II

103D CONGRESS

2D SESSION S. 1807

To guarantee individuals and families continued choice and control over their

doctors, hospitals, and health care services, to secure access to quality

health care for all, to ensure that health coverage is portable and renewable, to control medical cost inflation through market incentives and

tax reform, to reform medical malpractice litigation, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 27 (legislative day, JANUARY 25), 1994

Mr. GRAMM (for himself, Mr. MCCAIN, Mr. COATS, Mr. BROWN, Mr.

COVERDELL, Mrs. HUTCHISON, Mr. BENNETT, Mr. HELMS, Mr. LOTT,

Mr. FAIRCLOTH, and Mr. WALLOP) introduced the following bill; which

was read the first time

A BILL

To guarantee individuals and families continued choice and

control over their doctors, hospitals, and health care services, to secure access to quality health care for all, to

ensure that health coverage is portable and renewable,

to control medical cost inflation through market incentives and tax reform, to reform medical malpractice litigation, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; DEFINI2 TIONS.

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

4 ‘‘Comprehensive Family Health Access and Savings Act’’.

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

6 this Act is as follows:

Sec. 1. Short title; definitions; table of contents.

TITLE I—PORTABLE AND PERMANENT PRIVATE HEALTH

INSURANCE

Subtitle A—Portability

Sec. 101. Amendments to COBRA.

Sec. 102. Penalty-free withdrawals from qualified retirement plans for COBRA

coverage.

Subtitle B—Permanence

Sec. 111. General renewability requirements.

Sec. 112. Individual health insurance plans.

Sec. 113. Group health plans.

Sec. 114. Failure of health plans to meet portability and permanence requirements.

TITLE II—EXPANSION OF HEALTH CARE CHOICES

Subtitle A—Employer-Provided Health Insurance

Sec. 201. Tax treatment of employer-provided health insurance.

Subtitle B—Medical Savings Accounts

Sec. 211. Individuals allowed deduction from gross income for cost of catastrophic health insurance plan.

Sec. 212. Medical savings accounts.

TITLE III—EQUAL TAX TREATMENT FOR HEALTH INSURANCE

OF SELF-EMPLOYED AND UNINSURED

Sec. 301. Equal exclusion from gross income of health insurance coverage costs.

TITLE IV—SMALL BUSINESS HEALTH INSURANCE POOLS

Sec. 401. Prohibition of restrictions on groups purchasing health insurance.

Sec. 402. Prohibition of State benefit mandates for group health plans.

Sec. 403. Prohibition of restrictions on managed care.

TITLE V—ASSISTANCE TO INDIVIDUALS WITH PREEXISTING

CONDITIONS IN PURCHASING HEALTH INSURANCE

Sec. 501. Preexisting condition insurance pool allotment program.
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TITLE VI—ENCOURAGE RESPONSIBLE BEHAVIOR BY THE

FINANCIALLY CAPABLE

Sec. 601. One year window to purchase health insurance coverage.

Sec. 602. Prohibition of restrictions relating to the use of collection procedures.

TITLE VII—ASSISTANCE TO LOW-INCOME WORKERS TO

PURCHASE HEALTH INSURANCE

Sec. 701. Refundable catastrophic health insurance plan credit.

TITLE VIII—REWARD PREVENTIVE MEDICINE AND HEALTHY

LIFESTYLES

Sec. 801. Reward preventive medicine and healthy lifestyles.

TITLE IX—REFORM MEDICAID AND EXPAND CHOICES UNDER

MEDICARE

Subtitle A—Medicaid

Sec. 901. Cap on Federal payments made for medical assistance under the

medicaid program.

Sec. 902. Waivers for furnishing medical assistance under the medicaid program.

Subtitle B—Medicare

Sec. 951. Individual election for type of coverage.

Sec. 952. Health care coverage under a private health care arrangement.

TITLE X—ENHANCED EFFICIENCY THROUGH PAPERWORK

REDUCTION

Sec. 1001. Federal paperwork reduction and efficiency requirements.

Sec. 1002. State paperwork reduction and efficiency requirements.

Sec. 1003. Standardized Forms Commission.

TITLE XI—MEANINGFUL MEDICAL LIABILITY REFORM

Sec. 1101. Applicability and preemption.

Sec. 1102. Statute of limitations.

Sec. 1103. Scope of liability.

Sec. 1104. Discovery; failure to make or cooperate in discovery.

Sec. 1105. Limitation on noneconomic damages.

Sec. 1106. Treatment of payments for future economic losses.

Sec. 1107. Treatment of costs and attorney’s fees.

Sec. 1108. Contribution and indemnification.

Sec. 1109. Collateral sources.

Sec. 1110. Damages relating to medical product liability claims.

Sec. 1111. Class actions.

Sec. 1112. Definitions.

Sec. 1113. Severability.

Sec. 1114. Effective date.

TITLE XII—ANTITRUST REFORMS

Sec. 1201. Establishment of limited exemption program for health care joint

ventures.
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Sec. 1202. Issuance of health care certificates of public advantage.

Sec. 1203. Interagency Advisory Committee on Competition, Antitrust Policy,

and Health Care.

Sec. 1204. Definitions.

TITLE XIII—EXPENDITURE TARGETS FOR THE MEDICAID AND

MEDICARE PROGRAMS

Sec. 1301. Determination of expenditures under the medicaid and medicare

programs.

Sec. 1302. Delay of health insurance benefits due to excess expenditures.

1 (c) DEFINITIONS.—For purposes of this Act:

2 (1) EMPLOYER.—The term ‘‘employer’’ shall

3 have the meaning applicable under section 3(5) of

4 the Employee Retirement Income Security Act of

5 1974.

6 (2) GROUP HEALTH PLAN.—The term ‘‘group

7 health plan’’ has the meaning given such term by

8 section 5000(b)(1) of the Internal Revenue Code of

9 1986, but does not include any type of coverage ex10 cluded from the definition of a health insurance plan

11 under paragraph (2).

12 (3) HEALTH INSURANCE PLAN.—

13 (A) IN GENERAL.—Except as provided in

14 subparagraph (B), the term ‘‘health insurance

15 plan’’ means any hospital or medical service

16 policy or certificate, hospital or medical service

17 plan contract, or health maintenance organiza18 tion group contract offered by an insurer.

19 (B) EXCEPTION.—Such term does not in20 clude any of the following—
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1 (i) coverage only for accident, dental,

2 vision, disability income, or long-term care

3 insurance, or any combination thereof,

4 (ii) medicare supplemental health in5 surance,

6 (iii) coverage issued as a supplement

7 to liability insurance,

8 (iv) worker’s compensation or similar

9 insurance, or

10 (v) automobile medical-payment insur11 ance,

12 or any combination thereof.

13 (4) HEALTH MAINTENANCE ORGANIZATION.—

14 The term ‘‘health maintenance organization’’ in15 cludes a health insurance plan that offers to provide

16 health services on a prepaid, at-risk basis primarily

17 through a defined set of providers.

18 (5) INSURER.—The term ‘‘insurer’’ means a li19 censed insurance company, a prepaid hospital or

20 medical service plan, or a health maintenance orga21 nization offering such a plan to an employer, and in22 cludes a similar organization regulated under State

23 law for solvency.

24 (6) SECRETARY.—The term ‘‘Secretary’’ means

25 the Secretary of Health and Human Services.
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1 (7) STATE.—The term ‘‘State’’ means each of

2 the several States of the United States, the District

3 of Columbia, the Commonwealth of Puerto Rico, the

4 United States Virgin Islands, Guam, American

5 Samoa, and the Commonwealth of the Northern

6 Mariana Islands.

7 TITLE I—PORTABLE AND PER8 MANENT PRIVATE HEALTH

9 INSURANCE

10 Subtitle A—Portability

11 SEC. 101. AMENDMENTS TO COBRA.

12 (a) LOWER COST COVERAGE OPTIONS.—Subpara13 graph (A) of section 4980B(f)(2) of the Internal Revenue

14 Code of 1986 (relating to continuation coverage require15 ments of group health plans) is amended to read as

16 follows:

17 ‘‘(A) TYPE OF BENEFIT COVERAGE.—The

18 coverage must consist of coverage which, as of

19 the time the coverage is being provided—

20 ‘‘(i) is identical to the coverage pro21 vided under the plan to similarly situated

22 beneficiaries under the plan with respect to

23 whom a qualifying event has not occurred,
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1 ‘‘(ii) is so identical, except such cov2 erage is offered with an annual $1,000 de3 ductible, and

4 ‘‘(iii) is so identical, except such cov5 erage is offered with an annual $3,000 de6 ductible.

7 If coverage under the plan is modified for any

8 group of similarly situated beneficiaries, the

9 coverage shall also be modified in the same

10 manner for all individuals who are qualified

11 beneficiaries under the plan pursuant to this

12 subsection in connection with such group.’’

13 (b) TERMINATION OF COBRA COVERAGE AFTER

14 ELIGIBLE FOR EMPLOYER-BASED COVERAGE FOR 90

15 DAYS.—Clause (iv) of section 4980B(f)(2)(B) of the In16 ternal Revenue Code of 1986 (relating to period of cov17 erage) is amended—

18 (1) by striking ‘‘or’’ at the end of subclause (I),

19 (2) by redesignating subclause (II) as subclause

20 (III), and

21 (3) by inserting after subclause (I) the follow22 ing new subclause:

23 ‘‘(II) eligible for such employer24 based coverage for more than 90 days,

25 or’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to qualifying events occurring after

3 the date of the enactment of this Act.

4 SEC. 102. PENALTY-FREE WITHDRAWALS FROM QUALIFIED

5 RETIREMENT PLANS FOR COBRA COVERAGE.

6 (a) IN GENERAL.—Subparagraph (A) of section

7 72(t)(2) of the Internal Revenue Code of 1986 (relating

8 to additional tax not to apply to certain distributions) is

9 amended—

10 (1) by striking ‘‘or’’ at the end of clauses (iv)

11 and (v),

12 (2) by striking the period at the end of clause

13 (vi) and inserting ‘‘, or’’, and

14 (3) by adding at the end the following new

15 clause:

16 ‘‘(vii) made to an employee who is a

17 qualified beneficiary during the period of

18 continuation coverage under section

19 4980B(f).’’

20 (b) EFFECTIVE DATE.—The amendments made by

21 subsection (a) shall apply to distributions made after the

22 date of the enactment of this Act.

