loss 
                        incurred by the patient, on a periodic basis, 
                        reduced by any payments received by the patient 
                        under--
                                    ``(I) any health or accident 
                                insurance;
                                    ``(II) any wage or salary 
                                continuation plan; or
                                    ``(III) any disability income 
                                insurance;
                            ``(ii) payment for the non-economic damages 
                        incurred by the patient, if appropriate for the 
                        injury, based on a defined payment schedule 
                        developed by the State in consultation with 
                        relevant experts and with the Secretary;
                            ``(iii) reasonable attorney's fees; and
                            ``(iv) regular updates of the schedule 
                        under clause (ii) as necessary.
                    ``(D) Review by state court after exhaustion of 
                administrative remedies.--
                            ``(i) Right to file.--Nothing in this 
                        paragraph shall be construed to prohibit any 
                        individual who is not satisfied with the 
                        determinations of a tribunal under this 
                        paragraph, from filing a claim for the injury 
                        involved in a State court of competent 
                        jurisdiction.
                            ``(ii) Forfeit of award.--Any party filing 
                        an action in a State court under clause (i) 
                        shall forfeit any compensation award made under 
                        subparagraph (C).
                            ``(iii) Admissibility.--The determinations 
                        of the tribunal under subparagraph (C) shall be 
                        admissible into evidence in any State court 
                        proceeding under this subparagraph.
            ``(4) Expert panel review and administrative health care 
        tribunal combination model.--
                    ``(A) In general.--A State may use amounts received 
                under a grant under this section to develop and 
                implement an expert panel review and administrative 
                health care tribunal combination system to review any 
                dispute concerning injuries allegedly caused by health 
                care providers or health care organizations. Under such 
                system, a dispute concerning injuries allegedly caused 
                by health care providers or health care organizations 
                shall proceed through the procedures described in this 
                subparagraph prior to the submission of such dispute to 
                a State court.
                    ``(B) General procedure.--
                            ``(i) Establishment of expert panel.--Prior 
                        to submitting any dispute described in 
                        subparagraph (A) to an administrative health 
                        care tribunal under the system established 
                        under this paragraph, the State shall establish 
                        an expert panel (in accordance with 
                        subparagraph (C)) to review the allegations 
                        involved in such dispute.
                            ``(ii) Referral to tribunal.--If either 
                        party to a dispute described in clause (i) 
                        fails to accept the determination of the expert 
                        panel, the dispute shall then be referred to an 
                        administrative health care tribunal (in 
                        accordance with subparagraph (D).
                    ``(C) Expert review panel.--
                            ``(i) In general.--The provisions of 
                        paragraph (2) shall apply with respect to the 
                        establishment and operation of an expert review 
                        panel under this subparagraph, except that the 
                        subparagraphs (F) and (G) of such paragraph 
                        shall not apply.
                            ``(ii) Failure to accept determination of 
                        panel.--If any party to a dispute before an 
                        expert panel under this subparagraph refuses to 
                        accept the panel's determination, the dispute 
                        shall be referred to an administrative health 
                        care tribunal under subparagraph (D).
                    ``(D) Administrative health care tribunals.--
                            ``(i) In general.--Upon the failure of any 
                        party to accept the determination of an expert 
                        panel under subparagraph (C), the parties shall 
                        request a hearing concerning the liability or 
                        compensation involved by an administrative 
                        health care tribunal established by the State 
                        involved under this subparagraph.
                            ``(ii) Requirements.--The provisions of 
                        paragraph (3) shall apply with respect to the 
                        establishment and operation of an 
                        administrative health care tribunal under this 
                        subparagraph.
                            ``(iii) Forfeit of awards.--Any party 
                        proceeding to the second step-administrative 
                        health care tribunal-under this model shall 
                        forfeit any compensation awarded by the expert 
                        panel.
                            ``(iv) Admissibility.--The determinations 
                        of the expert panel under subparagraph (C) 
                        shall be admissible into evidence in any 
                        administrative health care tribunal proceeding 
                        under this subparagraph.
                    ``(E) Right to file.--Nothing in this paragraph 
                shall be construed to prohibit any individual who is 
                not satisfied with the determination of the tribunal 
                (after having proceeded through both the expert panel 
                under subparagraph (C) and the tribunal under 
                subparagraph (D)) from filing a claim for the injury 
                involved in a State court of competent jurisdiction.
                    ``(F) Admissibility.--The determinations of both 
                the expert panel and the tribunal under this paragraph 
                shall be admissible into evidence in any State court 
                proceeding under this paragraph.
                    ``(G) Forfeit of awards.--Any party filing an 
                action in State court under subparagraph (E) shall 
                forfeit any compensation award made by both the expert 
                panel and the administrative health care tribunal under 
                this paragraph.
    ``(e) Definitions.--In this section:
            ``(1) Current tort litigation.--The term `current tort 
        litigation' means the tort litigation system existing in the 
        State on the date on which the State submits an application 
        under subsection (b)(1), for the resolution of disputes 
        concerning injuries allegedly caused by health care providers 
        or health care organizations.
            ``(2) Health care organization.--The term `health care 
        organization' means any individual or entity that is obligated 
        to provide, pay for, or administer health benefits under any 
        health plan.
            ``(3) Net economic loss.--The term `net economic loss' 
        means--
                    ``(A) reasonable expenses incurred for products, 
                services and accommodations needed for health care, 
                training and other remedial treatment and care of an 
                injured individual;
                    ``(B) reasonable and appropriate expenses for 
                rehabilitation treatment and occupational training;
                    ``(C) 100 percent of the loss of income from work 
                that an injured individual would have performed if not 
                injured, reduced by any income from substitute work 
                actually performed; and
                    ``(D) reasonable expenses incurred in obtaining 
                ordinary and necessary services to replace services an 
                injured individual would have performed for the benefit 
                of the individual or the family of such individual if 
                the individual had not been injured.
            ``(4) Non-economic damages.--The term `non-economic 
        damages' means losses for physical and emotional pain, 
        suffering, inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), injury to reputation, and all other non-pecuniary 
        losses of any kind or nature, to the extent permitted under 
        State law.
    ``(f) Funding.--
            ``(1) One-time increase in medicaid payment.--In the case 
        of a State awarded a grant to carry out this section, the total 
        amount of the Federal payment determined for the State under 
        section 1913 of the Social Security Act (as amended by section 
        401) for fiscal year 2011 (in addition to the any increase 
        applicable for that fiscal year under section 203(b) but 
        determined without regard to any such increase) shall be 
        increased by an amount equal to 1 percent of the total amount 
        of payments made to the State for fiscal year 2010 under 
        section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) 
        for purposes of carrying out a grant awarded under this 
        section. Amounts paid to a State pursuant to this subsection 
        shall remain available until expended.
            ``(2) Authorization of appropriations.--There are 
        authorized to be appropriated for any fiscal year such sums as 
        may be necessary for purposes of making payments to States 
        pursuant to paragraph (1).''.

                    TITLE IV--SOCIAL SECURITY REFORM

SEC. 401. SHORT TITLE.

    This title may be cited as the ``Social Security Personal Savings 
Guarantee and Prosperity Act of 2010''.

SEC. 402. ESTABLISHMENT OF PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.

    (a) In General.--Title II of the Social Security Act is amended--
            (1) by inserting before section 201 the following:

                    ``PART A--INSURANCE BENEFITS'';

        and
            (2) by adding at the end the following new part:

           ``PART B--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

``SEC. 251. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Participating individual.--The term `participating 
        individual' has the meaning provided in section 253(a).
            ``(2) Board.--The term `Board' means the Personal Social 
        Security Savings Board established under section 260.
            ``(3) Executive director.--The term `Executive Director' 
        means the Executive Director appointed under section 261.
            ``(4) Personal social security savings account.--The term 
        `personal social security savings account' means an account 
        established under section 254(a).
            ``(5) Personal social security savings annuity.--The term 
        `personal social security savings annuity' means an annuity 
        approved by the Board under section 258(b)(3).
            ``(6) Savings fund.--The term `Savings Fund' means the 
        Social Security Personal Savings Fund established under section 
        252.
            ``(7) Tier i investment fund.--The term `Tier I Investment 
        Fund' means the trust fund created under section 255.
            ``(8) Tier ii investment fund.--The term `Tier II 
        Investment Fund' means the trust fund created under section 
        256.
            ``(9) Tier iii investment option.--The term `Tier III 
        Investment Option' means an investment option which is--
                    ``(A) offered by an eligible entity certified by 
                the Board under section 257(b); and
                    ``(B) approved by the Board under section 257(c).

``SEC. 252. SOCIAL SECURITY PERSONAL SAVINGS FUND.

    ``(a) Establishment of Savings Fund.--
            ``(1) Establishment.--There is established in the Treasury 
        of the United States a trust fund to be known as the `Social 
        Security Personal Savings Fund'.
            ``(2) Amounts in fund.--The Savings Fund shall consist of--
                    ``(A) all amounts transferred to or deposited into 
                the Savings Fund under subsection (b), increased by the 
                total net earnings from investments of sums in the 
                Savings Fund attributable to such transferred or 
                deposited amounts, and reduced by the total net losses 
                from investments of such sums, and
                    ``(B) the reserves held in the Annuity Reserves 
                Account established under section 258(b)(3), increased 
                by the total net earnings from investments of such 
                reserves, and reduced by the total net losses from 
                investments of such reserves.
            ``(3) Trustees.--The Board shall serve as trustees of the 
        Savings Fund.
            ``(4) Budget authority; appropriation.--This part 
        constitutes budget authority in advance of appropriations Acts 
        and represents the obligation of the Board to provide for the 
        payment of amounts provided under this part. The amounts held 
        in the Savings Fund are appropriated and shall remain available 
        without fiscal year limitation.
    ``(b) Deposits Into Fund.--
            ``(1) In general.--During each calendar year, the Secretary 
        of the Treasury shall deposit into the Savings Fund, from 
        amounts held in the Federal Old-Age and Survivors Insurance 
        Trust Fund, a total amount equal, in the aggregate, to 100 
        percent of the redirected Social Security contribution for such 
        calendar year of each individual who is a participating 
        individual for such calendar year.
            ``(2) Transfers based on estimates.--
                    ``(A) In general.--The amounts deposited pursuant 
                to paragraph (1) shall be transferred in at least 
                weekly payments from the Federal Old-Age and Survivors 
                Insurance Trust Fund to the Savings Fund.
                    ``(B) Determination of amounts.--The amounts 
                transferred under subparagraph (A) shall be determined 
                on the basis of estimates, made by the Commissioner of 
                Social Security and certified to the Secretary of the 
                Treasury, of the wages paid to, and self-employment 
                income derived by, participating individuals. Proper 
                adjustments shall be made in amounts subsequently 
                transferred to the extent prior estimates were in 
                excess of or were less than actual amounts transferred.
            ``(3) Redirected social security contributions.--For 
        purposes of paragraph (1)--
                    ``(A) In general.--The term `redirected social 
                security contributions' means, with respect to an 
                individual for a calendar year, the sum of--
                            ``(i) the product derived by multiplying--
                                    ``(I) the sum of the total wages 
                                paid to, and self-employment income 
                                derived by, such individual during such 
                                calendar year, to the extent such total 
                                wages and self-employment income do not 
                                exceed the base amount for such 
                                calendar year; by
                                    ``(II) the applicable base 
                                percentage for the calendar year; and
                            ``(ii) the product derived by multiplying--
                                    ``(I) the sum of the total wages 
                                paid to, and self-employment income 
                                derived by, such individual during such 
                                calendar year, to the extent such total 
                                wages and self-employment income exceed 
                                the base amount (taking into account 
                                the limits imposed by the contribution 
                                and benefit base under section 230); by
                                    ``(II) the applicable supplemental 
                                percentage for the calendar year.
                    ``(B) Base amount.--For purposes of subparagraph 
                (A)--
                            ``(i) Initial base amount.--The base amount 
                        for calendar year 2012 is $10,000.
                            ``(ii) Adjustments to base amount.--The 
                        base amount for any calendar year after 2011 is 
                        the product derived by multiplying $10,000 by a 
                        fraction--
                                    ``(I) the numerator of which is the 
                                national average wage index (as defined 
                                in section 209(k)) for the first of the 
                                2 preceding calendar years; and
                                    ``(II) the denominator of which is 
                                the national average wage index (as so 
                                defined) for 2010.
                    ``(C) Applicable base percentage.--For purposes of 
                subparagraph (A), the applicable base percentage for a 
                calendar year is--
                            ``(i) for calendar years after 2011 and 
                        before 2022, 2 percent;
                            ``(ii) for calendar years after 2021 and 
                        before 2032, 4 percent;
                            ``(iii) for calendar years after 2031 and 
                        before 2042, 6 percent; and
                            ``(iv) for calendar years after 2041, 8 
                        percent.
                    ``(D) Applicable supplemental percentage.--For 
                purposes of subparagraph (A), the applicable 
                supplemental percentage for a calendar year is--
                            ``(i) for calendar years after 2011 and 
                        before 2022, 1 percent;
                            ``(ii) for calendar years after 2021 and 
                        before 2032, 2 percent;
                            ``(iii) for calendar years after 2031 and 
                        before 2042, 3 percent; and
                            ``(iv) for calendar years after 2041, 4 
                        percent.
    ``(c) Availability.--The sums in the Savings Fund are appropriated 
and shall remain available without fiscal year limitation--
            ``(1) to invest funds in the Tier I Investment Fund of the 
        Savings Fund and the Tier II Investment Fund of the Savings 
        Fund under sections 255 and 256, respectively;
            ``(2) to transfer into Tier III Investment Options under 
        section 257;
            ``(3) to make distributions in accordance with section 258; 
        and
            ``(4) to pay the administrative expenses of the Board in 
        accordance with subsection (e).
    ``(d) Limitations on Use of Funds.--
            ``(1) In general.--Sums in the Savings Fund credited to a 
        participating individual's personal social security savings 
        account may not be used for, or diverted to, purposes other 
        than for the exclusive benefit of the participating individual 
        or the participating individual's beneficiaries under this 
        part.
            ``(2) Assignments.--Sums in the Savings Fund may not be 
        assigned or alienated and are not subject to execution, levy, 
        attachment, garnishment, or other legal process.
    ``(e) Payment of Administrative Expenses.--Administrative expenses 
incurred to carry out this part shall be paid out of net earnings in 
the Savings Fund in conjunction with the allocation of investment 
earnings and losses under section 254(c).
    ``(f) Limitation.--The sums in the Savings Fund shall not be 
appropriated for any purpose other than the purposes specified in this 
part and may not be used for any other purpose.

``SEC. 253. PARTICIPATION IN PROGRAM.

    ``(a) Participating Individual.--For purposes of this part, the 
term `participating individual' means any individual--
            ``(1)(A) who receives wages in any calendar year after 
        December 31, 2011, on which there is imposed a tax under 
        section 3101(a) of the Internal Revenue Code of 1986, or
            ``(B) who derives self-employment income for a taxable year 
        beginning after December 31, 2011, on which there is imposed a 
        tax under section 1401(a) of the Internal Revenue Code of 1986,
            ``(2) who is born on or after January 1, 1956, and
            ``(3) who has filed an election to be treated as a 
        participating individual under subsection (b) and has not 
        subsequently filed an election to renounce such individual's 
        status as a participating individual under subsection (c).
    ``(b) Election of Participation.--
            ``(1) In general.--An individual who has not become 
        entitled to old-age insurance benefits under section 202(a) may 
        elect, subject to paragraph (2) and in such form and manner as 
        shall be prescribed in regulations of the Board, to be treated 
        as a `participating individual' for purposes of this part. Such 
        regulations shall provide for regular, periodic opportunities 
        for the filing of such an election. The Board shall provide for 
        immediate notification to the Commissioner of Social Security, 
        the Secretary of the Treasury, and the Executive Director of 
        such election.
            ``(2) Deadline for election.--An election under paragraph 
        (1) may be made by an individual not later than the later of--
                    ``(A) the date on which such individual attains age 
                25, or
                    ``(B) December 31, 2012.
            ``(3) Effectiveness of election.--An election under this 
        subsection shall be effective with respect to wages earned, and 
        self-employment income derived, on the earliest date on which 
        the Board determines is practicable to make such election 
        effective following the date of the filing of the election.
    ``(c) Revocation of Election.--
            ``(1) In general.--An individual may, in such form and 
        manner as shall be prescribed in regulations of the Board, 
        revoke an election made by such individual under subsection (b) 
        within 1 year after the date of a qualifying event described in 
        paragraph (2). Upon completion of the procedures provided for 
        under paragraph (3), any such individual who has made such an 
        election shall not be treated as a participating individual 
        under this part, effective as if such individual had never been 
        a participating individual. The Board shall provide for 
        immediate notification of such election to the Commissioner of 
        Social Security, the Secretary of the Treasury, and the 
        Executive Director.
            ``(2) Qualifying events.--For purposes of paragraph (1), 
        the term `qualifying event' means, in connection with an 
        individual, any of the following events:
                    ``(A) The death of the individual's spouse.
                    ``(B) The entry into marriage by the individual.
                    ``(C) The divorce or legal separation of the 
                individual from the individual's spouse.
                    ``(D) A dependent child of the individual ceasing 
                to be a dependent child of the individual under section 
                202(d)(3).
            ``(3) Procedure.--The Board shall prescribe by regulation 
        procedures governing the termination of an individual's status 
        as `participating individual' pursuant to a revocation under 
        this subsection. Such procedures shall include--
                    ``(A) prompt closing of the individual's personal 
                social security savings account established under 
                section 254, and
                    ``(B) prompt transfer to the Federal Old-Age and 
                Survivors Insurance Trust Fund as general receipts of 
                any amount held in the Tier II Investment Fund of the 
                Savings Fund or under a Tier III Investment Option 
                pursuant to section 256 or 257 and credited to such 
                individual's personal social security savings account.

``SEC. 254. PERSONAL SOCIAL SECURITY SAVINGS ACCOUNTS.

    ``(a) Establishment of Publicly Administered System of Personal 
Security Savings Accounts.--As soon as practicable after the later of 
January 1, 2011, or the date on which an individual becomes a 
participating individual under this part, the Executive Director shall 
establish a personal social security savings account for such 
individual. Such account shall be the means by which amounts held in 
the Tier I Investment Fund and the Tier II Investment Fund of the 
Savings Fund under sections 255 and 256 and amounts held under Tier III 
Investment Options under section 257 are credited to such individual, 
under procedures which shall be established by the Board by regulation. 
Each account of a participating individual shall be identified to such 
participating individual by means of the participating individual's 
Social Security account number.
    ``(b) Account Balance.--The balance in a participating individual's 
account at any time is the sum of--
            ``(1) the balance in the Tier I Investment Fund of the 
        Savings Fund credited to such participating individual prior to 
        transfer of the credited amount to the Tier II Investment Fund 
        of the Savings Fund; plus
            ``(2) the excess of--
                    ``(A) all deposits in the Tier II Investment Fund 
                of the Savings Fund credited to such participating 
                individual's personal social security savings account, 
                subject to such increases and reductions as may result 
                from allocations made to and reductions made in the 
                account pursuant to subsection (c)(1); over
                    ``(B) amounts paid out of the Tier II Investment 
                Fund in connection with amounts credited to such 
                participating individual's personal social security 
                savings account; plus
            ``(3) the excess of--
                    ``(A) the deposits in the Tier III Investment 
                Options credited to such participating individual's 
                personal social security savings account, subject to 
                such increases and reductions as may result from 
                amounts credited to, and reductions made in, the 
                account pursuant to subsection (c)(2); over
                    ``(B) amounts paid out of the Tier III Investment 
                Options of such participating individual.
The calculation made under paragraph (3) shall be made separately for 
each Tier III Investment Option of the participating individual. The 
Board shall also hold for the participating individual any benefit 
credit certificate assigned to the participating individual's personal 
social security savings account under section 255.
    ``(c) Allocation of Earnings and Losses.--Pursuant to regulations 
which shall be prescribed by the Board, the Executive Director shall 
allocate to each personal social security savings account an amount 
equal to the net earnings and net losses from each investment of sums--
            ``(1) in the Tier I Investment Fund and the Tier II 
        Investment Fund which are attributable to sums credited to such 
        account reduced by an appropriate share of the administrative 
        expenses paid out of the net earnings, as determined by the 
        Executive Director; and
            ``(2) in the Tier III Investment Options which are 
        attributable to sums credited to such account reduced by the 
        administrative expenses paid out of the net earnings.

``SEC. 255. TIER I INVESTMENT FUND.

    ``(a) Establishment of Tier I Investment Fund.--
            ``(1) In general.--The Savings Fund shall include a 
        separate fund to be known as the `Tier I Investment Fund'.
            ``(2) Amounts in fund.--The Tier I Investment Fund consists 
        of all amounts derived from payments into the Fund under 
        section 252(b) and remaining after investment of such amounts 
        under subsection (b), including additional amounts derived as 
        income from such investments.
            ``(3) Use of funds.--The amounts held in the Fund are 
        appropriated and shall remain available without fiscal year 
        limitation--
                    ``(A) to be held for investment on behalf of 
                participating individuals under subsection (b),
                    ``(B) to pay the administrative expenses related to 
                the Fund, and
                    ``(C) to make transfers from the Fund under 
                subsection (c)(2).
    ``(b) Investment of Fund Balance.--For purposes of investment of 
the Tier I Investment Fund, the Board shall contract with appropriate 
professional asset managers, recordkeepers, and custodians selected for 
investment of amounts held in the Fund, so as to provide for investment 
of the balance of the Fund, in a manner providing broad diversification 
in accordance with regulations of the Board, in--
            ``(1) insurance contracts,
            ``(2) certificates of deposit, or
            ``(3) other instruments or obligations selected by such 
        asset managers,
which return the amount invested and pay interest, at a specified rate 
or rates, on that amount during a specified period of time.
    ``(c) Separate Crediting to Personal Social Security Savings 
Accounts and Transfers to the Tier II Investment Fund or to Tier III 
Investment Options.--
            ``(1) Crediting to accounts.--
                    ``(A) In general.--Subject to this paragraph, the 
                Board shall provide for prompt, separate crediting, as 
                soon as practicable, of the amounts deposited in the 
                Tier I Investment Fund to the personal social security 
                savings account of each participating individual with 
                respect to the redirected social security contributions 
                (as defined in section 252(b)(3)) of such participating 
                individual. The Board shall include in such crediting, 
                with respect to each such individual, any increases or 
                decreases in such amounts so as to reflect the net 
                returns and losses from investment of the balance of 
                the Fund prior to such crediting. For purposes of 
                determining such increases and decreases for each 
                calendar year, the amounts deposited into the Fund in 
                connection with such individual during such calendar 
                year shall be deemed to have been deposited on June 30 
                of such year.
                    ``(B) Treatment of married participating 
                individuals.--If the participating individual is 
                married as of the end of the calendar year in which the 
                amounts to be credited were deposited in the Tier I 
                Investment Fund and the spouse is also a participating 
                individual, the personal social security savings 
                account of the participating individual and the 
                personal social security savings account of his or her 
                spouse shall each be credited with 50 percent of such 
                amounts.
            ``(2) Transfers from the tier i investment fund.--In 
        accordance with elections filed with the Board by a 
        participating individual, any amount credited to the personal 
        social security savings account of such participating 
        individual under paragraph (1) shall be promptly transferred to 
        the Tier II Investment Fund of the Savings Fund for investment 
        in accordance with section 256 and, to the extent available 
        under section 257, to Tier III Investment Options in accordance 
        with section 257.
    ``(d) Treatment of Amounts Held in Tier I Investment Fund.--Subject 
to this part--
            ``(1) until amounts deposited into the Tier I Investment 
        Fund during any calendar year are credited to personal social 
        security savings accounts, such amounts shall be treated as the 
        unallocated property of all participating individuals with 
        respect to whom amounts were deposited in the Fund during such 
        year, jointly held in trust for such participating individuals 
        in the Savings Fund, and
            ``(2) amounts deposited into the Fund which are credited to 
        the personal social security savings account of a participating 
        individual shall be treated as property of the participating 
        individual, held in trust for such participating individual in 
        the Savings Fund.

``SEC. 256. TIER II INVESTMENT FUND.

    ``(a) Establishment of Tier II Investment Fund.--
            ``(1) In general.--The Savings Fund shall include a 
        separate fund to be known as the `Tier II Investment Fund'.
            ``(2) Amounts in fund.--The Tier II Investment Fund 
        consists of all amounts derived from payments into the Fund 
        under section 255(c)(2) and remaining after investment of such 
        amounts under subsection (b), including additional amounts 
        derived as income from such investments.
            ``(3) Use of funds.--The amounts held in the Fund are 
        appropriated and shall remain available without fiscal year 
        limitation--
                    ``(A) to be held for investment under subsection 
                (b),
                    ``(B) to pay the administrative expenses related to 
                the Fund, and
                    ``(C) to make transfers to Tier III Investment 
                Options under section 257 or to make payments under 
                section 258.
    ``(b) Payments Into Tier II Investment Fund.--
            ``(1) In general.--Upon the crediting under section 252 to 
        the personal social security savings account of a participating 
        individual of any amount held in the Tier I Investment Fund for 
        any calendar year, the Board shall transfer from the Tier I 
        Investment Fund into the Tier II Investment Fund any amount so 
        credited to such participating individual's account which is 
        not transferred to a Tier III Investment Option pursuant to an 
        election under section 257(a).
            ``(2) Ongoing separate crediting.--Subject to this 
        paragraph, the Board shall provide for ongoing separate 
        crediting to each participating individual's personal social 
        security savings account of the amounts deposited in the Tier 
        II Investment Fund with respect to such participating 
        individual, together with any increases or decreases therein so 
        as to reflect the net returns and losses from investment 
        thereof while held in the Fund.
    ``(c) Investment Accounts.--
            ``(1) In general.--For purposes of investment of the Tier 
        II Investment Fund, the Board shall divide the Fund into 6 
        investment accounts. The Board shall contract with appropriate 
        investment managers, recordkeepers, and custodians selected for 
        investment of amounts held in each investment account. Such 
        accounts shall consist of--
                    ``(A) a Lifecycle Investment Account,
                    ``(B) a Government Securities Investment Account,
                    ``(C) a Fixed Income Investment Account,
                    ``(D) a Common Stock Index Investment Account,
                    ``(E) a Small Capitalization Stock Index Investment 
                Account, and
                    ``(F) an International Stock Index Investment 
                Account.
            ``(2) Election of investment options.--
                    ``(A) Default investment account.--Except as 
                provided in an election in effect under subparagraph 
                (B), amounts held in the Tier II Investment Fund shall 
                be credited to the Lifecycle Investment Account.
                    ``(B) Election of transfers between investment 
                accounts.--In any case in which a participating 
                individual who has an amount in such individual's 
                personal social security savings account credited to 
                any of the investment accounts in the Tier II 
                Investment Fund files with the Secretary of the 
                Treasury a written election under this subparagraph, 
                not more frequently than annually and in accordance 
                with regulations of the Board, the Secretary of the 
                Treasury shall transfer the full amount so credited in 
                such investment account from such investment account to 
                any one of the other investment accounts in the Tier II 
                Investment Fund (whichever is designated in such 
                election).
    ``(d) Lifecyle Investment Account.--
            ``(1) In general.--The investment manager, recordkeeper, 
        and custodian selected for investment of amounts held in the 
        Lifecyle Investment Account shall invest such amounts under 
        regulations which shall be prescribed by the Board in a mix of 
        equities and fixed income instruments so as to ensure, to the 
        maximum extent practicable, that, of the total balance in the 
        Fund credited to such account and available for investment 
        (after allowing for administrative expenses), the percentage 
        invested in fixed income instruments by individuals in 
        designated cohorts, ranging in age up to those of at least 
        retirement age, will increase in a linear progression from 0 
        percent to 100 percent as the cohort approaches retirement age.
            ``(2) Investment in equities.--In accordance with 
        regulations which shall be prescribed by the Board, the Board 
        shall establish standards which must be met by equities 
        selected for investment in the Lifecycle Investment Account. In 
        conformity with such standards, the Board shall select, for 
        purposes of such investment, indices which are comprised of 
        equities the aggregate market value of which is, in each case, 
        a reasonably broad representation of companies whose shares are 
        traded on the equity markets. Amounts invested in equities 
        under an investment option shall be held in a portfolio 
        designed to replicate the performance of one or more of such 
        indices.
            ``(3) Investment in fixed income instruments.--In 
        accordance with regulations which shall be prescribed by the 
        Board, the Board shall establish standards which must be met by 
        fixed income instruments selected for investment in the 
        Lifecycle Investment Account. Such standards shall take into 
        account the competing considerations of risk and return. 
        Amounts invested in fixed income instruments in an investment 
        option shall be held in a portfolio which shall consist of a 
        diverse range of fixed income instruments, taking into full 
        account the opposing considerations of risk and maximization of 
        return.
    ``(e) Government Securities Investment Account.--
            ``(1) In general.--Amounts in the Government Securities 
        Investment Account shall be invested in securities of the 
        United States Government as provided in this subsection
            ``(2) Issuance of special obligations.--The Secretary of 
        the Treasury is authorized to issue special interest-bearing 
        obligations of the United States for purchase by the Tier II 
        Investment Fund for purposes of investment of amounts in the 
        Government Securities Investment Account. Such obligations 
        shall have maturities fixed with due regard to the needs of the 
        Fund as determined by the Board, and shall bear interest at a 
        rate equal to the average market yield (computed by the 
        Secretary of the treasury on the basis of market quotations as 
        of the end of the calendar month next preceding the date of 
        issue of such obligations) on all marketable interest-bearing 
        obligations of the United States then forming a part of the 
        public debt which are not due or callable earlier than 4 years 
        after the end of such calendar month. Any average market yield 
        computed under this paragraph which is not a multiple of one-
        eighth of 1 percent shall be rounded to the nearest multiple of 
        one-eighth of 1 percent.
    ``(f) Fixed Income Investment Account.--Amounts in the Fixed Income 
Investment Account shall be invested in instruments or obligations 
which return the amount invested and pay interest, at a specified rate 
or rates, on that amount during a specified period of time, consisting 
of instruments or obligations in one or more of the following 
categories:
            ``(1) insurance contracts;
            ``(2) certificates of deposit; or
            ``(3) other instruments or obligations selected by 
        qualified professional asset managers.
    ``(g) Common Stock Index Investment Account.--
            ``(1) Portfolio design.--Amounts held in the Common Stock 
        Investment Account shall be invested in a portfolio of common 
        stock designed to replicate the performance of the index 
        selected under paragraph (2). The portfolio shall be designed 
        such that, to the extent practicable, the percentage of the 
        balance in the Common Stock Index Investment Account that is 
        invested in each stock is the same as the percentage determined 
        by dividing the aggregate market value of all shares of that 
        stock by the aggregate market value of all shares of all stocks 
        included in such index.
            ``(2) Selection of index.--The Board shall select, for 
        purposes of investment of amounts held in the Common Stock 
        Investment Account, an index which is a commonly recognized 
        index comprised of common stock the aggregate market value of 
        which is a reasonably complete representation of the United 
        States equity markets.
    ``(h) Small Capitalization Stock Index Investment Account.--
            ``(1) Portfolio design.--Amounts held in the Small 
        Capitalization Stock Index Investment Account shall be invested 
        in a portfolio of common stock designed to replicate the 
        performance of the index selected under paragraph (2). The 
        portfolio shall be designed such that, to the extent 
        practicable, the percentage of the balance in the Small 
        Capitalization Stock Index Investment Account that is invested 
        in each stock is the same as the percentage determined by 
        dividing the aggregate market value of all shares of that stock 
        by the aggregate market value of all shares of all stocks 
        included in such index.
            ``(2) Selection of index.--The Board shall select, for 
        purposes of investment of amounts held in the Small 
        Capitalization Stock Index Investment Account, an index which 
        is a commonly recognized index comprised of common stock the 
        aggregate market value of which represents the United States 
        equity markets excluding the common stocks included in the 
        Common Stock Index Investment Account.
    ``(i) International Stock Index Investment Account.--
            ``(1) Portfolio design.--Amounts held in the International 
        Stock Index Investment Account shall be invested in a portfolio 
        of stock designed to replicate the performance of the index 
        selected under paragraph (2). The portfolio shall be designed 
        such that, to the extent practicable, the percentage of the 
        balance in the International Stock Index Investment Account 
        that is invested in each stock is the same as the percentage 
        determined by dividing the aggregate market value of all shares 
        of that stock by the aggregate market value of all shares of 
        all stocks included in such index.
            ``(2) Selection of index.--The Board shall select, for 
        purposes of investment of amounts held in the International 
        Stock Index Investment Account, an index which is a commonly 
        recognized index comprised of common stock the aggregate market 
        value of which is a reasonably complete representation of the 
        international equity markets excluding the United States equity 
        markets.
    ``(j) Additional Investment Options.--The Board may from time to 
time, as determined by regulation as appropriate to further the 
purposes of this section, shall--
            ``(1) establish investment accounts in the Tier II 
        Investment Fund meeting the requirements of this section in 
        addition to those established by this section, and
            ``(2) terminate investment accounts in the Tier II 
        Investment Fund established pursuant to paragraph (1).
    ``(k) Disclosure of Administrative Costs.--The Board shall provide 
to each participating individual an annual disclosure of the rate of 
administrative costs chargeable with respect to investment in each 
investment account in the Tier II Investment Fund. Such disclosure 
shall be written in a manner calculated to be understood by the average 
participating individual.
    ``(l) Treatment of Amounts Held in Tier II Investment Fund.--
Subject to this part, amounts deposited into, and held and accounted 
for in, the Tier II Investment Fund with respect to any participating 
individual shall continue to be treated as property of such 
participating individual, held in trust for such participating 
individual in the Fund.

``SEC. 257. TIER III INVESTMENT OPTIONS.