23 Subtitle B—Permanence

24 SEC. 111. GENERAL RENEWABILITY REQUIREMENTS.

25 (a) INSURERS.—
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1 (1) IN GENERAL.—An insurer may not cancel

2 an individual health insurance plan or group health

3 plan or deny renewal of coverage under such a plan

4 other than—

5 (A) for nonpayment of premiums,

6 (B) for fraud or other misrepresentation

7 by the insured,

8 (C) for noncompliance with plan provi9 sions, or

10 (D) because the insurer is ceasing to pro11 vide any health insurance plan in a State, or,

12 in the case of a health maintenance organiza13 tion, in a geographic area.

14 (2) LIMITATION ON MARKET REENTRY.—If an

15 insurer terminates the offering of health insurance

16 plans or group health plans in an area, the insurer

17 may not offer such a plan in the area until 5 years

18 after the date of the termination.

19 (b) EMPLOYERS.—An employer may not cancel a

20 self-insured group health plan or deny renewal of coverage

21 under such a plan other than—

22 (1) for nonpayment of premiums,

23 (2) for fraud or other misrepresentation by the

24 insured,

25 (3) for noncompliance with plan provisions, or
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1 (4) because the plan is ceasing to provide any

2 coverage in a geographic area.

3 (c) EFFECTIVE DATE.—The provisions of this section

4 shall apply to any plan on or after the date of the enact5 ment of this Act.

6 SEC. 112. INDIVIDUAL HEALTH INSURANCE PLANS.

7 (a) EXISTING PLANS.—With respect to any individ8 ual health insurance plan in effect on the date of the en9 actment of this Act, the insurer shall offer the insured

10 the option to purchase a new individual health insurance

11 described in subsection (b).

12 (b) NEW PLANS.—With respect to any individual

13 health insurance plan, the effective date of which with re14 spect to the insured occurs after the date of the enactment

15 of this Act, the insurer may not increase the premium for

16 such a plan based on the health of the insured.

17 SEC. 113. GROUP HEALTH PLANS.

18 (a) EXISTING PLANS.—With respect to any group

19 health plan (other than a self-insured group health plan)

20 in effect on the date of the enactment of this Act, the

21 insurer shall offer—

22 (1) any insured of such plan the option to pur23 chase upon leaving the group a new individual health

24 insurance plan, the premium of which shall be rated

25 based on actuarial data, may be based on any pre-
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1 existing condition of the insured, and may be in2 creased based on the health of such insured, and

3 (2) the employer or group sponsor of such plan

4 the option to purchase a new group health plan de5 scribed in subsection (b).

6 (b) NEW PLANS.—With respect to any group health

7 plan (other than a self-insured group health plan), the ef8 fective date of which with respect to the employer or group

9 sponsor occurs after the date of the enactment of this Act,

10 the insurer—

11 (1) may not increase the premium for such a

12 plan based on the health of the group’s insured, and

13 (2) shall offer any insured of such plan the op14 tion to purchase upon leaving the group a new indi15 vidual health insurance plan, the premium of which

16 shall be rated based on actuarial data, may not be

17 based on any preexisting condition of the insured,

18 and may not be increased based on the health of

19 such insured.

20 (c) SELF-INSURED GROUP HEALTH PLANS.—With

21 respect to a self-insured group health plan—

22 (1) in effect on the date of the enactment of

23 this Act—
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1 (A) subsection (a)(1) shall apply through 1

2 or more insurers contracted with by such plan,

3 and

4 (B) subsection (a)(2) shall not apply, and

5 (2) the effective date of which with respect to

6 the employer or group sponsor occurs after the date

7 of the enactment of this Act, subsection (b) shall

8 apply through 1 or more insurers contracted with by

9 such plan.

10 SEC. 114. FAILURE OF HEALTH PLANS TO MEET PORT11 ABILITY AND PERMANENCE REQUIREMENTS.

12 (a) DEDUCTION FOR INDIVIDUAL HEALTH INSUR13 ANCE PLANS.—Paragraph (1) of section 213(d) of the In14 ternal Revenue Code of 1986 (defining medical care) is

15 amended—

16 (1) by striking ‘‘or’’ at the end of subparagraph

17 (B), and

18 (2) by striking subparagraph (C) and inserting

19 the following new subparagraphs:

20 ‘‘(C) for insurance—

21 ‘‘(i) meeting the requirements of sec22 tion 112 of the Comprehensive Family

23 Health Access and Savings Act, and

24 ‘‘(ii) covering medical care referred to

25 in subparagraphs (A) and (B), or
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1 ‘‘(D) as premiums under part B of title

2 XVIII of the Social Security Act, relating to

3 supplementary medical insurance for the aged.

4 (b) TAX EXCLUSIONS FOR EMPLOYER-PROVIDED

5 HEALTH INSURANCE.—Section 106 of the Internal Reve6 nue Code of 1986 (relating to contributions by employer

7 to accident and health plans) is amended by striking ‘‘an

8 accident or health plan’’ and inserting ‘‘an accident or

9 health plan meeting the requirements of section 113 of

10 the Comprehensive Family Health Access and Savings

11 Act’’.

12 (c) BUSINESS EXPENSE DEDUCTION FOR HEALTH

13 INSURANCE.—Section 162 of the Internal Revenue Code

14 of 1986 (relating to trade or business expenses) is amend15 ed by redesignating subsection (o) as subsection (p) and

16 by inserting after subsection (n) the following new sub17 section:

18 ‘‘(o) GROUP HEALTH PLANS.—The expenses paid or

19 incurred by an employer for a group health plan shall not

20 be allowed as a deduction under this section unless such

21 plan meets the requirements of section 113 of the Com22 prehensive Family Health Access and Savings Act.’’

23 (d) PAYROLL TAX EXCLUSION FOR EMPLOYER-PRO24 VIDED HEALTH INSURANCE.—Section 209(a)(2) of the

25 Social Security Act (42 U.S.C. 409(a)(2)) is amended by
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1 inserting ‘‘or group health insurance’’ after ‘‘group-term

2 life insurance’’.

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

4 this section shall take effect on the date of the enactment

5 of this Act.

6 TITLE II—EXPANSION OF

7 HEALTH CARE CHOICES

8 Subtitle A—Employer-Provided

9 Health Insurance

10 SEC. 201. TAX TREATMENT OF EMPLOYER-PROVIDED

11 HEALTH INSURANCE.

12 (a) TAX EXCLUSIONS FOR EMPLOYER-PROVIDED

13 HEALTH INSURANCE.—Section 106 of the Internal Reve14 nue Code of 1986 (relating to contributions by employer

15 to accident and health plans), as amended by section

16 115(b), is amended by striking ‘‘an accident or health plan

17 meeting the requirements of section 113 of the Com18 prehensive Family Health Access and Savings Act’’ and

19 inserting ‘‘a qualified health insurance package (as de20 fined in section 162(o)(2)), which meets the requirements

21 of section 113 of the Comprehensive Family Health Access

22 and Savings Act, to the extent the employer contribution

23 does not exceed the actual cost of such coverage’’.

24 (b) BUSINESS EXPENSE DEDUCTION FOR HEALTH

25 INSURANCE.—Subsection (o) of section 162 of the Inter-
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1 nal Revenue Code of 1986 (relating to trade or business

2 expenses), as added by section 115(c), is amended to read

3 as follows:

4 ‘‘(o) GROUP HEALTH PLANS.—

5 ‘‘(1) IN GENERAL.—The expenses paid or in6 curred by an employer for a group health plan shall

7 not be allowed as a deduction under this section un8 less—

9 ‘‘(A) such plan meets the requirements of

10 section 113 of the Comprehensive Family

11 Health Access and Savings Act,

12 ‘‘(B) such plan is offered through a quali13 fied health insurance package, and

14 ‘‘(C) such employer’s contribution per em15 ployee—

16 ‘‘(i) for coverage described in subpara17 graph (B) or (C) of paragraph (2) is not

18 less than such contribution for coverage

19 described in paragraph (2)(A) (determined

20 either on an average cost or actual cost

21 basis as elected by the employer), and

22 ‘‘(ii) for coverage described in para23 graph (2)(C) does not exceed such con24 tribution for coverage described in sub-
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1 paragraph (A) or (B) of paragraph (2),

2 whichever is higher (as so determined).

3 ‘‘(2) QUALIFIED HEALTH INSURANCE PACK4 AGE.—For purposes of paragraph (1), the term

5 ‘qualified health insurance package’ means an an6 nual option provided to each employee of the em7 ployer during a 2-month election period to select 1

8 of the following health insurance coverages for the

9 following calendar year:

10 ‘‘(A) The health insurance coverage pro11 vided by the employer on the date of the enact12 ment of the Comprehensive Family Health Ac13 cess and Savings Act.

14 ‘‘(B) Coverage in a health maintenance or15 ganization, managed care arrangement, or pre16 ferred provider organization.

17 ‘‘(C) Medical savings account under section

18 220.’’

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

20 this section shall apply with respect to any taxable year

21 beginning after the date of the enactment of this Act.
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1 Subtitle B—Medical Savings

2 Accounts

3 SEC. 211. INDIVIDUALS ALLOWED DEDUCTION FROM

4 GROSS INCOME FOR COST OF CATASTROPHIC

5 HEALTH INSURANCE PLAN.

6 (a) IN GENERAL.—Subsection (a) of section 62 of the

7 Internal Revenue Code of 1986 (defining adjusted gross

8 income) is amended—

9 (1) by striking the flush sentence immediately

10 following paragraph (14), and

11 (2) by inserting after paragraph (15) the fol12 lowing:

13 ‘‘(16) MEDICAL EXPENSES ATTRIBUTABLE TO

14 CATASTROPHIC HEALTH INSURANCE PLAN COV15 ERAGE.—

16 ‘‘(A) IN GENERAL.—The deduction allowed

17 by section 213 to the extent attributable to cov18 erage under a catastrophic health insurance

19 plan (as defined in section 220(c)(2)).

20 ‘‘(B) EXCEPTION.—Subparagraph (A)

21 shall not apply to coverage of an individual who

22 has coverage described in section 220(c)(1)(B).

23 Nothing in this section shall permit the same item to be

24 deducted more than once.’’
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1 (b) COORDINATION WITH DEDUCTION FOR OTHER

2 MEDICAL EXPENSES.—Subsection (a) of section 213 of

3 the Internal Revenue Code of 1986 (relating to medical,

4 dental, etc., expenses) is amended to read as follows:

5 ‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be

6 allowed as a deduction the expenses paid during the tax7 able year, not compensated by insurance or otherwise, for

8 medical care of the taxpayer, his spouse, or a dependent

9 (as defined in section 152) in an amount equal to the sum

10 of—

11 ‘‘(1) the portion of such expenses attributable

12 to coverage under a catastrophic health insurance

13 plan (as defined in section 220(c)(2)), and

14 ‘‘(2) the excess of such expenses (other than ex15 penses described in paragraph (1)) over 7.5 percent

16 of the adjusted gross income of the taxpayer.’’