    ``(a) Election of Tier III Investment Options.--
            ``(1) In general.--A participating individual may elect to 
        direct transfers from amounts in the Savings Fund credited to 
        the personal social security savings account of such individual 
        into 1 or more Tier III Investment Options in accordance with 
        paragraph (2).
            ``(2) Commencement of tier iii investment options upon 
        attainment of election threshold.--In any case in which, as of 
        the end of any calendar year, the total balance in the Savings 
        Fund credited to a participating individual's personal social 
        security savings account exceeds for the first time the 
        election threshold, the Board shall, by regulation, provide for 
        an opportunity for such participating individual to make, at 
        any time thereafter, such individual's first election of one or 
        more of the Tier III Investment Options for investment of an 
        amount in the Savings Fund credited to such account. Such 
        election may be in lieu of or in addition to investment in the 
        options available with respect to the Tier II Investment Fund 
        of the Savings Fund.
            ``(3) Allocation of funds.--In the case of an election 
        under paragraph (1), funds credited to the personal social 
        security savings account of the participating individual and 
        elected for transfer to one or more Tier III Investment Options 
        shall be transferred to the Tier III Investment Options so 
        elected for such calendar year, in percentages specified in the 
        election by the participating individual for each applicable 
        portfolio.
            ``(4) Election threshold.--
                    ``(A) In general.--Subject to subparagraph (B), for 
                purposes of this subsection the term `election 
                threshold' means an amount equal to $25,000.
                    ``(B) Adjustments.--The Board shall adjust annually 
                (effective for annual reporting months occurring after 
                December 2011) the dollar amount set forth in 
                subparagraph (A) under procedures providing for 
                adjustments in the same manner and to the same extent 
                as adjustments are provided for under the procedures 
                used to adjust benefit amounts under section 
                215(i)(2)(A), except that any amount so adjusted that 
                is not a multiple of $1.00 shall be rounded to the 
                nearest multiple of $1.00.
            ``(5) Subsequent investment of amounts held in tier iii 
        investment options.--Any amounts held in one or more Tier III 
        Investment Options may be--
                    ``(A) transferred at any time to one or more other 
                Tier III Investment Options, subject to applicable 
                regulations of the Board and the terms governing the 
                affected Tier III Investment Options, and
                    ``(B) transferred, not more frequently than 
                annually, to the Tier II Investment Fund, for deposit 
                in the applicable investment account then selected by 
                the participating individual under section 256.
    ``(b) Certification of Eligible Entities.--
            ``(1) In general.--The Board shall certify eligible 
        entities to offer Tier III Investment Options under this part.
            ``(2) Application.--Any eligible entity that desires to be 
        certified by the Board to offer a Tier III Investment Option 
        shall submit an application to the Board at such time, in such 
        manner, and containing such information as the Board may 
        require.
            ``(3) Requirements for approval.--The Board shall not 
        certify an eligible entity unless such eligible entity agrees 
        to the following requirements:
                    ``(A) Separate accounting.--Each eligible entity 
                shall, with respect to each Tier III Investment Option 
                offered by such eligible entity to participating 
                individuals--
                            ``(i) establish separate accounts for the 
                        contributions of each participating individual, 
                        and any earnings properly allocable to the 
                        contributions, and
                            ``(ii) maintain separate recordkeeping with 
                        respect to each account.
                    ``(B) Treatment of amounts held in fund.--Amounts 
                deposited into, and held and accounted for in, a Tier 
                III Investment Option with respect to any participating 
                individual shall be treated as property of such 
                participating individual, held in trust for such 
                participating individual.
                    ``(C) Trust requirements.--Amounts held and 
                accounted for with respect to a participating 
                individual shall be held in a trust created or 
                organized in the United States for the exclusive 
                benefit of such individual or his beneficiaries.
                    ``(D) Exemption from third party claims.--Each Tier 
                III Investment Option shall be exempt from any and all 
                third party claims against the eligible entity.
                    ``(E) Disclosure of administrative costs.--Each 
                eligible entity offering a Tier III Investment Option 
                under this section shall provide to each participating 
                individual an annual disclosure of the rate of 
                administrative costs chargeable with respect to 
                investment in such Option. Such disclosure shall be 
                written in a manner calculated to be understood by the 
                average participating individual. The Board shall 
                provide for coordination of disclosures with respect to 
                Tier III Investment Options under this subparagraph so 
                as to assist participating individuals in comparing 
                alternative Options based on administrative costs.
                    ``(F) Reporting to the executive director and the 
                board.--Each eligible entity shall provide reports to 
                the Executive Director and the Board at such time, in 
                such manner, and containing such information as the 
                Board may require.
            ``(4) Eligible entity defined.--For purposes of this 
        section, the term `eligible entity' means any investment 
        company (as defined in section 3 of the Investment Company Act 
        of 1940) or other person that the Board determines appropriate 
        to offer Tier III Investment Options under this part.
    ``(c) Approval of Tier III Investment Options.--
            ``(1) In general.--No funds may be transferred into a Tier 
        III Investment Option unless the Board has approved an 
        application submitted under paragraph (2) with respect to the 
        option.
            ``(2) Application.--With respect to each Tier III 
        Investment Option that an eligible entity certified under 
        subsection (b)(1) seeks to offer, such entity shall submit an 
        application to the Board at such time, in such manner, and 
        containing such information as the Board may require.
            ``(3) Qualifications for approval.--The Board may not 
        approve an application submitted under paragraph (2) in 
        connection with a Tier III Investment Option unless the 
        following requirements are met:
                    ``(A) Option must be offered by certified eligible 
                entity.--The Tier III Investment Option is offered by 
                an eligible entity certified under subsection (b).
                    ``(B) Option must meet quality factors.--
                            ``(i) In general.--The Tier III Investment 
                        Option meets qualifications which shall be 
                        prescribed by the Board relating to the quality 
                        factors described in clause (ii).
                            ``(ii) Quality factors.--The quality 
                        factors described in this clause are--
                                    ``(I) the safety and soundness of 
                                the Tier III Investment Option's 
                                proposed investment policy;
                                    ``(II) the experience and record of 
                                performance of the proposed investment 
                                option, if any;
                                    ``(III) the experience and record 
                                of performance of the entity issuing or 
                                offering such option; and
                                    ``(IV) such other factors as the 
                                Board may determine appropriate.
    ``(d) Considerations for Certification and Approval.--In 
determining whether to certify an eligible entity under subsection (b) 
or to approve a Tier III Investment Option under subsection (c), the 
Board shall--
            ``(1) act in the best interests of the participating 
        individuals;
            ``(2) base its determination solely on considerations of 
        balancing safety and soundness of the Tier III Investment 
        Option with the maximization of returns of such option; and
            ``(3) not base any determination related to the entity or 
        option on political or other extraneous considerations.
    ``(e) Sponsorship of Tier III Investment Options by Membership and 
Labor Organizations.--
            ``(1) In general.--A membership or labor organization (as 
        defined by the Board) may sponsor Tier III Investment Options 
        under contracts with eligible entities certified under 
        subsection (b) who shall administer the investment option if 
        such investment option is approved by the Board under 
        subsection (c).
            ``(2) Limitation to membership.--A membership or labor 
        organization (as so defined) may limit to the members of such 
        organization participation in a Tier III Investment Option 
        sponsored by such organization.
    ``(f) Distributions in Case of Death.--Upon the death of a 
participating individual, the amount of any assets held under a Tier 
III Investment Option credited to the personal social security savings 
account of such individual shall be distributed in accordance with 
section 258(e).

``SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY AND OTHER 
              DISTRIBUTIONS.

    ``(a) Date of Initial Distribution.--Except as provided in 
subsection (e), distributions may be made to a participating individual 
from amounts credited to the personal social security savings account 
of such individual only on or after the earliest of--
            ``(1) the date the participating individual attains 
        retirement age (as defined in section 216(l)(1)) or, if elected 
        by the individual, early retirement age (as defined in section 
        216(l)(2)); or
            ``(2) the date on which the amount credited to the 
        participating individual's personal social security savings 
        account is sufficient to purchase a personal social security 
        savings annuity with a monthly benefit that is at least equal 
        to the minimum annuity payment amount (as defined in subsection 
        (b)(4)(C)(iii)).
    ``(b) Personal Social Security Savings Annuities.--
            ``(1) Notice of available annuities.--Not later than the 
        date determined under subsection (a), the Board shall notify 
        each participating individual of--
                    ``(A) the most recent listing of personal social 
                security savings annuities offered by the Annuity 
                Issuance Authority under paragraph (2); and
                    ``(B) the entitlement of the participating 
                individual to purchase such an annuity.
            ``(2) Annuity issuance authority.--There is established in 
        the office of the Board an agency which shall be known as the 
        `Annuity Issuance Authority'. The Authority shall provide, in 
        accordance with regulations of the Board, for the issuance of 
        personal social security savings annuities for purchase from 
        the Authority under this section and to otherwise administer 
        the issuance of such annuities in accordance with such 
        regulations.
            ``(3) Annuity reserves account.--There is established in 
        the Savings Fund an Annuity Reserves Account. The Account shall 
        consist of all amounts received by the Authority from the 
        purchase of personal social security savings annuities under 
        this section (plus such amounts as may be transferred to the 
        Account under paragraph (5)(B)), increased by the total net 
        earnings from investments of such reserves under subparagraph 
        (A) of paragraph (5) and reduced by the total net losses from 
        investments of such reserves under such subparagraph.
            ``(4) Purchase of annuities.--
                    ``(A) Selection of annuity.--On a date elected by 
                the participating individual, but no earlier than the 
                date determined under subsection (a), a participating 
                individual may purchase a personal social security 
                savings annuity selected from among the annuities 
                offered by the Authority under paragraph (2).
                    ``(B) Transfer of assets.--Upon the selection of an 
                annuity by a participating individual under 
                subparagraph (A), the Board shall provide for the 
                transfer of assets, credited to the personal social 
                security savings account of the participating 
                individual and held in the Tier II Investment Fund or 
                under 1 or more Tier III Investment Options (or any 
                combination thereof), in a total amount sufficient to 
                purchase the annuity selected by the participating 
                individual from annuities offered by the Authority.
                    ``(C) Minimum annuity payment amount.--
                            ``(i) In general.--Subject to subparagraph 
                        (D), if, at the time a personal social security 
                        savings annuity is purchased under subparagraph 
                        (A), the assets credited to the personal social 
                        security savings account of the participating 
                        individual are sufficient to purchase a 
                        personal social security savings annuity 
                        offered by the Authority under paragraph (2) 
                        with a monthly annuity payment that is at least 
                        equal to the minimum annuity payment amount, 
                        the amount of the monthly annuity payment 
                        provided by such annuity may not be less then 
                        the minimum annuity payment amount.
                            ``(ii) Construction.--Nothing in this 
                        subparagraph shall be construed to prohibit a 
                        participating individual from using personal 
                        social security savings account assets to 
                        purchase a personal social security savings 
                        annuity offered by the Authority under 
                        paragraph (2) which provides for a monthly 
                        payment in excess of the minimum amount 
                        required under clause (i).
                            ``(iii) Minimum annuity payment amount 
                        defined.--For purposes of this part, the term 
                        `minimum annuity payment amount' means, as of 
                        any date, an amount equal to the monthly 
                        equivalent of 150 percent of the poverty line 
                        for an individual (as in effect on such date), 
                        determined under the poverty guidelines of the 
                        Department of Health and Human Services issued 
                        under sections 652 and 673(2) of the Omnibus 
                        Budget Reconciliation Act of 1981.
                    ``(D) Purchase of annuities in the event of 
                insufficient assets.--If a participating individual 
                desires, or is required under subsection (f), to 
                purchase a personal social security savings annuity 
                under subsection (b) on or after the date determined 
                under subsection (a)(1) and the assets of the personal 
                social security savings account of such individual are 
                insufficient to purchase a personal social security 
                savings annuity that provides for a monthly payment 
                that is at least equal to the minimum annuity payment 
                amount (as defined in paragraph (4)(C)(iii)), the 
                participating individual shall purchase a personal 
                social security savings annuity with a monthly payment 
                equal to the maximum amount that the participating 
                individual's personal social security savings account 
                can fund, as determined in accordance with regulations 
                which shall be prescribed by the Authority, and that 
                otherwise meets the requirements of this subsection 
                (including the cost-of-living protection requirement of 
                subsection (c)(1)(C)), and the Authority shall provide 
                for appropriate certification to the Secretary of the 
                Treasury with respect to the participating individual's 
                eligibility for guarantee payments under section 259.
            ``(5) Maintenance of reserves for payment of annuities.--
                    ``(A) Investment of reserves.--For purposes of 
                investment of reserves held in the Annuity Reserves 
                Account, the Authority shall contract with appropriate 
                investment managers, recordkeepers, and custodians 
                selected by the Authority for investment of such 
                reserves. Such reserves shall be invested under 
                regulations which shall be prescribed by the Authority 
                so as to ensure, to the maximum extent practicable, 
                that, of the total balance of the reserves (after 
                payment of administrative expenses to such managers, 
                recordkeepers, and custodians)--
                            ``(i) 65 percent is invested in equities in 
                        the same manner and under the same standards as 
                        are provided in section 256(c)(4), and
                            ``(ii) 35 percent is invested in fixed 
                        income instruments in the same manner and under 
                        the same standards as are provided in section 
                        256(c)(5).
                    ``(B) Provision for full payment of annuities.--
                Payment of personal social security savings annuities 
                in accordance with the terms of such annuities shall be 
                made, irrespective of the sufficiency of reserves in 
                the Annuity Reserves Fund attributable to funds 
                obtained from the purchase of such annuities. In the 
                event of any impending insufficiency in the Annuity 
                Reserves Account for the next fiscal year, the 
                Authority shall certify to the Secretary of the 
                Treasury the amount of such insufficiency, and the 
                Secretary of the Treasury shall transfer from the 
                Federal Old-Age and Survivors Insurance Trust Fund to 
                the Annuity Reserves Account the amount of the 
                insufficiency, as so certified, in such installments, 
                made prior to or during such fiscal year, as are 
                necessary to eliminate in advance such insufficiency.
    ``(c) Personal Social Security Savings Annuity.--
            ``(1) In general.--For purposes of this part, the term 
        `personal social security savings annuity' means an annuity 
        that meets the following requirements:
                    ``(A) The annuity starting date (as defined in 
                section 72(c)(4) of the Internal Revenue Code of 1986) 
                commences on the first day of the month beginning after 
                the date of the purchase of the annuity.
                    ``(B) The terms of the annuity provide--
                            ``(i) for a monthly payment to the 
                        participating individual during the life of the 
                        participating individual equal to at least the 
                        minimum annuity payment amount (as defined in 
                        subsection (b)(4)(C)(iii)), or
                            ``(ii) in the case of an annuity purchased 
                        under subparagraph (D) of subsection (b)(4), 
                        the maximum monthly payment determined under 
                        regulations prescribed under such subparagraph.
                    ``(C) The terms of the annuity include procedures 
                providing for adjustments in the amount of the monthly 
                payments in the same manner and to the same extent as 
                adjustments are provided for under the procedures used 
                to adjust benefit amounts under section 215(i)(2)(A). 
                Nothing in this subparagraph shall be construed to 
                preclude the terms governing such an annuity from 
                providing for adjustments in the amount of monthly 
                payments resulting in a payment for any month greater 
                than the payment for that month that would result from 
                adjustments required under the preceding sentence 
                (b)(4)(D).
                    ``(D) The terms of the annuity include such other 
                terms and conditions as the Board requires for the 
                protection of the annuitant.
            ``(2) Exemption from third party claims.--Each personal 
        social security savings annuity shall be exempt from any and 
        all third party claims against the issuer.
    ``(d) Right To Use Excess Personal Social Security Savings Account 
Assets.--To the extent assets credited to a participating individual's 
personal social security savings account remain after the purchase of 
an annuity under subsection (b), the remaining assets shall be payable 
to the participating individual at such time, in such manner, and in 
such amounts as the participating individual may specify, subject to 
subsection (f).
    ``(e) Distributions in Case of Death.--If the participating 
individual dies before all amounts which are held in the Tier I 
Investment Fund or the Tier II Investment Fund of the Savings Fund or 
held under a Tier III Investment Option and which are credited to the 
personal social security savings account of the individual are 
otherwise distributed in accordance with this section, such amounts 
shall be distributed, under regulations which shall be prescribed by 
the Board--
            ``(1) in any case in which one or more beneficiaries have 
        been designated in advance, to such beneficiaries in accordance 
        with such designation as provided in such regulations, and
            ``(2) in the case of any amount not distributed as 
        described in paragraph (1), to such individual's estate.
    ``(f) Date of Final Distribution.--All amounts credited to the 
personal social security savings account of an individual shall be 
distributed, by means of the purchase of annuities or otherwise in a 
manner consistent with the requirements of this section, not later than 
5 years after the date the individual attains retirement age (as 
defined in section 216(l)). The Board shall provide by regulation for 
means of distribution necessary to ensure compliance with the 
requirements of this subsection.

``SEC. 259. GUARANTEE OF ACCOUNT SAVINGS.

    ``(a) In General.--If, as of immediately before the month for which 
the first monthly payment under a participating individual's personal 
social security savings annuity is paid, the amount credited to such 
individual's personal social security savings account is less that the 
sum of all deposits made to the account under section 252(b), adjusted 
as provided in subsection (b), the Annuity Issuance Authority shall so 
certify to the Secretary of the Treasury and, upon receipt of such 
certification, such Secretary shall transfer to such individual's Tier 
I Investment Fund, from amounts in the Federal Old-Age and Survivors 
Insurance Trust Fund, an amount equal to the excess of such sum of such 
deposits, as so adjusted, over such amount credited to such account.
    ``(b) Adjustments.--
            ``(1) In general.--For purposes of subsection (a), deposits 
        described in subsection (a) which are made in any calendar year 
        shall be deemed to be equal to the product of--
                    ``(A) the deposits made in such year (as determined 
                without regard to this subsection); and
                    ``(B) the quotient obtained by dividing--
                            ``(i) the Consumer Price Index for the 
                        calendar quarter beginning on July 1 and ending 
                        on September 30 preceding the year in which the 
                        month referred to in subsection (a) occurs; by
                            ``(ii) the Consumer Price Index for the 
                        calendar quarter beginning on July 1 and ending 
                        on September 30 preceding the calendar year in 
                        which such deposits were made.
            ``(2) Consumer price index.--For purposes of paragraph (1), 
        the Consumer Price Index for a calendar quarter shall be the 
        arithmetical mean of the Consumer Price Index for Urban Wage 
        Earners and Clerical Workers (CPI-W) for the 3 months in such 
        quarter.

``SEC. 260. PERSONAL SOCIAL SECURITY SAVINGS BOARD.

    ``(a) Establishment.--There is established in the executive branch 
of the Government a Personal Social Security Savings Board.
    ``(b) Composition.--The Board shall be composed of--
            ``(1) 3 members appointed by the President, of whom 1 shall 
        be designated by the President as Chairman; and
            ``(2) 2 members appointed by the President, of whom--
                    ``(A) 1 shall be appointed by the President after 
                taking into consideration the recommendation made by 
                the Speaker of the House of Representatives in 
                consultation with the minority leader of the House of 
                Representatives; and
                    ``(B) 1 shall be appointed by the President after 
                taking into consideration the recommendation made by 
                the majority leader of the Senate in consultation with 
                the minority leader of the Senate.
    ``(c) Advice and Consent.--Appointments under subsection (b) shall 
be made by and with the advice and consent of the Senate.
    ``(d) Membership Requirements.--Members of the Board shall have 
substantial experience, training, and expertise in the management of 
financial investments and pension benefit plans.
    ``(e) Length of Appointments.--
            ``(1) Terms.--A member of the Board shall be appointed for 
        a term of 4 years, except that of the members first appointed 
        under subsection (b)--
                    ``(A) the Chairman shall be appointed for a term of 
                4 years;
                    ``(B) the members appointed under subsection (b)(2) 
                shall be appointed for terms of 3 years; and
                    ``(C) the remaining members shall be appointed for 
                terms of 2 years.
            ``(2) Vacancies.--
                    ``(A) In general.--A vacancy on the Board shall be 
                filled in the manner in which the original appointment 
                was made and shall be subject to any conditions that 
                applied with respect to the original appointment.
                    ``(B) Completion of term.--An individual chosen to 
                fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
            ``(3) Expiration.--The term of any member shall not expire 
        before the date on which the member's successor takes office.
    ``(f) Duties.--The Board shall--
            ``(1) administer the program established under this part;
            ``(2) establish policies for the investment and management 
        of the Savings Fund, including the Tier I Investment Fund and 
        the Tier II Investment Fund, and amounts held under Tier III 
        Investment Options, including policies applicable to the asset 
        managers, recordkeepers, and custodians with responsibility for 
        managing the investment of amounts credited to personal social 
        security investment accounts, and for the management and 
        operation of personal social security savings annuities, which 
        shall provide for--
                    ``(A) prudent investments suitable for accumulating 
                funds for payment of retirement income;
                    ``(B) sound management practices; and
                    ``(C) low administrative costs;
            ``(3) review the performance of investments made for the 
        Tier I Investment Fund and the Tier II Investment Fund;
            ``(4) review the performance of investments made under Tier 
        III Investment Options;
            ``(5) review the management and operation of personal 
        social security savings annuities;
            ``(6) review and approve the budget of the Board; and
            ``(7) comply with the fiduciary requirements of part 4 of 
        subtitle B of title I of the Employee Retirement Income 
        Security Act of 1974 (relating to fiduciary responsibility) in 
        connection with any exercise of discretion in connection with 
        the assets of the Savings Fund.
    ``(g) Administrative Provisions.--
            ``(1) In general.--The Board may--
                    ``(A) adopt, alter, and use a seal;
                    ``(B) except as provided in paragraph (4), direct 
                the Executive Director to take such action as the Board 
                considers appropriate to carry out the provisions of 
                this part and the policies of the Board in accordance 
                with delegations under this part;
                    ``(C) upon the concurring votes of 4 members, 
                remove the Executive Director from office for good 
                cause shown;
                    ``(D) provide to the Executive Director such 
                resources as are necessary to carry out the duties of 
                the Executive Director; and
                    ``(E) take such other actions as may be necessary 
                to carry out the functions of the Board.
            ``(2) Meetings.--The Board shall meet--
                    ``(A) not less than once during each month; and
                    ``(B) at additional times at the call of the 
                Chairman.
            ``(3) Exercise of powers.--
                    ``(A) In general.--Except as provided in paragraph 
                (1)(C), the Board shall perform the functions and 
                exercise the powers of the Board on a majority vote of 
                a quorum of the Board. Three members of the Board shall 
                constitute a quorum for the transaction of business.
                    ``(B) Vacancies.--A vacancy on the Board shall not 
                impair the authority of a quorum of the Board to 
                perform the functions and exercise the powers of the 
                Board.
            ``(4) Limitations on investments.--The Board may not direct 
        any person to invest or to cause to be invested any sums in the 
        Tier II Investment Fund or any personal social security 
        investment account in a specific asset or to dispose of or 
        cause to be disposed of any specific asset of such Fund or any 
        such account.
    ``(h) Compensation.--
            ``(1) In general.--Each member of the Board who is not an 
        officer or employee of the Federal Government shall be 
        compensated at the daily rate of basic pay for level IV of the 
        Executive Schedule for each day during which such member is 
        engaged in performing a function of the Board.
            ``(2) Expenses.--A member of the Board shall be paid 
        travel, per diem, and other necessary expenses under subchapter 
        I of chapter 57 of title 5, United States Code, while traveling 
        away from such member's home or regular place of business in 
        the performance of the duties of the Board.
            ``(3) Source of funds.--Payments authorized under this 
        subsection shall be paid from the Tier I Investment Fund or the 
        Tier II Investment Fund, as determined appropriate by the 
        Board.
    ``(i) Discharge of Responsibilities.--The members of the Board 
shall discharge their responsibilities solely in the interest of the 
participating individuals and their beneficiaries under this part.
    ``(j) Annual Independent Audit.--The Board shall annually engage an 
independent qualified public accountant to audit the activities of the 
Board.
    ``(k) Submission of Budget to Congress.--The Board shall prepare 
and submit to the President, and, at the same time, to the appropriate 
committees of Congress, an annual budget of the expenses and other 
items relating to the Board which shall be included as a separate item 
in the budget required to be transmitted to Congress under section 1105 
of title 31, United States Code.
    ``(l) Submission of Legislative Recommendations.--The Board may 
submit to the President, and, at the same time, shall submit to each 
House of Congress, any legislative recommendations of the Board 
relating to any of its functions under this part or any other provision 
of law.

``SEC. 261. EXECUTIVE DIRECTOR.

    ``(a) Appointment of Executive Director.--The Board shall appoint, 
without regard to the provisions of law governing appointments in the 
competitive service, an Executive Director by action agreed to by a 
majority of the members of the Board.
    ``(b) Duties.--The Executive Director shall, as determined 
appropriate by the Board--
            ``(1) carry out the policies established by the Board;
            ``(2) invest and manage the Tier I Investment Fund and the 
        Tier II Investment Fund in accordance with the investment 
        policies and other policies established by the Board;
            ``(3) administer the provisions of this part relating to 
        the Tier I Investment Fund and the Tier II Investment Fund; and
            ``(4) prescribe such regulations (other than regulations 
        relating to fiduciary responsibilities) as may be necessary for 
        the administration of this part relating to the Tier I 
        Investment Fund and the Tier II Investment Fund.
    ``(c) Administrative Authority.--The Executive Director may, within 
the scope of the duties of the Executive Director as determined by the 
Board--
            ``(1) appoint such personnel as may be necessary to carry 
        out the provisions of this part relating to the Tier I 
        Investment Fund and the Tier II Investment Fund;
            ``(2) subject to approval by the Board, procure the 
        services of experts and consultants under section 3109 of title 
        5, United States Code;
            ``(3) secure directly from an Executive agency, the United 
        States Postal Service, or the Postal Rate Commission any 
        information necessary to carry out the provisions of this part 
        and the policies of the Board relating to the Tier I Investment 
        Fund and the Tier II Investment Fund;
            ``(4) make such payments out of sums in the Tier I 
        Investment Fund and the Tier II Investment Fund as the 
        Executive Director determines, in accordance with regulations 
        of the Board, are necessary to carry out the provisions of this 
        part and the policies of the Board;
            ``(5) pay the compensation, per diem, and travel expenses 
        of individuals appointed under paragraphs (1), (2), and (6) 
        from the Tier I Investment Fund or the Tier II Investment Fund, 
        in accordance with regulations of the Board;
            ``(6) accept and use the services of individuals employed 
        intermittently in the Government service and reimburse such 
        individuals for travel expenses, authorized by section 5703 of 
        title 5, United States Code, including per diem as authorized 
        by section 5702 of such title;
            ``(7) except as otherwise expressly prohibited by law or 
        the policies of the Board, delegate any of the Executive 
        Director's functions to such employees under the Board as the 
        Executive Director may designate and authorize such successive 
        redelegations of such functions to such employees under the 
        Board as the Executive Director may consider to be necessary or 
        appropriate; and
            ``(8) take such other actions as are appropriate to carry 
        out the functions of the Executive Director.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to wages paid after December 31, 2011, for pay 
periods ending after such date and self-employment income for taxable 
years beginning after such date.

SEC. 403. MONTHLY INSURANCE BENEFITS FOR PARTICIPATING INDIVIDUALS.

    Section 202 of the Social Security Act (42 U.S.C. 402) is amended 
by adding at the end the following new subsection:

                ``Benefits for Participants Under Part B

    ``(z)(1) Notwithstanding the preceding provisions of this section--
            ``(A) a participating individual under the Personal Social 
        Security Savings Program under part B shall not be entitled to 
        old-age insurance benefits under subsection (a); and
            ``(B) except as provided in paragraph (2), no individual 
        shall be entitled to benefits under this section on the basis 
        of the wages and self-employment income of such a participating 
        individual.
    ``(2) In the case of any such participating individual who dies 
before such individual purchases a personal social security savings 
annuity under section 258, paragraph (1)(B) shall not apply with 
respect to child's insurance benefits under subsection (d), widow's 
insurance benefits under subsection (e), widower's insurance benefits 
under subsection (f), mother's and father's insurance benefits under 
subsection (g), and parent's insurance benefits under subsection 
(h).''.

SEC. 404. TAX TREATMENT OF ACCOUNTS.

    (a) In General.--
            (1) In general.--Subchapter F of chapter 1 of the Internal 
        Revenue Code of 1986 (relating to exempt organizations) is 
        amended by adding at the end the following new part:

          ``PART IX--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

``Sec. 530A. Personal social security savings program.

``SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.

    ``(a) General Rule.--The Social Security Personal Savings Fund and 
each Tier III Investment Option are exempt from taxation under this 
subtitle. Notwithstanding the preceding sentence, sums in a personal 
social security savings account which are attributable to a Tier III 
Option shall be subject to the taxes imposed by section 511 (relating 
to imposition of tax on unrelated business income of charitable, etc. 
organizations).
    ``(b) Distributions.--
            ``(1) In general.--Any qualified distribution from--
                    ``(A) amounts credited to a personal social 
                security savings account from the Social Security 
                Personal Savings Fund or attributable to a Tier III 
                Investment Option, or
                    ``(B) a personal social security savings annuity,
        shall not be included in the gross income of the distributee.
            ``(2) Qualified distribution.--For purposes of paragraph 
        (1), the term `qualified distribution' means a distribution 
        which meets the requirements of section 258 of the Social 
        Security Act and which is not a guaranty payment (as defined by 
        section 259 of such Act).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Personal social security savings account.--The term 
        `personal social security savings account' means an account 
        established under section 254(a) of the Social Security Act.
            ``(2) Personal social security savings annuity.--The term 
        `personal social security savings annuity' means an annuity 
        approved by the Personal Social Security Savings Board under 
        section 258(b)(3) of the Social Security Act.
            ``(3) Social security personal savings fund.--The term 
        `Social Security Personal Savings Fund' means the Savings Fund 
        established under section 252 of the Social Security Act.
            ``(4) Tier iii investment option.--The term `Tier III 
        Investment Option' has the meaning given such term by section 
        251(9) of the Social Security Act.
    ``(d) Estate Tax Treatment.--No amount shall be includible in the 
gross estate of any individual for purposes of chapter 11 by reason of 
an interest in the Tier I Investment Fund or the Tier II Investment 
Fund of the Savings Fund or held under a Tier III Investment Option and 
which is credited to the personal social security savings account of 
the individual.''.
            (2) Conforming amendment.--Section 86(d)(1)(A) of such Code 
        is amended by inserting ``part A of'' after ``under''.
            (3) Clerical amendment.--The table of parts for subchapter 
        F of chapter 1 of such Code is amended by adding after the item 
        relating to part VIII the following new item:

        ``Part IX. Personal Social Security Savings Program.''.

    (b) Guaranty Payments.--Paragraph (1) of section 86(d) of the 
Internal Revenue Act of 1986, as amended by subsection (a)(2), is 
amended by striking ``or'' at the end of subparagraph (A), by striking 
the period and inserting ``, or'' at the end of subparagraph (B), and 
by adding at the end the following new subparagraph:
                    ``(C) a guaranty payment under section 259(a), and 
                a payment of an additional amount under section 259(c), 
                of the Social Security Act.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2011.

SEC. 405. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

    Part B of title II of the Social Security Act (as added by section 
101 of this Act) is amended by adding at the end the following new 
section:

``SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

    ``(a) Establishment.--There is hereby created on the books of the 
Treasury of the United States a trust fund to be known as the Self-
Liquidating Social Security Transition Fund (in this section referred 
to as the `Transition Fund').
    ``(b) Board of Trustees.--
            ``(1) Establishment.--With respect to the Transition Fund, 
        there is hereby created a body to be known as the Board of 
        Trustees of the Transition Fund (in this section referred to as 
        the `Board of Trustees') composed of the Commissioner of Social 
        Security, the Secretary of the Treasury, and the members of the 
        Personal Social Security Savings Board.
            ``(2) Duties.--The Board of Trustees shall--
                    ``(A) provide for the issuance of obligations by 
                the Transition Fund pursuant to subsection (c),
                    ``(B) provide for the receipt and management of 
                amounts paid into the Transition Fund pursuant to 
                subsection (d),
                    ``(C) use all funds paid into the Transition Fund 
                to redeem obligations issued under subsection (c) as 
                soon as practicable,
                    ``(D) report to Congress not later than the first 
                day of April of each year on the operation and status 
                of the Transition Fund during the preceding fiscal year 
                and on its expected operation and status during the 
                current fiscal year and the next 2 fiscal years, and
                    ``(E) review the general policies followed in 
                managing the Transition Fund, and recommend changes in 
                such policies, including necessary changes in the 
                provisions of law which govern the way in which the 
                Transition Fund is to be managed.
            ``(3) Meetings.--The Board of Trustees shall meet not less 
        frequently than once each calendar year.
    ``(c) Issuance of Transition Fund Bonds.--
            ``(1) Issuance.--
                    ``(A) In general.--The purposes for which 
                obligations of the United States may be issued under 
                chapter 31 of title 31, United States Code, are hereby 
                extended to authorize the issuance at par of public-
                debt obligations by the Transition Fund.
                    ``(B) Required issuance.--Beginning on January 1, 
                2012, whenever any obligation held in the Federal Old-
                Age and Survivors Insurance Trust Fund or the Federal 
                Disability Insurance Trust Fund is repaid from the 
                general fund of the Treasury to either of such Trust 
                Funds, the Transition Fund shall issue an obligation 
                under this subsection in an amount equal to the amount 
                of interest and principal so repaid.
                    ``(C) Transfer of proceeds to general fund of the 
                treasury.--Proceeds from the issuance of any obligation 
                issued under this section shall be transferred to the 
                general fund of the Treasury.
                    ``(D) Accounting.--The debt owed on any obligation 
                issued under this section shall be considered to be 
                debt of the Transition Fund and shall be accounted for 
                in such manner.
            ``(2) Maturities and interest rate.--Such obligations 
        issued by the Transition Fund for purchase by the public shall 
        have maturities fixed with due regard for the needs of the 
        Transition Fund and shall bear interest at a rate equal to the 
        average market yield (computed by the Secretary of the Treasury 
        on the basis of market quotations as of the end of the calendar 
        month next preceding the date of such issue) on all marketable 
        interest-bearing obligations of the United States then forming 
        a part of the public debt which are not due or callable until 
        after the expiration of 4 years from the end of such calendar 
        month, except that where such average market yield is not a 
        multiple of one-eighth of 1 per centum, the rate of interest on 
        such obligations shall be the multiple of one-eighth of 1 per 
        centum nearest such market yield.
            ``(3) Repayment of obligations.--Obligations issued under 
        this subsection may be redeemed only by funds in the Transition 
        Fund.
    ``(d) Deposit of OASDI Trust Fund Surplus.--
            ``(1) In general.--In advance of the initial repayment from 
        the general fund of the Treasury described in subsection 
        (c)(1)(B), the Chief Actuary of the Social Security 
        Administration shall certify to the Secretary of the Treasury 
        the date of such repayment. There are appropriated to the 
        Transition Fund for the fiscal year during which such date 
        occurs, and for each fiscal year thereafter, out of any moneys 
        in the Federal Old-Age and Survivors Insurance Trust Fund, 
        amounts equivalent to the OASDI trust fund surplus (as defined 
        in paragraph (2)) for the preceding fiscal year.
            ``(2) Transfers based on estimates.--The amounts 
        appropriated by paragraph (1) shall be transferred from time to 
        time from the Federal Old-Age and Survivors Insurance Trust 
        Fund to the Transition Fund, such amounts to be determined on 
        the basis of estimates by the Commissioner of Social Security. 
        Proper adjustments shall be made in amounts subsequently 
        transferred to the extent prior estimates were in excess of or 
        were less than such surplus.
            ``(3) OASDI trust fund surplus defined.--In this section, 
        the term `OASDI trust fund surplus' for a fiscal year means the 
        dollar amount by which the Federal Old-Age and Survivors 
        Insurance Trust Fund could be reduced as of the end of such 
        fiscal year so as to result in an OASDI trust fund ratio (as 
        defined in section 201(p)(4)) for such fiscal year equal to 125 
        percent.
            ``(4) Rule of construction.--This section shall not be 
        construed to require redemption of obligations of the Trust 
        Fund for the purpose of making transfers to the Transition Fund 
        under this section or for any other purpose other than to 
        provide for payment of benefits under part A of title II of the 
        Social Security Act.
    ``(e) Redemption of Obligations Upon Deposit of Funds.--Obligations 
issued under subsection (c) may be redeemed only by funds in the 
Transition Fund. The Board of Trustees shall provide for the redemption 
of such obligations as soon as possible with funds deposited into the 
Transition Fund pursuant to subsection (d).
    ``(f) Sunset.--On the first date as of which all of the obligations 
issued under subsection (c) have been redeemed, any balance remaining 
in the Transition Fund as of such date shall be deposited in the 
Federal Old-Age and Survivors Insurance Trust Fund, the terms of the 
Board of Trustees shall end, the Transition Fund shall cease to exist, 
and this section shall be repealed.''.

SEC. 406. BUDGETARY TREATMENT OF SOCIAL SECURITY.

    (a) In General.--Section 710 of the Social Security Act (42 U.S.C. 
911) is amended to read as follows:

                ``budgetary treatment of social security

    ``Sec. 710. 
    ``Notwithstanding any other provision of law and except as provided 
in subsection (b), the receipts and disbursements shall be treated in 
the same manner as section 13301 of the Budget Enforcement Act of 
1990.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to fiscal years beginning on or after October 1, 
2011.

SEC. 407. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DISABILITY 
              INSURANCE PROGRAM AND THE PERSONAL SOCIAL SECURITY 
              SAVINGS PROGRAM.

    Title VII of the Social Security Act is amended by inserting after 
section 705 (42 U.S.C. 906) the following new section:

   ``accounting for the old-age, survivors, and disability insurance 
        program and the personal social security savings program

                    ``Social Security Lockbox Budget

    ``Sec. 706. (a) At the time of the transmittal to the Congress by 
the President of the budget of the United States Government, the 
President shall transmit to each House of the Congress a separate 
report (to be known as the `Social Security Lockbox Budget') detailing 
the performance during the preceding fiscal year of each of the 
accounts established under subsection (b). Such report shall set forth, 
as determined as of the end of the year--
            ``(1) the amount of the balance of each account,
            ``(2) the amount of the total charges and the amount of the 
        total credits to each account for the year, and
            ``(3) the amount of the total for the year of each category 
        of charges and credits itemized in subsection (b).

                      ``Establishment of Accounts

    ``(b) For purposes of accounting for certain receipts and 
disbursement of the Treasury of the United States in connection with 
the Old-Age, Survivors, and Disability Insurance Program under part A 
of title II of the Social Security Act and the Personal Security 
Savings Program under part B of such title, the Secretary of the 
Treasury shall establish and maintain a Social Security Part A Account, 
a Social Security Part B Account, and a Self-Liquidating Social 
Security Transition Fund Account.

      ``Credits and Charges to the Social Security Part A Account

    ``(c)(1) For each fiscal year, the Social Security Part A Account 
shall be credited with the sum of--
            ``(A) all receipts during the year by the Federal Old-Age 
        and Survivors Insurance Trust Fund and the Federal Disability 
        Insurance Trust Fund under section 201 (including amounts 
        received as interest on notes and obligations purchased by the 
        Trust Funds under section 201(d) of such Act, and excluding 
        amounts received in redemption of such notes and obligations 
        and amounts received by either such Trust Fund as transfers 
        from the other such Trust Fund), and
            ``(B) all receipts during the year by the Federal Old-Age 
        and Survivors Insurance Trust Fund and the Federal Disability 
        Insurance Trust Fund under section 121(e) of the Social 
        Security Amendments of 1983 (relating to appropriation of 
        amounts equivalent to taxes on social security benefits) (42 
        U.S.C. 401 note).
    ``(2) For each fiscal year, the Social Security Part A Account 
shall be charged with the sum of--
            ``(A) all benefits paid during the year from the Federal 
        Old-Age and Survivors Insurance Trust Fund and the Federal 
        Disability Insurance Trust Fund under part A of title II of the 
        Social Security Act,
            ``(B) all redirected social security contributions 
        transferred during the year to the Social Security Personal 
        Savings Fund under section 252(b),
            ``(C) all other expenditures during the year from the Trust 
        Funds under part A of title II (excluding amounts expended as 
        transfers by either such Trust Fund to the other such Trust 
        Fund and amounts paid for the purchase of notes and obligations 
        under section 201(d)), and
            ``(D) all transfers from the Federal Old-Age and Survivors 
        Insurance Trust Fund to the Self-Liquidating Social Security 
        Transition Fund under section 262(d).

      ``Charges and Credits to the Social Security Part B Account

    ``(d)(1) For each fiscal year, the Social Security Part B Account 
shall be credited with--
            ``(A) all redirected social security contributions 
        transferred during the year to the Personal Social Security 
        Savings Fund under section 252(b) of the Social Security Act, 
        and
            ``(B) any net increase in the Tier I Investment Fund 
        attributable to investment for the fiscal year, any net 
        increase in the Tier II Investment Fund attributable to 
        investment for the fiscal year, and the total amount of any net 
        increases in Tier III Investment Options attributable to 
        investment for the fiscal year.
    ``(2) For each fiscal year, the Social Security Part B Account 
shall be charged with--
            ``(A) all administrative costs incurred for the fiscal year 
        with respect to the Tier I Investment Fund, the Tier II 
        Investment Fund, and the Tier III Investment Options,
            ``(B) any net decrease in the Tier I Investment Fund 
        attributable to investment for the fiscal year, any net 
        decrease in the Tier II Investment Fund attributable to 
        investment for the fiscal year, and the total amount of any net 
        decreases in Tier III Investment Options attributable to 
        investment for the fiscal year, and
            ``(C) annuity payments made during the year under section 
        258 from the Annuity Reserve Account in the Savings Fund.

     ``Charges and Credits to the Self-Liquidating Social Security 
                        Transition Fund Account

    ``(e)(1) For each fiscal year, the Self-Liquidating Social Security 
Transition Account shall be credited with--
            ``(A) all transfers to the Transition Fund from the Federal 
        Old-Age and Survivors Insurance Trust Fund under section 
        262(b), and
            ``(B) all amounts expended during the fiscal year from the 
        Trust Funds in the redemption under section 262(e) of 
        obligations issued by the Transition fund under section 262(c).
    ``(2) For each fiscal year, the Self-Liquidating Social Security 
Transition Fund Account shall be charged with the total amount of 
obligations issued during the fiscal year by the Transition Fund under 
section 262(c)''.

SEC. 408. PROGRESSIVE INDEXING OF BENEFITS FOR OLD-AGE, WIFE'S, AND 
              HUSBAND'S INSURANCE BENEFITS.

    (a) In General.--Section 215(a) of the Social Security Act (42 
U.S.C. 415(a)) is amended--
            (1) by striking ``The'' in paragraph (1)(A) and inserting 
        ``In the case of any benefit other than an applicable benefit 
        to which paragraph (2) applies, the'', and
            (2) by redesignating paragraphs (2) through (7) as 
        paragraphs (3) through (8), respectively, and by inserting 
        after paragraph (1) the following new paragraph:
    ``(2)(A) In the case of an applicable benefit with respect to any 
individual who initially becomes eligible for old-age insurance 
benefits or who dies (before becoming eligible for such benefits) in 
calendar year 2018 or later, the primary insurance amount of the 
individual shall be equal to the sum of--
            ``(i) 90 percent of the individual's average indexed 
        monthly earning (determined under subsection (b)) to the extent 
        that such earnings do not exceed the amount established for 
        purposes of paragraph (1)(A)(i) by paragraph (1)(B);
            ``(ii) 32 percent of the individual's average indexed 
        monthly earnings to the extent that such earnings exceed the 
        amount established for purposes of paragraph (1)(A)(i) by 
        paragraph (1)(B) but do not exceed the amount established for 
        purposes of this clause by subparagraph (B);
            ``(iii) 32 percent (reduced as provided in subparagraph 
        (C)) of the individual's average indexed monthly earnings to 
        the extent that such earnings exceed the amount established for 
        purposes of clause (ii) but do not exceed the amount 
        established for purposes of paragraph (1)(A)(ii) by paragraph 
        (1)(B); and
            ``(iv) 15 percent (reduced as provided in subparagraph (C)) 
        of the individual's average indexed monthly earnings to the 
        extent that such earnings exceed the amount established for 
        purposes of paragraph (1)(A)(ii) by paragraph (1)(B).
    ``(B)(i) For purposes of subparagraph (A)(ii), the amount 
established under this subparagraph for calendar year 2016 shall be the 
level of average indexed monthly earnings determined by the Chief 
Actuary of the Social Security Administration under clause (ii) as 
being at the 30th percentile for the period of calendar years 2007 
through 2009.
    ``(ii) For purposes of clause (i), the average indexed monthly 
earnings for the period of calendar years 2007 through 2009 shall be 
determined by--
            ``(I) determining the average indexed monthly earnings for 
        each individual who initially became eligible for old-age 
        insurance benefits or who died (before becoming eligible for 
        such benefits) during such period, except that in determining 
        such average indexed monthly earnings under subsection (b), 
        subsection (b)(3)(A)(ii)(I) shall be applied by substituting 
        calendar year 2004 for the second calendar year described in 
        such subsection; and
            ``(II) multiplying the amount determined for each 
        individual under subclause (I) by the quotient obtained by 
        dividing the national average wage index (as defined in section 
        209(k)(1)) for the calendar year 2016 by such index for the 
        calendar year 2004.
    ``(iii) For purposes of subparagraph (A)(ii), the amount 
established under this subparagraph for any calendar year after 2018 
shall be equal to the product of the amount in effect under clause (i) 
with respect to calendar year 2018 and the quotient obtained by 
dividing--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1)) for the second calendar year preceding the 
        calendar year for which the determination is being made, by
            ``(II) the national average wage index (as so defined) for 
        2016.
    ``(iv) The amount established under this subparagraph for any 
calendar year shall be rounded to the nearest $1, except that any 
amount so established which is a multiple of $0.50 but not of $1 shall 
be rounded to the next higher $1.
    ``(C)(i) Except as provided in clause (ii), in the case of any 
calendar year after 2017, each of the percentages to which this 
subparagraph applies by reason of clauses (iii) or (iv) of subparagraph 
(A) shall be a percentage equal to such percentage multiplied by the 
quotient obtained by dividing--
            ``(I) the difference of the maximum CPI-indexed benefit 
        amount for such year over the amount determined under this 
        paragraph for an individual whose average indexed monthly 
        earnings are equal to the amount established for purposes of 
        subparagraph (A)(ii) for such year, by
            ``(II) the difference of the maximum wage-indexed benefit 
        amount for such year over the amount determined under this 
        paragraph for an individual whose average indexed monthly 
        earnings are equal to the amount established for purposes of 
        subparagraph (A)(ii) for such year.
    ``(ii)(I) In the case of any calendar year which is a positive 
balance year, clause (i) shall not apply and each of the percentages to 
which this subparagraph applies by reason of clause (iii) or (iv) of 
subparagraph (B) shall be a percentage equal to the percentage 
determined under this subparagraph for the preceding year (determined 
after the application of this subparagraph).
    ``(II) In the case of any calendar year after a positive balance 
year which is not a positive balance year, this subparagraph shall be 
applied by substituting `the second calendar year preceding the most 
recent positive balance year' for `2015' each place it appears in 
clause (iv).
    ``(iii) For purposes of clause (i), the maximum wage-indexed 
benefit amount for any calendar year shall be equal to the amount 
determined under this paragraph (determined without regard to any 
reduction under this subparagraph) for an individual with wages paid in 
and self-employment income credited to each computation base year in an 
amount equal to the contribution and benefit base for each calendar 
year.
    ``(iv) For purposes of clause (i), the maximum CPI-indexed benefit 
amount for any calendar year shall be an amount equal to the amount 
determined under clause (iii) for such year multiplied by a fraction--
            ``(I) the numerator of which is the ratio (rounded to the 
        nearest one-thousandth of 1 percent) of the Consumer Price 
        Index for the second preceding year to such index for 2015; and
            ``(II) the denominator of which is the ratio (rounded to 
        the nearest one-thousandth of 1 percent) of the national wage 
        index (as defined in section 209(k)(1)) for the second year 
        preceding such year to such index for 2015.
    ``(v)(I) For purposes of this subparagraph, a positive balance year 
is a calendar year following any calendar year after 2082 for which the 
Chief Actuary of the Social Security Administration certifies to the 
Secretary of the Treasury and the Congress that the combined balance 
ratio of the Federal Old-Age and Survivors Trust Fund and the Federal 
Disability Insurance Trust Fund is not less than 100 percent for such 
year.
    ``(II) For purposes of subclause (I), the combined balance ratio of 
the Federal Old-Age and Survivors Trust Fund and the Federal Disability 
Insurance Trust Fund for any calendar year is the ratio of the combined 
balance of such Trust Funds as of the last day of such calendar year 
(reduced by any transfer made pursuant to section 201(o) in such 
calendar year) to the amount estimated by the Commissioner of Social 
Security under section 201(l)(3)(B)(iii)(II) to be paid from such Trust 
Funds during the calendar year following such calendar year for all 
purposes authorized by section 201 (determined as if such following 
calendar year were a positive balance year).
    ``(D) For purposes of this paragraph, rules similar to the rules of 
subparagraphs (C) and (D) of paragraph (1) shall apply.
    ``(E) For purposes of this paragraph, the term `applicable benefit' 
means any benefit under section 202 other than--
            ``(i) a child's insurance benefit under section 202(d) with 
        respect to a child of an individual who has died;
            ``(ii) a widow's insurance benefit under section 202(e) 
        with respect to a widow who has not attained age 60 and is 
        under a disability (as defined in section 223(d)) which began 
        before the end of the period specified in section 202(e)(4);
            ``(iii) a widower's insurance benefit under section 202(f) 
        with respect to a widower who has not attained age 60 and is 
        under a disability (as defined in section 223(d)) which began 
        before the end of the period specified in section 202(f)(4); 
        and
            ``(iv) a mother's and father's insurance benefit under 
        section 202(g).''.
    (b) Treatment of Disabled Beneficiaries.--Section 215(a) of such 
Act (as amended by subsection (a)) is amended further by adding at the 
end the following new paragraph:
    ``(9)(A) Notwithstanding the preceding provisions of this 
subsection, in the case of an individual who has or has had a period of 
disability and who initially becomes eligible for old-age insurance 
benefits or who dies (before becoming eligible for such benefits) in 
any calendar year in or after 2018, the primary insurance amount of 
such individual shall be the sum of--
            ``(i) the amount determined under subparagraph (B); and
            ``(ii) the product derived by multiplying--
                    ``(I) the excess of the amount determined under 
                subparagraph (C) over the amount determined under 
                subparagraph (B), by
                    ``(II) the adjustment factor for such individual 
                determined under subparagraph (D).
    ``(B) The amount determined under this subparagraph is the amount 
of such individual's primary insurance amount as determined under this 
section without regard to this paragraph.
    ``(C) The amount determined under this subparagraph is the amount 
of such individual's primary insurance amount as determined under this 
section as in effect with respect to individuals becoming eligible for 
old-age or disability insurance benefits under section 202(a) on the 
date of the enactment of the Social Security Personal Savings Guarantee 
and Prosperity Act of 2010.
    ``(D) The adjustment factor determined under this subparagraph for 
any individual is the ratio (not greater than 1) of--
            ``(i) the total number of months during which such 
        individual is under a disability (as defined in section 223(d)) 
        during the period beginning on the date the individual attains 
        age 22 and ending on the first day of such individual's first 
        month of eligibility for old-age insurance benefits under 
        section 202(a) (or, if earlier, the month of such individual's 
        death), to
            ``(ii) the number of months during the period beginning on 
        the date the individual attains age 22 and ending on the first 
        day of such individual's first month of eligibility for old-age 
        insurance benefits under section 202(a) (or, if earlier, the 
        month of such individual's death).''.
    (c) Conforming Amendments.--
            (1) Subsections (e)(2)(B)(i)(I) and (f)(2)(B)(i)(I) of 
        section 202 of the Social Security Act are each amended by 
        inserting ``or section 215(a)(2)(B)(iii)'' after ``section 
        215(a)(1)(B)(i) and (ii)''.
            (2) Section 203(a)(10) of such Act is amended--
                    (A) in subparagraph (A)(i), by striking 
                ``215(a)(2)(B)(i)'' and inserting ``215(a)(3)(B)(i)'';
                    (B) in subparagraph (A)(ii), by striking 
                ``215(a)(2)(C)'' and inserting ``215(a)(3)(C)''; and
                    (C) in subparagraph (B)(ii), by striking 
                ``215(a)(2)'' and inserting ``215(a)(3)''.
            (3) Section 209(k)(1) of such Act is amended by inserting 
        ``215(a)(2)(B), 215(a)(2)(C),'' after ``215(a)(1)(D),''.
            (4) Section 215(a) of such Act is amended--
                    (A) in paragraph (4)(A), as redesignated by 
                paragraph (2), by striking ``paragraph (4)'' and 
                inserting ``paragraph (5)'';
                    (B) in paragraph (4)(B), as redesignated by 
                paragraph (2), by striking ``paragraph (2)(A)'' and 
                inserting ``paragraph (3)(A)'';
                    (C) in paragraph (5), as redesignated by paragraph 
                (2), by striking ``paragraph (3)(A)'' and inserting 
                ``paragraph (4)(A)'';
                    (D) in paragraph (6)(A), as redesignated by 
                paragraph (2), by striking ``paragraph (4)(B)'' and 
                inserting ``paragraph (5)(B)''; and
                    (E) in paragraph (8)(B)(ii)(I), as redesignated by 
                paragraph (2), by striking ``paragraph (3)(B)'' and 
                inserting ``paragraph (4)(B)''.
            (5) Section 215(d)(3) of such Act is amended--
                    (A) by striking ``paragraph (4)(B)(ii)'' and 
                inserting ``paragraph (5)(B)(ii)''; and
                    (B) by striking ``subsection (a)(7)(C)'' and 
                inserting ``subsection (a)(8)(C)''.
            (6) Subsection 215(f) of such Act is amended--
                    (A) in paragraph (2)(B), by striking ``subsection 
                (a)(4)(B)'' and inserting ``subsection (a)(5)(B)'';
                    (B) in paragraph (7), by striking ``subsection 
                (a)(4)(B)'' and inserting ``subsection (a)(5)(B)'', and 
                by striking ``subsection (a)(6)'' and inserting 
                ``subsection (a)(7)'';
                    (C) in paragraph (9)(A)--
                            (i) by striking ``subsection (a)(7)(A)'' 
                        and inserting ``subsection (a)(8)(A)''; and
                            (ii) by striking ``subsection (a)(7)(C)'' 
                        and inserting ``subsection (a)(8)(C)''; and
                    (D) in paragraph (9)(B), by striking ``subsection 
                (a)(7)'' each place it appears and inserting 
                ``subsection (a)(8)''.

SEC. 409. ADJUSTMENTS TO SCHEDULE FOR INCREASES IN NORMAL RETIREMENT 
              AGE.

    (a) Completion of Phase-In of Normal Retirement Age to Age 67 by 
2021.--
            (1) In general.--Section 216(l) of the Social Security Act 
        (42 U.S.C. 416(l)) is amended--
                    (A) in paragraph (1)(C), by striking ``2017'' and 
                inserting ``2016'';
                    (B) in paragraph (1)(D), by striking ``2016'' and 
                inserting ``2015'', and by striking ``2022'' and 
                inserting ``2021'';
                    (C) in paragraph (1)(E), by striking ``2021'' and 
                inserting ``2020''; and
                    (D) in paragraph (3)(B), by striking ``2017'' and 
                inserting ``2016'', by striking ``2021'' and inserting 
                ``2020'', and by striking ``2017'' and inserting 
                ``2016''.
            (2) Maintenance of current law for individuals born prior 
        to january 1, 1956.--Section 216(l)(3) of such Act (as amended 
        by paragraph (1)(D)) is amended--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively;
                    (B) by inserting ``(A)'' after ``(3)''; and
                    (C) by adding at the end the following new 
                subparagraph:
    ``(B) Notwithstanding the preceding provisions of this subsection--
            ``(i) with respect to an individual who attains early 
        retirement age after December 31, 2015, and before January 1, 
        2017, the age increase factor under subparagraph (A)(ii) shall 
        not be applied; and
            ``(ii) with respect to an individual who attains early 
        retirement age after December 31, 2016, and before January 1, 
        2018, the age increase factor under subparagraph (A)(ii) shall 
        be 2 months.''.
    (b) Adjustments to Normal Retirement Age After 2021.--Section 
216(l) of such Act (as amended by subsection (a)) is amended--
            (1) in paragraph (1)(E), by inserting ``and before January 
        1, 2022,'' after ``2020,'' and by striking ``age.'' and 
        inserting ``age; and'' ;
            (2) in paragraph (1), by adding after subparagraph (E) the 
        following new subparagraph:
            ``(F) with respect to an individual who attains early 
        retirement age after December 31, 2121, 67 years of age plus 
        the number of months in the age increase factor (as determined 
        under paragraph (3)) for the calendar year in which such 
        individual attains early retirement age.''; and
            (3) in paragraph (3), by adding at the end the following 
        new subparagraph:
            ``(C) The Commissioner of Social Security shall determine 
        (using reasonable actuarial assumptions) and publish on or 
        before November 1 of each calendar year after 2020 the number 
        of months (rounded, if not a multiple of one month, to the next 
        lower multiple of one month) by which the life expectancy as of 
        October 1 of such calendar year of an individual attaining 
        early retirement age on such October 1 exceeds the life 
        expectancy as of October 1, 2020, of an individual attaining 
        early retirement age on October 1, 2020. With respect to an 
        individual who attains early retirement age in the calendar 
        year following any calendar year in which a determination is 
        made under this subparagraph, the age increase factor shall be 
        the number of months determined under this subparagraph as of 
        October 1 of such calendar year in which such determination is 
        made.''.

                     TITLE V--SIMPLIFIED INCOME TAX

SEC. 501. SHORT TITLE.

    This title may be cited as the ``Taxpayer Choice Act''.

SEC. 502. REPEAL OF ALTERNATIVE MINIMUM TAX FOR NONCORPORATE TAXPAYERS.

    (a) In General.--Section 55(a) of the Internal Revenue Code of 1986 
(relating to alternative minimum tax imposed) is amended by adding at 
the end the following new flush sentence:
``In the case of a taxpayer other than a corporation, no tax shall be 
imposed by this section for any taxable year beginning after December 
31, 2010, and the tentative minimum tax of any taxpayer other than a 
corporation for any such taxable year shall be zero for purposes of 
this title.''.
    (b) Conforming Amendments.--
            (1) Section 26(c) of such Code is amended by striking ``the 
        term `tentative minimum tax' means the amount determined under 
        section 55(b)(1)'' and inserting ``the tentative minimum tax is 
        zero.''.
            (2) Section 911(f)(2) of such Code is amended to read as 
        follows:
            ``(2) the tentative minimum tax under section 55 for the 
        taxable year shall be zero.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

SEC. 503. SIMPLIFIED INCOME TAX SYSTEM.

    (a) In General.--Part I of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to tax on individuals) is 
amended by redesignating section 5 as section 6 and by inserting after 
section 4 the following new section:

``SEC. 5. SIMPLIFIED INCOME TAX SYSTEM.

    ``(a) Election.--
            ``(1) In general.--A taxpayer other than a corporation may 
        elect in accordance with this subsection to be subject to the 
        tax imposed by this section in lieu of the tax imposed by 
        section 1 for a taxable year and all subsequent taxable years.
            ``(2) Effect of election.--For purposes of this title, if 
        an election is in effect under paragraph (1) for any taxable 
        year, the tax imposed by this section shall be treated as the 
        tax imposed by section 1 for the taxable year and, except as 
        provided by sections 31 and 36, no amount shall be allowed as a 
        credit against such tax for the taxable year.
            ``(3) Election.--
                    ``(A) In general.--
                            ``(i) In general.--Except as provided in 
                        clause (ii) of this subparagraph and clauses 
                        (ii) and (iii) of subparagraph (B), the 
                        election under paragraph (1) may only be made 
                        with respect to any taxable year beginning 
                        before January 1, 2021, on a timely filed 
                        return for the first taxable year for which the 
                        election applies.
                            ``(ii) New taxpayers.--In the case of an 
                        individual with no tax liability under this 
                        title before January 1, 2021, the election 
                        under paragraph (1) may only be made for the 
                        first taxable year beginning after December 31, 
                        2020, for which such individual has tax 
                        liability under this title.
                    ``(B) Effect of election.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), the election under 
                        paragraph (1), once made, shall be irrevocable.
                            ``(ii) One-time revocation of election.--A 
                        taxpayer may revoke an election under paragraph 
                        (1) for a taxable year and all subsequent 
                        taxable years. The preceding sentence shall not 
                        apply if the taxpayer has made a revocation 
                        under such sentence for any prior taxable year.
                            ``(iii) Filing status changes due to major 
                        life events.--In the case of any major life 
                        event described in clause (iv), a taxpayer may 
                        make an election under paragraph (1) or revoke 
                        such an election under clause (ii). Any such 
                        election or revocation shall apply for the 
                        taxable year for which made and all subsequent 
                        taxable years until the taxpayer makes an 
                        election under the preceding sentence for any 
                        subsequent (and all succeeding) taxable year.
                            ``(iv) Major life event.--For purposes of 
                        clause (iii), a major life event described in 
                        this clause is marriage, divorce, and death.
    ``(b) Tax Imposed.--
            ``(1) Married individuals and surviving spouses.--In the 
        case of a taxpayer for whom an election under subsection (a) is 
        in effect and who is a married individual (as defined in 
        section 7703) who makes a single return jointly with his spouse 
        under section 6013 or a surviving spouse (as defined in section 
        2(a)), there is hereby imposed on the alternative taxable 
        income of such individual a tax determined in accordance with 
        the following table:

``If taxable income is:             The tax is:
    Not over $100,000..............
                                        10% of alternative taxable 
                                                income.
    Over $100,000..................
                                        $10,000, plus 25% of the excess 
                                                over $100,000.
            ``(2) Unmarried individuals (other than surviving 
        spouses).--In the case of a taxpayer for whom an election under 
        subsection (a) is in effect and who is not described in 
        paragraph (1), there is hereby imposed on the alternative 
        taxable income of such individual a tax determined in 
        accordance with the following table:

``If taxable income is:             The tax is:
    Not over $50,000...............
                                        10% of alternative taxable 
                                                income.
    Over $50,000...................
                                        $5,000, plus 25% of the excess 
                                                over $50,000.
    ``(c) Alternative Taxable Income.--For purposes of this section--
            ``(1) In general.--The term `alternative taxable income' 
        means--
                    ``(A) gross income,
                    ``(B) the amount excluded from income under section 
                139C for capital gains, dividends, and interest, minus
                    ``(C) the sum of--
                            ``(i) the personal exemption,
                            ``(ii) the dependent allowance, plus
                            ``(iii) the alternative standard deduction.
            ``(2) Personal exemption.--The personal exemption is--
                    ``(A) 200 percent of the dollar amount in effect 
                under subparagraph (B) in the case of--
                            ``(i) a joint return, or
                            ``(ii) a surviving spouse (as defined in 
                        section 2(a)), and
                    ``(B) $3,500 in the case of an individual--
                            ``(i) who is not married and is not a 
                        surviving spouse, or
                            ``(ii) who is a married individual filing a 
                        separate return.
            ``(3) Dependent allowance.--The dependent allowance is 
        $3,500 for each dependent (as defined in section 152).
            ``(4) Alternative standard deduction.--The alternative 
        standard deduction means--
                    ``(A) $25,000 in the case of--
                            ``(i) a joint return, or
                            ``(ii) a surviving spouse (as defined in 
                        section 2(a)), and
                    ``(B) $12,500 in the case of an individual--
                            ``(i) who is not married and is not a 
                        surviving spouse, or
                            ``(ii) who is a married individual filing a 
                        separate return.
    ``(d) Inflation Adjustments.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2011, each of the dollar 
        amounts for the rate brackets in subsection (b) and each of the 
        dollar amounts in subsection (d)(2)(B), (d)(3), and (d)(4) 
        shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                2010' for `calendar year 1992' in subparagraph (B) 
                thereof.
            ``(2) Rounding.--If any amount as adjusted under clause (i) 
        is not a multiple of $100, such amount shall be rounded to the 
        nearest multiple of $100.''.
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter A of chapter 1 of such Code is amended by striking the item 
relating to section 5 and inserting after the item relating to section 
4 the following:

``Sec. 5. Simplified income tax system.
``Sec. 6. Cross references relating to tax on individuals.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

SEC. 504. EXCLUSION FOR CAPITAL GAINS, DIVIDENDS, AND INTEREST.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 139C the 
following new section:

``SEC. 139D. CAPITAL GAINS, DIVIDENDS, AND INTEREST.

    ``(a) Exclusion.--Gross income does not include amounts received by 
an individual as net capital gains, qualified dividends, and interest.
    ``(b) Qualified Dividends.--For purposes of this section--
            ``(1) In general.--The term `qualified dividends' means 
        dividends received during the taxable year from--
                    ``(A) domestic corporations, and
                    ``(B) qualified foreign corporations.
            ``(2) Qualified foreign corporations.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `qualified foreign 
                corporation' means any foreign corporation if--
                            ``(i) such corporation is incorporated in a 
                        possession of the United States, or
                            ``(ii) such corporation is eligible for 
                        benefits of a comprehensive income tax treaty 
                        with the United States which the Secretary 
                        determines is satisfactory for purposes of this 
                        paragraph and which includes an exchange of 
                        information program.
                    ``(B) Dividends on stock readily tradable on united 
                states securities market.--A foreign corporation not 
                otherwise treated as a qualified foreign corporation 
                under subparagraph (A) shall be so treated with respect 
                to any dividend paid by such corporation if the stock 
                with respect to which such dividend is paid is readily 
                tradable on an established securities market in the 
                United States.
                    ``(C) Exclusion of dividends of certain foreign 
                corporations.--Such term shall not include any foreign 
                corporation which for the taxable year of the 
                corporation in which the dividend was paid, or the 
                preceding taxable year, is a passive foreign investment 
                company (as defined in section 1297).
            ``(3) Special rule.--If a taxpayer to whom this section 
        applies receives, with respect to any share of stock, qualified 
        dividend income from 1 or more dividends which are 
        extraordinary dividends (within the meaning of section 
        1059(c)), any loss on the sale or exchange of such share shall, 
        to the extent of such dividends, be treated as long-term 
        capital loss.
    ``(c) Interest.--For purposes of this section, the term `interest' 
means--
            ``(1) interest on deposits with a bank (as defined in 
        section 581),
            ``(2) amounts (whether or not designated as interest) paid, 
        in respect to deposits, investment certificates, or 
        withdrawable or repurchasable shares, by--
                    ``(A) a mutual savings bank, cooperative bank, 
                domestic building and loan association, industrial loan 
                association or bank, or credit union, or
                    ``(B) any other savings or thrift institution, 
                which is chartered and supervised under Federal or 
                State law,
        the deposits or accounts in which are insured under Federal or 
        State law or which are protected and guaranteed under State 
        law,
            ``(3) interest on--
                    ``(A) evidences of indebtedness (including bonds, 
                debentures, notes, and certificates) issued by a 
                domestic corporation in registered form, and
                    ``(B) to the extent provided in regulations 
                prescribed by the Secretary, other evidences of 
                indebtedness issued by a domestic corporation of a type 
                offered by corporations to the public,
            ``(4) interest on obligations of the United States, a 
        State, or a political subdivision of a State (not excluded from 
        gross income of the taxpayer under any other provision of law), 
        and
            ``(5) interest attributable to participation shares in a 
        trust established and maintained by a corporation established 
        pursuant to Federal law.
    ``(d) Certain Nonresident Aliens Ineligible for Exclusion.--In the 
case of a nonresident alien individual, subsection (a) shall apply 
only--
            ``(1) in determining the tax imposed for the taxable year 
        pursuant to section 871(b)(1) and only in respect to dividends 
        and interest which are effectively connected with the conduct 
        of a trade or business within the United States, or
            ``(2) in determining the tax imposed for the taxable year 
        pursuant to section 877(b).''.
    (b) Conforming Amendment.--Section 1 of such Code is amended by 
striking subsection (h).
    (c) Clerical Amendment.--The table of sections for such part III is 
amended by inserting after the item relating to section 139C the 
following new item:

``Sec. 139D. Capital gains, dividends, and interest.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

SEC. 505. REPEAL OF ESTATE AND GIFT TAXES.

    (a) In General.--Subtitle B of the Internal Revenue Code of 1986 is 
hereby repealed.
    (b) Effective Date.--The repeal made by subsection (a) shall apply 
to the estates of decedents dying, and gifts made, and generation-
skipping transfers after December 31, 2010.

                   TITLE VI--BUSINESS CONSUMPTION TAX

SEC. 601. SHORT TITLE.

    This title may be cited as the ``Competitive American Business 
Tax''.

SEC. 602. REPEAL OF CORPORATE INCOME TAX; NEW TAX PAID BY CORPORATIONS 
              AND OTHER BUSINESSES.

    (a) In General.--Chapter 2 of the Internal Revenue Code is 
renumbered chapter 3 and the following new chapter is inserted after 
chapter 1:

             ``CHAPTER 2--COMPETITIVE AMERICAN BUSINESS TAX

                   ``subchapter a. imposition of tax

        ``subchapter b. basic rules for business consumption tax

   ``subchapter c. capital contributions, mergers, acquisitions, and 
                             distributions

                ``subchapter d. accounting method rules

                ``subchapter e. land and rental property

            ``subchapter f. insurance and financial products

                ``subchapter g. tax-exempt organizations

                      ``subchapter h. cooperatives

                     ``subchapter i. sourcing rules

           ``subchapter j. business conducted in a possession

                       ``subchapter k. import tax

                    ``subchapter l. transition rules

     ``subchapter m. rules for administration, consolidated returns

          ``subchapter n. definitions and rules of application

                   ``Subchapter A--Imposition of Tax

``Sec. 201. Tax imposed.

``SEC. 201. TAX IMPOSED.

    ``(a) Taxable Business Activity.--A business consumption tax is 
imposed on the sale of goods and services in the United States by a 
business entity.
    ``(b) Business Consumption Tax Imposed.--`Business consumption tax' 
is 8.5 percent of the gross profits of the business entity for the 
taxable year.
    ``(c) Import Tax.--For rules relating to the import tax imposed by 
this chapter, see subchapter K (sections 281 through 283).

        ``Subchapter B--Basic Rules for Business Consumption Tax

``Sec. 202. Gross profits.
``Sec. 203. Taxable receipts.
``Sec. 204. Deductible amounts.
``Sec. 205. Cost of business purchases.
``Sec. 206. Business entity and business activity.
``Sec. 207. Loss carryover deduction.

``SEC. 202. GROSS PROFITS.

    ```Gross profits' means for a taxable year of a business entity the 
amount by which--
            ``(1) the taxable receipts of the business entity for the 
        taxable year exceed,
            ``(2) the deductible amounts for the business entity for 
        the taxable year.

``SEC. 203. TAXABLE RECEIPTS.

    ``(a) In General.--`Taxable receipts' means all receipts from the 
sale of property, use of property, and performance of services in the 
United States.
    ``(b) Games of Chance.--Amounts received for playing games of 
chance by business entities engaging in the activity of providing such 
games shall be treated as receipts from the sale of property or 
services.
    ``(c) In-Kind Receipts.--The taxable receipts attributable to the 
receipt of property, use of property or services in whole or partial 
exchange for property, use of property or services equal the fair 
market value of the services or property received.
    ``(d) Taxes.--Taxable receipts do not include any excise tax, sales 
tax, custom duty, or other separately stated levy imposed by a Federal, 
State, or local government received by a business entity in connection 
with the sale of property or services or the use of property.
    ``(e) Financial Receipts.--
            ``(1) In general.--Taxable receipts do not include 
        financial receipts.
            ``(2) Financial receipts.--`Financial receipts' include--
                    ``(A) interest,
                    ``(B) dividends and other distributions by a 
                business entity,
                    ``(C) proceeds from the sale of stock, other 
                ownership interests in business entities, or other 
                financial instruments,
                    ``(D) proceeds from life insurance policies,
                    ``(E) proceeds from annuities,
                    ``(F) proceeds from currency hedging or exchanges, 
                and
                    ``(G) proceeds from other financial transactions.
            ``(3) Financial instrument.--`Financial instrument' means 
        any--
                    ``(A) share of stock in a corporation,
                    ``(B) equity ownership in any widely held or 
                publicly traded partnership, trust, or other business 
                entity,
                    ``(C) note, bond, debenture, or other evidence of 
                indebtedness,
                    ``(D) interest rate, currency, or equity notional 
                principal contract,
                    ``(E) evidence or interest in, or a derivative 
                financial instrument in, any financial instrument 
                described in subparagraph (A), (B), (C), or (D), or any 
                currency, including any option, forward contract, short 
                position, and any similar financial instrument in such 
                a financial instrument or currency, and
                    ``(F) a position which--
                            ``(i) is not a financial instrument 
                        described in subparagraph (A), (B), (C), (D) or 
                        (E),
                            ``(ii) is a hedge with respect to such a 
                        financial instrument, and
                            ``(iii) is clearly identified in the 
                        dealer's records as being described in this 
                        subparagraph before the close of the day on 
                        which it was acquired or entered into.
    ``(f) Cross References.--
            ``(1) Exports, sales in the united states.--See subchapter 
        I for the exclusion from gross receipts for export sales and 
        for rules on sales of property and services in the United 
        States.
            ``(2) Land.--See subchapter E for rules relating to certain 
        sales of land.