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

18 this section shall apply to taxable years beginning after

19 the date of the enactment of this Act.

20 SEC. 212. MEDICAL SAVINGS ACCOUNTS.

21 (a) IN GENERAL.—Part VII of subchapter B of chap22 ter 1 of the Internal Revenue Code of 1986 (relating to

23 additional itemized deductions for individuals) is amended

24 by redesignating section 220 as section 221 and by insert25 ing after section 219 the following new section:
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1 ‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.

2 ‘‘(a) DEDUCTION ALLOWED.—In the case of an eligi3 ble individual, there shall be allowed as a deduction the

4 amounts paid in cash during the taxable year by or on

5 behalf of such individual to a medical savings account for

6 the benefit of such individual and (if any) such individual’s

7 spouse and dependents if such spouse and dependents are

8 eligible individuals.

9 ‘‘(b) LIMITATIONS.—

10 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as

11 provided in regulations prescribed by this Secretary,

12 no deduction shall be allowed under subsection (a)

13 for amounts paid to any medical savings account for

14 the benefit of an individual, such individual’s spouse,

15 or any dependent of such individual or spouse if

16 such individual, spouse, or dependent is a beneficiary

17 of any other medical savings account.

18 ‘‘(2) DOLLAR LIMITATION.—The amount allow19 able as a deduction under subsection (a) for the tax20 able year shall not exceed $3,000, or such higher

21 amounts as may be specified in subparagraph

22 (c)(2)(C).

23 ‘‘(c) DEFINITIONS.—For purposes of this section:

24 ‘‘(1) ELIGIBLE INDIVIDUAL.—

25 ‘‘(A) IN GENERAL.—The term ‘eligible in26 dividual’ means any individual who is covered
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1 under a catastrophic health insurance plan

2 throughout the calendar year in which or with

3 which the taxable year ends.

4 ‘‘(B) LIMITATIONS.—Such term does not

5 include an individual who is 65 years of age or

6 older, unless the individual is covered under a

7 catastrophic health insurance plan that is a pri8 mary plan (within the meaning of section

9 1862(b)(2)(A) of the Social Security Act).

10 ‘‘(2) CATASTROPHIC HEALTH INSURANCE

11 PLAN.—

12 ‘‘(A) IN GENERAL.—The term ‘cata13 strophic health insurance plan’ means a health

14 plan covering specified expenses incurred by an

15 individual for medical care (as defined in sub16 paragraph (B)) for such individual and the

17 spouse and dependents (as defined in section

18 152) of such individual only to the extent such

19 expenses covered by the plan for any calendar

20 year exceed $3,000 or such higher amounts as

21 may be specified by the plan.

22 ‘‘(B) MEDICAL CARE.—The term ‘medical

23 care’ means—

24 ‘‘(i) medical care as defined in section

25 213(d) (without regard to non-emergency
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1 transportation under paragraph (1)(B) and

2 amounts described in paragraph (2)), and

3 ‘‘(ii) services and care not less than

4 such services and care identified (but not

5 in the manner prescribed) in paragraphs

6 (1), (2), (3), (4)(A), (4)(B), (5), (17), and

7 (21) of section 1905(a).

8 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—In

9 the case of any calendar year after 1995, the

10 dollar amount in subparagraph (A) and para11 graph (b)(2) shall be increased by an amount

12 equal to—

13 ‘‘(i) such dollar amount, multiplied by

14 ‘‘(ii) the cost-of-living adjustment de15 termined under section 1(f)(3) for such

16 calendar year.

17 If any increase under the preceding sentence is

18 not a multiple of $50, such increase shall be

19 rounded to the nearest multiple of $50.

20 ‘‘(d) MEDICAL SAVINGS ACCOUNT.—For purposes of

21 this section:

22 ‘‘(1) MEDICAL SAVINGS ACCOUNT DEFINED.—

23 ‘‘(A) IN GENERAL.—The term ‘medical

24 savings account’ means a trust created or orga25 nized in the United States exclusively for the
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1 purpose of paying the medical expenses of the

2 beneficiaries of such trust, but only if the writ3 ten governing instrument creating the trust

4 meets the following requirements:

5 ‘‘(i) Except in the case of a rollover

6 contribution described in subsection (e)(5),

7 no contribution will be accepted unless it is

8 in cash, and contributions will not be ac9 cepted in excess of the amount allowed as

10 a deduction under this section for the tax11 able year.

12 ‘‘(ii) The trustee is a bank (as defined

13 in section 408(n)) or another person who

14 demonstrates to the satisfaction of the Sec15 retary that the manner in which such per16 son will administer the trust will be con17 sistent with the requirements of this

18 section.

19 ‘‘(iii) No part of the trust assets will

20 be invested in life insurance contracts.

21 ‘‘(iv) The assets of the trust will not

22 be commingled with other property except

23 in a common trust fund or common invest24 ment fund.
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1 ‘‘(v) The interest of an individual in

2 the balance in his account is nonforfeit3 able.

4 ‘‘(vi) Under regulations prescribed by

5 the Secretary, rules similar to the rules of

6 section 401(a)(9) shall apply to the dis7 tribution of the entire interest of bene8 ficiaries of such trust.

9 ‘‘(B) TREATMENT OF COMPARABLE AC10 COUNTS HELD BY INSURANCE COMPANIES.—

11 For purposes of this section, an account held by

12 an insurance company in the United States

13 shall be treated as a medical savings account

14 (and such company shall be treated as a bank)

15 if—

16 ‘‘(i) such account is part of a health

17 insurance plan that includes a catastrophic

18 health insurance plan (as defined in sub19 section (c)(2)),

20 ‘‘(ii) such account is exclusively for

21 the purpose of paying the medical expenses

22 of the beneficiaries of such account who

23 are covered under such catastrophic health

24 insurance plan, and
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1 ‘‘(iii) the written instrument govern2 ing the account meets the requirements of

3 clauses (i), (v), and (vi) of subparagraph

4 (A).

5 ‘‘(2) MEDICAL EXPENSES.—

6 ‘‘(A) IN GENERAL.—The term ‘medical ex7 penses’ means, with respect to an individual,

8 amounts paid or incurred by such individual for

9 medical care for such individual, the spouse of

10 such individual, and any dependent (as defined

11 in section 152) of such individual, but only to

12 the extent such amounts—

13 ‘‘(i) are not compensated for by insur14 ance or otherwise, and

15 ‘‘(ii) are counted towards a deductible

16 under the terms of such individual’s cata17 strophic health insurance plan.

18 ‘‘(B) HEALTH PLAN COVERAGE MAY NOT

19 BE PURCHASED FROM ACCOUNT.—Such term

20 shall not include any amount paid for coverage

21 under a health plan.

22 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

23 MADE.—A contribution shall be deemed to be made

24 on the last day of the preceding taxable year if the

25 contribution is made on account of such taxable year
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1 and is made not later than the time prescribed by

2 law for filing the return for such taxable year (not

3 including extensions thereof).

4 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graphs (2), (3), and (5), any amount paid or distrib7 uted out of a medical savings account shall be in8 cluded in the gross income of the individual for

9 whose benefit such account was established.

10 ‘‘(2) EXCEPTION FOR MEDICAL AND LONG

11 TERM CARE EXPENSES.—

12 ‘‘(A) IN GENERAL.—Paragraph (1) shall

13 not apply if such amount paid or distributed is

14 used exclusively to pay—

15 ‘‘(i) the medical expenses of such indi16 vidual, or

17 ‘‘(ii) except as provided in subpara18 graph (B), the expenses for long term care

19 services of the type identified in section

20 1931(e)(3) of the Social Security Act for

21 the individual.

22 ‘‘(B) NONQUALIFIED PAYMENTS OR DIS23 TRIBUTIONS FOR LONG TERM EXPENSES.—

24 Paragraph (1) shall apply to any portion of a

25 payment or distribution for expenses for long
26

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1 term care services equal to the amount by

2 which, after such payment or distribution—

3 ‘‘(i) the amount of the deductible

4 under the catastrophic health insurance

5 plan covering the individual, exceeds

6 ‘‘(ii) the aggregate balance of all med7 ical savings accounts established for the

8 benefit of the individual.

9 For purposes of this paragraph, any payment or dis10 tribution for medical expenses shall be considered to

11 have been made before any other payment or dis12 tribution.

13 ‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE14 FORE DUE DATE OF RETURN.—Paragraph (1) shall

15 not apply to the distribution of any contribution paid

16 during a taxable year to a medical savings account

17 to the extent that such contribution exceeds the

18 amount allowable as a deduction under subsection

19 (a) if—

20 ‘‘(A) such distribution is received by the

21 individual on or before the last day prescribed

22 by law (including extensions of time) for filing

23 such individual’s return for such taxable year,

24 and
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1 ‘‘(B) such distribution is accompanied by

2 the amount of net income attributable to such

3 excess contribution.

4 Any net income described in subparagraph (B) shall

5 be included in the gross income of the individual for

6 the taxable year in which it is received.

7 ‘‘(4) PENALTY FOR DISTRIBUTIONS NOT USED

8 FOR MEDICAL EXPENSES WHICH LEAVE AN AMOUNT

9 LESS THAN THE CATASTROPHIC DEDUCTIBLE IN

10 THE ACCOUNT.—

11 ‘‘(A) IN GENERAL.—The tax imposed by

12 this chapter for any taxable year in which there

13 is a payment or distribution from a medical

14 savings account which is includible in gross in15 come under paragraph (1) shall be increased by

16 10 percent with respect to the penalty portion

17 of such payment or distribution.

18 ‘‘(B) PENALTY PORTION.—For purposes of

19 subparagraph (A), the penalty portion of any

20 payment or distribution is equal to the amount

21 by which, after such payment or distribution—

22 ‘‘(i) the amount of the deductible

23 under the catastrophic health insurance

24 plan covering the individual, exceeds
28

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1 ‘‘(ii) the aggregate balance of all med2 ical savings accounts established for the

3 benefit of the individual.

4 For purposes of this paragraph, any payment or dis5 tribution for medical expenses shall be considered to

6 have been made before any other payment or dis7 tribution.

8 ‘‘(5) ROLLOVERS.—Paragraph (1) shall not

9 apply to any amount paid or distributed out of a

10 medical savings account to the individual for whose

11 benefit the account is maintained if the entire

12 amount received (including money and any other

13 property) is paid into another medical savings ac14 count for the benefit of such individual not later

15 than the 60th day after the day on which he received

16 the payment or distribution.

17 ‘‘(f) TAX TREATMENT OF ACCOUNTS.—

18 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav19 ings account is exempt from taxation under this sub20 title unless such account has ceased to be a medical

21 savings account by reason of paragraph (2) or (3).

22 Notwithstanding the preceding sentence, any such

23 account shall be subject to the taxes imposed by sec24 tion 511 (relating to imposition of tax on unrelated

25 business income of charitable, etc. organizations).
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1 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN2 GAGES IN PROHIBITED TRANSACTION.—

3 ‘‘(A) IN GENERAL.—If, during any taxable

4 year of the individual for whose benefit the

5 medical savings account was established, such

6 individual engages in any transaction prohibited

7 by section 4975 with respect to the account, the

8 account ceases to be a medical savings account

9 as of the first day of that taxable year.

10 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

11 ALL ITS ASSETS.—In any case in which any ac12 count ceases to be a medical savings account by

13 reason of subparagraph (A) on the first day of

14 any taxable year, paragraph (1) of subsection

15 (e) shall be applied as if there were a distribu16 tion on such first day in an amount equal to

17 the fair market value (on such first day) of all

18 assets in the account (on such first day) and no

19 portion of such distribution were used to pay

20 medical expenses.

21 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU22 RITY.—If, during any taxable year, the individual for

23 whose benefit a medical savings account was estab24 lished uses the account or any portion thereof as se25 curity for a loan, the portion so used is treated as
30

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1 distributed to that individual and not used to pay

2 medical expenses.

3 ‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this

4 section, a custodial account shall be treated as a trust if—

5 ‘‘(1) the assets of such account are held by a

6 bank (as defined in section 408(n)) or another per7 son who demonstrates to the satisfaction of the Sec8 retary that the manner in which he will administer

9 the account will be consistent with the requirements

10 of this section, and

11 ‘‘(2) the custodial account would, except for the

12 fact that it is not a trust, constitute a medical sav13 ings account described in subsection (d).

14 For purposes of this title, in the case of a custodial ac15 count treated as a trust by reason of the preceding sen16 tence, the custodian of such account shall be treated as

17 the trustee thereof.

18 ‘‘(h) REPORTS.—The trustee of a medical savings ac19 count shall make such reports regarding such account to

20 the Secretary and to the individual for whose benefit the

21 account is maintained with respect to contributions, dis22 tributions, and such other matters as the Secretary may

23 require under regulations. The reports required by this

24 subsection shall be filed at such time and in such manner
31

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1 and furnished to such individuals at such time and in such

2 manner as may be required by those regulations.’’

3 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI4 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

5 of section 62 of the Internal Revenue Code of 1986 (defin6 ing adjusted gross income), as amended by section 211,

7 is amended by inserting after paragraph (16) the following

8 new paragraph:

9 ‘‘(17) MEDICAL SAVINGS ACCOUNTS.—The de10 duction allowed by section 220.’’

11 (c) DISTRIBUTIONS FROM MEDICAL SAVINGS AC12 COUNTS NOT ALLOWED AS MEDICAL EXPENSE DEDUC13 TION.—Section 213 of the Internal Revenue Code of 1986

14 (relating to medical, dental, etc., expenses) is amended by

15 adding at the end the following new subsection:

16 ‘‘(g) COORDINATION WITH MEDICAL SAVINGS AC17 COUNTS.—The amount otherwise taken into account

18 under subsection (a) as expenses paid for medical care

19 shall be reduced by the amount (if any) of the distribu20 tions from any medical savings account of the taxpayer

21 during the taxable year which is not includible in gross

22 income by reason of being used for medical care.’’

23 (d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO

24 MEDICAL SAVINGS ACCOUNTS FROM EMPLOYMENT

25 TAXES.—
32

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1 (1) SOCIAL SECURITY TAXES.—

2 (A) Subsection (a) of section 3121 of the

3 Internal Revenue Code of 1986 (defining

4 wages) is amended by striking ‘‘or’’ at the end

5 of paragraph (20), by striking the period at the

6 end of paragraph (21) and inserting ‘‘; or’’, and

7 by inserting after paragraph (21) the following

8 new paragraph:

9 ‘‘(22) remuneration paid to or on behalf of an

10 employee if (and to the extent that) at the time of

11 payment of such remuneration it is reasonable to be12 lieve that a corresponding deduction is allowable

13 under section 220.’’

14 (B) Subsection (a) of section 209 of the

15 Social Security Act is amended by striking ‘‘or’’

16 at the end of paragraph (17), by striking the

17 period at the end of paragraph (18) and insert18 ing ‘‘; or’’, and by inserting after paragraph

19 (18) the following new paragraph:

20 ‘‘(19) remuneration paid to or on behalf of an

21 employee if (and to the extent that) at the time of

22 payment of such remuneration it is reasonable to be23 lieve that a corresponding deduction is allowable

24 under section 220 of the Internal Revenue Code of

25 1986.’’
33

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1 (2) RAILROAD RETIREMENT TAX.—Subsection

2 (e) of section 3231 of such Code (defining com3 pensation) is amended by adding at the end the fol4 lowing new paragraph:

5 ‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL

6 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

7 not include any payment made to or on behalf of an

8 employee if (and to the extent that) at the time of

9 payment of such remuneration it is reasonable to be10 lieve that a corresponding deduction is allowable

11 under section 220.’’

12 (3) UNEMPLOYMENT TAX.—Subsection (b) of

13 section 3306 of such Code (defining wages) is

14 amended by striking ‘‘or’’ at the end of paragraph

15 (15), by striking the period at the end of paragraph

16 (16) and inserting ‘‘; or’’, and by inserting after

17 paragraph (16) the following new paragraph:

18 ‘‘(17) remuneration paid to or on behalf of an

19 employee if (and to the extent that) at the time of

20 payment of such remuneration it is reasonable to be21 lieve that a corresponding deduction is allowable

22 under section 220.’’

23 (4) WITHHOLDING TAX.—Subsection (a) of sec24 tion 3401 of such Code (defining wages) is amended

25 by striking ‘‘or’’ at the end of paragraph (19), by
34

•S 1807 IS

1 striking the period at the end of paragraph (20) and

2 inserting ‘‘; or’’, and by inserting after paragraph

3 (20) the following new paragraph:

4 ‘‘(21) remuneration paid to or on behalf of an

5 employee if (and to the extent that) at the time of

6 payment of such remuneration it is reasonable to be7 lieve that a corresponding deduction is allowable

8 under section 220.’’

9 (e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

10 of the Internal Revenue Code of 1986 (relating to tax on

11 excess contributions to individual retirement accounts, cer12 tain section 403(b) contracts, and certain individual re13 tirement annuities) is amended—

14 (1) by inserting ‘‘MEDICAL SAVINGS AC15 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

16 such section,

17 (2) by redesignating paragraph (2) of sub18 section (a) as paragraph (3) and by inserting after

19 paragraph (1) the following:

20 ‘‘(2) a medical savings account (within the

21 meaning of section 220(d)),’’,

22 (3) by striking ‘‘or’’ at the end of paragraph

23 (1) of subsection (a), and

24 (4) by adding at the end the following new sub25 section:
35

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1 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

2 ACCOUNTS.—For purposes of this section, in the case of

3 a medical savings account (within the meaning of section

4 220(d)), the term ‘excess contributions’ means the amount

5 by which the amount contributed for the taxable year to

6 the account exceeds the amount excludable from gross in7 come under section 220 for such taxable year. For pur8 poses of this subsection, any contribution which is distrib9 uted out of the medical savings account in a distribution

10 to which section 220(e)(3) applies shall be treated as an

11 amount not contributed.’’

12 (f) TAX ON PROHIBITED TRANSACTIONS.—Section

13 4975 of the Internal Revenue Code of 1986 (relating to

14 prohibited transactions) is amended—

15 (1) by adding at the end of subsection (c) the

16 following new paragraph:

17 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC18 COUNTS.—An individual for whose benefit a medical

19 savings account (within the meaning of section

20 220(d)) is established shall be exempt from the tax

21 imposed by this section with respect to any trans22 action concerning such account (which would other23 wise be taxable under this section) if, with respect

24 to such transaction, the account ceases to be a medi-
36

•S 1807 IS

1 cal savings account by reason of the application of

2 section 220(f)(2)(A) to such account.’’, and

3 (2) by inserting ‘‘or a medical savings account

4 described in section 220(d)’’ in subsection (e)(1)

5 after ‘‘described in section 408(a)’’.

6 (g) FAILURE TO PROVIDE REPORTS ON MEDICAL

7 SAVINGS ACCOUNTS.—Section 6693 of the Internal Reve8 nue Code of 1986 (relating to failure to provide reports

9 on individual retirement account or annuities) is amend10 ed—

11 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

12 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

13 such section, and

14 (2) by adding at the end of subsection (a) the

15 following: ‘‘The person required by section 220(h) to

16 file a report regarding a medical savings account at

17 the time and in the manner required by such section

18 shall pay a penalty of $50 for each failure unless it

19 is shown that such failure is due to reasonable

20 cause.’’

21 (h) CLERICAL AMENDMENTS.—

22 (1) The table of sections for part VII of sub23 chapter B of chapter 1 of the Internal Revenue Code

24 of 1986 is amended by striking the last item and in25 serting the following:

‘‘Sec. 220. Medical savings accounts.
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‘‘Sec. 221. Cross reference.’’

1 (2) The table of sections for chapter 43 of such

2 Code is amended by striking the item relating to sec3 tion 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

4 (3) The table of sections for subchapter B of

5 chapter 68 of such Code is amended by inserting ‘‘or

6 on medical savings accounts’’ after ‘‘annuities’’ in

7 the item relating to section 6693.

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

9 this section shall apply to taxable years beginning after

10 the date of the enactment of this Act.

11 TITLE III—EQUAL TAX TREAT12 MENT FOR HEALTH INSUR13 ANCE OF SELF-EMPLOYED

14 AND UNINSURED.

15 SEC. 301. EQUAL EXCLUSION FROM GROSS INCOME OF

16 HEALTH INSURANCE COVERAGE COSTS.

17 (a) IN GENERAL.—Part III of subchapter B of chap18 ter 1 of the Internal Revenue Code of 1986 (relating to

19 items specifically excluded from gross income) is amended

20 by inserting after section 106 the following new section:
38

•S 1807 IS

1 ‘‘SEC. 106A. CERTAIN HEALTH INSURANCE COVERAGE

2 COSTS.

3 ‘‘(a) IN GENERAL.—Gross income does not include

4 the applicable percentage of so much of—

5 ‘‘(1) the amounts paid by the taxpayer for cov6 erage under a health insurance plan (as defined in

7 section 1(3) of the Comprehensive Family Health

8 Access and Savings Act), plus

9 ‘‘(2) the contributions made by such taxpayer

10 to a medical savings account under section 220,

11 during the taxable year as do not exceed the national per

12 employee average of employer-provided contributions ex13 cluded under section 106 for the preceding taxable year.