``SEC. 204. DEDUCTIBLE AMOUNTS.

    ```Deductible amounts' for a business entity in a taxable year 
include--
            ``(1) the cost of business purchases in the taxable year 
        (as determined under section 205),
            ``(2) the cost of employer-provided health insurance for 
        which the employee, members of his family, or persons 
        designated by him or members of his family are the 
        beneficiaries,
            ``(3) such entity's loss carryover deduction (as determined 
        under section 207), and
            ``(4) the transition basis deduction (as determined under 
        section 290).

``SEC. 205. COST OF BUSINESS PURCHASES.

    ``(a) Business Purchases.--
            ``(1) In general.--`Business purchases' means the 
        acquisition of--
                    ``(A) property,
                    ``(B) the use of property, or
                    ``(C) services
        in the United States for use in a business activity.
            ``(2) Examples.--Business purchases include (without 
        limitation) the--
                    ``(A) purchase or rental of real property,
                    ``(B) purchase or rental of capital equipment,
                    ``(C) purchase of supplies and inventory,
                    ``(D) purchase of services from independent 
                contractors, and
                    ``(E) imports for use in a business activity.
            ``(3) Exclusions.--Business purchases do not include--
                    ``(A) payments for use of money or capital, such as 
                interest or dividends (except to the extent that a 
                portion so paid is a fee for financial intermediation 
                services),
                    ``(B) premiums for life insurance,
                    ``(C) the acquisition of savings assets or other 
                financial instruments (as defined in section 
                203(e)(3)).
                    ``(D) property acquired outside the United States 
                (but such property shall be taken into account as an 
                import if imported),
                    ``(E) services performed outside the United States 
                (unless treated as imported into the United States),
                    ``(F) compensation expenses for an individual 
                (other than amounts paid to an individual in his 
                capacity as a business entity), or
                    ``(G) taxes (except as provided in subsection 
                (b)(2) relating to product taxes).
            ``(4) Compensation expenses.--`Compensation expenses' 
        means--
                    ``(A) wages, salaries or other cash payable for 
                services,
                    ``(B) any taxes imposed on the recipient that are 
                withheld by the business entity,
                    ``(C) the cost of property purchased to provide 
                employees with compensation (other than property 
                incidental to the provision of fringe benefits that are 
                excluded from income under the individual tax),
                    ``(D) the cost of fringe benefits which are 
                includible in an employee's, partner's, or proprietor's 
                income under the business consumption tax (or are 
                excluded solely because they constitute employee 
                savings), including (without limitation)--
                            ``(i) contributions to retirement and 
                        severance benefit plans,
                            ``(ii) premiums for the cost of life, 
                        accident, disability and other insurance 
                        policies for which the employee, members of his 
                        family, or persons designated by him or members 
                        of his family are the beneficiaries,
                            ``(iii) rental of parking spaces or parking 
                        fees (unless the parking space is used for a 
                        vehicle that is regularly used in a business 
                        activity);
                            ``(iv) employer paid educational benefits;
                            ``(v) employer paid housing (other than 
                        housing provided for the convenience of the 
                        employer); and
                            ``(vi) employer paid meals (other than 
                        meals provided for the convenience of the 
                        employer).
    ``(b) Cost of Business Purchases.--
            ``(1) In general.--The `cost of a business purchase' is the 
        amount paid or to be paid for the business purchase.
            ``(2) Taxes.--
                    ``(A) In general.--The `cost of business purchases' 
                includes any product taxes paid with respect to the 
                property or services purchased.
                    ``(B) Product tax.--`Product tax' means any excise 
                tax, sales or use tax, custom duty, or other separately 
                stated levy imposed by a Federal, State, or local 
                government on the production, severance or consumption 
                of property or on the provision of services, whether or 
                not separately stated, and including any such taxes 
                that are technically imposed on the seller of property 
                or services.
                    ``(C) Taxes not product taxes.--Product taxes do 
                not include--
                            ``(i) the import tax,
                            ``(ii) state and local property taxes,
                            ``(iii) franchise or income taxes,
                            ``(iv) payroll taxes and self-employment 
                        taxes, or
                            ``(v) the business consumption tax.
            ``(3) Imports.--In the case of an import by a business 
        entity, the cost of the import is the import price for purposes 
        of the import tax. The import tax is not part of the cost of 
        the import.
    ``(c) Property and Services Acquired for Property.--If a business 
entity receives property or services from a business entity in whole or 
partial exchange for property or services, the property or services 
acquired shall be treated as if they were purchased for an amount equal 
to the fair market value of the services or property received. For 
purposes of this section, property includes stock and other equity 
interests in business other than stock or an equity interest in the 
business entity acquiring the property or services. See section 210(b) 
for rules on property or services received in exchange for an equity 
interest in the recipient.
    ``(d) Gambling Payments.--In the case of a business involving 
gambling, lotteries, or other games of chance, business purchases 
include amounts paid to winners.
    ``(e) Savings Assets.--`Savings assets' means stocks, bonds, 
securities, certificates of deposits, investments in partnerships and 
limited liability companies, shares of mutual funds, life insurance 
policies, annuities, and other similar savings or investment assets.
    ``(f) Cross References.--
            ``(1) Land.--For special rules relating to the acquisition 
        of land, see subchapter E.
            ``(2) Rental real estate.--For special rules relating to 
        the rental of real estate previously occupied by an owner of 
        the real estate, see section 232.
            ``(3) Outside the united states.--For special rules 
        relating to services performed outside the United States but 
        used inside the United States and international services, see 
        subchapter I.

``SEC. 206. BUSINESS ENTITY AND BUSINESS ACTIVITY.

    ``(a) Business Entity.--For purposes of the business consumption 
tax, `business entity' means any corporation, unincorporated 
association, partnership, limited liability company, proprietorship, 
independent contractor, individual, or any other person engaging in 
business activity in the United States. An individual shall be 
considered a business entity only with respect to the individual's 
business activities.
    ``(b) Business Activity.--`Business activity' means the sale of 
property or services, the leasing of property, the development of 
property or services for subsequent sale or use in producing property 
or services for subsequent sale. `Business activity' does not include 
casual or occasional sales of property used by an individual (other 
than in a business activity), such as the sale by an individual of a 
vehicle used by the individual.
    ``(c) Exception for Certain Employees.--
            ``(1) In general.--`Business activity' does not include--
                    ``(A) the performance of services by an employee 
                for an employer that is a business entity with respect 
                to the activity in which the employee is engaged, or
                    ``(B) the performance of regular domestic household 
                services (including babysitting, housecleaning, and 
                lawn cutting) by an employee of an employer that is an 
                individual or family.
            ``(2) Employee defined.--For purposes of this subsection, 
        `employee' includes an individual partner who provides services 
        to a partnership or an individual member who provides services 
        to a limited liability company, or a proprietor with respect to 
        compensation for services from his proprietorship.

``SEC. 207. LOSS CARRYOVER DEDUCTION.

    ``(a) Deduction.--The `loss carryover deduction' for a taxable year 
is the lesser of--
            ``(1) the business entity's gross profits for the taxable 
        year (determined without the loss carryover deduction), or
            ``(2) the amount of the loss carryover to the taxable year.
    ``(b) Loss Carryover.--
            ``(1) General rule.--A loss for any taxable year shall be a 
        loss carryover to each of the 15 taxable years following the 
        taxable year of the loss.
            ``(2) Loss carryovers to a taxable year.--The loss 
        carryover to a taxable year is the sum of the loss carryovers 
        from all prior taxable years beginning on or after January 1, 
        2011, that can be carried over to the taxable year.
            ``(3) Reduction of loss carryovers as a result of the 
        deduction.--A business entity's loss carryovers shall be 
        reduced each year by the amount of the loss carryover deduction 
        for the year. Loss carryovers shall be reduced in the order 
        that they arose.
    ``(c) Loss for Taxable Year.--A business entity's loss (if any) for 
the taxable year equals the excess (if any) of--
            ``(1) the sum of--
                    ``(A) the cost of business purchases for the 
                taxable year, and
                    ``(B) the transition basis adjustment for the 
                taxable year, over
            ``(2) taxable receipts for the taxable year.
    ``(d) Special Rules.--
            ``(1) Consolidated returns.--In the case of a consolidated 
        return, the loss for a taxable year shall be determined on a 
        consolidated group basis. In the case of a deconsolidation, the 
        loss carryovers from the consolidated group shall be allocated 
        in accordance with rules to be prescribed by the Secretary.
            ``(2) Loss carryovers of acquired business entity.--
                    ``(A) In general.--If a business entity acquires 
                another business entity in a transaction that is 
                considered the acquisition of a business entity and the 
                two entities file a consolidated return or if two 
                business entities merge, the loss carryovers will 
                survive and can be applied against the taxable receipts 
                attributable to the business activities carried on (or 
                in the case of a merger formerly carried on) by either 
                entity.
                    ``(B) Asset acquisition.--If a business entity 
                acquires all or substantially all of the assets of 
                another entity in a transaction that is considered an 
                asset acquisition rather than the acquisition of a 
                business entity, the acquirer will be treated as if it 
                acquired the loss carryovers of the selling entity. For 
                purposes of this rule, the assets of a business entity 
                include ownership interests in other business entities.
                    ``(C) Substantially all.--For purposes of this 
                paragraph `substantially all' means more than 80 
                percent of the fair market value of a business entity's 
                net assets. Under rules prescribed by the Secretary, 
                the parties to a transaction may elect to treat 
                acquisitions in excess of 70 percent of the fair market 
                value of a business entity's net assets as acquisitions 
                of `substantially all' of a business entity's net 
                assets.

   ``Subchapter C--Capital Contributions, Mergers, Acquisitions, and 
                             Distributions

``Sec. 210. Contributions to a business entity.
``Sec. 211. Distributions of property.
``Sec. 212. Asset acquisitions.
``Sec. 213. Mergers and stock acquisitions.
``Sec. 214. Spin-offs, split-off, etc.
``Sec. 215. Allocation of certain tax attributes.

``SEC. 210. CONTRIBUTIONS TO A BUSINESS ENTITY.

    ``(a) By Business Entity.--
            ``(1) Cash.--If a business entity contributes cash to a 
        business entity of which it is or becomes a partial or full 
        owner, the amount contributed is not a deductible amount to the 
        contributor or a taxable receipt to the recipient.
            ``(2) Property or services.--If a business entity 
        contributes property or services to a business entity of which 
        it is or becomes a partial or full owner, the transaction will 
        not result in taxable receipts to the contributor or a 
        deduction for a business purchase for the recipient and will 
        not constitute a sale resulting in taxable receipts to the 
        contributor.
    ``(b) By Individual.--
            ``(1) Cash.--If an individual contributes cash to a 
        business entity, the cash received is not a taxable receipt.
            ``(2) New property.--If an individual contributes to a 
        business entity property that the individual purchased for the 
        business entity but which was not used by any person after its 
        purchase, the property shall be considered purchased by such 
        business entity from the person from which the individual 
        purchased the property.
            ``(3) Personal use property.--
                    ``(A) In general.--If an individual contributes 
                personal use property to a business entity in which the 
                individual has an ownership interest or for which the 
                individual receives an ownership interest, the business 
                entity shall not be permitted to deduct the value of 
                the property received as a business expense. The 
                business entity will have a tax basis in the 
                contributed property equal to the contributor's basis.
                    ``(B) Personal use property.--`Personal use 
                property' means any property used by an individual at 
                any time other than in a business activity.
            ``(4) Services.--If an individual contributes services to a 
        business entity in which the individual has an ownership 
        interest or receives an ownership interest, the business entity 
        shall not be permitted to deduct the value of the services 
        received (or the value of the equity interest provided to the 
        services provider).

``SEC. 211. DISTRIBUTIONS OF PROPERTY.

    ``(a) Distributions Other Than to Controlling Business.--If a 
business entity distributes all or a portion of its assets to its 
owners (other than a controlling business entity), the business entity 
will be treated as if it sold the assets to its owners at fair market 
value. The fair market value will be determined by the distributing 
corporation and those determinations, unless unreasonable, will be 
binding on the recipients.
    ``(b) Distributions to a Controlling Business.--If a business 
entity distributes all or a portion of its assets to a controlling 
business, the controlling business will assume the distributing 
entity's tax attributes with respect to the assets and neither entity 
will have taxable receipts or a deduction as a result of the 
transaction.
    ``(c) Distribution of Personal Use Property.--If personal use 
property is distributed to the individual who contributed the personal 
use property to a business entity, the fair market value of the 
property for purposes of paragraph (a) shall equal the basis of the 
property plus any enhancement in value of the property attributable to 
business purchases with respect to the property.
    ``(d) Controlling Business Entity.--A business entity is a 
`controlling business entity' with respect to another business entity 
if it owns directly or indirectly more than 50 percent of the profits 
or capital interest in the other business entity.
    ``(e) Application of This Section.--This section applies to both 
liquidating and nonliquidating distributions. Property shall be treated 
as distributed if the property is used for a nonbusiness purpose or 
used as non rental property (as defined in section 232) for more than 
an insubstantial period of time during a taxable year. See section 232 
for rules relating to certain rental property.

``SEC. 212. ASSET ACQUISITIONS.

    ``(a) In General.--If a business entity transfers some or all of 
its assets, the consideration received for such assets shall be 
allocated among the assets transferred in the same manner as was 
required by section 1060 of the Internal Revenue Code of 1986. If the 
transferee and transferor agree in writing on the allocation of any 
consideration, or as to the fair market value of any of the assets, 
such agreement shall be binding on both the transferor and transferee 
unless the Secretary determines that such allocation (or fair market 
value) is not appropriate.
    ``(b) Tax Consequences.--The tax consequences of an asset 
acquisition shall be determined in accordance with the rules of this 
chapter and shall be dependent upon allocations made under subsection 
(a). In general, consideration allocable to savings assets, such as 
stock in another business entity, would not be included in taxable 
receipts of the transferor and would not be a business purchase of the 
purchaser, but consideration allocable to the sale of tangible property 
and intangible property (other than savings assets) will constitute 
taxable receipts of the seller and a business purchase of the 
purchaser.
    ``(c) Election To Treat Asset Acquisition as a Stock Acquisition.--
In the case of the sale of substantially all of the assets of a 
business entity or substantially all of the assets of a line of 
business or a separately standing business of a business entity, the 
transferee and transferor can jointly elect to treat the acquisition as 
if it were an acquisition of the stock of a business entity holding the 
assets so transferred. In such case, the rules of section 213 shall 
apply.
    ``(d) Authority To Require Allocation Agreement and Notice to the 
Secretary.--If the Secretary determines that certain types of asset 
acquisitions have significant possibilities of tax avoidance, the 
Secretary may require--
            ``(1) parties to such types of acquisitions to enter into 
        agreements allocating consideration,
            ``(2) parties to acquisitions involving certain kinds of 
        assets to enter into agreements allocating part of the 
        consideration to those assets, or
            ``(3) parties to certain acquisitions to report information 
        to the Secretary.
    ``(e) Asset Acquisition Rules Do Not Apply if Consideration 
Includes Equity in Purchaser.--
            ``(1) In general.--If a business entity issues its own 
        equity or equity in a subsidiary or other controlled entity as 
        part of the consideration for the transfer of assets to it, the 
        transaction shall be treated as a business purchase and not as 
        an asset acquisition, and the taxpayer shall not be entitled to 
        a loss carryover for any unused deduction attributable to the 
        equity portion of such transfer.
            ``(2) Equity.--For purposes of this subsection, equity 
        means--
                    ``(A) stock, in the case of a corporation,
                    ``(B) partnership or similar interest, in the case 
                of a partnership or limited liability company, and
                    ``(C) an ownership interest or interest in profits 
                in the case of any other business entity.

``SEC. 213. MERGERS AND STOCK ACQUISITIONS.

    ``(a) Mergers.--A merger of one business entity into another or two 
businesses entities into a third business entity or any other similar 
transaction shall have no direct consequences under the business 
consumption tax. The surviving entity shall assume the tax attributes 
of the merged corporations, including any loss carryovers and credit 
carryovers.
    ``(b) Stock Acquisition.--The acquisition of all or substantially 
all of the ownership interest in one business entity either for cash or 
in exchange for ownership in the acquiring entity or an entity 
controlled by the acquired entity shall have no direct consequences 
under the business consumption tax.

``SEC. 214. SPIN-OFFS, SPLIT-OFFS, ETC.

    ``A spin-off, split-off or split-up of a business entity shall have 
no direct tax consequences under the business consumption tax.

``SEC. 215. ALLOCATION OF CERTAIN TAX ATTRIBUTES.

    ``The Secretary shall prescribe rules for allocation of loss 
carryovers in cases of substantial shifts of assets from one business 
entity to another business entity. Under such rules, a portion of a 
business entity's carryovers may be deemed transferred when assets are 
transferred.

                ``Subchapter D--Accounting Method Rules

``Sec. 220. General accounting rules.
``Sec. 221. Use of the cash method of accounting.
``Sec. 222. Taxable year.
``Sec. 223. Long-term contracts.
``Sec. 224. Post-sale price adjustments and refunds.
``Sec. 225. Bad debts.
``Sec. 226. Transition rules.

``SEC. 220. GENERAL ACCOUNTING RULES.

    ``(a) In General.--Except as provided in section 221, a business 
entity shall use an accrual method of accounting for purposes of 
determining the timing of recognition of taxable receipts and deduction 
of business purchases. All business purchases shall be deducted when 
incurred (in the case of a business entity using the accrual method of 
accounting) or when paid (in case of a business entity using the cash 
method of accounting) without regard to whether the business purchases 
are for or relate to--
            ``(1) inventory,
            ``(2) assets with a useful life of more than one year, or
            ``(3) property that will be used to produce other property.
    ``(b) Economic Performance.--For purposes of determining whether an 
amount has been incurred, the all events test shall not be treated as 
met any earlier than when economic performance with respect to such 
item occurs.
    ``(c) Consistent Accounting Methods.--Except as otherwise expressly 
provided in this chapter, a business entity shall secure the consent of 
the Secretary before changing the method of accounting by which it 
determines gross profits. This provision shall not apply to changes 
required by the adoption of the business consumption tax.

``SEC. 221. USE OF THE CASH METHOD OF ACCOUNTING.

    ``(a) In General.--A business entity that was permitted to use and 
used the cash method of accounting under the Internal Revenue Code of 
1986 shall be permitted to continue to use the cash method of 
accounting.
    ``(b) New Business Entities.--A new business entity shall be 
permitted to use the cash method of accounting if permitted to under 
regulations prescribed by the Secretary.
    ``(c) Change or Expansion of Business.--Subsection (a) shall cease 
to apply to a business entity that changes or expands its business such 
that under regulations prescribed by the Secretary it is no longer 
eligible to use the cash method of accounting.
    ``(d) Regulations.--
            ``(1) Use of cash method.--The Secretary shall prescribe 
        regulations defining which business entities may use the cash 
        method of accounting. In general, those regulations shall be 
        consistent with the rules under sections 447 and 448 of the 
        Internal Revenue Code of 1986. The regulations shall not 
        require a business entity described in subsection (a) to 
        convert to the accrual method prior to January 1, 2012.
            ``(2) Change in accounting method.--The Secretary shall 
        prescribe regulations to prevent double counting of taxable 
        receipts and deductible expenses in the case of a change in 
        accounting method.

``SEC. 222. TAXABLE YEAR.

    ``(a) Computation of Gross Profits.--Gross profits shall be 
computed on the basis of a business entity's taxable year.
    ``(b) Taxable Year.--`Taxable year' means--
            ``(1) the taxpayer's annual accounting period, if it is a 
        calendar year or a fiscal year;
            ``(2) the calendar year, if subsection (g) applies; or
            ``(3) the period for which the return is made if the return 
        is made for a period of less than 12 months.
    ``(c) Annual Accounting Period.--`Annual accounting period' means 
the annual period on the basis of which the business entity regularly 
keeps its books.
    ``(d) Calendar Year.--`Calendar year' means a period of 12 months 
ending on December 31.
    ``(e) Fiscal Year.--`Fiscal year' means a period of 12 months 
ending on the last day of any month other than December. In the case of 
any business entity that has made the election provided by subsection 
(f), the term means the annual period (varying from 52 to 53 weeks) so 
elected.
    ``(f) Election of 52-53 Week Year.--
            ``(1) General rule.--A business entity which, in keeping 
        its books, regularly computes its income or profits on a basis 
        of an annual period which varies from 52 to 53 weeks and ends 
        always on the same day of the week and ends always--
                    ``(A) on whatever date such same day of the week 
                last occurs in a calendar month, or
                    ``(B) on whatever date such same day of the week 
                falls which is nearest to the last day of a calendar 
                month, may elect to compute its gross profits on the 
                basis of such annual period.
            ``(2) Regulations.--The Secretary shall prescribe such 
        regulations as he deems necessary for the application of this 
        subsection, including regulations relating to the application 
        of effective dates to taxpayers using a 52-53 week year.
    ``(g) Calendar Year Required.--
            ``(1) No accounting period.--A business entity's taxable 
        year shall be the calendar year if the business entity does not 
        have an annual accounting period or has an annual accounting 
        period that does not qualify as a fiscal year.
            ``(2) New business entity.--The taxable year of a business 
        entity that begins business activity after December 31, 2010, 
        shall be the calendar year (or a 52-53 week fiscal year ending 
        in December) unless the business entity can demonstrate a 
        business reason for selecting an accounting period other than 
        the calendar year.
    ``(h) Transition Rule for Business Entities With a Fiscal Year.--
            ``(1) In general.--A business entity with a taxable year 
        that is not the calendar year shall have a short taxable year 
        ending on December 31, 2010, and a subsequent taxable year 
        beginning on January 1, 2011, and ending on the day immediately 
        preceding the beginning of the business entity's next fiscal 
        year.
            ``(2) Business entities with 52-53 week year ending in 
        december.--
                    ``(A) In general.--If a business entity has a 52-53 
                week taxable year (under the Internal Revenue Code of 
                1986) that ends in December 2010, it may elect to begin 
                its first taxable year for the business consumption tax 
                on the first day immediately following the last day of 
                such taxable year.
                    ``(B) No election.--If a business entity that has a 
                52-53 week taxable year that ends in December 2010, 
                does not make the election under subparagraph (A) or is 
                prohibited from making such election by subparagraph 
                (C), the business entity's taxable year under the 
                Internal Revenue Code of 1986 that would end in 
                December 2010 shall end on December 31, 2010.
                    ``(C) Anti-abuse rule.--Subparagraph (A) shall not 
                apply to any taxpayer that enters into business 
                transactions in 2010 following the scheduled end of its 
                fiscal year with business entities that are not subject 
                to the business consumption tax at the time of such 
                transactions if such transactions deviate from the 
                normal course of business in order to achieve some tax 
                benefit.

``SEC. 223. LONG-TERM CONTRACTS.

    ``(a) In General.--In the case of a long-term contract--
            ``(1) Contractor expenses.--The contractor shall be 
        entitled to deduct its business purchases when paid or 
        incurred.
            ``(2) Contractor receipts.--The contractor shall recognize 
        taxable receipts--
                    ``(A) in the case of a project in which the 
                acquirer has no ownership interest in the project until 
                delivery--
                            ``(i) upon delivery of the project, in the 
                        case of an accrual basis contractor, or
                            ``(ii) upon the later of delivery of the 
                        project or the receipt of payment, in the case 
                        of cash-basis contractor.
                    ``(B) in the case of a project in which the 
                acquirer obtains an ownership interest as the project 
                is constructed--
                            ``(i) when the contractor has the right to 
                        payments, in the case of an accrual basis 
                        contractor, or
                            ``(ii) upon the later of when the 
                        contractor receives the cash or has the right 
                        to payments, in the case of a cash basis 
                        contractor.
            ``(3) Acquirer expenses.--The acquirer that is a business 
        entity shall be entitled to deduct its costs of the business 
        purchase--
                    ``(A) in the case of a cash-basis acquirer, at such 
                time as a cash basis contractor would be required to 
                treat the amounts paid as taxable receipts, or
                    ``(B) in the case of an accrual-basis acquirer, at 
                such time as an accrual basis contractor would be 
                required to treat the amounts paid or due as taxable 
                receipts.
    ``(b) Right to Payments.--
            ``(1) In general.--A contractor shall be treated as having 
        a right to payments with respect to a project at any time to 
        the extent that the contractor would not be required to return 
        payments received (or would be entitled to collect payments not 
        yet received) if the project were terminated at such time by 
        the contractor.
            ``(2) Contractual provisions.--If a long-term contract 
        includes a procedure for paying the contractor as work is 
        completed (for example, by reason of a draw down from a trust 
        account), the contractual provisions shall generally govern 
        when a contractor has a right to payment.
            ``(3) Percentage completion method of accounting.--If a 
        long-term contract does not include a mechanism for paying the 
        contractor as work is completed, the percentage-of-completion 
        method of accounting shall be used to determine the timing of 
        taxable receipts of the contractor and business purchases of 
        the acquirer.
    ``(c) Long-Term Contract.--
            ``(1) In general.--`Long-term contract' means--
                    ``(A) any contract that covers service or 
                production through parts of two different calendar 
                years if the contract includes a formal deposit and 
                draw-down mechanism, and
                    ``(B) any contract for the manufacture, building, 
                installation, or construction of property if such 
                contract is not completed within the taxable year of 
                the contractor in which such contract is entered into.
            ``(2) Exception.--A contract for the manufacture of 
        property shall not be treated as a long-term contract unless 
        such contract involves the manufacture of--
                    ``(A) any unique item of a type which is not 
                normally included in the finished goods inventory of 
                the taxpayer, or
                    ``(B) any item which normally requires more than 12 
                calendar months to complete.
    ``(d) Consistency.--The Secretary may require business entities to 
file statements containing such information with respect to long-term 
contracts as the Secretary may prescribe to ensure consistency in 
reporting.
    ``(e) Foreign Contracts.--This section shall not be construed to 
permit a deduction for a business purchase for the cost of property 
produced outside the United States pursuant to a long-term contract at 
any time prior to the import of such property into the United States.

``SEC. 224. POST-SALE PRICE ADJUSTMENTS AND REFUNDS.

    ``(a) Receipt of Price Adjustment.--In the case of a post-sale 
price adjustment attributable to a business purchase which was taken 
into account in computing gross profits for a prior taxable year, the 
amount of such adjustment shall be treated as a reduction or increase, 
as the case may be, in the cost of business purchases for the taxable 
year in which the adjustment is made or incurred.
    ``(b) Issuance of Price Adjustment.--In the case of a post-sale 
price adjustment attributable to a sale the receipts from which were 
taken into account in determining taxable receipts for a prior taxable 
year, the amount of such adjustment shall be treated as a reduction or 
increase, as the case may be, in taxable receipts for the taxable year 
in which the adjustment is made or incurred.
    ``(c) Post-Sale Price Adjustment.--`Post-sale price adjustment' 
means a refund, rebate, or other price allowance attributable to a sale 
of property or services or an upward adjustment in price that was not 
previously taken into account under the business entity's method of 
accounting.

``SEC. 225. BAD DEBTS.

    ``(a) Seller.--If an amount owed to an accrual basis business 
entity for property or services sold--
            ``(1) was taken into account as a taxable receipt in a 
        prior taxable year, and
            ``(2) becomes wholly or partially uncollectible during the 
        taxable year, then the seller shall treat the amount as a 
        reduction in taxable receipts for the taxable year in which it 
        becomes wholly or partially uncollectible.
    ``(b) Notice Requirement.--No reduction shall be allowed under 
subsection (a) unless the seller notifies the purchaser of the amount 
which the seller has treated as wholly or partially uncollectible.
    ``(c) Subsequent Collection.--If an amount which was treated as 
uncollectible under subsection (a) is subsequently collected, it shall 
be treated as a taxable receipt when collected.
    ``(d) Purchaser.--If a purchaser receives notice under subsection 
(b) from a seller and the purchaser has treated the amount labeled 
uncollectible as a business purchase in a prior taxable year, then the 
purchaser shall treat such amount as a reduction in the cost of 
business purchases in the taxable year to which the notice relates. If 
the purchaser subsequently repays such amount, the repayment shall 
constitute the cost of a business purchase.

``SEC. 226. TRANSITION RULES.

    ``(a) No Double Deductions.--A business entity shall not be 
entitled to treat as a `cost of business purchase' any amount that the 
business entity deducted in computing taxable income under the income 
tax in effect prior the effective date of the business consumption tax.
    ``(b) No Double Inclusion.--A business entity shall not be required 
to include in taxable receipts any receipt that the business entity 
took into account in computing taxable income under the income tax in 
effect prior to the effect date of the business consumption tax.
    ``(c) No Loss of Deduction.--An expense which--
            ``(1) a business entity would have been able to deduct as a 
        cost of a business purchase in an accounting period before the 
        effective date of the business consumption tax if the business 
        consumption tax had been in effect in such period, and
            ``(2) the business entity would have been able to deduct as 
        an expense in computing taxable income in a period after the 
        business consumption tax is effective if the income tax had 
        continued in effect,
shall be treated as a cost of a business purchase incurred or paid at 
the time that it would have been paid or incurred under the income tax 
if the income tax had continued in effect. This subsection shall not 
apply to any amount which is to be taken into account under subchapter 
L (relating to transition rules), any amounts which would have been 
deducted under the income tax through loss carryover deductions, or any 
deductions deferred by the uniform capitalization rules under section 
263A of the Internal Revenue Code of 1986.
    ``(d) All Taxable Receipts Taxed.--A receipt which--
            ``(1) a business entity would have been required to treat 
        as a taxable receipt in an accounting period before the 
        effective date of the business consumption tax if the business 
        consumption tax had been in effect in such period, and
            ``(2) the business entity would have been required to 
        include in gross income in a period after the business 
        consumption tax is effective if the income tax had continued in 
        effect,
shall be treated as a taxable receipt at the time that it would have 
been included in income if the income tax had continued in effect.

                ``Subchapter E--Land and Rental Property

``Sec. 230. No deduction for land purchased for nonbusiness use.
``Sec. 231. Taxable receipts for land held for nonbusiness use.
``Sec. 232. Certain rental property.

``SEC. 230. NO DEDUCTION FOR LAND PURCHASED FOR NONBUSINESS USE.

    ``(a) In General.--The acquisition of unimproved land shall not 
constitute a business purchase if the unimproved land is not acquired 
to be used in a business activity or if the land is acquired for--
            ``(1) speculation,
            ``(2) development (including subdivision), or
            ``(3) temporary leasing or other use not commensurate with 
        the value of the land,
            ``(4) indefinite future use in a business activity, or
            ``(5) use in compensating employees.
    ``(b) Future Use in Business Activity.--Unimproved land will not be 
considered held for `indefinite future use in a business activity' if 
promptly upon acquisition, the purchaser or the lessee begins 
construction of improvements on the land (other than improvements, such 
as paving or sewage lines, intended for indefinite future development) 
that will be used in a business activity. Such improvement must be 
commensurate with the value of the land.
    ``(c) Unimproved Land.--`Unimproved land' means--
            ``(1) land with no buildings on it,
            ``(2) land with improvements if the value of the 
        improvements is relatively small in comparison to the value of 
        the land and it is anticipated that the improvements will be 
        demolished and not used,
            ``(3) land in excess of the amount reasonably needed for 
        the buildings located on it.
    ``(d) Conversion to Business Use.--If the acquisition of land is 
not treated as a business purchase by reason of subsection (a) and the 
land is subsequently used in a manner for which it could have been 
treated as a business purchase, the cost of the land will be treated as 
a business purchase when the improvements on the land are placed in 
service (or in the case of construction for sale, substantially 
completed and advertised for sale).

``SEC. 231. TAXABLE RECEIPTS FROM SALE OF LAND HELD FOR NONBUSINESS 
              USE.

    ``(a) Tax Basis.--A business entity shall have a tax basis in land 
equal to the cost of the land if such cost is not deductible by reason 
of section 230(a) and the land has not been converted to business use 
for purposes of section 230(d).
    ``(b) Taxable Receipts of a Land Sale.--The taxable receipts from 
the sale of land (or portion thereof) in which a business entity has a 
tax basis by reason of subsection (a) shall be the amount by which the 
proceeds exceed the basis of such land (or portion thereof).

``SEC. 232. CERTAIN RENTAL PROPERTY.

    ``(a) In General.--Except as provided in subsection (b), the 
activity of rental of real estate is a business activity to which the 
business consumption tax applies.
    ``(b) Not Rental Property.--Subsection (a) shall not apply--
            ``(1) to property used on more than 14 days during the 
        taxable year for nonbusiness purposes, or
            ``(2) to property rented for no more than 14 days during 
        the taxable year and the total rental received with respect to 
        such property does not exceed $10,000.
    ``(c) Rental Property Becomes Nonrental Property.--If property 
which is considered rental property for purposes of subsection (a) in 
one taxable year ceases to be rental property (by reason of subsection 
(b)) in the following taxable year, the property (and any associated 
debt) shall be treated as distributed by the business entity to its 
owners. Section 211(a) shall apply to such distribution.

            ``Subchapter F--Insurance and Financial Products

``Sec. 241. General rules.

``SEC. 241. GENERAL RULES.

    ``(a) Taxable Receipts.--Taxable receipts do not include financial 
receipts (as defined in section 203(e)(2)).
    ``(b) Business Purchases.--Business purchases do not include the 
cost of financial instruments (as defined in section 203(e)(3)) or 
payments for use of money or capital.

                ``Subchapter G--Tax-exempt Organizations

``Sec. 251. Exemption for governmental entities.
``Sec. 252. Taxable activity of governmental entities.
``Sec. 253. Tax-exempt organizations.
``Sec. 254. Special rules for (c)(3) organizations.
``Sec. 255. Tax on unrelated business activity.
``Sec. 256. Unrelated business activity.

``SEC. 251. EXEMPTION FOR GOVERNMENTAL ENTITIES.

    ``(a) States.--Except as provided in section 252, a state, 
political subdivision thereof and the District of Columbia shall be 
exempt from taxation under this chapter on any gross profits derived 
from the exercise of any essential governmental function.
    ``(b) Possessions.--The government of any possession of the United 
States shall be exempt from taxation under this chapter on any gross 
profits earned by the possession.

``SEC. 252. TAXABLE ACTIVITY OF GOVERNMENTAL ENTITIES.

    ``(a) Certain Activities Taxable.--A governmental entity shall be 
considered a business and subject to tax on any business activity of a 
type frequently provided by business entities subject to tax under this 
chapter.
    ``(b) Certain Activities Treated as Essential Government 
Functions.--Subsection (a) shall not apply to the following activities, 
which shall be treated as essential government functions:
            ``(1) Provision of mass transportation services.
            ``(2) Provision of public utility services.

``SEC. 253. TAX-EXEMPT ORGANIZATIONS.