14 ‘‘(b) EXCLUSION NOT ALLOWED TO INDIVIDUALS

15 ELIGIBLE FOR EMPLOYER-SUBSIDIZED COVERAGE.—

16 ‘‘(1) IN GENERAL.—Subsection (a) shall not

17 apply to any individual—

18 ‘‘(A) who is eligible to participate in any

19 subsidized health plan maintained by an em20 ployer of such individual or the spouse of such

21 individual, or

22 ‘‘(B) who is (or whose spouse is) a member

23 of a subsidized class of employees of an em24 ployer.

25 ‘‘(2) SUBSIDIZED CLASS.—For purposes of

26 paragraph (1), an individual is a member of a sub-
39

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1 sidized class of employees of an employer if, at any

2 time during the 3 calendar years ending with or

3 within the taxable year, any member of such class

4 was eligible to participate in any subsidized health

5 plan maintained by such employer.

6 ‘‘(3) SPECIAL RULES.—

7 ‘‘(A) CONTROLLED GROUPS.—All persons

8 treated as a single employer under subsection

9 (a) or (b) of section 52 or subsection (m) or (o)

10 of section 414 shall be treated as a single em11 ployer for purposes of paragraph (2).

12 ‘‘(B) CLASSES.—Classes of employees shall

13 be determined under regulations prescribed by

14 the Secretary based on such factors as the Sec15 retary determines appropriate to carry out the

16 purposes of this subsection.

17 ‘‘(c) APPLICABLE PERCENTAGE.—

18 ‘‘(1) IN GENERAL.—For purposes of subsection

19 (a), the term ‘applicable percentage’ means—

20 ‘‘(A) 33 percent for any taxable year be21 ginning in 1996 or, if later, the alternate year,

22 ‘‘(B) 46 percent for any taxable year be23 ginning in 1997 or, if later, the alternate year,

24 ‘‘(C) 60 percent for any taxable year be25 ginning in 1998 or, if later, the alternate year,
40

•S 1807 IS

1 ‘‘(D) 73 percent for any taxable year be2 ginning in 1999 or, if later, the alternate year,

3 ‘‘(E) 86 percent for any taxable year be4 ginning in 2000 or, if later, the alternate year,

5 and

6 ‘‘(F) 100 percent for taxable years begin7 ning with 2001 or, if later, the alternate year.

8 ‘‘(2) ALTERNATE YEAR.—For purposes of para9 graph (1), the term ‘alternate year’ means any tax10 able year other than the taxable year described the

11 applicable subparagraph of paragraph (1) as deter12 mined under section 1302 of the Comprehensive

13 Family Health Access and Savings Act.

14 ‘‘(d) COORDINATION WITH DEDUCTIONS.—No

15 amount excluded from the gross income of the taxpayer

16 for any taxable year under this section shall be taken into

17 account for purposes of determining the allowable deduc18 tion for such year under sections 162(l), 213, and 220.

19 ‘‘(e) COORDINATION WITH HEALTH CARE EXPENSES

20 CREDIT.—The amount otherwise taken into account

21 under subsection (a) as expenses paid for medical care

22 shall be reduced by the amount (if any) of the amount

23 taken into account under section 34A for the taxable

24 year.’’
41

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1 (b) EXCLUSION OF CERTAIN HEALTH INSURANCE

2 COVERAGE COSTS FROM EMPLOYMENT TAXES.—

3 (1) SOCIAL SECURITY TAXES.—

4 (A) Subsection (a) of section 3121 of the

5 Internal Revenue Code of 1986 (defining

6 wages), as amended by section 212(d), is

7 amended by striking ‘‘or’’ at the end of para8 graph (21), by striking the period at the end of

9 paragraph (22) and inserting ‘‘; or’’, and by in10 serting after paragraph (22) the following new

11 paragraph:

12 ‘‘(23) remuneration paid to or on behalf of an

13 employee if (and to the extent that) at the time of

14 payment of such remuneration it is reasonable to be15 lieve that a corresponding exclusion is allowable

16 under section 106A.’’

17 (B) Subsection (a) of section 209 of the

18 Social Security Act, as amended by section

19 212(d), is amended by striking ‘‘or’’ at the end

20 of paragraph (18), by striking the period at the

21 end of paragraph (19) and inserting ‘‘; or’’, and

22 by inserting after paragraph (19) the following

23 new paragraph:

24 ‘‘(20) remuneration paid to or on behalf of an

25 employee if (and to the extent that) at the time of
42

•S 1807 IS

1 payment of such remuneration it is reasonable to be2 lieve that a corresponding exclusion is allowable

3 under section 106A of the Internal Revenue Code of

4 1986.’’

5 (2) RAILROAD RETIREMENT TAX.—Subsection

6 (e) of section 3231 of such Code (defining com7 pensation), as amended by section 212(d), is amend8 ed by adding at the end the following new para9 graph:

10 ‘‘(11) EMPLOYER CONTRIBUTIONS TO MEDICAL

11 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

12 not include any payment made to or on behalf of an

13 employee if (and to the extent that) at the time of

14 payment of such remuneration it is reasonable to be15 lieve that a corresponding exclusion is allowable

16 under section 106A.’’

17 (3) UNEMPLOYMENT TAX.—Subsection (b) of

18 section 3306 of such Code (defining wages), as

19 amended by section 212(d), is amended by striking

20 ‘‘or’’ at the end of paragraph (16), by striking the

21 period at the end of paragraph (17) and inserting ‘‘;

22 or’’, and by inserting after paragraph (17) the fol23 lowing new paragraph:

24 ‘‘(18) remuneration paid to or on behalf of an

25 employee if (and to the extent that) at the time of
43

•S 1807 IS

1 payment of such remuneration it is reasonable to be2 lieve that a corresponding exclusion is allowable

3 under section 106A.’’

4 (4) WITHHOLDING TAX.—Subsection (a) of sec5 tion 3401 of such Code (defining wages), as amend6 ed by section 212(d), is amended by striking ‘‘or’’ at

7 the end of paragraph (20), by striking the period at

8 the end of paragraph (21) and inserting ‘‘; or’’, and

9 by inserting after paragraph (21) the following new

10 paragraph:

11 ‘‘(22) remuneration paid to or on behalf of an

12 employee if (and to the extent that) at the time of

13 payment of such remuneration it is reasonable to be14 lieve that a corresponding exclusion is allowable

15 under section 106A.’’

16 (c) CLERICAL AMENDMENT.—The table of sections

17 for part III of subchapter B of chapter 1 of the Internal

18 Revenue Code of 1986 is amended by inserting after the

19 item relating to section 106 the following:

‘‘Sec. 106A. Certain health insurance coverage costs.’’

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 the date of the enactment of this Act.
44

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1 TITLE IV—SMALL BUSINESS

2 HEALTH INSURANCE POOLS

3 SEC. 401. PROHIBITION OF RESTRICTIONS ON GROUPS

4 PURCHASING HEALTH INSURANCE.

5 (a) IN GENERAL.—No provision of State or local law

6 shall apply that prohibits 2 or more employers or groups

7 from obtaining coverage under a multiple employer health

8 plan.

9 (b) MULTIPLE EMPLOYER HEALTH PLAN.—For pur10 poses of subsection (a), the term ‘‘multiple employer

11 health plan’’ means a multiple employer welfare arrange12 ment (as defined in section 3(40) of the Employee Retire13 ment Income Security Act of 1974).

14 SEC. 402. PROHIBITION OF STATE BENEFIT MANDATES FOR

15 GROUP HEALTH PLANS.

16 In the case of a group health plan, no provision of

17 State or local law shall apply that requires the coverage

18 of 1 or more specific benefits, services, or categories of

19 health care, or services of any class or type of provider

20 of health care.

21 SEC. 403. PROHIBITION OF RESTRICTIONS ON MANAGED

22 CARE.

23 (a) PREEMPTION OF STATE LAW PROVISIONS.—Sub24 ject to subsection (c), the following provisions of State law

25 are preempted and may not be enforced:
45

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1 (1) RESTRICTIONS ON REIMBURSEMENT RATES

2 OR SELECTIVE CONTRACTING.—Any law that re3 stricts the ability of a group health plan to negotiate

4 reimbursement rates with providers or to contract

5 selectively with 1 provider or a limited number of

6 providers.

7 (2) RESTRICTIONS ON DIFFERENTIAL FINAN8 CIAL INCENTIVES.—Any law that limits the financial

9 incentives that a group health plan may require a

10 beneficiary to pay when a non-plan provider is used

11 on a non-emergency basis.

12 (3) RESTRICTIONS ON UTILIZATION REVIEW

13 METHODS.—Any law that—

14 (A) prohibits utilization review of any or

15 all treatments and conditions,

16 (B) requires that such review be made (i)

17 by a resident of the State in which the treat18 ment is to be offered or by an individual li19 censed in such State, or (ii) by a physician in

20 any particular specialty or with any board cer21 tified specialty of the same medical specialty as

22 the provider whose services are being reviewed,

23 (C) requires the use of specified standards

24 of health care practice in such reviews or re-
46

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1 quires the disclosure of the specific criteria used

2 in such reviews,

3 (D) requires payments to providers for the

4 expenses of responding to utilization review re5 quests, or

6 (E) imposes liability for delays in perform7 ing such review.

8 Nothing in subparagraph (B) shall be construed as

9 prohibiting a State from (i) requiring a licensed phy10 sician or other health care professional be available

11 at some time in the review or appeal process, or (ii)

12 requiring that any decision in an appeal from such

13 a review be made by a licensed physician.

14 (b) GAO STUDY.—

15 (1) IN GENERAL.—The Comptroller General of

16 the United States shall conduct a study of the regu17 latory and legal impediments at the Federal, State,

18 and local levels of government that restrict the abil19 ity of small businesses and other organizations to

20 group together voluntarily to allow their employees

21 or members to pool their health insurance purchases.

22 (2) REPORT.—By not later than 2 years after

23 the date of the enactment of this Act, the Comptrol24 ler General shall submit a report to Congress on the

25 study conducted under paragraph (1) and shall in-
47

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1 clude in the report such recommendations (including

2 whether the provisions of subsection (a) should be

3 extended) as may be appropriate.

4 (c) SUNSET.—Unless otherwise provided, subsection

5 (a) shall not apply 5 years after the date of the enactment

6 of this Act.

7 TITLE V—ASSISTANCE TO INDI8 VIDUALS WITH PREEXISTING

9 CONDITIONS IN PURCHASING

10 HEALTH INSURANCE

11 SEC. 501. PREEXISTING CONDITION INSURANCE POOL AL12 LOTMENT PROGRAM.

13 (a) DEFINITIONS.—As used in this section:

14 (1) CATASTROPHIC HEALTH INSURANCE

15 PLAN.—The term ‘‘catastrophic health insurance

16 plan’’ has the meaning given such term by section

17 220(c)(2) of the Internal Revenue Code of 1986 (de18 termined without regard to subparagraph (B)(i)).

19 (2) PREEXISTING CONDITION.—The term ‘‘pre20 existing condition’’ means, with respect to coverage

21 under a health insurance plan, a condition that has

22 been diagnosed or treated during the 6-month period

23 ending on the day before the first date of such cov24 erage (without regard to any waiting period).
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1 (3) PROGRAM ADMINISTRATOR.—The term

2 ‘‘program administrator’’ means the entity respon3 sible for the administration of the program estab4 lished under subsection (e)(2).

5 (b) ESTABLISHMENT.—The Secretary shall establish

6 and administer a program to provide allotments to States

7 to enable such States to operate State-wide insurance risk

8 pools to provide health insurance coverage to individuals

9 with preexisting conditions.

10 (c) ALLOTMENTS TO STATES.—The Secretary shall

11 allot to a State under this section for each fiscal year an

12 amount equal to the State expected loss amount for such

13 fiscal year as determined under subsection (e)(3)(B)(v).

14 (d) APPLICATION.—To be eligible to receive an allot15 ment for a fiscal year under this section, a State shall

16 prepare and submit an application to the Secretary at

17 such time, in such manner, and containing such informa18 tion as the Secretary may by rule require. Such applica19 tion shall include an assurance by the State that all ad20 ministrative costs of the insurance pool program shall be

21 borne by the State from resources other than such allot22 ment.

23 (e) STATE PROGRAM.—

24 (1) USE OF FUNDS.—The State shall use

25 amounts received under this section to provide pre-
49

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1 mium assistance under the program established

2 under paragraph (2).

3 (2) ESTABLISHMENT.—The State shall estab4 lish an insurance pool program to provide premium

5 assistance to an individual who has a preexisting

6 condition and who is otherwise unable to purchase

7 coverage under an affordable health insurance pol8 icy, to enable such individual to obtain such cov9 erage.

10 (3) BID PROCESS.—

11 (A) IN GENERAL.—With respect to a pro12 gram established under paragraph (2), the

13 State shall, for each fiscal year, accept bids

14 from private insurance carriers that desire to

15 administer the program and provide cata16 strophic health insurance plans to individuals

17 with preexisting conditions under the program.

18 The State may accept such a bid or, after de19 termining that no such bids are acceptable, ad20 minister the program itself.

21 (B) CONSIDERATION OF BIDS.—In consid22 ering bids submitted under subparagraph (A),

23 the State, in consultation with private insurance

24 carriers, shall compile a profile of individuals
50

•S 1807 IS

1 with preexisting conditions. Such profile shall

2 consider—

3 (i) the number of individuals who may

4 be eligible for premium assistance under

5 the State program for the fiscal year in6 volved;

7 (ii) the estimated cost of providing

8 medical services for the eligible individuals

9 for the fiscal year involved;

10 (iii) the estimated amount of pre11 miums to be paid by such eligible individ12 uals for the fiscal year involved;

13 (iv) the estimated amount by which

14 the medical service costs will exceed the

15 premiums received for the fiscal year in16 volved;

17 (v) the estimated amount of Federal

18 assistance needed under this section to

19 cover the losses estimated under clause

20 (iv); and

21 (vi) any other information determined

22 appropriate by the State.

23 (4) PROVISION OF PREMIUM ASSISTANCE.—

24 (A) ELIGIBILITY.—To be eligible to receive

25 premium assistance under a State program
51

•S 1807 IS

1 under this section, an individual shall be deter2 mined by the program administrator—

3 (i) to have a preexisting condition;

4 (ii) to be charged under a catastrophic

5 health insurance plan, a premium which

6 exceeds 150 percent of the average pre7 mium paid for catastrophic health insur8 ance plans (considering residence, age and

9 gender);

10 (iii) not to have any avoidable health

11 conditions, including medical conditions re12 lated to smoking, alcohol abuse, drug

13 abuse, and other activities harmful to

14 health, which are the sole reason for the

15 excess described in clause (ii); and

16 (iv) not to be described in section 601.

17 (B) AMOUNT.—An individual determined

18 to be eligible under subparagraph (A) shall re19 ceive premium assistance under this section in

20 an amount that equals the amount by which the

21 premium paid by such individual for a cata22 strophic health insurance plan exceeds the

23 greater of—

24 (i) 150 percent of the average pre25 mium paid for catastrophic health insur-
52

•S 1807 IS

1 ance plans (considering residence, age and

2 gender), or

3 (ii) 7.5 percent of the individual or

4 family adjusted gross income of the indi5 vidual,

6 but only to the extent such excess is not attrib7 utable to any avoidable health conditions, in8 cluding medical conditions related to smoking,

9 alcohol abuse, drug abuse, and other activities

10 harmful to health.

11 (f) PAYMENTS.—

12 (1) IN GENERAL.—The Secretary shall pay to

13 each State for which an application has been ap14 proved under this section for each fiscal year an

15 amount not to exceed its allotment under subsection

16 (c) to be expended by the State in accordance with

17 the terms of the application for the fiscal year for

18 which the allotment is to be made.

19 (2) METHOD OF PAYMENTS.—The Secretary

20 may make payments to a State in installments, and

21 in advance or, by way of reimbursement, with nec22 essary adjustments due to overpayments or under23 payments, as the Secretary may determine appro24 priate.
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•S 1807 IS

1 (3) STATE SPENDING OF PAYMENTS.—Pay2 ments to a State from the allotment under sub3 section (c) for any fiscal year must be expended by

4 the State in that fiscal year or in the succeeding fis5 cal year.

6 (g) AUTHORIZATION OF APPROPRIATIONS.—There

7 are authorized to be appropriated such sums as may be

8 necessary to carry out this section.

9 (h) EFFECTIVE DATE.—

10 (1) IN GENERAL.—The provisions of this title

11 shall apply with respect to payments made to indi12 viduals in calendar years beginning with 1996 or, if

13 later, with the alternate year.

14 (2) ALTERNATE YEAR.—For purposes of para15 graph (1), the term ‘‘alternate year’’ means any cal16 endar year other than 1996 as determined under

17 section 1302 of the Comprehensive Family Health

18 Access and Savings Act.

19 TITLE VI—ENCOURAGE RESPON20 SIBLE BEHAVIOR BY THE FI21 NANCIALLY CAPABLE

22 SEC. 601. ONE YEAR WINDOW TO PURCHASE HEALTH IN23 SURANCE COVERAGE.

24 Any individual with family income exceeding 200 per25 cent of the income official poverty line (as determined
54

•S 1807 IS

1 under section 34A of the Internal Revenue Code of 1986),

2 or who is eligible for a partial or full credit to purchase

3 a catastrophic health insurance plan under such section,

4 but who fails to purchase coverage under a health insur5 ance plan providing coverage at least equal to such a cata6 strophic health insurance plan within 1 year of the date

7 of the enactment of this Act, shall not be eligible for the

8 insurance pool program under title V of this Act.

9 SEC. 602. PROHIBITION OF RESTRICTIONS RELATING TO

10 THE USE OF COLLECTION PROCEDURES.

11 No provision of Federal, State, or local law shall

12 apply that prohibits the use of any statutory procedure

13 for the collection of unpaid debts for medical expenses in14 curred by individuals described in section 601.

15 TITLE VII—ASSISTANCE TO LOW16 INCOME WORKERS TO PUR17 CHASE HEALTH CARE INSUR18 ANCE

19 SEC. 701. REFUNDABLE CATASTROPHIC HEALTH INSUR20 ANCE PLAN CREDIT.

21 (a) IN GENERAL.—Subpart C of part IV of sub22 chapter A of chapter 1 of the Internal Revenue Code of

23 1986 (relating to refundable personal credits) is amended

24 by inserting after section 34 the following new section:
55

•S 1807 IS

1 ‘‘SEC. 34A. CATASTROPHIC HEALTH INSURANCE PLAN PRE2 MIUMS.

3 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

4 qualified individual, there shall be allowed as a credit

5 against the tax imposed by this subtitle for the taxable

6 year an amount equal to the applicable percentage of the

7 premiums for a catastrophic health insurance plan paid

8 by such individual during the taxable year.

9 ‘‘(b) QUALIFIED INDIVIDUALS.—For purposes of this

10 section:

11 ‘‘(1) IN GENERAL.—The term ‘qualified individ12 ual’ means the taxpayer, the spouse of the taxpayer,

13 and each dependent of the taxpayer (as defined in

14 section 152) who is enrolled in a catastrophic health

15 insurance plan.

16 ‘‘(2) FEDERALLY COVERED INDIVIDUALS.—The

17 term ‘qualified individual’ does not include any indi18 vidual whose medical care is covered under titles

19 XIX and XVIII of the Social Security Act.

20 ‘‘(3) SPECIAL RULE IN THE CASE OF CHILD OF

21 DIVORCED PARENTS, ETC.—Any child to whom sec22 tion 152(e) applies shall be treated as a dependent

23 of both parents.

24 ‘‘(4) MARRIAGE RULES.—The determination of

25 whether an individual is married at any time during

26 the taxable year shall be made in accordance with
56

•S 1807 IS

1 the provisions of section 6013(d) (relating to deter2 mination of status as husband and wife).

3 ‘‘(c) APPLICABLE PERCENTAGE.—For purposes of

4 subsection (a), the applicable percentage for any taxable

5 year is 100 percent reduced (but not below zero percent)

6 by 1 percentage point for each 1 percentage point (or por7 tion thereof) the qualified individual’s family income ex8 ceeds 100 percent of the income official poverty line (as

9 defined by the Office of Management and Budget, and re10 vised annually in accordance with section 673(2) of the

11 Omnibus Budget Reconciliation Act of 1981) applicable

12 to a family of the size involved.

13 ‘‘(d) CATASTROPHIC HEALTH INSURANCE PLAN.—

14 For purposes of this section, the term ‘catastrophic health

15 insurance plan’ means a health plan covering specified ex16 penses incurred by an individual for medical care (as de17 fined in section 220(c)(2)(B)(ii)) for such individual and

18 the spouse and dependents (as so defined) of such individ19 ual only to the extent such expenses covered by the plan

20 for any calendar year exceed the greater of—

21 ‘‘(1) 20 percent of the adjusted gross income of

22 such individual for such year, or

23 ‘‘(2) $3,000.