    ``(a) Exemption From Taxation.--An organization described in 
subsection (c) or (d) shall be exempt from taxation under this chapter.
    ``(b) Tax on Unrelated Business Activity.--An organization exempt 
from taxation under subsection (a) shall be subject to tax to the 
extent provided in sections 255 and 256, but shall be considered a tax-
exempt organization for purposes of any law that refers to tax-exempt 
organizations.
    ``(c) List of Exempt Organizations.--The following organizations 
are referred to in subsection (a):
            ``(1) Instrumentality of the united states.--Any 
        corporation organized under Act of Congress which is an 
        instrumentality of the United States but only if such 
        corporation--
                    ``(A) is exempt from Federal income taxes--
                            ``(i) under such Act as amended and 
                        supplemented before July 18, 1984, or
                            ``(ii) under this title without regard to 
                        any provision of law which is not contained in 
                        this title and which is not contained in a 
                        revenue Act, or
                    ``(B) is described in subsection (h).
            ``(2) Title holding companies.--Corporations organized for 
        the exclusive purpose of holding title to property, collecting 
        income therefrom, and turning over the entire amount thereof, 
        less expenses, to an organization which itself is exempt under 
        this section. Rules similar to the rules of subparagraph (G) of 
        paragraph (25) shall apply for purposes of this paragraph.
            ``(3) Charitable, educational and religious 
        organizations.--Corporations, and any community chest, fund, or 
        foundation, organized and operated exclusively for religious, 
        charitable, scientific, testing for public safety, literary, or 
        educational purposes, or to foster national or international 
        amateur sports competition (but only if no part of its 
        activities involve the provision of athletic facilities or 
        equipment), or for the prevention of cruelty to children or 
        animals, no part of the net earnings of which inures to the 
        benefit of any private shareholder or individual, no 
        substantial part of the activities of which is carrying on 
        propaganda, or otherwise attempting, to influence legislation 
        (except as otherwise provided in subsection (g)), and which 
        does not participate in, or intervene in (including the 
        publishing or distributing of statements), any political 
        campaign on behalf of (or in opposition to) any candidate for 
        public office.
            ``(4) Social welfare organizations, etc.--
                    ``(A) Civic leagues or organizations not organized 
                for profit but operated exclusively for the promotion 
                of social welfare, or local associations of employees, 
                the membership of which is limited to the employees of 
                a designated person or persons in a particular 
                municipality, and the net earnings of which are devoted 
                exclusively to charitable, educational, or recreational 
                purposes.
                    ``(B) Subparagraph (A) shall not apply to an entity 
                unless no part of the net earnings of such entity 
                inures to the benefit of any private shareholder or 
                individual.
            ``(5) Labor and agricultural organizations.--Labor, 
        agricultural, or horticultural organizations.
            ``(6) Trade associations.--Business leagues, chambers of 
        commerce, real-estate boards, boards of trade, or professional 
        football leagues (whether or not administering a pension fund 
        for football players) not organized for profit and no part of 
        the net earnings of which inures to the benefit of any private 
        shareholder or individual.
            ``(7) Social clubs.--Clubs organized for pleasure, 
        recreation, and other nonprofitable purposes, substantially all 
        of the activities of which are for such purposes and no part of 
        the net earnings of which inures to the benefit of any private 
        shareholder.
            ``(8) Certain fraternal societies.--Fraternal beneficiary 
        societies, orders, or associations--
                    ``(A) operating under the lodge system or for the 
                exclusive benefit of the members of a fraternity itself 
                operating under the lodge system, and
                    ``(B) providing for the payment of life, sick, 
                accident, or other benefits to the members of such 
                society, order, or association or their dependents.
            ``(9) Vebas.--Voluntary employees' beneficiary associations 
        providing for the payment of life, sick, accident, or other 
        benefits to the members of such association or their dependents 
        or designated beneficiaries, if no part of the net earnings of 
        such association inures (other than through such payments) to 
        the benefit of any private shareholder or individual.
            ``(10) Other fraternal organizations.--Domestic fraternal 
        societies, orders, or associations, operating under the lodge 
        system--
                    ``(A) the net earnings of which are devoted 
                exclusively to religious, charitable, scientific, 
                literary, educational, and fraternal purposes, and
                    ``(B) which do not provide for the payment of life, 
                sick, accident, or other benefits.
            ``(11) Local teachers' retirement funds.--Teachers' 
        retirement fund associations of a purely local character, if--
                    ``(A) no part of their net earnings inures (other 
                than through payment of retirement benefits) to the 
                benefit of any private shareholder or individual, and
                    ``(B) the income consists solely of amounts 
                received from public taxation, amounts received from 
                assessments on the teaching salaries of members, and 
                income in respect of investments.
            ``(12) Certain cooperatives.--
                    ``(A) Benevolent life insurance associations of a 
                purely local character, mutual ditch or irrigation 
                companies, mutual or cooperative telephone companies, 
                or like organizations; but only if 85 percent or more 
                of the income consists of amounts collected from 
                members for the sole purpose of meeting losses and 
                expenses.
                    ``(B) In the case of a mutual or cooperative 
                telephone company, subparagraph (A) shall be applied 
                without taking into account any income received or 
                accrued--
                            ``(i) from a nonmember telephone company 
                        for the performance of communication services 
                        which involve members of the mutual or 
                        cooperative telephone company,
                            ``(ii) from qualified pole rentals,
                            ``(iii) from the sale of display listings 
                        in a directory furnished to the members of the 
                        mutual or cooperative telephone company, or
                            ``(iv) from the prepayment of a loan under 
                        section 306A, 306B, or 311 of the Rural 
                        Electrification Act of 1936 (as in effect on 
                        January 1, 1987).
                    ``(C) In the case of a mutual or cooperative 
                electric company, subparagraph (A) shall be applied 
                without taking into account any income received or 
                accrued--
                            ``(i) from qualified pole rentals, or
                            ``(ii) from the prepayment of a loan under 
                        section 306A, 306B, or 311 of the Rural 
                        Electrification Act of 1936 (as in effect on 
                        January 1, 1987).
                    ``(D) For purposes of this paragraph, the term 
                `qualified pole rental' means any rental of a pole (or 
                other structure used to support wires) if such pole (or 
                other structure)--
                            ``(i) is used by the telephone or electric 
                        company to support one or more wires which are 
                        used by such company in providing telephone or 
                        electric services to its members, and
                            ``(ii) is used pursuant to the rental to 
                        support one or more wires (in addition to the 
                        wires described in clause (i)) for use in 
                        connection with the transmission by wire of 
                        electricity or of telephone or other 
                        communications.
                For purposes of the preceding sentence, the term 
                `rental' includes any sale of the right to use the pole 
                (or other structure).
            ``(13) Nonprofit cemeteries.--Cemetery companies owned and 
        operated exclusively for the benefit of their members or which 
        are not operated for profit; and any corporation chartered 
        solely for the purpose of the disposal of bodies by burial or 
        cremation which is not permitted by its charter to engage in 
        any business not necessarily incident to that purpose and no 
        part of the net earnings of which inures to the benefit of any 
        private shareholder or individual.
            ``(14) Grandfathered mutual financial institutions.--
                    ``(A) Credit unions without capital stock organized 
                and operated for mutual purposes and without profit.
                    ``(B) Certain corporations or associations 
                organized before September 1, 1957, and described in 
                subparagraphs (B) or (C) of section 501(c)(14) of the 
                Internal Revenue Code of 1986.
            ``(15) Grandfathered small insurance companies.--Insurance 
        companies described in section 501(c)(15) of the Internal 
        Revenue Code of 1986.
            ``(16) Crop financing associations.--Corporations organized 
        by an association subject to part IV of this subchapter or 
        members thereof, for the purpose of financing the ordinary crop 
        operations of such members or other producers, and operated in 
        conjunction with such association. Exemption shall not be 
        denied any such corporation because it has capital stock, if 
        the dividend rate of such stock is fixed at not to exceed the 
        legal rate of interest in the State of incorporation or 8 
        percent per annum, whichever is greater, on the value of the 
        consideration for which the stock was issued, and if 
        substantially all such stock (other than nonvoting preferred 
        stock, the owners of which are not entitled or permitted to 
        participate, directly or indirectly, in the profits of the 
        corporation, on dissolution or otherwise, beyond the fixed 
        dividends) is owned by such association, or members thereof; 
        nor shall exemption be denied any such corporation because 
        there is accumulated and maintained by it a reserve required by 
        State law or a reasonable reserve for any necessary purpose.
            ``(17) Supplemental employment benefit trust.--
                    ``(A) A trust or trusts forming part of a plan 
                providing for the payment of supplemental unemployment 
                compensation benefits, if--
                            ``(i) under the plan, it is impossible, at 
                        any time prior to the satisfaction of all 
                        liabilities, with respect to employees under 
                        the plan, for any part of the corpus or income 
                        to be (within the taxable year or thereafter) 
                        used for, or diverted to, any purpose other 
                        than the providing of supplemental unemployment 
                        compensation benefits,
                            ``(ii) such benefits are payable to 
                        employees under a classification which is set 
                        forth in the plan and which is found by the 
                        Secretary not to be discriminatory in favor of 
                        employees who are highly compensated employees 
                        (within the meaning of section 414(q)), and
                            ``(iii) such benefits do not discriminate 
                        in favor of employees who are highly 
                        compensated employees (within the meaning of 
                        section 414(q). A plan shall not be considered 
                        discriminatory within the meaning of this 
                        clause merely because the benefits received 
                        under the plan bear a uniform relationship to 
                        the total compensation, or the basic or regular 
                        rate of compensation, of the employees covered 
                        by the plan.
                    ``(B) Rules similar to those contained in 
                subparagraphs (B) through (E) of section 501(c)(7) of 
                the Internal Revenue Code of 1986 shall apply to 
                subparagraph (A).
            ``(18) Grandfathered trusts.--A trust or trusts created 
        before June 25, 1959, and described in section 501(c)(18) of 
        the Internal Revenue Code of 1986.
            ``(19) Certain veterans' organizations.--A post or 
        organization of past or present members of the Armed Forces of 
        the United States, or an auxiliary unit or society of, or a 
        trust or foundation for, any such post or organization--
                    ``(A) organized in the United States or any of its 
                possessions,
                    ``(B) at least 75 percent of the members of which 
                are past or present members of the Armed Forces of the 
                United States and substantially all of the other 
                members of which are individuals who are cadets or are 
                spouses, widows, or widowers of past or present members 
                of the Armed Forces of the United States or of cadets, 
                and
                    ``(C) no part of the net earnings of which inures 
                to the benefit of any private shareholder or 
                individual.
            ``(20) Legal service plan trusts.--An organization or trust 
        created or organized in the United States, the exclusive 
        function of which is to form part of a qualified group legal 
        services plan or plans.
            ``(21) Black lung act trusts.--A trust or trusts 
        established in writing, created or organized in the United 
        States, and contributed to by any person (except an insurance 
        company) if--
                    ``(A) the purpose of such trust or trusts is 
                exclusively--
                            ``(i) to satisfy, in whole or in part, the 
                        liability of such person for, or with respect 
                        to, claims for compensation for disability or 
                        death due to pneumoconiosis under Black Lung 
                        Acts,
                            ``(ii) to pay premiums for insurance 
                        exclusively covering such liability,
                            ``(iii) to pay administrative and other 
                        incidental expenses of such trust in connection 
                        with the operation of the trust and the 
                        processing of claims against such person under 
                        Black Lung Acts, and
                            ``(iv) to pay accident or health benefits 
                        for retired miners and their spouses and 
                        dependents (including administrative and other 
                        incidental expenses of such trust in connection 
                        therewith) or premiums for insurance 
                        exclusively covering such benefits; and
                    ``(B) such trusts meets requirements similar to 
                those contained in section 501(c)(21) of the Internal 
                Revenue Code of 1986.
            ``(22) Multiemployer erisa trust.--A trust created or 
        organized in the United States and established in writing by 
        the plan sponsors of multiemployer plans if--
                    ``(A) the purpose of such trust is exclusively--
                            ``(i) to pay any amount described in 
                        section 4223(c) or (h) of the Employee 
                        Retirement Income Security Act of 1974, and
                            ``(ii) to pay reasonable and necessary 
                        administrative expenses in connection with the 
                        establishment and operation of the trust and 
                        the processing of claims against the trust,
                    ``(B) no part of the assets of the trust may be 
                used for, or diverted to, any purpose other than--
                            ``(i) the purposes described in 
                        subparagraph (A), or
                            ``(ii) prudent investment in securities, 
                        obligations, or time or demand deposits,
                    ``(C) such trust meets the requirements of 
                paragraphs (2), (3), and (4) of section 4223(b), 
                4223(h), or, if applicable, section 4223(c) of the 
                Employee Retirement Income Security Act of 1974, and
                    ``(D) the trust instrument provides that, on 
                dissolution of the trust, assets of the trust may not 
                be paid other than to plans which have participated in 
                the plan or, in the case of a trust established under 
                section 4223(h) of such Act, to plans with respect to 
                which employers have participated in the fund.
            ``(23) Grandfathered veterans' insurance organization.--Any 
        association organized before 1880 more than 75 percent of the 
        members of which are present or past members of the Armed 
        Forces and a principal purpose of which is to provide insurance 
        and other benefits to veterans or their dependents.
            ``(24) ERISA trust.--A trust described in section 4049 of 
        the Employee Retirement Income Security Act of 1974 (as in 
        effect on the date of the enactment of the Single-Employer 
        Pension Plan Amendments Act of 1986).
            ``(25) Real title holding corporation or trust.--
                    ``(A) Any corporation or trust which--
                            ``(i) has no more than 35 shareholders or 
                        beneficiaries,
                            ``(ii) has only 1 class of stock or 
                        beneficial interest, and
                            ``(iii) is organized for the exclusive 
                        purposes of--
                                    ``(I) acquiring real property and 
                                holding title to, and collecting income 
                                from, such property, and
                                    ``(II) remitting the entire amount 
                                of income from such property (less 
                                expenses) to 1 or more organizations 
                                described in subparagraph (C) which are 
                                shareholders of such corporation or 
                                beneficiaries of such trust.
                For purposes of clause (iii), the term `real property' 
                shall not include any interest as a tenant in common 
                (or similar interest) and shall not include any 
                indirect interest.
                    ``(B) A corporation or trust shall be described in 
                subparagraph (A) without regard to whether the 
                corporation or trust is organized by 1 or more 
                organizations described in subparagraph (C).
                    ``(C) An organization is described in this 
                subparagraph if such organization is--
                            ``(i) a qualified pension, profit sharing, 
                        or stock bonus plan that meets the requirements 
                        of section 401(a),
                            ``(ii) a governmental plan (within the 
                        meaning of section 414(d)),
                            ``(iii) the United States, any State or 
                        political subdivision thereof, or any agency or 
                        instrumentality of any of the foregoing, or
                            ``(iv) any organization described in 
                        paragraph (3).
                    ``(D) A corporation or trust shall in no event be 
                treated as described in subparagraph (A) unless such 
                corporation or trust permits its shareholders or 
                beneficiaries--
                            ``(i) to dismiss the corporation's or 
                        trust's investment adviser, following 
                        reasonable notice, upon a vote of the 
                        shareholders or beneficiaries holding a 
                        majority of interest in the corporation or 
                        trust, and
                            ``(ii) to terminate their interest in the 
                        corporation or trust by either, or both, of the 
                        following alternatives, as determined by the 
                        corporation or trust:
                                    ``(I) by selling or exchanging 
                                their stock in the corporation or 
                                interest in the trust (subject to any 
                                Federal or State securities law) to any 
                                organization described in subparagraph 
                                (C) so long as the sale or exchange 
                                does not increase the number of 
                                shareholders or beneficiaries in such 
                                corporation or trust above 35, or
                                    ``(II) by having their stock or 
                                interest redeemed by the corporation or 
                                trust after the shareholder or 
                                beneficiary has provided 90 days notice 
                                to such corporation or trust.
                    ``(E)(i) For purposes of this paragraph--
                            ``(I) a corporation which is a qualified 
                        subsidiary shall not be treated as a separate 
                        corporation, and
                            ``(II) all assets, liabilities, and items 
                        of income, deduction, and credit of a qualified 
                        subsidiary shall be treated as assets, 
                        liabilities, and such items (as the case may 
                        be) of the corporation or trust described in 
                        subparagraph (A).
                    ``(ii) For purposes of this subparagraph, the term 
                `qualified subsidiary' means any corporation if, at all 
                times during the period such corporation was in 
                existence, 100 percent of the stock of such corporation 
                is held by the corporation or trust described in 
                subparagraph (A).
                    ``(iii) For purposes of this subtitle, if any 
                corporation which was a qualified subsidiary ceases to 
                meet the requirements of clause (ii), such corporation 
                shall be treated as a new corporation acquiring all of 
                its assets (and assuming all of its liabilities) 
                immediately before such cessation from the corporation 
                or trust described in subparagraph (A) in exchange for 
                its stock.
                    ``(F) For purposes of subparagraph (A), the term 
                `real property' includes any personal property which is 
                leased under, or in connection with, a lease of real 
                property, but only if the rent attributable to such 
                personal property for the taxable year does not exceed 
                15 percent of the total rent for the taxable year 
                attributable to both the real and personal property 
                leased under, or in connection with, such lease.
                    ``(G)(i) An organization shall not be treated as 
                failing to be described in this paragraph merely by 
                reason of the receipt of any otherwise disqualifying 
                income which is incidentally derived from the holding 
                of real property.
                    ``(ii) Clause (i) shall not apply if the amount of 
                gross income described in such clause exceeds 10 
                percent of the organization's gross income for the 
                taxable year unless the organization establishes to the 
                satisfaction of the Secretary that the receipt of gross 
                income described in clause (i) in excess of such 
                limitation was inadvertent and reasonable steps are 
                being taken to correct the circumstances giving rise to 
                such income.
            ``(26) State established medical care insurer.--Any 
        membership organization if--
                    ``(A) such organization is established by a State 
                exclusively to provide coverage for medical care on a 
                not-for-profit basis to individuals described in 
                subparagraph (B) through--
                            ``(i) insurance issued by the organization, 
                        or
                            ``(ii) a health maintenance organization 
                        under an arrangement with the organization,
                    ``(B) the only individuals receiving such coverage 
                through the organization are individuals--
                            ``(i) who are residents of such State, and
                            ``(ii) who, by reason of the existence or 
                        history of a medical condition--
                                    ``(I) are unable to acquire medical 
                                care coverage for such condition 
                                through insurance or from a health 
                                maintenance organization, or
                                    ``(II) are able to acquire such 
                                coverage only at a rate which is 
                                substantially in excess of the rate for 
                                such coverage through the membership 
                                organization,
                    ``(C) the composition of the membership in such 
                organization is specified by such State, and
                    ``(D) no part of the net earnings of the 
                organization inures to the benefit of any private 
                shareholder or individual. A spouse and any qualifying 
                child) of an individual described in subparagraph (B) 
                (without regard to this sentence) shall be treated as 
                described in subparagraph (B).
            ``(27) Grandfathered workers compensation organization.--
        Any membership organization established before June 1, 1996, by 
        a State exclusively to reimburse its members for losses arising 
        under workmen's compensation acts, and described in section 
        501(c)(27) of the Internal Revenue Code of 1986.
    ``(d) Religious and Apostolic Organizations.--The following 
organizations are referred to in subsection (a): Religious or apostolic 
associations or corporations, if such associations or corporations have 
a common treasury or community treasury, even if such associations or 
corporations engage in business for the common benefit of the members, 
but only if such activity is treated as unrelated business activity.
    ``(e) Cooperative Hospital Service Organizations.--For purposes of 
this chapter, an organization shall be treated as an organization 
organized and operated exclusively for charitable purposes, if--
            ``(1) such organization is organized and operated solely--
                    ``(A) to perform, on a centralized basis, one or 
                more of the following services which, if performed on 
                its own behalf by a hospital which is an organization 
                described in subsection (c)(3) and exempt from taxation 
                under subsection (a), would constitute activities in 
                exercising or performing the purpose or function 
                constituting the basis for its exemption: data 
                processing, purchasing (including the purchasing of 
                insurance on a group basis), warehousing, billing and 
                collection, food, clinical, industrial engineering, 
                laboratory, printing, communications, record center, 
                and personnel (including selection, testing, training, 
                and education of personnel) services; and
                    ``(B) to perform such services solely for two or 
                more hospitals each of which is--
                            ``(i) an organization described in 
                        subsection (c)(3) which is exempt from taxation 
                        under subsection (a),
                            ``(ii) a constituent part of an 
                        organization described in subsection (c)(3) 
                        which is exempt from taxation under subsection 
                        (a) and which, if organized and operated as a 
                        separate entity, would constitute an 
                        organization described in subsection (c)(3), or
                            ``(iii) owned and operated by the United 
                        States, a State, the District of Columbia, or a 
                        possession of the United States, or a political 
                        subdivision or an agency or instrumentality of 
                        any of the foregoing;
            ``(2) such organization is organized and operated on a 
        cooperative basis and allocates or pays, within 8\1/2\ months 
        after the close of its taxable year, all net earnings to 
        patrons on the basis of services performed for them; and
            ``(3) if such organization has capital stock, all of such 
        stock outstanding is owned by its patrons.
For purposes of this title, any organization which, by reason of the 
preceding sentence, is an organization described in subsection (c)(3) 
and exempt from taxation under subsection (a), shall be treated as a 
hospital and as an organization the principal purpose or functions of 
which are the providing of medical or hospital care or medical 
education or medical research, if the organization is a hospital, or if 
the organization is a medical research organization directly engaged in 
the continuous active conduct of medical research in conjunction with a 
hospital.
    ``(f) Cooperative Service Organizations of Operating Educational 
Organizations.--For purposes of this chapter--
            ``(1) If an organization is--
                    ``(A) organized and operated solely to hold, 
                commingle, and collectively invest and reinvest 
                (including arranging for and supervising the 
                performance by independent contractors of investment 
                services related thereto) in stocks and securities, the 
                moneys contributed thereto by each of the members of 
                such organization, and to collect income therefrom and 
                turn over the entire amount thereof, less expenses, to 
                such members,
                    ``(B) organized and controlled by one or more such 
                members, and
                    ``(C) comprised solely of members that are 
                organizations described in paragraph (2) or (3)--
                            ``(i) which are exempt from taxation under 
                        subsection (a), or
                            ``(ii) the gross profits of which are 
                        excluded from taxation under section 251(a),
                then such organization shall be treated as an 
                organization organized and operated exclusively for 
                charitable purposes.
            ``(2) An organization is described in this paragraph if the 
        organization is an educational organization which normally 
        maintains a regular faculty and curriculum and normally has a 
        regularly enrolled body of pupils or students in attendance at 
        the place where its educational activities are regularly 
        carried on.
            ``(3) An organization is described in this paragraph if the 
        organization is an organization which normally receives a 
        substantial part of its support (exclusive of income received 
        in the exercise or performance by such organization of its 
        charitable, educational, or other purpose or function 
        constituting the basis for its exemption under section 253(a)) 
        from the United States or any State or political subdivision 
        thereof or from direct or indirect contributions from the 
        general public, and which is organized and operated exclusively 
        to receive, hold, invest, and administer property and to make 
        expenditures to or for the benefit of a college or university 
        which is an organization referred to in clause (ii) of this 
        subparagraph and which is an agency or instrumentality of a 
        State or political subdivision thereof, or which is owned or 
        operated by a State or political subdivision thereof or by an 
        agency or instrumentality of one or more States or political 
        subdivisions.
    ``(g) Expenditures by Public Charities to Influence Legislation.--
            ``(1) General rule.--In the case of an organization to 
        which this subsection applies, exemption from taxation under 
        subsection (a) shall be denied because a substantial part of 
        the activities of such organization consists of carrying on 
        propaganda, or otherwise attempting, to influence legislation, 
        but only if such organization normally--
                    ``(A) makes lobbying expenditures in excess of the 
                lobbying ceiling amount for such organization for each 
                taxable year, or
                    ``(B) makes grass roots expenditures in excess of 
                the grass roots ceiling amount for such organization 
                for each taxable year.
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) Lobbying expenditures.--`Lobbying 
                expenditures' means expenditures for the purpose of 
                influencing legislation (as defined in section 
                4911(d)).
                    ``(B) Lobbying ceiling amount.--The lobbying 
                ceiling amount for any organization for any taxable 
                year is 150 percent of the lobbying nontaxable amount 
                for such organization for such taxable year, determined 
                under section 4911.
                    ``(C) Grass roots expenditures.--`Grass roots 
                expenditures' means expenditures for the purpose of 
                influencing legislation (as defined in section 4911(d) 
                without regard to paragraph (1)(B) thereof).
                    ``(D) Grass roots ceiling amount.--The grass roots 
                ceiling amount for any organization for any taxable 
                year is 150 percent of the grass roots nontaxable 
                amount for such organization for such taxable year, 
                determined under section 4911.
            ``(3) Organizations to which this subsection applies.--This 
        subsection shall apply to any organization which has elected 
        (in such manner and at such time as the Secretary may 
        prescribe) to have the provisions of this subsection apply to 
        such organization and which, for the taxable year which 
        includes the date the election is made, is described in 
        subsection (c)(3) and is not described in paragraph (4) and is 
        not a private foundation.
            ``(4) Disqualified organizations.--This subsection does not 
        apply to--
                    ``(A) a church,
                    ``(B) an integrated auxiliary of a church or of a 
                convention or association of churches, or
                    ``(C) a member of an affiliated group of 
                organizations (within the meaning of section 
                4911(f)(2)) if one or more members of such group is 
                described in subparagraph (A) or (B).
            ``(5) Years for which election is effective.--An election 
        by an organization under this subsection shall be effective for 
        all taxable years of such organization which--
                    ``(A) end after the date the election is made, and
                    ``(B) begin before the date the election is revoked 
                by such organization (under regulations prescribed by 
                the Secretary).
            ``(6) No effect on certain organizations.--With respect to 
        any organization for a taxable year for which--
                    ``(A) such organization is described in paragraph 
                (5), or
                    ``(B) an election under this subsection is not in 
                effect for such organization, nothing in this 
                subsection or in section 4911 shall be construed to 
                affect the interpretation of the phrase, `no 
                substantial part of the activities of which is carrying 
                on propaganda, or otherwise attempting, to influence 
                legislation,' under subsection (c)(3).
    ``(h) Government Corporations Exempt Under Subsection (c)(1).--For 
purposes of subsection (c)(1), the following organizations are 
described in this subsection:
            ``(1) The Central Liquidity Facility established under 
        title III of the Federal Credit Union Act (12 U.S.C. 1795 et 
        seq.).
            ``(2) The Resolution Trust Corporation established under 
        section 21A of the Federal Home Loan Bank Act.
            ``(3) The Resolution Funding Corporation established under 
        section 21B of the Federal Home Loan Bank Act.
    ``(i) Certain Educational Organizations.--An organization shall not 
be eligible for exemption as an educational organization under 
subsection (c)(3) if a substantial amount of its activities and funds 
are devoted to--
            ``(1) conducting seminars and other similar programs,
            ``(2) conducting research to educate Congress or the 
        general public about public policy issues,
            ``(3) producing books and pamphlets, or
            ``(4) a combination of the foregoing.

``SEC. 254. SPECIAL RULES FOR (C)(3) ORGANIZATIONS.

    ``(a) New Organizations Must Notify Secretary.--Except as provided 
in subsection (c), an organization shall not be treated as an 
organization described in section 253(c)(3)--
            ``(1) unless that it has given notice to the Secretary, in 
        such manner as the Secretary may prescribe, that it is applying 
        for recognition of such status, or
            ``(2) for any period before giving of such notice, if such 
        notice is given after the time prescribed by the Secretary by 
        regulations for giving notice under this subsection.
    ``(b) Presumption That Organizations Are Private Foundations.--
Except as provided in subsection (c), any organization described in 
section 253(c)(3) and which does not notify the Secretary, at such time 
and in such manner as the Secretary may by regulations prescribe, that 
it is not a private foundation shall be presumed to be a private 
foundation.
    ``(c) Exceptions.--Subsections (a) and (b) shall not apply to--
            ``(1) organizations organized before October 10, 1969;
            ``(2) organizations which obtained recognition of tax-
        exempt status under section 501(c)(3) of the Internal Revenue 
        Code of 1986 (in the case of subsection (a) only);
            ``(3) organizations which were determined not to be private 
        foundations under the Internal Revenue Code of 1986;
            ``(4) churches, their integrated auxiliaries, and 
        conventions and associations of churches;
            ``(5) any organization that is not a private foundation and 
        the gross receipts of which in each taxable year are not more 
        than $25,000, or
            ``(6) such other classes of organizations which the 
        Secretary may exempt.

``SEC. 255. TAX ON UNRELATED BUSINESS ACTIVITY.

    ``(a) In General.--Each organization described in subsection (b) 
shall be subject to the Competitive American Business Tax for 
businesses under section 201 on its gross profits from its unrelated 
business activity.
    ``(b) Organizations Subject to Tax.--This section shall apply to--
            ``(1) organizations exempt from the business consumption 
        tax under section 253(a), other than instrumentalities of the 
        United States described in section 253(c)(1).
            ``(2) colleges and universities which are instrumentalities 
        of any government and corporations owned by one or more such 
        colleges or universities.

``SEC. 256. UNRELATED BUSINESS ACTIVITY.

    ``(a) In General.--`Unrelated business activity' means any trade or 
business the conduct of which is not substantially related (aside from 
the need of such organization for income or funds or the use it makes 
of the profits derived) to the exercise or performance by such 
organization of its charitable, educational, or other purpose or 
function constituting the basis for its exemption under section 253, 
except that such term does not include any trade or business--
            ``(1) in which substantially all the work in carrying on 
        such trade or business is performed for the organization 
        without compensation; or
            ``(2) which is carried on, in the case of an organization 
        described in section 253(c)(3) or in the case of a college or 
        university described in section 255(b), by the organization 
        primarily for the convenience of its members, students, 
        patients, officers, or employees, which is the selling by the 
        organization of items of work-related clothes and equipment and 
        items normally sold through vending machines, through food 
        dispensing facilities, or by snack bars, for the convenience of 
        its members at their usual places of employment; or
            ``(3) which is the selling of merchandise, substantially 
        all of which has been received by the organization as gifts or 
        contributions.
    ``(b) Advertising, etc., Activities.--For purposes of this section, 
`trade or business' includes any activity which is carried on for the 
production of income from the sale of goods or the performance of 
services. For purposes of the preceding sentence, an activity does not 
lose identity as a trade or business merely because it is carried on 
within a larger aggregate of similar activities or within a larger 
complex of other endeavors which may, or may not, be related to the 
exempt purposes of the organization. Where an activity carried on for 
profit constitutes an unrelated trade or business, no part of such 
trade or business shall be excluded from such classification merely 
because it does not result in profit.
    ``(c) Trade or Business.--
            ``(1) Certain business activities.--An activity shall not 
        be considered a `trade or business' solely because the activity 
        is a business activity (such as certain passive rental 
        activity) that would be subject to the business consumption tax 
        if conducted by a business entity other than a tax-exempt 
        organization.
            ``(2) Regulations.--The Secretary shall prescribe 
        regulations defining a `trade or business'. Such regulations 
        shall be consistent with the provisions under sections 511 
        through 513 of the Internal Revenue Code of 1986, except to the 
        extent such provisions are inconsistent with other principles 
        of the business consumption tax. The regulations shall include 
        exclusions from the definition of `trade or business' similar 
        to those contained in section 513 of the Internal Revenue Code 
        for--
                    ``(A) certain bingo games,
                    ``(B) certain hospital services, and
                    ``(C) certain public entertainment activity at 
                fairs and expositions by an organization which 
                regularly conducts, as one of its substantial exempt 
                purposes, an agricultural or educational fair or 
                exhibition.
            ``(3) Trade shows.--The conduct of trade shows and 
        conventions shall not be excluded from the definition of trade 
        or business.

                      ``Subchapter H--Cooperatives

``Sec. 260. Patronage dividends of cooperatives.

``SEC. 260. PATRONAGE DIVIDENDS OF COOPERATIVES.

    ``(a) Patronage Dividends Paid by Supply Cooperatives.--A qualified 
patronage dividend paid by a supply cooperative to a patron shall be 
treated as if it is a refund of a portion of the amounts paid by the 
patron for goods, services, or use of capital. In general, if the 
supply cooperative included the amount received from the patron in 
taxable receipts, the dividend shall reduce taxable receipts in the 
year incurred. If the recipient of the dividend is a business entity 
which deducted the cost of business purchases to which the dividend 
related, the recipient will reduce its cost of business purchases by 
the amount of the dividend in the year the dividend is paid or 
incurred.
    ``(b) Patronage Dividends Paid by Marketing Cooperatives.--A 
qualified patronage dividend paid to a patron by a marketing 
cooperative shall be treated as an upward price adjustment in the 
amount received by the patron for its goods marketed by the 
cooperative. In general, the cooperative will increase its cost of 
business purchases by the amount of the qualified patronage dividend 
and the recipient will increase its taxable receipts by the amount of 
the qualified patronage dividend.
    ``(c) Dividend Treatment.--Only the portion of a patronage dividend 
that is not a qualified patronage dividend shall be treated as a 
dividend under this chapter and chapter 2.
    ``(d) Definitions.--
            ``(1) Qualified patronage dividend.--A `qualified patronage 
        dividend' is that part of a patronage dividend that is 
        attributable to the patron's allocable share of patronage 
        earnings of a marketing cooperative or a supply cooperative.
            ``(2) Supply cooperative.--A `supply cooperative' is a 
        cooperative that sells goods or service to patrons and provided 
        patronage dividends with respect to the quantity of purchases 
        of the patrons.
            ``(3) Marketing cooperative.--A `marketing cooperative' is 
        a cooperative that sells goods produced by its members and 
        provides patronage dividends to the members based on the 
        quantities of goods sold or provided for sale.
    ``(e) Special Rules.--
            ``(1) Notices of allocation and per-unit retain 
        certificates.--Except as provided in paragraph (2), a notice of 
        allocation, per-unit retain certificate, or other similar 
        document shall not be treated as a patronage dividend until it 
        is redeemed in cash or property.
            ``(2) Opportunity to receive cash.--If a patron is given an 
        opportunity to receive a patronage dividend in cash, but 
        instead chooses to accept a per-unit retain certificate or a 
        qualified notice of allocation, the patron will be treated as 
        receiving cash and simultaneously contributing to the capital 
        of the cooperative.
            ``(3) Application limited to qualified cooperatives.--Under 
        rules to be prescribed by the Secretary, this section shall 
        apply only to cooperatives to which one of the following 
        provisions of the Internal Revenue Code of 1986 would have 
        applied:
                    ``(A) Section 501(c)(12) (relating to cooperative 
                telephone companies and similar organizations).
                    ``(B) Section 501(c)(14) (relating to certain 
                cooperative banks).
                    ``(C) Section 521 (relating to farm cooperatives).
                    ``(D) Section 1381 (relating to cooperatives 
                generally).
            ``(4) Regulations.--The Secretary shall prescribe 
        regulations for the application of this section. The 
        regulations shall generally be consistent with subchapter T of 
        chapter 1 of the Internal Revenue Code of 1986 except to the 
        extent that such rules are inconsistent with provisions of this 
        chapter.

                     ``Subchapter I--Sourcing Rules

``Sec. 265. Exports of property or services.
``Sec. 266. Imports of property or services.
``Sec. 267. Import or export of services.
``Sec. 268. International transportation services.
``Sec. 269. International communications.
``Sec. 270. Insurance.
``Sec. 271. Banking services.

``SEC. 265. EXPORTS OF PROPERTY OR SERVICES.

    ``(a) General Rule.--Taxable receipts do not include amounts 
received by the exporter thereof for property or services exported from 
the United States for use or consumption outside the United States.
    ``(b) Export Through Nonbusiness Entity.--For purposes of 
subsection (a), if property or services are sold to a governmental 
entity or a tax-exempt organization for export and are exported other 
than in an activity of such entity which is subject to the business 
consumption tax, then the seller of such property or services is deemed 
to be the exporter thereof.
    ``(c) Export of Services.--See section 267 for rules for 
determining whether services are exported or imported.

``SEC. 266. IMPORTS OF PROPERTY OR SERVICES.