24 ‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.—

25 For purposes of this section:
57

•S 1807 IS

1 ‘‘(1) DETERMINATIONS OF INCOME.—

2 ‘‘(A) IN GENERAL.—The term ‘income’

3 means adjusted gross income (as defined in sec4 tion 62(a))—

5 ‘‘(i) determined without regard to sec6 tions 135, 162(l), 911, 931, and 933; and

7 ‘‘(ii) increased by—

8 ‘‘(I) the amount of interest re9 ceived or accrued which is exempt

10 from tax, plus

11 ‘‘(II) the amount of social secu12 rity benefits (described in section

13 86(d)) which is not includible in gross

14 income under section 86.

15 ‘‘(B) FAMILY INCOME.—The term ‘family

16 income’ means, with respect to a family, the

17 sum of the income for all members of the fam18 ily, not including the income of a dependent

19 child with respect to which no return is re20 quired.

21 ‘‘(C) FAMILY SIZE.—The family size to be

22 applied under this section, with respect to fam23 ily income, is the number of individuals in24 cluded in the family for purposes of coverage

25 under a catastrophic health insurance plan.
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•S 1807 IS

1 ‘‘(2) COORDINATION WITH ADVANCE PAYMENT

2 AND MINIMUM TAX.—Rules similar to the rules of

3 subsections (g) and (h) of section 32 shall apply to

4 any credit to which this section applies.

5 ‘‘(f) REGULATIONS.—The Secretary shall prescribe

6 such regulations as may be necessary to carry out the pur7 poses of this section.

8 ‘‘(g) APPLICATION OF SECTION.—

9 ‘‘(1) IN GENERAL.—This section shall apply

10 with respect to—

11 ‘‘(A) any individual with a filing status de12 scribed in subsection (a), (b), or (d) of section

13 1 and whose family income is less than 100 per14 cent of the income official poverty line (as de15 fined by the Office of Management and Budget,

16 and revised annually in accordance with section

17 673(2) of the Omnibus Budget Reconciliation

18 Act of 1981) applicable to a family of the size

19 involved, in any taxable year beginning with

20 1997 or, if later, the alternate year,

21 ‘‘(B) any individual with a filing status de22 scribed in subsection (c) of section 1 and whose

23 family income is less than 100 percent of such

24 income official poverty line, in any taxable year
59

•S 1807 IS

1 beginning with 1998 or, if later, the alternate

2 year,

3 ‘‘(C) any individual with a filing status de4 scribed in subsection (a), (b), or (d) of section

5 1 and whose family income is equal to or ex6 ceeds 100 percent of such income official pov7 erty line, but only to the extent of 33 percent

8 of the credit allowable under this section, in any

9 taxable year beginning with 1999 or, if later,

10 the alternate year, and

11 ‘‘(D) any individual with a filing status de12 scribed in subsection (a), (b), (c), or (d) of sec13 tion 1 and whose family income is equal to or

14 exceeds 100 percent of such income official pov15 erty line, in any taxable year beginning with

16 2000 or, if later, the alternate year.

17 ‘‘(2) ALTERNATE YEAR.—For purposes of para18 graph (1), the term ‘alternate year’ means any tax19 able year other than the taxable year described the

20 applicable subparagraph of paragraph (1) as deter21 mined under section 1302 of the Comprehensive

22 Family Health Access and Savings Act.

23 (b) ADVANCE PAYMENT OF CREDIT.—Chapter 25 of

24 the Internal Revenue Code of 1986 (relating to general
60

•S 1807 IS

1 provisions relating to employment taxes) is amended by

2 inserting after section 3507 the following new section:

3 ‘‘SEC. 3507A. ADVANCE PAYMENT OF CATASTROPHIC

4 HEALTH INSURANCE PLAN PREMIUMS CRED5 IT.

6 ‘‘(a) GENERAL RULE.—Except as otherwise provided

7 in this section, every employer making payment of wages

8 with respect to whom a catastrophic health insurance plan

9 eligibility certificate is in effect shall, at the time of paying

10 such wages, make an additional payment equal to such

11 employee’s catastrophic health insurance plan advance

12 amount.

13 ‘‘(b) CATASTROPHIC HEALTH INSURANCE PLAN ELI14 GIBILITY CERTIFICATE.—For purposes of this title, a cat15 astrophic health insurance plan eligibility certificate is a

16 statement furnished by an employee to the employer

17 which—

18 ‘‘(1) certifies that the employee will be eligible

19 to receive the credit provided by section 34A for the

20 taxable year,

21 ‘‘(2) certifies that the employee does not have

22 a catastrophic health insurance plan eligibility cer23 tificate in effect for the calendar year with respect

24 to the payment of wages by another employer,
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•S 1807 IS

1 ‘‘(3) states whether or not the employee’s

2 spouse has a catastrophic health insurance plan eli3 gibility certificate in effect, and

4 ‘‘(4) estimates the amount of premiums for a

5 catastrophic health insurance plan (as defined in

6 section 34A(d)) for the calendar year.

7 For purposes of this section, a certificate shall be treated

8 as being in effect with respect to a spouse if such a certifi9 cate will be in effect on the first status determination date

10 following the date on which the employee furnishes the

11 statement in question.

12 ‘‘(c) CATASTROPHIC HEALTH INSURANCE PLAN AD13 VANCE AMOUNT.—

14 ‘‘(1) IN GENERAL.—For purposes of this title,

15 the term ‘catastrophic health insurance plan advance

16 amount’ means, with respect to any payroll period,

17 the amount determined—

18 ‘‘(A) on the basis of the employee’s wages

19 from the employer for such period,

20 ‘‘(B) on the basis of the employee’s esti21 mated premiums for a catastrophic health in22 surance plan (as so defined) included in the cat23 astrophic health insurance plan eligibility cer24 tificate, and
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•S 1807 IS

1 ‘‘(C) in accordance with tables provided by

2 the Secretary.

3 ‘‘(2) ADVANCE AMOUNT TABLES.—The tables

4 referred to in paragraph (1)(C) shall be similar in

5 form to the tables prescribed under section 3402

6 and, to the maximum extent feasible, shall be coordi7 nated with such tables and the tables prescribed

8 under section 3507(c).

9 ‘‘(d) OTHER RULES.—For purposes of this section,

10 rules similar to the rules of subsections (d) and (e) of sec11 tion 3507 shall apply.

12 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

13 such regulations as may be necessary to carry out the pur14 poses of this section.’’

15 (c) CREDIT AMOUNT NOT ALLOWED AS MEDICAL

16 EXPENSE DEDUCTION.—Section 213 of the Internal Rev17 enue Code of 1986 (relating to medical, dental, etc., ex18 penses), as amended by section 212(c), is amended by

19 adding at the end the following new subsection:

20 ‘‘(h) COORDINATION WITH CATASTROPHIC HEALTH

21 INSURANCE PLAN PREMIUMS CREDIT.—The amount oth22 erwise taken into account under subsection (a) as expenses

23 paid for medical care shall be reduced by the amount (if

24 any) of the amount taken into account under section 34A

25 for the taxable year.’’
63

•S 1807 IS

1 (d) CLERICAL AMENDMENTS.—

2 (1) The table of sections for subpart A of part

3 IV of subchapter A of chapter 1 of the Internal Rev4 enue Code of 1986 is amended by inserting after the

5 item relating to section 34 the following new item:

‘‘Sec. 34A. Catastrophic health insurance plan premiums.’’

6 (2) The table of sections for chapter 25 of such

7 Code is amended by adding after the item relating

8 to section 3507 the following new item:

‘‘Sec. 3507A. Advance payment of catastrophic health insurance

plan premiums credit.’’

9 SEC. 702. PROHIBITION OF RESTRICTIONS RELATING TO

10 THE USE OF COLLECTION PROCEDURES.

11 No provision of Federal, State, or local law shall

12 apply that prohibits the use of any statutory procedure

13 for the collection of unpaid debts for medical expenses in14 curred by individuals who are eligible for the credit al15 lowed under section 34A of the Internal Revenue Code of

16 1986, but who fail to claim such credit.

17 TITLE VIII—REWARD PREVEN18 TIVE MEDICINE AND

19 HEALTHY LIFESTYLES

20 SEC. 801. REWARD PREVENTIVE MEDICINE AND HEALTHY

21 LIFESTYLES.

22 In the case of any health insurance plan, no provision

23 of State or local law shall apply that restricts the reduc-
64

•S 1807 IS

1 tion of premiums or the allowance of incentives with re2 spect to such plans for individuals who pursue healthy life3 styles.

4 TITLE IX—REFORM MEDICAID

5 AND EXPAND CHOICES

6 UNDER MEDICARE

7 Subtitle A—Medicaid

8 SEC. 901. CAP ON FEDERAL PAYMENTS MADE FOR MEDI9 CAL ASSISTANCE UNDER THE MEDICAID PRO10 GRAM.

11 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

12 seq.) is amended by redesignating section 1931 as section

13 1932 and by inserting after section 1930 the following new

14 section:

15 ‘‘CAP ON FEDERAL PAYMENT MADE FOR MEDICAL

16 ASSISTANCE

17 ‘‘SEC. 1931. (a) ANNUAL FEDERAL CAP.—For pur18 poses of furnishing medical assistance to eligible individ19 uals, the Secretary shall pay to a State for a fiscal year

20 under section 1903 an amount that does not exceed the

21 State total funding amount determined under subsection

22 (b).

23 ‘‘(b) STATE TOTAL FUNDING AMOUNT.—

24 ‘‘(1) IN GENERAL.—A State’s total funding

25 amount for a fiscal year is an amount equal to the

26 sum of—
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•S 1807 IS

1 ‘‘(A) the State’s acute care funding

2 amount for the fiscal year determined under

3 subsection (c); and

4 ‘‘(B) the State’s long-term care funding

5 amount for the fiscal year determined under

6 subsection (d).

7 ‘‘(2) ESTIMATIONS OF AND ADJUSTMENTS TO

8 STATE TOTAL FUNDING AMOUNT.—The Secretary

9 shall—

10 ‘‘(A) establish a process for estimating the

11 State total funding amount under this sub12 section at the beginning of each fiscal year and

13 adjusting such amount during such fiscal year;

14 and

15 ‘‘(B) notify each State of the estimations

16 and adjustments referred to in subparagraph

17 (A).