    ``(a) In General.--The import of property or services for 
consumption in the United States shall constitute a business purchase 
if such property or service is to be used in a business activity in the 
United States. Property being held for sale or retail by a business 
entity that is in the business of selling goods shall be considered 
held for `use in a business activity'.
    ``(b) Amount of Business Purchase.--
            ``(1) In general.--The cost of business purchases with 
        respect to the import of property or services for use or 
        consumption in the United States is the customs value, price or 
        other amount used for purposes of determining the import tax 
        under section 281 or section 282.
            ``(2) Import tax.--The cost of business purchases does not 
        include any import tax paid. No deduction shall be allowed with 
        respect to property or service imported by a business entity 
        unless the import tax is paid with respect to such import.

``SEC. 267. IMPORT OR EXPORT OF SERVICES.

    ``(a) In General.--Except as otherwise provided in this subchapter, 
services shall not be treated as imported or exported from the location 
in which they are performed.
    ``(b) Import of Services.--A business entity shall be treated as 
importing a service if--
            ``(1) the entire benefit of the service will be realized in 
        the United States, and
            ``(2) the benefit will be realized in connection with the 
        United States business activities of the business entity.
    ``(c) Export of Services.--A business will be treated as exporting 
a service if--
            ``(1) the entire benefit of the service will be realized 
        outside of the United States, and
            ``(2) the benefit will be realized solely in connection 
        with the activities of the purchaser occurring outside the 
        United States.
    ``(d) Services Acquired From Service Provider That Provides 
Services In and Outside the United States.--
            ``(1) In general.--If a business entity acquires services 
        from a service provider that provides services both in and 
        outside the United States and the service provider shows on the 
        invoice where the services are provided--
                    ``(A) the business entity shall treat the services 
                as provided where stated on the invoice, and
                    ``(B) the service provider shall treat as taxable 
                receipts any services listed as provided in the United 
                States.
            ``(2) No invoice.--If a business entity acquires services 
        from a service provider that provides services both in and 
        outside the United States and the service provider does not 
        show on an invoice where such services are provided--
                    ``(A) the business entity shall treat the services 
                as if provided in the location to which payment is 
                sent, and
                    ``(B) the service provider shall treat as taxable 
                receipts any payments received in the United States.
    ``(e) Special Rules Prevail.--See sections 268 and 269 for special 
rule relating to transportation and communication services.

``SEC. 268. INTERNATIONAL TRANSPORTATION SERVICES.

    ``(a) Transportation of Property.--
            ``(1) Taxable receipts.--
                    ``(A) Exports.--Taxable receipts do not include 
                receipts from the transportation of property exported 
                from the United States.
                    ``(B) Imports.--Taxable receipts include receipts 
                from transportation of property imported into the 
                United States only if such costs are not taken into 
                account in determining the import tax.
                    ``(C) Presumptions.--The Secretary shall prescribe 
                regulations describing situations in which a 
                transporter of property must presume that no import tax 
                has been paid on the cost of its services.
            ``(2) Business purchases.--
                    ``(A) Exports.--Business purchases do not include 
                amounts paid or incurred for the cost of transportation 
                of property exported from the United States.
                    ``(B) Imports.--Amounts paid or incurred for 
                transportation of goods imported into the United 
                States, shall constitute a cost of business purchase 
                only to the extent that they are taken into account in 
                determining the customs value for purposes of section 
                281(a) (relating to the import tax).
    ``(b) Transportation of Passengers.--
            ``(1) Taxable receipts.--Taxable receipts--
                    ``(A) include receipts from the transportation of 
                passengers from the United States to a destination 
                outside the United States, but
                    ``(B) do not include receipts from the 
                transportation of passengers from outside the United 
                States to a destination in the United States.
            ``(2) Business purchases.--Business purchases--
                    ``(A) include amounts paid or incurred in a 
                business activity for the transportation of passengers 
                from the United States to a destination outside the 
                United States, but
                    ``(B) do not include amounts paid or incurred for 
                transportation of passengers from outside the United 
                States to a destination in the United States.
            ``(3) Simplifying rules.--The Secretary may provide rules 
        that simplify this subsection, including rules under which--
                    ``(A) half of receipts attributable to 
                transportation to or from the United States are treated 
                as taxable receipts,
                    ``(B) half of the cost for business trips to and 
                from the United States are treated as business 
                purchases, and
                    ``(C) all transportation expenses of a business 
                entity that has no regular business outside the United 
                States are treated as business purchases.

``SEC. 269. INTERNATIONAL COMMUNICATIONS.

    ``(a) In General.--For purposes of section 266, communications 
services shall be treated as provided at the point of origin of the 
communications and shall not be treated as imported or exported.
    ``(b) Communications Services.--Communications services include--
            ``(1) internet services,
            ``(2) telephone and electronic email communications 
        services,
            ``(3) courier services (except in the case of 
        transportation of property that is imported or exported),
            ``(4) satellite transmission services,
            ``(5) telegraph services,
            ``(6) facsimile transmission services, and
            ``(7) other similar services.

``SEC. 270. INSURANCE.

    ``(a) In General.--Insurance services will be treated as provided 
at the location of the insurance company providing the services. Except 
as the Secretary may prescribe by regulations, insurance companies will 
be treated as providing services at the location to which insurance 
payments are made.
    ``(b) Insured Risks in the United States.--If insurance services 
are provided outside the United States and the insured risk is located 
in the United States--
            ``(1) the insurance service shall be treated as imported,
            ``(2) the insurance premiums shall be subject to the import 
        tax, and
            ``(3) payments of insurance benefits shall not be treated 
        as imported.
    ``(c) Insured Risk Outside the United States.--If insurance 
services are provided inside the United States and the insured risk is 
located outside the United States--
            ``(1) insurance services shall be treated as exported,
            ``(2) payments of insurance benefits shall be treated as 
        payments for services outside the United States, and shall not 
        be deducted as business purchases.
    ``(d) Insurance Services.--Insurance services means the provision 
of insurance and services related to insurance other than insurance 
that is treated as a savings asset.

``SEC. 271. BANKING SERVICES.

    ``The Secretary shall prescribe regulations on the location of 
banking services and the extent to which such services are to be 
treated as imported or exported.

           ``Subchapter J--Business Conducted in a Possession

``Sec. 276. Treatment of possessions.

``SEC. 276. TREATMENT OF POSSESSIONS.

    ``(a) In General.--For purposes of the business consumption tax 
imposed by this chapter, the U.S. possessions shall not be treated as 
part of the United States.
    ``(b) Possession.--For purposes of this subchapter, `U.S. 
possession' or `possession' means a possession of the United States and 
includes the Commonwealth of Puerto Rico and the Virgin Islands.

                       ``Subchapter K--Import Tax

``Sec. 281. Imposition of tax on property.
``Sec. 282. Imposition of tax on import of services.
``Sec. 283. General rules for the import tax.

``SEC. 281. IMPOSITION OF TAX ON PROPERTY.

    ``(a) General Rule.--There is hereby imposed a tax equal to 8.5 
percent of the customs value of all property entered into the United 
States for consumption, use or warehousing.
    ``(b) Liability for Tax.--The tax imposed on the import of property 
by subsection (a) shall be paid by the person entering the property 
into the United States for consumption, use or warehousing. Such tax 
shall be due and payable at the time of import.
    ``(c) Imports of Previously Exported Property.--In the case of any 
article that is classified under a heading or subheading of subchapter 
I or II of chapter 98 of the Tariff Schedules of the United States, the 
tax under this section shall be imposed only on that portion of the 
customs value of such article that is dutiable under such heading or 
subheading.
    ``(d) Imports for Personal Consumption.--The import tax imposed by 
this section shall not apply to any article entered into the United 
States duty free under subchapters I through VII of chapter 98 of the 
Tariff Schedules of the United States.
    ``(e) Exception for Certain Commodities and Products.--The import 
tax imposed by this section shall not apply to petroleum, petroleum 
products or such commodities or products as the President shall by 
Executive Order determine to be in short supply and vital to national 
security.

``SEC. 282. IMPOSITION OF TAX ON IMPORT OF SERVICES.

    ``(a) General Rule.--There is hereby imposed a tax equal to 8.5 
percent of the cost of all services treated as imported into the United 
States during the taxable year of the service recipient.
    ``(b) Liability for the Tax.--The tax on the import of services 
imposed by subsection (a) shall be paid by the person who receives the 
imported services. The tax shall be payable as if it were an addition 
to the business consumption tax imposed by section 201.
    ``(c) Imported Services.--For purposes of this section, services 
shall be treated as imported if they are treated as imported under 
section 267 (general rules on import or export of services) or section 
270 (related to insurance).
    ``(d) Special Rule for Insurance.--The seller of insurance that is 
treated as imported under section 270 shall be liable for the 
collection of the tax imposed by subsection (a) on the insurance and 
for paying such tax to the Secretary. The first sentence of subsection 
(b) (relating to the person liable for the tax) shall apply to 
insurance only to the extent that the seller of the insurance services 
does not collect such tax.

``SEC. 283. GENERAL RULES FOR THE IMPORT TAX.

    ```Import tax' means the tax imposed by section 281 on the import 
of property and the tax imposed by section 282 on the import of 
services.

                    ``Subchapter L--Transition Rules

``Sec. 290. Amortization of transition basis.

``SEC. 290. AMORTIZATION OF TRANSITION BASIS.

    ``(a) Transition Basis Deduction.--The `transition basis deduction' 
for a taxable year is the sum of the amortization allowance determined 
under this section for the taxable year.
    ``(b) Treatment of Interest Flows.--Interest flows between non-
financial businesses shall be treated as under current law, phased out 
over 5 years.
    ``(c) Amortization Rules.--The amortization allowance to all 
property placed in service before the effective date of this section 
shall be the lesser of--
            ``(1) the amortization period under current law remaining 
        on such date, or
            ``(2) a 5-year ratable period beginning on such date.

     ``Subchapter M--Rules for Administration, Consolidated Returns

``Sec. 301. Returns, due dates, etc.
``Sec. 302. Consolidated returns.

``SEC. 301. RETURNS, DUE DATES, ETC.

    ``(a) In General.--Until subtitle F is amended to reflect the 
adoption of this chapter, the rules of subtitle F relating to C 
corporations shall apply to business entities with respect to--
            ``(1) returns and records;
            ``(2) time and place for paying tax;
            ``(3) assessment of taxes;
            ``(4) collections and liens;
            ``(5) abatements, credits, and refunds;
            ``(6) interest on underpayments and overpayments;
            ``(7) additions to tax and penalties;
            ``(8) closing agreements and compromises;
            ``(9) crimes;
            ``(10) judicial proceedings;
            ``(11) discovery of liability and enforcement; and
            ``(12) estimated taxes.
    ``(b) Individuals Engaging in Business Activities.--Under rules 
prescribed by the Secretary, individuals engaging in business 
activities on their own or with their spouses shall be permitted to 
file their business consumption tax returns with their individual tax 
returns and shall be subject to estimated tax rules for individual 
income tax returns. Such rules shall include rules to prevent the 
avoidance or abuse of this chapter and chapter 1.

``SEC. 302. CONSOLIDATED RETURNS.

    ``(a) In General.--Business entities may file consolidated returns 
of business consumption tax if they would have been permitted to file 
consolidated returns under section 1501 of the Internal Revenue Code 
and such section were applied by treating each business entity as a 
corporation and its owners or partners as shareholders.
    ``(b) Financial Institutions.--Financial intermediation businesses 
may be included in consolidated returns.
    ``(c) Intercompany Transactions.--In computing the gross profits of 
a consolidated group, intercompany transactions can be taken into 
account, or at the election of the filer, be disregarded (except in the 
case of transactions with financial intermediation businesses).

          ``Subchapter N--Definitions and Rules of Application

``Sec. 310. Definitions.
``Sec. 311. Rules of application.

``SEC. 310. DEFINITIONS.

    ``When used in this chapter, where not otherwise distinctly 
expressed or manifestly incompatible with the intent thereof--
            ``(1) Internal revenue code of 1986.--`Internal Revenue 
        Code of 1986' means the Internal Revenue Code of 1986 as in 
        effect immediately before the enactment of the Competitive 
        American Business Tax.
            ``(2) United states.--`United States' means the States and 
        the District of Columbia.

``SEC. 311. RULES OF APPLICATION.

    ``(a) Definitions.--Any definition included in this chapter shall 
apply for all purposes of this chapter unless--
            ``(1) such definition is limited to the purposes of a 
        particular chapter, section, or subsection, or
            ``(2) the definition clearly would not be applicable in a 
        particular context.
    ``(b) Interpretations Consistent With Internal Revenue Code of 
1986.--Terms not defined in this chapter or elsewhere in this title, 
but defined in the Internal Revenue Code of 1986, shall be interpreted 
in a manner consistent with the Internal Revenue Code of 1986, except 
to the extent such interpretation would be inconsistent with the 
principles and purposes of this chapter.''.
    (b) The amendments made by this section shall be effective on 
January 1, 2011, except to the extent otherwise specifically provided 
in the text of such amendments.

SEC. 603. REPEAL OF CHAPTER 6.

    Chapter 6 of the Code (relating to consolidated returns) is 
repealed as of January 1, 2011.

              TITLE VII--JOB TRAINING RESULTS ACT OF 2010

SEC. 701. SHORT TITLE.

    This title may be cited as the ``Job Training Results Act of 
2010''.

SEC. 702. PURPOSE.

    The purpose of this title is to ensure accountability and job 
training results in Federal job training programs.

SEC. 703. IMPROVEMENT OF JOB TRAINING PROGRAMS; PERFORMANCE METRICS FOR 
              WIA JOB TRAINING PROGRAMS.

    Title V of the Workforce Investment Act of 1998 (20 U.S.C. 9271 et 
seq.) is amended--
            (1) by redesignating section 507 as section 510; and
            (2) by inserting after section 506, the following:

``SEC. 507. IMPROVEMENT OF JOB TRAINING PROGRAMS.

    ``(a) General Rules.--
            ``(1) Grant competition.--In order to encourage competition 
        under the grant programs for providers of job training programs 
        authorized under this Act, any grants under such grant programs 
        shall be awarded on a competitive basis.
            ``(2) Priority.--In awarding grants under this Act, the 
        Secretary shall give priority to applicants that leverage 
        private resources.
            ``(3) Grant renewal.--
                    ``(A) Threshold determination.--The Secretary shall 
                not renew a grant for a provider of a training program 
                under this Act that fails to demonstrate, in accordance 
                with the performance measures described section 508(b), 
                that at least 50 percent of the participants of such 
                program were employed for at least 1 year in an 
                occupation related to the training provided under the 
                program.
                    ``(B) Priority.--In renewing grants for providers 
                who meet the requirement described in subparagraph (A), 
                the Secretary shall give priority to those providers 
                that have the greatest percentage of participants who--
                            ``(i) were employment for at least 1 year 
                        in an occupation related to the training 
                        provided under the program; and
                            ``(ii) as a result of the training provided 
                        under the program--
                                    ``(I) have the highest income 
                                levels; and
                                    ``(II) the lowest percentage of 
                                participants receiving Federal 
                                assistance.
    ``(b) Exceptions.--Subsection (a) shall not apply to State 
allotments made under sections 127 and 132.
    ``(c) Enrollment Prohibition and Requirement.--
            ``(1) Prohibition.--A provider of a job training program 
        under this Act may not in any way limit recruitment for, or 
        enrollment in, such program to individuals who are more likely 
        to be successful in obtaining employment or earning a higher 
        income after the completion of the program, as compared to 
        other individuals.
            ``(2) Requirement.--An individual who participates in, or 
        receives any service under, a training program shall be 
        considered to be enrolled as a participant in the program.
    ``(d) Definitions.--For purposes of this section and section 508:
            ``(1) Federal assistance.--
                    ``(A) In general.--The term `Federal assistance' 
                includes--
                            ``(i) supplemental nutrition assistance 
                        authorized under the Food and Nutrition Act of 
                        2008 (7 U.S.C. 2011 et seq.);
                            ``(ii) the case where a participant's 
                        adjusted gross income (or, if greater, earned 
                        income) for the most recently ended taxable 
                        year exceeds the amount of adjusted gross 
                        income, or earned income, as the case may be, 
                        which would cause the credit allowable to the 
                        participant for such taxable year under 
                        paragraph (1) of section 32(a) of the Internal 
                        Revenue Code of 1986 to be reduced by reason of 
                        paragraph (2) of such section;
                            ``(iii) supplemental security income 
                        benefits under title XVI of the Social Security 
                        Act (42 U.S.C. 1382 et seq.);
                            ``(iv) assistance under the State medicaid 
                        program under title XIX of the Social Security 
                        Act (42 U.S.C. 1396 et seq.); and
                            ``(v) benefits under the temporary 
                        assistance for needy families program funded 
                        under part A of title IV of the Social Security 
                        Act (42 U.S.C. 601 et seq.).
                    ``(B) Defined terms.--The terms `adjusted gross 
                income', `earned income', and `phaseout amount' shall 
                have the respective meanings given such terms by 
                section 32 of the Internal Revenue Code of 1986.
            ``(2) Job training program.--The term `job training 
        program' includes the following programs:
                    ``(A) Programs for migrant youth authorized under 
                section 127.
                    ``(B) Native American Programs authorized under 
                section 166.
                    ``(C) Migrant and seasonal farm workers programs 
                authorized under section 167.
                    ``(D) Youth Opportunity Grant authorized under 
                section 169.
                    ``(E) Grants to States for Incarcerated Youth 
                Offenders authorized under section 171.
                    ``(F) Programs for the reintegration of ex-
                offenders authorized under section 171.
                    ``(G) Responsible Reintegration of Youth Offenders 
                program authorized under section 171.
                    ``(H) Program of Competitive Grants for Worker 
                Training and Placement in High Growth and Emerging 
                Industry Sectors authorized under section 171.
                    ``(I) Energy Efficiency and Renewable Worker 
                Training Programs authorized under section 171(e).
                    ``(J) Youthbuild Program authorized under section 
                173A.
                    ``(K) Veterans' Workforce Investment Program 
                authorized under section 168.
                    ``(L) The program of workforce investment 
                activities for youth authorized under chapter 4 of 
                subtitle B of title I.
                    ``(M) The program of workforce investment 
                activities for adults authorized under chapter 5 of 
                subtitle B of title I.
                    ``(N) The program of workforce investment 
                activities for dislocated workers under chapter 5 of 
                subtitle B of title I.
                    ``(O) Job Corps program authorized under subtitle C 
                of title I.
                    ``(P) The Adult Education and Family Literacy Act 
                authorized under title II.
            ``(3) Participant.--The term `participant' means an 
        individual who participated in, or received a service under, a 
        job training program that is funded under this Act.
            ``(4) Provider.--The term `provider'--
                    ``(A) has the meaning given the term `eligible 
                provider' in section 101(12);
                    ``(B) has the meaning given the term `service 
                provider' in section 142(10); and
                    ``(C) means any other agency, entity, or provider 
                that is responsible for administering, or carrying out, 
                a job training program under this Act.

``SEC. 508. PERFORMANCE MEASURES FOR JOB TRAINING PROGRAMS.

    ``(a) In General.--Notwithstanding any other provision of law, each 
provider of a job training program under this Act shall, annually--
            ``(1) use the performance measures described in subsection 
        (b) to assess the effectiveness of such job training program; 
        and
            ``(2) submit the results of such assessment to the 
        Secretary.
    ``(b) Performance Measures.--In carrying out the assessment 
described in subsection (a), a provider of a job training program shall 
include the following performance measures in the assessment:
            ``(1) The type of job training each participant received 
        under the program and the program costs (such as tuition and 
        fees) for each participant.
            ``(2) The employment status of each participant--
                    ``(A) 1 year after the participant completes the 
                program;
                    ``(B) 3 years after the participant completes the 
                program; and
                    ``(C) 5 years after the participant completes the 
                program.
            ``(3) The percentage and number of participants who 
        obtained employment after the completion of the program in an 
        occupation related to the training provided under the program.
            ``(4) The income level of each participant--
                    ``(A) 2 years prior to participating in the 
                program; and
                    ``(B) every year, up to 5 years, after 
                participation in the program.
            ``(5) The percentage and number of participants receiving 
        Federal assistance--
                    ``(A) prior to participating in the program; and
                    ``(B) every year, up to 5 years, after 
                participation in the program.
    ``(c) Rule of Construction.--Nothing in this section shall be 
construed to prohibit a provider of a job training program from 
assessing the program by using (in addition to the performance measures 
described in subsection (b)) a performance measure--
            ``(1) not described in subsection (b); or
            ``(2) that was being used by the provider on the day before 
        the date of the enactment of this section.
    ``(d) Audits.--
            ``(1) In general.--The Inspector General of the Department 
        of Labor and the Comptroller General of the United States shall 
        conduct periodic audits to ensure that providers of job 
        training programs are--
                    ``(A) accurately assessing the programs, including 
                the outcomes of all participants of such programs, 
                using the performance measures required under this 
                section; and
                    ``(B) in compliance with section 507(c).
            ``(2) Requirements.--
                    ``(A) In general.--In carrying out any audit under 
                this section (other than any initial audit survey or 
                any audit investigating possible criminal or fraudulent 
                conduct), either directly or through grant or contract, 
                the Inspector General of the Department of Labor and 
                the Comptroller General of the United States shall 
                furnish to the providers of job training programs, or 
                other entity to be audited, advance notification of the 
                overall objectives and purposes of the audit, and any 
                extensive recordkeeping or data requirements to be met, 
                not later than 14 days (or as soon as practicable), 
                prior to the commencement of the audit.
                    ``(B) Notification requirement.--If the scope, 
                objectives, or purposes of the audit change 
                substantially during the course of the audit, the 
                entity being audited shall be notified of the change as 
                soon as practicable.
                    ``(C) Additional requirement.--The reports on the 
                results of such audits shall cite the law, regulation, 
                policy, or other criteria applicable to any finding 
                contained in the reports.
                    ``(D) Rule of construction.--Nothing contained in 
                this title shall be construed so as to be inconsistent 
                with the Inspector General Act of 1978 (5 U.S.C. App.) 
                or government auditing standards issued by the 
                Comptroller General of the United States.''.

SEC. 704. OTHER JOB TRAINING PROGRAMS.

    (a) In General.--The appropriate Secretaries shall--
            (1) require that the providers of job training programs, as 
        such term is defined by such Secretaries, under the programs 
        described in subsection (b), conduct an annual assessment of 
        the programs in accordance with section 508(b) of the Workforce 
        Investment Act of 1998; and
            (2) award grants under the programs described in subsection 
        (b) on a competitive basis.
    (b) Job Training Programs.--Subsection (a) shall apply to the 
following programs:
            (1) The Disabled Veterans Outreach Program authorized under 
        section 4103A of title 38, United States Code.
            (2) The Local Veterans' Employment Representative Program 
        authorized under section 4104 of title 38, United States Code.
            (3) The Homeless Veterans' Reintegration Program authorized 
        under section 2021 of title 38, United States Code.
            (4) Vocational Rehabilitation for Disabled Veterans 
        authorized under chapter 31 of title 38, United States Code.
            (5) The National Guard Challenge Program authorized under 
        section 509 of title 32, United States Code.
            (6) The Older American Community Service Program authorized 
        under title V of the Older Americans Act of 1965 (42 U.S.C. 
        3056 et seq.).
            (7) The Native American Vocational and Technical Education 
        Program authorized under section 116 of the Carl D. Perkins 
        Career and Technical Education Act of 2006 (29 U.S.C. 741).
            (8) Tribally Controlled Post-secondary Vocational and 
        Technical Institutions programs authorized under section 117 of 
        the Carl D. Perkins Career and Technical Education Act of 2006 
        (20 U.S.C. 2327).
            (9) The Native Hawaiian Vocational Education Program 
        authorized under section 116 of the Carl D. Perkins Career and 
        Technical Education Act of 2006 (29 U.S.C. 741).
            (10) Career and Technical Assistance to the States 
        authorized under section title I of the Carl D. Perkins Career 
        and Technical Education Act of 2006 (20 U.S.C. 2321 et seq.).
            (11) Tech Prep Education Program authorized under title II 
        of the Carl D. Perkins Career and Technical Education Act of 
        2006 (29 U.S.C. 2371 et seq.).
            (12) Migrant and Seasonal Farmworkers Program authorized 
        under section 304 of the Rehabilitation Act of 1973 (29 U.S.C. 
        774).
            (13) Projects with industry authorized under section 611 of 
        the Rehabilitation Act of 1973 (29 U.S.C. 795).
            (14) Vocational Rehabilitation Services authorized under 
        title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et 
        seq.).
            (15) American Indian Vocational Rehabilitation Services 
        authorized under part C of title I of the Rehabilitation Act of 
        1973 (29 U.S.C. 741 et seq.).
            (16) Coordination of Migrant Education Activities 
        authorized under section 1308 of the Elementary and Secondary 
        Education Act of 1965 (20 U.S.C. 6398).
            (17) Programs authorized under the Community Services Block 
        Grant Act (42 U.S.C. 9901 et seq.).
            (18) The Tribal Work Grants program authorized under 
        section 412(a)(2) of Social Security Act (42 U.S.C. 612(a)(2)).
            (19) Job training grants authorized under section 414(c) of 
        the American Competitiveness and Workforce Improvement Act of 
        1998 (29 U.S.C. 2916a).
            (20) Indian Employment, Job Placement Assistance, and 
        Vocational Training programs authorized under the Indian Self-
        Determination Act (25 U.S.C. 450 et seq.).
            (21) Programs authorized under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.).
            (22) Refugee assistance programs authorized under chapter 2 
        of title IV of the Immigration and Nationality Act (8 U.S.C. 
        1521 et seq.).
            (23) Targeted assistance programs for refugees and entrants 
        authorized under chapter 2 of title IV of the Immigration and 
        Nationality Act (8 U.S.C. 1521 et seq.).
            (24) Programs authorized under section 16(h) of the Food 
        and Nutrition Act of 2008 (7 U.S.C. 2025(h)).
            (25) The Federal Prisoner Reentry Initiative authorized 
        under section 231(i) of Second Chance Act of 2007 (42 U.S.C. 
        17541(i)).
            (26) Employment services authorized under the Wagner-Peyser 
        Act of 1933 (29 U.S.C. 49 et seq.).
            (27) Training programs under section 236 of part II of 
        subchapter B of chapter 2 of title II of the Trade Adjustment 
        Assistance Act of 1974 (19 U.S.C. 2296).
    (c) Definition.--The term ``appropriate Secretary'' means the head 
of the Federal agency who exercises administrative authority over a 
program described in subsection (b).

SEC. 705. TRANSPARENCY.

    Section 136(d)(3)(A) of the Workforce Investment Act of 1998 (29 
U.S.C. 2871) is amended to read as follows:
                    ``(A) shall make available to the general public 
                the information contained in such reports and the 
                results of an assessment using the performance measures 
                described in section 508(b) with respect to the 
                workforce investment activities authorized under this 
                subtitle--
                            ``(i) through publication; and
                            ``(ii) by posting such information and 
                        results on the Internet website of the 
                        Department of Labor in a format and language 
                        understandable by the general public.''.

SEC. 706. EVALUATIONS.

    (a) Evaluations.--Section 172 of the Workforce Investment Act of 
1998 (29 U.S.C. 2917) is amended--
            (1) in subsection (a)--
                    (A) in the matter preceding paragraph (1)--
                            (i) by inserting ``impact'' after 
                        ``continuing''; and
                            (ii) by inserting ``impact'' after 
                        ``Such''; and
                    (B) in paragraph (1)--
                            (i) by striking ``the general 
                        effectiveness'' and inserting ``outcomes 
                        measuring of the effectiveness'';
                            (ii) in subparagraph (A), by striking 
                        ``and'' after the semicolon;
                            (iii) in subparagraph (B)--
                                    (I) by striking ``to the extent 
                                feasible,''; and
                                    (II) by inserting ``and'' after the 
                                semicolon; and
                            (iv) by adding at the end the following:
                    ``(C) increase the incomes and hourly wages of 
                participants in comparison to similarly situated 
                individuals who did not participate in such programs 
                and activities.'';
            (2) in subsection (b), by inserting ``impact'' after 
        ``conduct'';
            (3) in subsection (c)--
                    (A) by striking ``Evaluations'' and inserting 
                ``Impact evaluations'';
                    (B) by inserting ``intervention and'' after ``, 
                including the use of'''
                    (C) by inserting ``The Secretary for each impact 
                evaluation shall fulfill all the notification and 
                reporting requirements under subsections (d), (e), and 
                (f).'' after ``assignment methodologies.''; and
                    (D) by striking ``by the end of fiscal year 2005'' 
                and inserting ``not later than 3 years after the date 
                of the enactment of the Job Training Results Act of 
                2010'';
            (4) by redesignating subsections (c) through (f), as 
        subsections (d) through (g), respectively; and
            (5) by inserting after subsection (c), the following:
    ``(a) Notification of Impact Evaluation Progress.--
            ``(1) Reports to congress.--Not later than 1 year after the 
        date of the enactment of the Job Training Results Act of 2010, 
        and annually thereafter, the Secretary shall transmit to the 
        Committee on Education and the Labor, and the Committee on the 
        Budget, of the House of Representatives and the Committee on 
        Health, Education, Labor, and Pensions, and the Committee on 
        Budget, of the Senate a report on the progress the Secretary is 
        making in evaluating the programs and activities carried out 
        under this section.
            ``(2) Availability to general public.--Not later than 1 
        year after the date of the enactment of the Job Training 
        Results Act of 2010, and annually thereafter not later than 30 
        days after the transmission of an annual report under paragraph 
        (1), the Secretary shall make available the reports to the 
        general public on the Internet website of the Department of 
        Labor.'';
            (6) by amending subsection (e) (as so redesignated), by 
        inserting ``impact'' after ``carrying out an'';
            (7) by amending subsection (f) (as so redesignated)--
                    (A) by striking ``Workforce'' and inserting ``, 
                Labor and the Committee on the Budget,'';
                    (B) by striking ``Committee on Labor and Human 
                Resources'' and inserting ``Committee on Health, 
                Education, Labor, and Pensions, and the Committee on 
                Budget,'';
                    (C) by striking ``30 days'' and inserting ``60 
                days''; and
                    (D) by inserting the following: ``All reports 
                transmitted under this subsection shall be made 
                available to the general public on the Internet website 
                of the Department of Labor.''; and
            (8) by adding at the end the following:
    ``(h) GAO Report.--Not later than 3 years after the date of the 
enactment of the Job Training Results Act of 2010, and every 3 years 
thereafter, the Comptroller General of the United States shall conduct 
a study and submit a report to Congress that evaluates--
            ``(1) the effectiveness of the impact evaluations conducted 
        under this section; and
            ``(2) the impact of such evaluations on the assessments 
        conducted under section 508(b) with respect to the programs and 
        activities carried out under this title.
    ``(i) Definitions.--In this section:
            ``(1) Impact evaluation.--The term `impact evaluation' 
        means an evaluative study that evaluates, in accordance with 
        subsection (a), the outcomes of programs and activities carried 
        out under this title, including the impact on social conditions 
        such programs and activities are intended to improve.
            ``(2) Scientific random assignment methodologies.--The term 
        `scientific random assignment methodologies' means research 
        designs conducted in program settings in which intervention and 
        control groups are--
                    ``(A) formed by random assignment; and
                    ``(B) compared on the basis of outcome measures for 
                the purpose of determining the impact of the programs 
                and activities carried out under this title on 
                participants.
            ``(3) Control group.--The term `control group' means a 
        group of individuals--
                    ``(A) who did not participate in the programs and 
                activities carried out under this title; and
                    ``(B) whose outcome measures are compared to the 
                outcome measures of individuals in an intervention 
                group.
            ``(4) Intervention group.--The term `intervention group' 
        means a group of individuals--
                    ``(A) who participated in the programs and 
                activities carried out under this title; and
                    ``(B) whose outcome measures are compared to the 
                outcome measures of individuals in a control group.''.

SEC. 707. ENCOURAGING INNOVATION.

    (a) State Block Grant.--Section 192 (29 U.S.C. 2942) is amended to 
read as follows:

``SEC. 192. JOB TRAINING IMPROVEMENT PLAN.

    ``(a) State Block Grant.--
            ``(1) In general.--Not earlier than 1 year of the date of 
        the enactment of the `Job Training Results Act of 2010', a 
        State may submit to the Secretary, and the Secretary (in 
        cooperation with the appropriate Secretaries) may approve a Job 
        Training Improvement Plan (in this section referred to as a 
        `Plan') submitted by a State pursuant to subsection (d) under 
        which the State is authorized to--
                    ``(A) integrate any of the funds that the State is 
                eligible to receive under the job training programs 
                described in subsection (g) to improve job training 
                results in the State; and
                    ``(B) waive, in accordance with the Plan and except 
                as otherwise indicated in this subsection, any of the 
                statutory and regulatory requirements--
                            ``(i) applicable under this title to local 
                        areas; and
                            ``(ii) applicable under the programs 
                        described in subsection (g), the funds of which 
                        will be integrated under a Plan submitted under 
                        this section.
            ``(2) Eligibility.--In order for a State's Plan to be 
        approved under this section, the providers of training programs 
        in the State shall have carried out at least 1 assessment 
        pursuant to section 508 with respect to such programs.
    ``(b) Periods.--
            ``(1) In general.--The Secretary (in cooperation with other 
        appropriate Secretaries) may--
                    ``(A) approve a State's Plan under this section for 
                a period of not more than 3 years; and
                    ``(B) renew a State's Plan under this section for 
                additional 3-year periods if the State demonstrates a 
                significant improvement in job training results at the 
                end of the preceding 3-year period.
    ``(c) Definitions.--For purposes of this section:
            ``(1) Job training results.--
                    ``(A) In general.--The term `job training results' 
                means an improvement in the assessment carried out 
                pursuant to section 508 with respect to the job 
                training programs conducted in a State, as compared to 
                the assessment of such programs carried out in the most 
                recent preceding fiscal year.
                    ``(B) Improvements.--An improvement in an 
                assessment described in subparagraph (A) shall 
                include--
                            ``(i) an increase in the percentage of 
                        participants--
                                    ``(I) who were employed for at 
                                least 1 year in an occupation related 
                                to the training provided under the 
                                program;
                                    ``(II) who are employed at higher 
                                income levels; and
                            ``(ii) a decrease in the percentage of 
                        participants who are receiving Federal 
                        assistance
            ``(2) Appropriate secretary.--The term `appropriate 
        Secretary' means the head of the Federal agency who exercises 
        administrative authority over a program described in subsection 
        (g).
    ``(d) Contents of Plan.--To have a Plan approved under this 
subsection, a State, after consultation with State and local workforce 
investment boards, shall submit a Plan to the Secretary at such time, 
in such manner, and containing such information as the Secretary may 
require, including--
            ``(1) identification of the funds the State is eligible to 
        receive under the job training programs described in subsection 
        (g) that will be integrated;
            ``(2) a description of how the Plan, including how the 
        integration of funds under the Plan will result in a 
        significant improvement in job training results in the State;
            ``(3) a description of how the State will maintain accurate 
        records of the performance measures for the assessments 
        required pursuant to section 508;
            ``(4) assurances that in carrying out the Plan--
                    ``(A) the State will serve populations consistent 
                with the populations served by the funds which are 
                being integrated, and will provide such populations 
                universal access to work ready services as described in 
                section 134(d)(2) of this Act;
                    ``(B) of the funds expended under the plan each 
                fiscal year, not more than 10 percent of such funds 
                will be expended on the costs of administration (as 
                defined by the Secretary); and
                    ``(C) the State will comply with requirements under 
                this title and the programs to be integrated relating 
                to wage and labor standards (including nondisplacement 
                provisions), grievance procedures and judicial review, 
                and nondiscrimination;
            ``(5) identification of private resources that will be used 
        to assist in improving job training results; and
            ``(6) a description of the job training awareness campaign 
        that the State will carry out as part of such Plan.
    ``(e) Integration of Job Training Programs Authorized.--
            ``(1) Authorization for integration.--In carrying out this 
        subsection, the Secretary, in cooperation with the appropriate 
        Secretaries, shall, upon the approval of the Plan submitted 
        under subsection (d), authorize a State to integrate, as 
        described in paragraph (2) the portion of the funds the State 
        is eligible to receive under the programs described in 
        subsection (g) to assist in implementing such Plan.
            ``(2) Integration.--The authorization shall give the State 
        the authority to integrate, in accordance with the State's 
        Plan, funds the State--
                    ``(A) is eligible to receive under the programs 
                described in subsection (g); and
                    ``(B) has identified under the Plan as funds to be 
                integrated.
    ``(f) Effect on Program Requirements.--The State may use the 
integrated funds used to carry out any of the activities authorized 
under any of the programs described in subsection (g), but shall not be 
required to carry out any requirements of the statutes authorizing the 
programs, except as otherwise specified in this section.
    ``(g) Job Training Programs.--Funds that shall be made available 
for integration under an approved Plan are funds provided under the 
following programs:
            ``(1) Programs for migrant youth authorized under section 
        127.
            ``(2) Native American Programs authorized under section 
        166.
            ``(3) Migrant and seasonal farm workers programs authorized 
        under section 167.
            ``(4) Youth Opportunity Grant authorized under section 169.
            ``(5) Grants to States for Incarcerated Youth Offenders 
        authorized under section 171.
            ``(6) Programs for the reintegration of ex-offenders 
        authorized under section 171.
            ``(7) Responsible Reintegration of Youth Offenders program 
        authorized under section 171.
            ``(8) Program of Competitive Grants for Worker Training and 
        Placement in High Growth and Emerging Industry Sectors 
        authorized under section 171.
            ``(9) Energy Efficiency and Renewable Worker Training 
        Programs authorized under section 171(e).
            ``(10) Youthbuild Program authorized under section 173A.
            ``(11) Veterans' Workforce Investment Program authorized 
        under section 168.
            ``(12) The program of workforce investment activities for 
        youth authorized under chapter 4 of subtitle B of title I.
            ``(13) The program of workforce investment activities for 
        adults authorized under chapter 5 of subtitle B of title I.
            ``(14) The program of workforce investment activities for 
        dislocated workers under chapter 5 of subtitle B of title I.
            ``(15) The Adult Education and Family Literacy Act 
        authorized under title II.
            ``(16) The Disabled Veterans Outreach Program authorized 
        under section 4103A of title 38, United States Code.
            ``(17) The Local Veterans' Employment Representative 
        Program authorized under section 4104 of title 38, United 
        States Code.
            ``(18) The Homeless Veterans' Reintegration Program 
        authorized under section 2021 of title 38, United States Code.
            ``(19) Vocational Rehabilitation for Disabled Veterans 
        authorized under chapter 31 of title 38, United States Code.
            ``(20) The National Guard Challenge Program authorized 
        under section 509 of title 32, United States Code.
            ``(21) The Older American Community Service Program 
        authorized under title V of the Older Americans Act of 1965 (42 
        U.S.C. 3056 et seq.).
            ``(22) The Native American Vocational and Technical 
        Education Program authorized under section 116 of the Carl D. 
        Perkins Career and Technical Education Act of 2006 (29 U.S.C. 
        741).
            ``(23) Tribally Controlled Post-secondary Vocational and 
        Technical Institutions programs authorized under section 117 of 
        the Carl D. Perkins Career and Technical Education Act of 2006 
        (20 U.S.C. 2327).
            ``(24) The Native Hawaiian Vocational Education Program 
        authorized under section 116 of the Carl D. Perkins Career and 
        Technical Education Act of 2006 (29 U.S.C. 741).
            ``(25) Career and Technical Assistance to the States 
        authorized under section title I of the Carl D. Perkins Career 
        and Technical Education Act of 2006 (20 U.S.C. 2321 et seq.).
            ``(26) Tech Prep Education Program authorized under title 
        II of the Carl D. Perkins Career and Technical Education Act of 
        2006 (29 U.S.C. 2371 et seq.).
            ``(27) Migrant and Seasonal Farmworkers Program authorized 
        under section 304 of the Rehabilitation Act of 1973 (29 U.S.C. 
        774).
            ``(28) Projects with industry authorized under section 611 
        of the Rehabilitation Act of 1973 (29 U.S.C. 795).
            ``(29) Vocational Rehabilitation Services authorized under 
        title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et 
        seq.).
            ``(30) American Indian Vocational Rehabilitation Services 
        authorized under part C of title I of the Rehabilitation Act of 
        1973 (29 U.S.C. 741 et seq.).
            ``(31) Coordination of Migrant Education Activities 
        authorized under section 1308 of the Elementary and Secondary 
        Education Act of 1965 (20 U.S.C. 6398).
            ``(32) Programs authorized under the Community Services 
        Block Grant Act (42 U.S.C. 9901 et seq.).
            ``(33) The Tribal Work Grants program authorized under 
        section 412(a)(2) of Social Security Act (42 U.S.C. 612(a)(2)).
            ``(34) Job training grants authorized under section 414(c) 
        of the American Competitiveness and Workforce Improvement Act 
        of 1998 (29 U.S.C. 2916a).
            ``(35) Indian Employment, Job Placement Assistance, and 
        Vocational Training programs authorized under the Indian Self-
        Determination Act (25 U.S.C. 450 et seq.).
            ``(36) Programs authorized under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.).
            ``(37) Refugee assistance programs authorized under chapter 
        2 of title IV of the Immigration and Nationality Act (8 U.S.C. 
        1521 et seq.).
            ``(38) Targeted assistance programs for refugees and 
        entrants authorized under chapter 2 of title IV of the 
        Immigration and Nationality Act (8 U.S.C. 1521 et seq.).
            ``(39) Programs authorized under section 16(h) of the Food 
        and Nutrition Act of 2008 (7 U.S.C. 2025(h)).
            ``(40) The Federal Prisoner Reentry Initiative authorized 
        under section 231(i) of Second Chance Act of 2007 (42 U.S.C. 
        17541(i)).
            ``(41) Employment services authorized under the Wagner-
        Peyser Act of 1933 (29 U.S.C. 49 et seq.).
            ``(42) Training programs under section 236 of part II of 
        subchapter B of chapter 2 of title II of the Trade Adjustment 
        Assistance Act of 1974 (19 U.S.C. 2296).
    ``(h) Performance Measures and Reporting.--
            ``(1) Performance measures.--Each State with an approved 
        Plan under this section shall carry out an assessment pursuant 
        to section 508 of all the job training programs conducted in 
        such State that receive funding under the Plan for each fiscal 
        year the Plan is approved under this section.
            ``(2) Reporting.--Each State with an approved Plan under 
        this section shall ensure that records are maintained and 
        reports are submitted, in such form and containing such 
        information, as the Secretary may require regarding the 
        performance of job training programs funded pursuant to this 
        section.
    ``(i) Technical Assistance and Evaluation.--
            ``(1) Technical assistance.--The Secretary shall provide 
        such staff training, technical assistance, and other activities 
        as the Secretary deems appropriate to support the 
        implementation of this section.
            ``(2) Evaluation.--The Secretary may require that States 
        with an approved Plan under this section participate in an 
        evaluation of job training programs funded pursuant to this 
        subsection, including an evaluation using the techniques 
        described in section 172(c).
    ``(j) Plan Review.--
            ``(1) In general.--Upon receipt of a Plan from the 
        Governor, the Secretary shall consult with the appropriate 
        Secretaries in reviewing and approving such plan. Such plan 
        shall be approved if it meets the requirements described in 
        subsection (d).
            ``(2) Plan approval.--
                    ``(A) 90-day period.--Subject to subparagraph (B), 
                a Plan that is submitted to the Secretary under this 
                section shall be considered to be approved by the 
                Secretary at the end of the 90-day period beginning on 
                the day the Secretary receives the Plan, unless the 
                Secretary denies the Plan during the 90-day period.
                    ``(B) 30-day extensions.--If the Secretary is in 
                good faith negotiations with a State with respect to 
                the State's Plan--
                            ``(i) at the end of the 90-day period 
                        described in subparagraph (A), the Secretary 
                        may have an additional 30 days to determine 
                        whether to approve the Plan; or
                            ``(ii) at the end of the 30 days described 
                        in clause (i), the Secretary may have an 
                        additional 30 days to determine whether to 
                        approve the Plan.
            ``(3) Plan denial.--In the case where the Secretary denies 
        a Plan submitted by a State under this section, the Secretary 
        shall--
                    ``(A) provide a written explanation to the State 
                for the denial of the Plan; and
                    ``(B) make such written explanation accessible to 
                the general public.
    ``(k) Federal Responsibilities.--
            ``(1) Interagency memorandum of understanding.--Within 90 
        days following the date of enactment of this section, the 
        Secretary and the appropriate Secretaries shall enter into an 
        interdepartmental memorandum of agreement providing for the 
        implementation of the Plans with respect to the integration of 
        funds administered by each Secretary.
            ``(2) Interagency funds transfers authorized.--The 
        Secretary and the appropriate Secretaries responsible for the 
        programs that are included in a Plan approved are authorized to 
        take such action as may be necessary to provide for intra-
        agency or interagency transfers of funds otherwise available to 
        a State in order to further the purposes of this section.''.

SEC. 708. MAKING WIA TRAINING VOUCHERS MORE ACCESSIBLE AND FLEXIBLE.

    (a) Use of Funds for Employment and Training Activities.--
            (1) Work ready services.--Section 134(d)(2) (29 U.S.C. 
        2864(c)(2)) is amended--
                    (A) in the heading, by striking ``core services'' 
                and inserting ``work ready services'';
                    (B) by striking ``core services'' and inserting 
                ``work ready services'';
                    (C) by striking ``paragraph (1)(A)'' and inserting 
                ``paragraph (1)(A)(i)'';
                    (D) by striking ``who are adults or dislocated 
                workers'';
                    (E) in subparagraph (A), by inserting ``and 
                assistance in obtaining eligibility determinations 
                under the other one-stop partner programs through such 
                activities as assisting in the submission of 
                applications, the provision of information on the 
                results of such applications, the provision of intake 
                services and information, and, where appropriate and 
                consistent with the authorizing statute of the one-stop 
                partner program, determinations of eligibility'' after 
                ``subtitle'';
                    (F) by amending subparagraph (D) to read as 
                follows:
                    ``(D) labor exchange services, including--
                            ``(i) job search and placement assistance, 
                        and where appropriate career counseling;
                            ``(ii) appropriate recruitment services for 
                        employers, including small employers, in the 
                        local area, which may include services 
                        described in this subsection, including 
                        information and referral to specialized 
                        business services not traditionally offered 
                        through the one-stop delivery system; and
                            ``(iii) reemployment services provided to 
                        unemployment claimants, including claimants 
                        identified as in need of such services under 
                        the worker profiling system established under 
                        section 303(j) of the Social Security Act (42 
                        U.S.C. 503(j));'';
                    (G) in subparagraph (I), by inserting ``and the 
                administration of the work test for the unemployment 
                compensation system'' after ``compensation''; and
                    (H) by striking subparagraph (H) and inserting the 
                following:
                    ``(H) provision of accurate information, in formats 
                that are usable and understandable to all one-stop 
                center customers, relating to the availability of 
                supportive services or assistance, including child 
                care, child support, medical or child health assistance 
                under title XIX or XXI of the Social Security Act (42 
                U.S.C. 1396 et seq. and 1397aa et seq.), benefits under 
                the Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), the 
                earned income tax credit under section 32 of the 
                Internal Revenue Code of 1986, and assistance under a 
                State program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.) and other 
                supportive services and transportation provided through 
                funds made available under such part, available in the 
                local area, and referral to such services or assistance 
                as appropriate;''; and
                    (I) by amending subparagraph (J) to read as 
                follows:
                    ``(J) assistance in establishing eligibility for 
                programs of financial aid assistance for training and 
                education programs that are not funded under this Act 
                and are available in the local area; and''; and
                    (J) by redesignating subparagraph (K) as 
                subparagraph (M); and
                    (K) by inserting the following new subparagraphs 
                after subparagraph (J)):
                    ``(K) the provision of information from official 
                publications of the Internal Revenue Service, regarding 
                Federal tax credits available to individuals relating 
                to education, job training and employment, including 
                the Hope Scholarship Credit and the Lifetime Learning 
                Credit (26 U.S.C. 25A), and the Earned Income Tax 
                Credit (26 U.S.C. 32);
                    ``(L) services relating to the Work Opportunity Tax 
                Credit (26 U.S.C. 51);
                    ``(M) comprehensive and specialized assessments of 
                the skill levels and service needs of adults and 
                dislocated workers, which may include--
                            ``(i) diagnostic testing and use of other 
                        assessment tools; and
                            ``(ii) in-depth interviewing and evaluation 
                        to identify employment barriers and appropriate 
                        employment goals;
                    ``(N) development of an individual employment plan, 
                to identify the employment goals, appropriate 
                achievement objectives, and appropriate combination of 
                services for the participation to achieve the 
                employment goals;
                    ``(O) group counseling;
                    ``(P) individual counseling and career planning;
                    ``(Q) case management;
                    ``(R) short-term prevocational services, including 
                development of learning skills, communications skills, 
                interviewing skills, punctuality, personal maintenance 
                skills, and professional conduct, to prepare 
                individuals for unsubsidized employment or training;
                    ``(S) internships and work experience;
                    ``(T) literacy activities relating to basic work 
                readiness, information and communication technology 
                literacy activities, and financial literacy activities, 
                if such activities are not available to participants in 
                the local area under programs administered under the 
                Adult Education and Family Literacy Act (20 U.S.C. 2901 
                et seq.); and
                    ``(U) out-of-area job search assistance and 
                relocation assistance.''.
                    (L) Delivery of services.--Section 134(c)(3) (29 
                U.S.C. 2864(c)(3)) is amended to read as follows:
            ``(3) Delivery of services.--The work ready services 
        described in paragraph (M) through (U) shall be provided 
        through the one-stop delivery system and may be provided 
        through contracts with public, private for-profit, and private 
        nonprofit service providers, approved by the local board.''.
                    (M) Training services.--Section 134(c)(4) is 
                amended--
                            (i) by amending subparagraph (A) to read as 
                        follows:
                    ``(A) In general.--Funds allocated to a local area 
                under section 133(b) shall be used to provide training 
                services to adults who--
                            ``(i) after an interview, evaluation, or 
                        assessment, and case management, have been 
                        determined by a one-stop operator or one-stop 
                        partner, as appropriate, to--
                                    ``(I) be in need of training 
                                services to obtain or retain suitable 
                                employment; and
                                    ``(II) have the skills and 
                                qualifications to successfully 
                                participate in the selected program of 
                                training services;
                            ``(ii) select programs of training services 
                        that are directly linked to the employment 
                        opportunities in the local area involved or in 
                        another area in which the adults receiving such 
                        services are willing to commute or relocate;
                            ``(iii) who meet the requirements of 
                        subparagraph (B); and
                            ``(iv) who are determined eligible in 
                        accordance with the priority system in effect 
                        under subparagraph (E).'';
                            (ii) in subparagraph (B)(i), by striking 
                        ``Except'' and inserting ``Notwithstanding 
                        section 479B of the Higher Education Act of 
                        1965 (20 U.S.C. 1087uu) and except'';
                            (iii) by amending subparagraph (D) to read 
                        as follows:
                    ``(D) Training services.--Training services 
                authorized under this paragraph may include--
                            ``(i) occupational skills training;
                            ``(ii) on-the-job training;
                            ``(iii) skill upgrading and retraining;
                            ``(iv) entrepreneurial training;
                            ``(v) education activities leading to a 
                        high school diploma or its equivalent, 
                        including a General Educational Development 
                        credential, in combination with, concurrently 
                        or subsequently, occupational skills training;
                            ``(vi) adult education and literacy 
                        activities provided in conjunction with other 
                        training authorized under this subparagraph;
                            ``(vii) workplace training combined with 
                        related instruction; and
                            ``(viii) occupational skills training that 
                        incorporates English language acquisition.'';
                            (iv) by amending subparagraph (E) to read 
                        as follows:
                    ``(E) Priority.--
                            ``(i) In general.--A priority shall be 
                        given to dislocated workers or workers who are 
                        in danger of being dislocated for the provision 
                        of intensive and training services under this 
                        subsection.
                            ``(ii) Determinations.--The Governor and 
                        the appropriate local board shall direct the 
                        one-stop operators in the local area with 
                        regard to making determinations with respect to 
                        the priority of service under this 
                        subparagraph.'';
                            (v) in subparagraph (F), by striking clause 
                        (iii) and inserting the following:
                            ``(iii) Enhanced individual training 
                        accounts.--An individual who seeks training 
                        services and who is eligible pursuant to 
                        subparagraph (A), may, in consultation with a 
                        case manager, select an eligible provider of 
                        training services from the list or identifying 
                        information for providers described in clause 
                        (ii)(I). Upon such selection, the one-stop 
                        operator involved shall, to the extent 
                        practicable, refer such individual to the 
                        eligible provider of training services, and 
                        arrange for payment for such services through a 
                        enhanced individual training account.
                            ``(iv) Coordination.--Each local board may, 
                        through one-stop centers, coordinate enhanced 
                        individual training accounts with other 
                        Federal, State, local, or private job training 
                        programs or sources to assist the individual in 
                        obtaining training services.
                            ``(v) Enhanced individual training 
                        accounts.--Each local board may, through one-
                        stop centers, assist individuals receiving 
                        enhanced individual training accounts through 
                        the establishment of such accounts that 
                        include, in addition to the funds provided 
                        under this paragraph, funds from other programs 
                        and sources that will assist the individual in 
                        obtaining training services.''; and
                            (vi) in subparagraph (G)--
                                    (I) in the subparagraph heading, by 
                                striking ``individual training 
                                accounts'' and inserting ``enhanced 
                                individual training accounts'';
                                    (II) in clause (i) by striking 
                                ``individual training accounts'' and 
                                inserting ``enhanced individual 
                                training accounts'';
                                    (III) in clause (ii)--
                                            (aa) by striking ``an 
                                        individual training account'' 
                                        and inserting ``a enhanced 
                                        individual training account'';
                                            (bb) in subclause (II), by 
                                        striking ``individual training 
                                        accounts'' and inserting 
                                        ``enhanced individual training 
                                        accounts'';
                                            (cc) in subclause (II) by 
                                        striking ``or'' after the 
                                        semicolon;
                                            (dd) in subclause (III) by 
                                        striking the period and 
                                        inserting ``; or''; and
                                            (ee) by adding at the end 
                                        of the following:
                                    ``(IV) The local board determines 
                                that it would be most appropriate to 
                                award a contract to an institution of 
                                higher education in order to facilitate 
                                the training of multiple individuals in 
                                high-demand occupations, if such 
                                contract does not limit customer 
                                choice.''.
                                    (IV) in clause (iv)--
                                            (aa) by redesignating 
                                        subclause (IV) as subclause (V) 
                                        and inserting after subclause 
                                        (III) the following:
                                    ``(IV) Individuals with 
                                disabilities.''.
            (2) Permissible activities.--Section 134(c) is amended by 
        amending paragraph (1) to read as follows:
            ``(1) Discretionary one-stop delivery activities.--
                    ``(A) In general.--Funds allocated to a local area 
                under section 133(b) may be used to provide, through 
                the one-stop delivery system--
                            ``(i) customized screening and referral of 
                        qualified participants in training services to 
                        employers;
                            ``(ii) customized employment-related 
                        services to employers on a fee-for-service 
                        basis;
                            ``(iii) customer support to navigate among 
                        multiple services and activities for special 
                        participant populations that face multiple 
                        barriers to employment, including individuals 
                        with disabilities;
                            ``(iv) employment and training assistance 
                        provided in coordination with child support 
                        enforcement activities of the State agency 
                        carrying out subtitle D of title IV of the 
                        Social Security Act (42 U.S.C. 651 et seq.);
                            ``(v) activities to improve services to 
                        local employers, including small employers in 
                        the local area, and increase linkages between 
                        the local workforce investment system and 
                        employers;
                            ``(vi) activities to facilitate remote 
                        access to services provided through a one-stop 
                        delivery system, including facilitating access 
                        through the use of technology; and
                            ``(vii) activities to carry out business 
                        services and strategies that meet the workforce 
                        investment needs of local area employers, as 
                        determined by the local board, consistent with 
                        the local plan under section 118, which 
                        services--
                                    ``(I) may be provided through 
                                effective business intermediaries 
                                working in conjunction with the local 
                                board, and may also be provided on a 
                                fee-for-service basis or through the 
                                leveraging of economic development and 
                                other resources as determined 
                                appropriate by the local board; and
                                    ``(II) may include--
                                            ``(aa) identifying and 
                                        disseminating to business, 
                                        educators, and job seekers, 
                                        information related to the 
                                        workforce, economic and 
                                        community development needs, 
                                        and opportunities of the local 
                                        economy;
                                            ``(bb) development and 
                                        delivery of innovative 
                                        workforce investment services 
                                        and strategies for area 
                                        businesses, which may include 
                                        sectoral, industry cluster, 
                                        regional skills alliances, 
                                        career ladder, skills 
                                        upgrading, skill standard 
                                        development and certification, 
                                        apprenticeship, and other 
                                        effective initiatives for 
                                        meeting the workforce 
                                        investment needs of area 
                                        employers and workers;
                                            ``(cc) participation in 
                                        seminars and classes offered in 
                                        partnership with relevant 
                                        organizations focusing on the 
                                        workforce-related needs of area 
                                        employers and job seekers;
                                            ``(dd) training consulting, 
                                        needs analysis, and brokering 
                                        services for area businesses, 
                                        including the organization and 
                                        aggregation of training (which 
                                        may be paid for with funds 
                                        other than those provided under 
                                        this title), for individual 
                                        employers and coalitions of 
                                        employers with similar 
                                        interests, products, or 
                                        workforce needs;
                                            ``(ee) assistance to area 
                                        employers in the aversion of 
                                        layoffs and in managing 
                                        reductions in force in 
                                        coordination with rapid 
                                        response activities;
                                            ``(ff) the marketing of 
                                        business services offered under 
                                        this title, to appropriate area 
                                        employers, including small and 
                                        mid-sized employers;
                                            ``(gg) information referral 
                                        on concerns affecting local 
                                        employers; and
                                            ``(hh) other business 
                                        services and strategies 
                                        designed to better engage 
                                        employers in workforce 
                                        investment activities and to 
                                        make the workforce investment 
                                        system more relevant to the 
                                        workforce investment needs of 
                                        area businesses, as determined 
                                        by the local board to be 
                                        consistent with the objectives 
                                        of this title.''.

SEC. 709. LIFE LONG LEARNING AWARENESS CAMPAIGNS.

    (a) Federal Communications Commission.--
            (1) In general.--The Federal Communications Commission 
        shall require that each licensed broadcaster keep a record of 
        the number and duration of public service announcements 
        voluntarily broadcast with respect to the job training 
        opportunities and services described in section 509 of the 
        Workforce Investment Act of 1998.
            (2) Deadline.--Not later than 90 days after the date of the 
        enactment of this Act, the Federal Communications Commission 
        shall take all actions necessary to adopt a regulation to 
        implement paragraph (1).
            (3) Requirement.--The Federal Communications Commission 
        shall consider the voluntary broadcast of any public service 
        announcement described in paragraph (1) as--
                    (A) fulfilling part of a broadcaster's obligation 
                to serve the public interest; and
                    (B) demonstrating such service for the purposes of 
                license renewal.
    (b) Job Training Providers.--Title V of the Workforce Investment 
Act of 1998 (20 U.S.C. 9271 et seq.) is further amended by adding at 
the end the following:

``SEC. 509. PUBLIC SERVICE ANNOUNCEMENTS.

    ``(a) In General.--Each provider of a job training program shall 
make periodic public service announcements to inform the general public 
about job training opportunities and services, including--
            ``(1) the availability of job training opportunities under 
        the program;
            ``(2) Federal Pell Grants available under title IV of the 
        Higher Education Act of 1965 (20 U.S.C. 1070 et seq.);
            ``(3) the Job Corps centers;
            ``(4) the one-stop delivery systems; and
            ``(5) community colleges.
    ``(b) Regulations.--The Secretary shall promulgate regulations to 
assist providers of job training programs in carrying out the 
requirements described in subsection (a). In promulgating such 
regulations, the Secretary shall consider whether the requirements may 
be satisfied by--
            ``(1) posting the required information on an Internet Web 
        site;
            ``(2) publishing the required information in a newspaper; 
        or
            ``(3) making an announcement containing the required 
        information on the television or radio.
    ``(c) Definition.--The term `job training program' has the meaning 
given such term in section 507(d).''.

SEC. 710. GAO REPORTS.

    (a) Identifying Duplication.--Not later than 1 year after the date 
of the enactment of this Act, the Comptroller General of the United 
States shall conduct a study and submit a report to Congress on job 
training programs that--
            (1) identifies duplications among such programs; and
            (2) if applicable, recommends the consolidation of such 
        programs.
    (b) Effectiveness of Programs.--Not later than 2 years after the 
date of the enactment of this Act, and every 2 years thereafter, the 
Comptroller General of the United States shall conduct a study and 
submit a report to Congress that evaluates the effectiveness of job 
training programs based on the assessments of such programs carried out 
under section 508(b) of the Workforce Investment Act of 1998 (as 
amended by this Act).
    (c) Definition.--For purposes of this section, the term ``job 
training program'' has the meaning given such term in 507(d) of the 
Workforce Investment Act of 1998 (as amended by this Act).

            TITLE VIII--SPENDING LIMITS AND DEFICIT CONTROL

SEC. 800. SHORT TITLE.

    This title may be cited as the ``Spending Enforcement and Control 
Act of 2010''.

            Subtitle A--Spending Limits and Deficit Control

SEC. 801. DISCRETIONARY SPENDING LIMITS.

    (a)  Discretionary Spending Limits.--Section 251 of the Balanced 
Budget and Emergency Deficit Control of Act of 1985 is amended to read 
as follows:
    ``(a)  Discretionary Spending Limits.--The fiscal years for the 
discretionary spending limits shall be as follows:
            ``(1) Fiscal year 2011: $1,203,000,000,000 in outlays.
            ``(2) Fiscal year 2012: $1,144,000,000,000 in outlays.
            ``(3) Fiscal year 2013: $1,143,000,000,000 in outlays.
            ``(4) Fiscal year 2014: $1,143,000,000,000 in outlays.
            ``(5) Fiscal year 2015: $1,149,000,000,000 in outlays.
            ``(6) Fiscal year 2016: $1,165,000,000,000 in outlays.
            ``(7) Fiscal year 2017: $1,176,000,000,000 in outlays.
            ``(8) Fiscal year 2018: $1,184,000,000,000 in outlays.
            ``(9) Fiscal year 2019: $1,202,000,000,000 in outlays.
    ``(b) Spending Reduction Order.--A spending reduction ordered shall 
be implemented using the procedures set forth in section 256.''.
    (b) Conforming Amendment.--The item relating to section 251 in the 
table of contents set forth in 250(c) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended to read as follows:

``Sec. 251. Discretionary spending limits.''.

SEC. 802. TOTAL SPENDING LIMITS.

    (a) Total Spending Limits.--After section 252 of the Balanced 
Budget and Emergency Deficit Control Act of 1985, add the following new 
section:

``SEC. 252A. TOTAL SPENDING LIMITS.

    ``(a) Projections.--
            ``(1) OMB report.--OMB shall prepare a report comparing 
        projected total spending under section 257 and the total 
        spending limits in subsection (d), and include such report in 
        the budget as submitted by the President annually under section 
        1105(a) of title 31, United States Code.
            ``(2) CBO report.--CBO shall prepare a report comparing 
        projected total spending under section 257 and the total 
        spending limits in subsection (d) and include such report in 
        the CBO annual baseline and reestimate of the President's 
        budget.
            ``(3) Inclusion in spending reduction orders.--Reports 
        prepared pursuant to this subsection shall be included in the 
        spending reduction report.
    ``(b) Spending Reduction Order.--A spending reduction order shall 
be implemented using the procedures set forth in section 256.
    ``(c) Fiscal Years of the Total Spending Period.--The fiscal years 
within the total spending period shall be as follows:
            ``(1) Fiscal year 2011: 22.8 percent.
            ``(2) Fiscal year 2012: 21.6 percent.
            ``(3) Fiscal year 2013: 21.8 percent.
            ``(4) Fiscal year 2014: 21.9 percent.
            ``(5) Fiscal year 2015: 21.7 percent.
            ``(6) Fiscal year 2016: 22.0 percent.
            ``(7) Fiscal year 2017: 21.7 percent.
            ``(8) Fiscal year 2018: 21.6 percent.
            ``(9) Fiscal year 2019: 22.3 percent.
            ``(10) Fiscal year 2020: 22.3 percent.
            ``(11) Fiscal year 2021: 22.4 percent.
            ``(12) Fiscal year 2022: 22.6 percent.
            ``(13) Fiscal year 2023: 22.8 percent.
            ``(14) Fiscal year 2024: 22.9 percent.
            ``(15) Fiscal year 2025: 22.9 percent.
            ``(16) Fiscal year 2026: 23.2 percent.
            ``(17) Fiscal year 2027: 23.5 percent.
            ``(18) Fiscal year 2028: 23.6 percent.
            ``(19) Fiscal year 2029: 23.7 percent.
            ``(20) Fiscal year 2030: 23.8 percent.
            ``(21) Fiscal year 2031: 23.9 percent.
            ``(22) Fiscal year 2032: 24.0 percent.
            ``(23) Fiscal year 2033: 24.1 percent.
            ``(24) Fiscal year 2034: 24.1 percent.
            ``(25) Fiscal year 2035: 24.1 percent.
            ``(26) Fiscal year 2036: 24.1 percent.
            ``(27) Fiscal year 2037: 24.1 percent.
            ``(28) Fiscal year 2038: 23.9 percent.
            ``(29) Fiscal year 2039: 23.7 percent.
            ``(30) Fiscal year 2040: 23.5 percent.
            ``(31) Fiscal year 2041: 23.5 percent.
            ``(32) Fiscal year 2042: 23.4 percent.
            ``(33) Fiscal year 2043: 23.1 percent.
            ``(34) Fiscal year 2044: 23.0 percent.
            ``(35) Fiscal year 2045: 22.7 percent.
            ``(36) Fiscal year 2046: 22.4 percent.
            ``(37) Fiscal year 2047: 22.2 percent.
            ``(38) Fiscal year 2048: 21.9 percent.
            ``(39) Fiscal year 2049: 21.7 percent.
            ``(40) Fiscal year 2050: 21.6 percent.
            ``(41) Fiscal year 2051: 21.4 percent.
            ``(42) Fiscal year 2052: 21.2 percent.
            ``(43) Fiscal year 2053: 20.9 percent.
            ``(44) Fiscal year 2054: 20.9 percent.
            ``(45) Fiscal year 2055: 20.6 percent.
            ``(46) Fiscal year 2056: 20.3 percent.
            ``(47) Fiscal year 2057: 20.1 percent.
            ``(48) Fiscal year 2058: 20.0 percent.
            ``(49) Fiscal year 2059: 19.7 percent.
            ``(50) Fiscal year 2060: 19.6 percent.
            ``(51) Fiscal year 2061: 19.4 percent.
            ``(52) Fiscal year 2062: 19.2 percent.
            ``(53) Fiscal year 2063: 18.9 percent.
            ``(54) Fiscal year 2064: 18.8 percent.
            ``(55) Fiscal year 2065: 18.4 percent.
            ``(56) Fiscal year 2066: 18.2 percent.
            ``(57) Fiscal year 2067: 18.1 percent.
            ``(58) Fiscal year 2068: 17.6 percent.
            ``(59) Fiscal year 2069: 17.5 percent.
            ``(60) Fiscal year 2070: 17.1 percent.
            ``(61) Fiscal year 2071: 16.8 percent.
            ``(62) Fiscal year 2072: 16.6 percent.
            ``(63) Fiscal year 2073: 16.2 percent.
            ``(64) Fiscal year 2074: 16.0 percent.
            ``(65) Fiscal year 2075: 15.6 percent.
            ``(66) Fiscal year 2076: 15.4 percent.
            ``(67) Fiscal year 2077: 15.0 percent.
            ``(68) Fiscal year 2078: 14.7 percent.
            ``(69) Fiscal year 2079: 14.3 percent.
            ``(70) Fiscal year 2080: 14.0 percent.
            ``(71) Fiscal year 2081: 13.6 percent.
            ``(72) Fiscal year 2082: 13.4 percent.
            ``(73) Fiscal year 2083: 13.0 percent.''.
    (b) Definitions.--Section 3 of the Congressional Budget and 
Impoundment Control Act of 1974 (2 U.S.C. 622) is amended by adding at 
the end the following new paragraph:
            ``(11) The term `total spending' means all outlays of the 
        Federal Government including those from off-budget entities and 
        budget authority and outlays flowing therefrom, as applicable, 
        designated as emergencies.''.
    (c) Conforming Amendment.--The table of contents set forth in 
250(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 
is amended by inserting after the item relating to section 252A the 
following new item:

``Sec. 252A. Total spending limits.''.

                     Subtitle B--Reports and Orders

SEC. 811. REPORTS AND ORDERS.

    Section 254 of the Balanced Budget and Emergency Deficit Control 
Act of 1985 is amended to read as follows:

``SEC. 254. REPORTS AND ORDERS.

    ``(a) Timetable.--

``Date:                                   Action to be completed:
5 days before the President's budget      CBO sequestration preview report.
 submission.
President's budget submission...........  OMB sequestration preview report.
August 10...............................  CBO sequestration update report.
August 20...............................  OMB sequestration update report.
10 days after end of session............  CBO sequestration final report.
15 days after end of session............  OMB sequestration final report; Presidential order.
 

    ``(b) Submission and Availability of Reports.--Each report required 
by this section shall be submitted to the Committees on the Budget of 
the House of Representatives and the Senate. On the following day a 
notice of the report shall be printed in the Federal Register.
    ``(c) Sequestration Preview Report.--
            ``(1) Reporting requirement.--On the dates specified in 
        subsection (a), OMB and CBO shall issue a preview report 
        regarding discretionary limits and total spending limits, 
        sequestration based on laws enacted through those dates.
            ``(2)  Discretionary spending limit sequestration report.--
        The preview report shall set forth for the current year and the 
        budget year the following:
                    ``(A) The discretionary spending limit;
                    ``(B) The estimated discretionary spending amount; 
                and
                    ``(C) The amount of reductions required under 
                section 251.
            ``(3) Total spending limit sequestration report.--The 
        preview reports shall set forth for the budget year estimates 
        for the following:
                    ``(A) The total spending limit;
                    ``(B) The estimated total spending amount; and
                    ``(C) The amount of reductions required under 
                section 252A.
            ``(4) Explanation of differences.--The OMB reports shall 
        explain the differences between OMB and CBO estimates for each 
        item set forth in this subsection.
    ``(d) Sequestration Update Report.--On the dates specified in 
subsection (a), OMB and CBO shall issue a sequestration update report, 
reflecting laws enacted through those dates, containing all of the 
information required in the sequestration preview report.
    ``(e) Sequestration Final Report.--
            ``(1) Reporting requirement.--On the dates specified in 
        subsection (a), OMB and CBO shall issue a sequestration final 
        report, reflecting laws enacted through those dates, containing 
        all of the information required in the sequestration preview 
        report.
            ``(2) Presidential order.--On the date specified in 
        subsection (a), if in its sequestration final report OMB 
        estimates that any sequestration is required, the President 
        shall issue an order fully implementing without change all 
        sequestrations required by the OMB calculations set forth in 
        that report. This order shall be effective on issuance.
    ``(f) GAO Compliance Report.--Upon request of the Committee on the 
Budget of the House of Representatives or the Senate, the Comptroller 
General shall submit to the Congress and the President a report on--
            ``(1) the extent to which each order issued by the 
        President under this section complies with all of the 
        requirements contained in this part, either certifying that the 
        order fully and accurately complies with such requirements or 
        indicating the respects in which it does not; and
            ``(2) the extent to which each report issued by OMB or CBO 
        under this section complies with all of the requirements 
        contained in this part, either certifying that the report fully 
        and accurately complies with such requirements or indicating 
        the respects in which it does not.
    ``(g) Low-Growth Report.--At any time, CBO and OMB shall notify the 
Congress if--
            ``(1) during the period consisting of the quarter during 
        which such notification is given, the quarter preceding such 
        notification, and the 4 quarters following such notification, 
        CBO or OMB has determined that real economic growth is 
        projected or estimated to be less than zero with respect to 
        each of any 2 consecutive quarters within such period; or
            ``(2) the most recent of the Department of Commerce's 
        advance preliminary or final reports of actual real economic 
        growth indicate that the rate of real economic growth for each 
        of the most recently reported quarter and the immediately 
        preceding quarter is less than one percent.
    ``(h) Economic and Technical Assumptions.--In all reports required 
by this section, OMB shall use the same economic and technical 
assumptions as used in the most recent budget submitted by the 
President under section 1105(a) of title 31, United States Code''.

SEC. 812. SPENDING LIMITS ENFORCEMENT.

    (a) Conforming Amendments to Section 312.--Section 312 of the 
Congressional Budget Act of 1974 is amended--
            (1) by striking subsection (a) and inserting the following:
    ``(a) Budget Committee Determinations.--For purposes of this title, 
the levels of new budget authority, outlays, direct spending, deficits, 
revenues, and debt, or the increases or decreases of such levels for 
purpose of section 303, shall be determined on the basis of estimates 
made by the Committee on the Budget of the House of Representatives or 
the Senate, as applicable.''.
            (2) by striking subsections (b) and (c) and redesignating 
        subsections (d), (e), and (f) as (g), (h), and (i), 
        respectively.
    (b) Enforcement Amendments to Section 312.--Section 312 of the 
Congressional Budget Act of 1974 is further amended by adding the 
following new subsections:
    ``(b) Discretionary Spending Limit Point of Order.--It shall not be 
in order in the House of Representatives or the Senate to consider any 
bill, joint resolution, amendment, or conference report that--
            ``(1) causes the discretionary spending limits for the 
        budget year to be breached; or
            ``(2) increases the discretionary spending limits for the 
        budget year or any ensuing fiscal year.
    ``(c) Total Spending Limit Point of Order.--It shall not be in 
order in the House of Representatives or the Senate to consider any 
bill, joint resolution, amendment, or conference report that--
            ``(1) causes the total spending limits for the budget year, 
        as a percentage of gross domestic product, to be breached; or
            ``(2) increases the total spending limits for the budget 
        year or any ensuing fiscal year after the budget year, as a 
        percentage of gross domestic product.
    ``(d) Revenue Limit Point of Order.--It shall not be in order in 
the House of Representatives or the Senate to consider any bill, joint 
resolution, amendment, or conference report that increases levels of 
revenue above 19 percent of gross domestic product, as estimated by the 
Committee on the Budget of the applicable House.
    ``(e) Waiver or Suspension.--The provisions of this section may be 
waived or suspended:
            ``(1) In the senate.--In the Senate only by the affirmative 
        vote of three-fifths of the Members, duly chosen and sworn.
            ``(2) In the house of representatives.--In the House of 
        Representatives:
                    ``(A) Only by a rule or order proposing only to 
                waive such provisions by an affirmative vote of two-
                thirds of the Members, duly chosen and sworn.
                    ``(B) It shall not be in order to consider a rule 
                or order that waives the application of subparagraph 
                (A).
                    ``(C) It shall not be in order for the Speaker to 
                entertain a motion to suspend the application of this 
                section under clause 1 of rule XV of the Rules of the 
                House of Representatives.''.

SEC. 813. SPENDING REDUCTION ORDERS.

    (a) In General.--Section 256 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended to read as follows:

``SEC. 256. SPENDING REDUCTION ORDER.

    ``(a) General Rules.--
            ``(1) Calculation of spending reduction percentage.--OMB 
        shall include in its final spending sequestration report a 
        requirement that each nonexempt spending account shall be 
        reduced by an amount of budget authority calculated by 
        multiplying the baseline level of budgetary resources in that 
        account at that time by the uniform percentage necessary to 
        reduce outlays sufficient to eliminate an excess spending 
        amount.
            ``(2) Exemptions.--The following shall be exempt from 
        reduction under any order issued under this part:
                    ``(A) Payments for net interest.
                    ``(B) Benefits payable under the old-age, 
                survivors, and disability insurance program established 
                under title II of the Social Security Act if--
                            ``(i) OASDI Trust Funds are actuarially 
                        solvent in the 75-year period utilized in the 
                        most recent annual report of the Board of 
                        Trustees provided pursuant to section 201(C)(2) 
                        of the Social Security Act; and
                            ``(ii) OASDI Trust Funds have not run a 
                        cash deficit in the fiscal year prior to the 
                        transmittal of the most recent Sequestration 
                        Preview Report.
                    ``(C) Benefits provided to veterans defined as 
                direct spending payable by the Department of Veterans 
                Affairs.
                    ``(D) Obligated balances of budget authority 
                carried over from prior fiscal years.
                    ``(E) Any obligations of the Federal Government 
                required to be paid under the United States 
                Constitution or legally contractual obligations.
                    ``(F) Any program whose growth in the budget year 
                is equal to or less than the consumer price index.
                    ``(G) Intergovernmental transfers.
            ``(3) One-percent reduction limitation.--No program shall 
        be subject to a spending reduction of more than one percent of 
        its budgetary resources.
            ``(4) Calculation of spending reduction.--The percentage 
        required to produce a spending reduction, as ordered by a 
        spending reduction order, shall be calculated by OMB by adding 
        all budgetary resources of the Government, and reducing that 
        amount by an amount sufficient to reduce the total amount of 
        outlays of the Government to equal, or lower, a level of 
        outlays than the amount set forth in the guideline period.
            ``(5) Application.--Once issued, a spending reduction shall 
        be applied to nonexempt programs as follows:
                    ``(A) Budgetary resources subject to a spending 
                reduction to any discretionary account shall be 
                permanently canceled.
                    ``(B) The same percentage spending reduction shall 
                apply to all programs, projects, and activities within 
                a budget account (with programs, projects, and 
                activities as delineated in the appropriation Act or 
                accompanying report for the relevant fiscal year 
                covering that account, or for accounts not included in 
                appropriation Acts, as delineated in the most recently 
                submitted President's budget).
                    ``(C) Administrative regulations implementing a 
                spending reduction shall be made within 120 days of the 
                issue of a spending reduction order.
            ``(6) OASDI special procedures.--If the OASDI Trust Funds 
        are subject to sequestration, then payments from such Trust 
        Funds shall be treated the same as other programs, except--
                    ``(A) reductions from such Trust Funds shall not 
                exceed one percent of the 75-year unfunded liability 
                set forth in the most current Social Security Trustees 
                Report;
                    ``(B) reduction in individual benefits shall be 
                implemented by increasing the Normal Retirement Age 
                (NRA) by an amount certified by the Social Security 
                Office of the Chief Actuary;
                    ``(C) the increase in the NRA shall not be applied 
                to any beneficiary born in a year 55 years or before--
                            ``(i) the year of the enactment of the 
                        Roadmap for America's Future Act of 2010; or
                            ``(ii) the year in which the final spending 
                        sequestration report is issued; and
                    ``(D) no change in the NRA shall be made before it 
                is fully phased-in under the Social Security Act as in 
                effect before the date of enactment of the Roadmap for 
                America's Future Act of 2010.
    ``(b) Emergencies.--No program shall be subject to sequestration or 
counted for purposes of calculating a sequester if it is designated as 
an emergency under this section and so designated by the President.''.
    (b) Low-Growth Amendment.--Section 258(b) of the Balanced Budget 
and Emergency Deficit Control Act of 1985 is amended to read as 
follows:
    ``(b) Suspension of Sequestration Procedures.--Upon the enactment 
of a declaration of war or a joint resolution described in subsection 
(a)--
            ``(1) the subsequent issuance of any sequestration report 
        to enforce the spending limits in sections 251 and 252A order 
        is precluded;
            ``(2) sections 302(f), 310(d), and 311(a), of the 
        Congressional Budget Act of 1974 are suspended; and
            ``(3) section 1103 of title 31, United States Code, is 
        suspended.''.
    (c) Technical and Conforming Amendments.--
            (1) Repeals.--Sections 255 and 275 of the Balanced Budget 
        and Emergency Deficit Control Act of 1985 are repealed.
            (2) Conforming amendment.--The item relating to section 256 
        in the table of contents set forth in section 250(a) of the 
        Balanced Budget and Emergency Deficit Control Act of 1985 is 
        amended to read as follows:

``Sec. 256. Spending reduction order.''.

SEC. 814. ALTERNATE SPENDING REDUCTION LEGISLATION IN THE HOUSE OF 
              REPRESENTATIVES.

    (a) Introduction of Joint Resolution.--At any time after the 
Director of OMB issues a final order for a fiscal year, but before the 
end of the session of Congress in session on the date of the issuance 
of such order, the majority leader of the House of Representatives may 
introduce a joint resolution which contains provisions directing the 
President to modify the most recent final order issued pursuant to this 
title, or provide an alternative to eliminate the spending excess for 
such fiscal year or years. After the introduction of the first such 
joint resolution in either House of Congress in any calendar year, then 
no other joint resolution introduced pursuant to this section shall be 
subject to the procedures set forth in this section.
    (b) Procedures for Consideration of Joint Resolutions.--
            (1) Any committee of the House of Representatives to which 
        an alternative spending compliance measure is referred shall 
        report it to the House without amendment not later than the 
        seventh legislative day after the date of its introduction. If 
        a committee fails to report the bill within that period or the 
        House has adopted a concurrent resolution providing for 
        adjournment sine die at the end of a Congress, it shall be in 
        order to move that the House discharge the committee from 
        further consideration of the bill. Such a motion shall be in 
        order only at a time designated by the Speaker in the 
        legislative schedule within two legislative days after the day 
        on which the proponent announces his intention to offer the 
        motion. Such a motion shall not be in order after a committee 
        has reported a spending compliance measure with respect to that 
        special message or after the House has disposed of a motion to 
        discharge with respect to that special message. The previous 
        question shall be considered as ordered on the motion to its 
        adoption without intervening motion except twenty minutes of 
        debate equally divided and controlled by the proponent and an 
        opponent. If such a motion is adopted, the House shall proceed 
        immediately to consider the spending compliance measure bill in 
        accordance with paragraph (3). A motion to reconsider the vote 
        by which the motion is disposed of shall not be in order.
            (2) After a spending compliance measure is reported or a 
        committee has been discharged from further consideration, or 
        the House has adopted a concurrent resolution providing for 
        adjournment sine die at the end of a Congress, it shall be in 
        order to move to proceed to consider the spending compliance 
        measure in the House. Such a motion shall be in order only at a 
        time designated by the Speaker in the legislative schedule 
        within two legislative days after the day on which the 
        proponent announces his intention to offer the motion. Such a 
        motion shall not be in order after the House has disposed of a 
        motion to proceed with respect to that special message. The 
        previous question shall be considered as ordered on the motion 
        to its adoption without intervening motion. A motion to 
        reconsider the vote by which the motion is disposed of shall 
        not be in order.
            (3) The spending compliance measure shall be considered as 
        read. All points of order against an approval bill and against 
        its consideration are waived. The previous question shall be 
        considered as ordered on an approval bill to its passage 
        without intervening motion except five hours of debate equally 
        divided and controlled by the proponent and an opponent and one 
        motion to limit debate on the bill. A motion to reconsider the 
        vote on passage of the bill shall not be in order.
            (4) A spending compliance measure received from the Senate 
        shall not be referred to committee.
    (c) Voting.--The vote on final passage of a joint resolution or 
conference report thereon referred to in paragraph (1) shall require 
approval of not less than three-fifths of the Members of the House of 
Representatives.

SEC. 815. ALTERNATE SPENDING REDUCTION LEGISLATION IN THE SENATE.

    (a) Introduction of Joint Resolution.--At any time after OMB issues 
a final order for a fiscal year, but before the end of the session of 
Congress in session on the date of the issuance of such order, the 
majority leader of either House of Congress may introduce a joint 
resolution which contains provisions directing the President to modify 
the most recent final order provide an alternative to eliminate the 
spending excess for such fiscal year or years. After the introduction 
of the first such joint resolution in either House of Congress in any 
calendar year, then no other joint resolution introduced in such House 
in such calendar year shall be subject to the procedures set forth in 
this section.
    (b) Procedures for Consideration of Joint Resolutions.--
            (1) Referral to committee.--A joint resolution introduced 
        in the Senate under subsection (a) shall not be referred to a 
        committee of the Senate and shall be placed on the calendar 
        pending disposition of such joint resolution in accordance with 
        this subsection.
            (2) Consideration in the senate.--On or after the third 
        calendar day (excluding Saturdays, Sundays, and legal holidays) 
        beginning after a joint resolution is introduced under 
        subsection (a), notwithstanding any rule or precedent of the 
        Senate, including rule XXII of the Standing Rules of the 
        Senate, it is in order (even though a previous motion to the 
        same effect has been disagreed to) for any Member of the Senate 
        to move to proceed to the consideration of the joint 
        resolution. The motion is not in order after the eighth 
        calendar day (excluding Saturdays, Sundays, and legal holidays) 
        beginning after a joint resolution (to which the motion 
        applies) is introduced. The joint resolution is privileged in 
        the Senate. A motion to reconsider the vote by which the motion 
        is agreed to or disagreed to shall not be in order. If a motion 
        to proceed to the consideration of the joint resolution is 
        agreed to, the Senate shall immediately proceed to 
        consideration of the joint resolution without intervening 
        motion, order, or other business, and the joint resolution 
        shall remain the unfinished business of the Senate until 
        disposed of.
            (3) Debate in the senate.--
                    (A) In the Senate, debate on a joint resolution 
                introduced under subsection (a), amendments thereto, 
                and all debatable motions and appeals in connection 
                therewith shall be limited to not more than 10 hours, 
                which shall be divided equally between the majority 
                leader and the minority leader (or their designees).
                    (B) A motion to postpone, or a motion to proceed to 
                the consideration of other business is not in order. A 
                motion to reconsider the vote by which the joint 
                resolution is agreed to or disagreed to is not in 
                order, and a motion to recommit the joint resolution is 
                not in order.
                    (C)(i) No amendment that is not germane to the 
                provisions of the joint resolution shall be in order in 
                the Senate. In the Senate, an amendment, any amendment 
                to an amendment, or any debatable motion or appeal is 
                debatable for not to exceed 30 minutes to be equally 
                divided between, and controlled by, the mover and the 
                majority leader (or their designees), except that in 
                the event that the majority leader favors the 
                amendment, motion, or appeal, the minority leader (or 
                the minority leader's designee) shall control the time 
                in opposition to the amendment, motion, or appeal.
                    (ii) In the Senate, an amendment that is otherwise 
                in order shall be in order notwithstanding the fact 
                that it amends the joint resolution in more than one 
                place or amends language previously amended. It shall 
                not be in order in the Senate to vote on the question 
                of agreeing to such a joint resolution or any amendment 
                thereto unless the figures then contained in such joint 
                resolution or amendment are mathematically consistent.
            (4) Vote on final passage.--Immediately following the 
        conclusion of the debate on a joint resolution introduced under 
        subsection (a), a single quorum call at the conclusion of the 
        debate if requested in accordance with the rules of the Senate, 
        and the disposition of any pending amendments under paragraph 
        (3), the vote on final passage of the joint resolution shall 
        occur.
            (5) Appeals.--Appeals from the decisions of the Chair shall 
        be decided without debate.
            (6) Conference reports.--In the Senate, points of order 
        under titles III and IV of the Congressional Budget Act of 1974 
        are applicable to a conference report on the joint resolution 
        or any amendments in disagreement thereto.
            (7) Resolution from other house.--If, before the passage by 
        the Senate of a joint resolution of the Senate introduced under 
        subsection (a), the Senate receives from the House of 
        Representatives a joint resolution introduced under subsection 
        (a), then the following procedures shall apply:
                    (A) The joint resolution of the House of 
                Representatives shall not be referred to a committee 
                and shall be placed on the calendar.
                    (B) With respect to a joint resolution introduced 
                under subsection (a) in the Senate--
                            (i) the procedure in the Senate shall be 
                        the same as if no joint resolution had been 
                        received from the House; but
                            (ii)(I) the vote on final passage shall be 
                        on the joint resolution of the House if it is 
                        identical to the joint resolution then pending 
                        for passage in the Senate; or
                            (II) if the joint resolution from the House 
                        is not identical to the joint resolution then 
                        pending for passage in the Senate and the 
                        Senate then passes the Senate joint resolution, 
                        the Senate shall be considered to have passed 
                        the House joint resolution as amended by the 
                        text of the Senate joint resolution.
                    (C) Upon disposition of the joint resolution 
                received from the House, it shall no longer be in order 
                to consider the resolution originated in the Senate.
            (8) Senate action on house resolution.--If the Senate 
        receives from the House of Representatives a joint resolution 
        introduced pursuant to this section after the Senate has 
        disposed of a Senate originated resolution which is identical 
        to the House passed joint resolution, the action of the Senate 
        with regard to the disposition of the Senate originated joint 
        resolution shall be deemed to be the action of the Senate with 
        regard to the House originated joint resolution. If it is not 
        identical to the House passed joint resolution, then the Senate 
        shall be considered to have passed the joint resolution of the 
        House as amended by the text of the Senate joint resolution.
            (9) The vote on final passage of a joint resolution or 
        conference report thereon referred to in paragraph (1) shall 
        require approval of not less than three-fifths of the Members 
        of the Senate.

                    Subtitle C--Long-Term Budgeting

SEC. 821. CBO AND OMB PROJECTIONS.

    (a) Congressional Budget Office.--At the end of section 308 of the 
Congressional Budget Act of 1974, add the following:
    ``(d) Long-Term Projections.--Not later than February 15 of each 
calendar year after the date of enactment of this subsection, the 
Director of the Congressional Budget Office shall issue a report 
projecting total spending, revenue, deficits, and debt for 75 years 
beginning with such fiscal year as a percentage of gross domestic 
product annually based on current law levels as modified to maintain 
current policy.
    ``(e) CBO Spending Review Report Issuance.--As a component of the 
report required by subsection (d), the Congressional Budget Office 
shall issue a Spending Review Report and transmit such report to the 
Committees on the Budget of the House of Representatives and the 
Senate.
    ``(f) Content of Spending Review Report.--The content of the 
Spending Review Report referred to in subsection (e) shall include 
analyses of the following:
            ``(1) OASDI.--The solvency of the Old-Age, Survivors, and 
        Disability Insurance Trust Fund.
            ``(2) Medicare.--The long-range sustainability of the 
        spending levels of Medicare.
            ``(3) Medicaid.--The long-range sustainability of the 
        spending levels of Medicaid.
            ``(4) Other direct spending.--The long-range sustainability 
        of spending levels of other direct spending.
    ``(g) Definitions.--For purposes of the development of the Spending 
Review Report referred to in subsection (b):
            ``(1) Solvency of the oasdi.--The term `solvency' as used 
        in this section means the solvency of the Old-Age Security and 
        Disability Insurance Trust Funds over a 75-year period 
        beginning in the year the Spending Review Report is reported.
            ``(2) Sustainability.--The term `sustainability' means the 
        following:
                    ``(A) Medicare.--The Medicare program is 
                sustainable if it is projected to grow, beginning in 
                the tenth year following the date of the enactment of 
                this Act from the fixed percentage of Gross Domestic 
                Product in the year prior to the date of enactment of 
                this subsection, adjusted by the adjustment formula as 
                set forth in section 252A(e) of the Balanced Budget and 
                Emergency Deficit Control Act of 1985.
                    ``(B) Medicaid.--The Medicaid program is 
                sustainable if its outlays, excluding those designated 
                as emergencies, are projected to grow from the fixed 
                percentage of Gross Domestic Product in the year prior 
                to the date of the enactment of this Act, adjusted by a 
                rate no higher than a blend of the Consumer Price Index 
                and the Medical Economic Index, as adjusted after 
                fiscal year 2018 using the same calculation, excluding 
                benefits provided from the OASDI Trust funds, as that 
                set forth in section 252A(e) of the Balanced Budget and 
                Emergency Deficit Control Act of 1985 to reflect the 
                increase in the the number of Medicare eligible 
                retirees receiving benefiits in the program relative to 
                fiscal year 2018.
                    ``(C) Other direct spending.--Other direct spending 
                is direct spending other than OASDI, the Medicare and 
                Medicaid program and is sustainable if it grows from a 
                fixed percentage of gross domestic product in fiscal 
                year 2008.''.
    (b) Office of Management and Budget.--Section 1105(a) of title 31, 
United States Code, (as amended by section 142(e)) is further amended 
by adding at the end the following:
            ``(38) long-term projections of total spending over 75 
        years as a percentage of gross domestic product annually and 
        the impact of proposed policies over that period.''.

SEC. 822. GAO AND OMB STATEMENTS OF THE FEDERAL GOVERNMENT'S FINANCIAL 
              CONDITION.

    (a) Government Accountability Office.--On or before April 15 of 
each fiscal year, the Government Accountability Office shall submit a 
report on the federal government's financial condition, including the 
long-term unfunded obligations.
    (b) Definition of Long-Term Unfunded Obligations.--Section 3 of the 
Congressional Budget Act of 1974 is further amended by adding at the 
end the following new paragraph, and redesignate the paragraph 
accordingly:
            ``(11) Unfunded obligations.--The term `Unfunded 
        Obligations' means the dollar sum of the Total Net Position as 
        displayed in the United States Government Balance Sheets 
        contained within the most recently published Financial Report 
        of the United States Government; plus the 75-year actuarial 
        balances, using the intermediate open-group assumption, of 
        Medicare's Hospital Insurance, Supplementary Medical Insurance, 
        and Prescription Drug programs contained within the most 
        recently published Annual Report of the Boards of Trustees of 
        the Federal Hospital Insurance and Federal Supplementary 
        Medical Insurance Trust Funds; plus the 75-year actuarial 
        balance, using the intermediate open group assumption, of the 
        Old-Age Survivors and Disability Insurance program contained 
        within the most recently published Annual Report of the Board 
        of Trustees of the Federal Old-Age and Survivors Insurance and 
        Federal Disability Insurance Trust Funds.''.
    (c) Office of Management and Budget.--Section 1105(a) of title 31, 
United States Code, (as amended by section 301(b)) is further amended 
by adding at the end the following:
            ``(39) a report on the Federal Government's financial 
        condition, the including the long-term unfunded obligations.''.

SEC. 823. FIVE-YEAR FISCAL SUSTAINABILITY REVIEW.

    Title III of the Congressional Budget Act of 1974 (as amended by 
section 126(a)) is further amended by adding at the end the following 
new section:

                ``five-year fiscal sustainability review

    ``Sec. 318.  (a) Congressional Spending Review Report.--Not later 
than 15 calendar days after the date of the transmittal of the report 
referred to in subsection 308(e), the Committees on the Budget of the 
House of Representatives and the Senate shall issue, and have printed 
in the Congressional Record, an assessment of such report.
    ``(b) Committee Recommendations.--Not later than 15 calendar days 
after the date of the report of the review referred to in subsection 
(c), the committees of the House of Representatives and the Senate 
shall consider and vote to submit to the Committees on the Budget of 
the House of Representatives and Senate, as applicable, 
recommendations, if any, such committees deem appropriate in response 
to the Spending Review Report issued pursuant to subsection (c).
    ``(c) Expedited Consideration of Spending Review Legislation.--
            ``(1) Consideration in the house of representatives.--
                    ``(A) Introduction of spending review 
                legislation.--
                            ``(i) If the report referred to in section 
                        308 indicates that the OASDI Trust Funds are 
                        not solvent, or that Medicare, Medicaid or 
                        other direct spending programs are not 
                        sustainable, or total spending exceeds the 
                        limits set forth in section 252A for any year 
                        within the 75-year period referred to in such 
                        report, then not later than 30 calendar days 
                        after the transmittal of the report referred to 
                        in subsection (a), if any, the majority leader 
                        and minority leader of the House of 
                        Representatives shall each introduce 
                        legislation implementing to the extent 
                        practicable the recommendations referred to in 
                        subsection (d), or if necessary additional 
                        spending reduction sufficient to achieve the 
                        spending levels referred to in subsection (b).
                            ``(ii) If Spending Review Legislation is 
                        not introduced pursuant to this subparagraph by 
                        the majority leader or minority leader, then 
                        not later than 45 calendar days after the 
                        transmittal of the report referred to in 
                        subsection (a), the chairman or ranking member 
                        of the Committee on the Budget shall introduce 
                        Spending Review Legislation sufficient to 
                        achieve the same spending levels.
                            ``(iii) Spending review legislation shall 
                        be referred solely to the Committee on the 
                        Budget of the House of Representatives which 
                        shall have sole jurisdiction of such 
                        legislation.
                            ``(iv) Spending review legislation 
                        introduced pursuant to this section shall cause 
                        total spending to be reduced by an amount equal 
                        or greater than the amount of the breach of the 
                        limits set forth in section 252A, and shall 
                        cause the OASDI Trust Funds to achieve 
                        solvency, and shall cause Medicare, Medicaid, 
                        and other direct spending programs to achieve 
                        sustainability.
                    ``(B) Referral and reporting.--The Committee on the 
                Budget of the House of Representatives shall report 
                Spending Review Legislation to the House of 
                Representatives not later than the seventh legislative 
                day after the date of introduction of the legislation 
                referred to in subparagraph (A). If such committee 
                fails to report the Spending Review Legislation within 
                that period or the House of Representatives has adopted 
                a concurrent resolution providing for adjournment sine 
                die at the end of a Congress, such committee shall be 
                automatically discharged from further consideration of 
                the Spending Review Legislation and it shall be placed 
                on the appropriate calendar.
                    ``(C) Proceeding to consideration.--After Spending 
                Review Legislation is reported by or discharged from 
                the Committee on the Budget or the House of 
                Representatives has adopted a concurrent resolution 
                providing for adjournment sine die at the end of a 
                Congress, it shall be in order to move to proceed to 
                consider the Spending Review Legislation in the House 
                of Representatives. Such a motion shall be in order in 
                the legislative schedule within two legislative days 
                after the day on which the proponent announces his 
                intention to offer the motion. Such a motion shall not 
                be in order after the House of Representatives has 
                disposed of a motion to proceed with respect to that 
                special message. The previous question shall be 
                considered as ordered on the motion to its adoption 
                without intervening motion. A motion to reconsider the 
                vote by which the motion is disposed of shall not be in 
                order.
                    ``(D) Consideration.--The Spending Review 
                Legislation shall be considered as read. All points of 
                order against Spending Review Legislation and against 
                its consideration are waived. The previous question 
                shall be considered as ordered on an Spending Review 
                Legislation to its passage without intervening motion 
                except five hours of debate equally divided and 
                controlled by the proponent and an opponent and one 
                motion to limit debate on the Spending Review 
                Legislation. A motion to reconsider the vote on passage 
                of the Spending Review Legislation shall not be in 
                order.
                    ``(E) Senate spending review legislation.--Spending 
                Review Legislation received from the Senate shall not 
                be referred to committee.
            ``(2) Consideration in the senate.--
                    ``(A) Motion to proceed to consideration.--A motion 
                to proceed to the consideration of Spending Review 
                Legislation under this subsection in the Senate shall 
                not be debatable. It shall not be in order to move to 
                reconsider the vote by which the motion to proceed is 
                agreed to or disagreed to.
                    ``(B) Limits on debate.--Debate in the Senate on 
                Spending Review Legislation under this subsection, and 
                all debatable motions and appeals in connection 
                therewith (including debate pursuant to subparagraph 
                (D)), shall not exceed 10 hours, equally divided and 
                controlled in the usual form.
                    ``(C) Appeals.--Debate in the Senate on any 
                debatable motion or appeal in connection with Spending 
                Review Legislation under this subsection shall be 
                limited to not more than 1 hour, to be equally divided 
                and controlled in the usual form.
                    ``(D) Motion to limit debate.--A motion in the 
                Senate to further limit debate on Spending Review 
                Legislation under this subsection is not debatable.
                    ``(E) Motion to recommit.--A motion to recommit 
                Spending Review Legislation under this subsection is 
                not in order.
                    ``(F) Consideration of the house of representatives 
                spending review legislation.--
                            ``(i) In general.--If the Senate has 
                        received the House of Representatives companion 
                        resolution to the Spending Review Legislation 
                        introduced in the Senate prior to the vote 
                        required under paragraph (1)(C), then the 
                        Senate may consider, and the vote under 
                        paragraph (1)(C) may occur on, the House of 
                        Representatives companion resolution.
                            ``(ii) Procedure after vote on senate 
                        spending review legislation.--If the Senate 
                        votes, pursuant to paragraph (1)(C), on the 
                        Spending Review Legislation introduced in the 
                        Senate, then immediately following that vote, 
                        or upon receipt of the House of Representatives 
                        companion resolution, the House of 
                        Representatives Spending Review Legislation 
                        shall be deemed to be considered, read the 
                        third time, and the vote on passage of the 
                        Senate resolution shall be considered to be the 
                        vote on the Spending Review Legislation 
                        received from the House of Representatives.
            ``(3) Jurisdiction.--The Committees on the Budget of the 
        House of Representatives and Senate shall have exclusive 
        jurisdiction over any Spending Review Legislation and all the 
        provisions therein for all purposes of the rules of either 
        House.''.

SEC. 824. LONG-TERM RECONCILIATION.

    (a) Long-Term Reconciliation.--Section 310 of the Congressional 
Budget Act of 1974 is amended as follows:
    ``(h) Long-Term Reconciliation Directives.--
            ``(1) Long-term reconciliation directives.--In addition to 
        a reconciliation measure as set forth in subsection (a), a 
        concurrent resolution on the budget for any fiscal year, to the 
        extent necessary to effectuate the spending levels as set forth 
        for such categories in section 301(a) (providing for long-term 
        spending levels as a percentage of gross domestic product) of 
        such resolution, shall--
                    ``(A) specify the total amount by which Medicare, 
                Medicaid, the OASDI Trust Funds, and other direct 
                spending outlays are to be reduced within the 
                jurisdiction of a committee as a percentage of gross 
                domestic product of such fiscal year; and
                    ``(B) direct that committee to determine and 
                recommend changes to accomplish a reduction of such 
                total amount for such categories as a percentage of 
                gross domestic product.
            ``(2)  Limitation on amendments to long-term reconciliation 
        legislation.--
                    ``(A) It shall not be in order in the House of 
                Representatives to consider any amendment to a 
                reconciliation bill or reconciliation resolution if 
                such amendment decreases outlay reductions below the 
                level of such outlay reductions provided (for the 
                fiscal years covered) in the reconciliation 
                instructions which relate to such long-term 
                reconciliation bill.
                    ``(B) It shall not be in order in the Senate to 
                consider any amendment to a reconciliation bill or 
                reconciliation resolution if such amendment decreases 
                outlay reductions below the level of such outlay 
                reductions provided (for the fiscal years covered) in 
                the reconciliation instructions which relate to such 
                long-term reconciliation bill.
                    ``(C) Subparagraphs (A) and (B) shall not apply if 
                a declaration of war by the Congress is in effect.
                    ``(D) For purposes of this section, the levels of 
                outlays as a percentage of a gross domestic product for 
                a fiscal year shall be determined on the basis of 
                estimates made by the Committee on the Budget of the 
                House of Representatives or of the Senate.
                    ``(E) The Committee on Rules of the House of 
                Representatives may make in order amendments to achieve 
                outlay reductions specified by reconciliation 
                directives contained in a concurrent resolution on the 
                budget if a committee or committees of the House of 
                Representatives fail to submit recommended reductions 
                in outlays as a percentage or gross domestic product to 
                its Committee on the Budget pursuant to its 
                instruction.
                    ``(F) In the Senate, a motion to strike a provision 
                shall always be in order.
            ``(3) Subject matter.--Subject matter included in a long-
        term reconciliation bill may be any of the following:
                    ``(A) Any part of the Medicare program.
                    ``(B) Medicaid.
                    ``(C) The Old-Age, Survivors, and Disability 
                Insurance Trust Fund.
                    ``(D) Other direct spending.
            ``(4) Application.--Subsections (c), (d), and (g) shall not 
        apply to long-term reconciliation measures reported under this 
        subsection.''.
    (b) Conforming Amendment.--In section 310(b) of the Congressional 
Budget Act of 1974, strike ``subsection (a)'' and insert ``subsections 
(a) and (h)''.

SEC. 825. LONG-TERM SPENDING INCREASE POINT OF ORDER.

    (a) In General.--Title III of the Congressional Budget Act of 1974 
(as amended by section 303) is further amended by adding at the end the 
following new section:

              ``long-term spending increase point of order

    ``Sec. 317.  (a) Congressional Budget Office Analysis of 
Proposals.--The Director of the Congressional Budget Office shall, to 
the extent practicable, prepare for each bill and joint resolution 
reported from committee (except measures within the jurisdiction of the 
Committee on Appropriations), and amendments thereto and conference 
reports thereon, an estimate of whether the measure causes, relative to 
current law, a net increase in direct spending in excess of 
$5,000,000,000 in any of the four 10-year periods beginning in fiscal 
year 2019 through fiscal year 2058.
    ``(b) In the Senate.--
            ``(1) Point of order.--It shall not be in order in the 
        Senate to consider any bill, joint resolution, amendment, 
        motion, or conference report that causes a net increase in 
        deficits in excess of $5,000,000,000 in any of the four 10-year 
        periods beginning in 2019 through 2058.
            ``(2) Supermajority waiver and appeal.--
                    ``(A) This section may be waived or suspended only 
                by the affirmative vote of three-fifths of the Members, 
                duly chosen and sworn.
                    ``(B) An affirmative vote of three-fifths of the 
                Members, duly chosen and sworn, shall be required to 
                sustain an appeal of the ruling of the Chair on a point 
                of order raised under this section.
    ``(c) In the House of Representatives.--
            ``(1) Point of order.--It shall not be in order in the 
        House of Representatives to consider any bill, joint 
        resolution, amendment, motion, or conference report that causes 
        a net increase in deficits in excess of $5,000,000,000 in any 
        of the four 10-year periods beginning in 2019 through 2058.
            ``(2) Supermajority waiver and appeal.--
                    ``(A) This section may be waived or suspended only 
                by the affirmative vote of three-fifths of the Members, 
                duly chosen and sworn.
                    ``(B) An affirmative vote of two-thirds of the 
                Members, duly chosen and sworn, shall be required to 
                sustain an appeal of the ruling of the Chair on a point 
                of order raised under this section.
    ``(d) Determinations of Budget Levels.--For purposes of this 
section, the levels of net deficit increases shall be determined on the 
basis of estimates provided by the chairmen of the Senate and House 
Committees on the Budget, as applicable.''.
    (b) Conforming Amendment.--The table of contents set forth in 
section 1(b) of the Congressional Budget and Impoundment Control Act of 
1974 is amended by inserting after the item relating to section 316 the 
following new item:

``Sec. 317. Long-term spending increase point of order.''.
                                 <all>
```