18 ‘‘(c) STATE ACUTE CARE FUNDING AMOUNT.—

19 ‘‘(1) IN GENERAL.—A State’s acute care fund20 ing amount for a fiscal year is an amount equal to

21 the product of—

22 ‘‘(A) the per capita acute care funding

23 amount determined under paragraph (2) for the

24 State for such fiscal year, multiplied by
66

•S 1807 IS

1 ‘‘(B) the total number of eligible individ2 uals receiving medical assistance in the form of

3 acute medical services in the State during the

4 fiscal year.

5 ‘‘(2) PER CAPITA ACUTE CARE FUNDING

6 AMOUNT.—

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

8 calculate for each State a per capita acute care

9 funding amount in accordance with subpara10 graph (B) for each fiscal year.

11 ‘‘(B) DETERMINATION OF PER CAPITA

12 ACUTE CARE FUNDING AMOUNTS.—

13 ‘‘(i) IN GENERAL.—The per capita

14 acute care funding amount for a State

15 shall be—

16 ‘‘(I) for fiscal year 1995, an

17 amount equal to the base acute care

18 per capita funding amount (as deter19 mined under clause (ii)) updated by

20 the estimated change in the medical

21 consumer price index through the

22 midpoint of fiscal year 1995; and

23 ‘‘(II) for fiscal year 1996 and

24 succeeding fiscal years, an amount

25 equal to the amount determined under
67

•S 1807 IS

1 this clause for the previous fiscal year

2 updated through the midpoint of the

3 fiscal year by the estimated percent4 age change in the medical consumer

5 price index during the 12-month pe6 riod ending at that midpoint, with ap7 propriate adjustments to reflect pre8 vious underestimations or overesti9 mations under this clause in the pro10 jected percentage change in the medi11 cal consumer price index.

12 ‘‘(ii) BASE PER CAPITA ACUTE CARE

13 FUNDING AMOUNT.—The base per capita

14 acute care funding amount for a State is

15 an amount equal to the quotient of—

16 ‘‘(I) the total amount of Federal

17 funds paid to such State under sec18 tion 1903 for fiscal year 1993 for fur19 nishing medical assistance in the form

20 of acute medical services to eligible in21 dividuals; divided by

22 ‘‘(II) the total number of eligible

23 individuals who received medical as24 sistance in the form of acute medical
68

•S 1807 IS

1 services in such State during fiscal

2 year 1993.

3 ‘‘(d) STATE LONG-TERM CARE FUNDING

4 AMOUNT.—

5 ‘‘(1) IN GENERAL.—A State’s long-term care

6 funding amount for a fiscal year is an amount equal

7 to the product of—

8 ‘‘(A) the per capita long-term care funding

9 amount determined under paragraph (2) for the

10 State for such fiscal year, multiplied by

11 ‘‘(B) the total number of eligible individ12 uals receiving medical assistance in the form of

13 long-term care services in the State during the

14 fiscal year.

15 ‘‘(2) PER CAPITA LONG-TERM CARE FUNDING

16 AMOUNT.—

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

18 calculate for each State a per capita long-term

19 care funding amount in accordance with sub20 paragraph (B) for each fiscal year.

21 ‘‘(B) DETERMINATION OF PER CAPITA

22 LONG-TERM CARE FUNDING AMOUNTS.—

23 ‘‘(i) IN GENERAL.—The per capita

24 long-term care funding amount for a State

25 shall be—
69

•S 1807 IS

1 ‘‘(I) for fiscal year 1995, an

2 amount equal to the base long-term

3 care per capita funding amount (as

4 determined under clause (ii)) updated

5 by the estimated change in the medi6 cal consumer price index through the

7 midpoint of fiscal year 1995; and

8 ‘‘(II) for fiscal year 1996 and

9 succeeding fiscal years, an amount

10 equal to the amount determined under

11 this clause for the previous fiscal year

12 updated through the midpoint of the

13 fiscal year by the estimated percent14 age change in the medical consumer

15 price index during the 12-month pe16 riod ending at that midpoint, with ap17 propriate adjustments to reflect pre18 vious underestimations or overesti19 mations under this clause in the pro20 jected percentage change in the medi21 cal consumer price index.

22 ‘‘(ii) BASE PER CAPITA LONG-TERM

23 CARE FUNDING AMOUNT.—The base per

24 capita long-term care funding amount for
70

•S 1807 IS

1 a State is an amount equal to the quotient

2 of—

3 ‘‘(I) the total amount of Federal

4 funds paid to such State under sec5 tion 1903 for fiscal year 1993 for fur6 nishing medical assistance in the form

7 of long-term care services to eligible

8 individuals; divided by

9 ‘‘(II) the total number of eligible

10 individuals who received medical as11 sistance in the form of long-term care

12 medical services in such State during

13 fiscal year 1993.

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

15 ‘‘(1) ACUTE MEDICAL SERVICES.—The term

16 ‘acute medical services’ means all of the care and

17 services furnished to individuals eligible under a

18 State plan under this title other than long-term care

19 services.

20 ‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible

21 individual’ means an individual who is a member of

22 any group of individuals described in section

23 1902(a)(10) that is eligible to receive medical assist24 ance under the State plan under this title.
71

•S 1807 IS

1 ‘‘(3) LONG-TERM CARE SERVICES.—The term

2 ‘long-term care services’ means the following care

3 and services furnished to individuals eligible under a

4 State plan under this title:

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

6 in section 1905(f)).

7 ‘‘(B) Intermediate care facility for the

8 mentally retarded services (as defined in section

9 1905(d)).

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

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

12 ‘‘(D) Private duty nursing services (as re13 ferred to in section 1905(a)(8)).

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

15 furnished under a waiver granted under sub16 section (c), (d), or (e) of section 1915.

17 ‘‘(F) Home and community care furnished

18 to functionally disabled elderly individuals

19 under section 1929.

20 ‘‘(G) Community supported living arrange21 ments services under section 1930.

22 ‘‘(H) Case-management services (as de23 scribed in section 1915(g)(2)).

24 ‘‘(I) Home health care services (as referred

25 to in section 1905(a)(7)).
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•S 1807 IS

1 ‘‘(J) Hospice care.

2 ‘‘(4) MEDICAL CONSUMER PRICE INDEX.—The

3 term ‘medical consumer price index’ means the

4 consumer price index for medical services as deter5 mined by the Bureau of Labor Statistics.’’

6 (b) REQUIRING STATE MAINTENANCE OF EFFORT.—

7 Section 1902(a) (42 U.S.C. 1369a(a)) is amended—

8 (1) by striking ‘‘and’’ at the end of paragraph

9 (61);

10 (2) by striking the period at the end of para11 graph (62) and inserting ‘‘; and’’; and

12 (3) by adding at the end the following new

13 paragraph:

14 ‘‘(63) provide that the State will continue to

15 make eligible for medical assistance under section

16 1902(a)(10) any class or category of individuals eli17 gible for medical assistance under such section dur18 ing fiscal year 1993.’’

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

20 this section shall be effective with respect to fiscal years

21 beginning on or after October 1, 1994.

22 SEC. 902. WAIVERS FOR FURNISHING MEDICAL ASSIST23 ANCE UNDER THE MEDICAID PROGRAM.

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

25 Act (42 U.S.C. 1396 et seq.), as amended by section 901,
73

•S 1807 IS

1 is amended by redesignating section 1932 as section 1933

2 and by inserting after section 1931 the following new sec3 tion:

4 ‘‘WAIVERS FOR FURNISHING MEDICAL ASSISTANCE

5 UNDER THE MEDICAID PROGRAM

6 ‘‘SEC. 1932. (a) IN GENERAL.—The Secretary shall

7 establish a process under which a State with a State plan

8 approved under this title may apply for waivers of any

9 of the requirements under this title in order to establish

10 innovative and cost-effective programs for furnishing med11 ical assistance to eligible individuals (as defined in section

12 1931(e)(2)).

13 ‘‘(b) APPLICATION FOR WAIVERS.—

14 ‘‘(1) IN GENERAL.—In order to receive a waiver

15 under subsection (a), a State shall submit an appli16 cation to the Secretary at such time and containing

17 such information as the Secretary determines appro18 priate.

19 ‘‘(2) APPROVAL OF APPLICATION.—

20 ‘‘(A) INITIAL REVIEW.—Within 60 days

21 after an application is submitted by the State

22 under this subsection, the Secretary shall review

23 and approve such application or provide the

24 State with a list of the modifications that are

25 necessary for such application to be approved.
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•S 1807 IS

1 ‘‘(B) ADDITIONAL REVIEW.—Within 60

2 days after a State resubmits any application

3 under this subsection, the Secretary shall review

4 and approve such application or provide the

5 State with a summary of which items included

6 on the list provided to the State under subpara7 graph (A) remain unsatisfied. A State may re8 submit an application under this subparagraph

9 as many times as necessary to gain approval.

10 ‘‘(c) DURATION OF WAIVERS.—Except as provided in

11 subsection (d), any waiver under this section shall be

12 granted for a period of 5 years, and renewed for subse13 quent 5-year periods, unless the Secretary determines that

14 the State has failed to furnish medical assistance in ac15 cordance with the terms of the waiver and any provisions

16 of this title with respect to which the Secretary has not

17 granted a waiver.

18 ‘‘(d) TERMINATION OF WAIVERS.—The Secretary

19 may terminate a waiver granted under this section at any

20 time if the Secretary determines that the State has failed

21 to furnish medical assistance in accordance with the terms

22 of the waiver and any provisions of this title with respect

23 to which the Secretary has not granted a waiver.

24 ‘‘(e) REPORTS.—The State shall evaluate the pro25 grams operated under a waiver granted under this section
75

•S 1807 IS

1 and submit reports to the Secretary at such times and

2 containing such information as the Secretary shall re3 quire.’’

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

5 subsection (a) shall be effective with respect to fiscal years

6 beginning on or after October 1, 1994.

7 Subtitle B—Medicare

8 SEC. 951. INDIVIDUAL ELECTION FOR TYPE OF COVERAGE.

9 (a) ELECTION FOR NEW ELIGIBLES.—

10 (1) IN GENERAL.—Title XVIII of the Social Se11 curity Act (42 U.S.C. 1395 et seq.) is amended by

12 adding after section 1804 the following new section:

13 ‘‘INDIVIDUAL ELECTION FOR TYPE OF COVERAGE

14 ‘‘SEC. 1805. (a) An individual may enroll with a pri15 vate health care arrangement under section 1893 or an

16 eligible organization under section 1876 only if such indi17 vidual has elected to enroll with such an arrangement or

18 organization within 1 year after the date that the individ19 ual—

20 ‘‘(1) becomes entitled to benefits under part A

21 of this title, or

22 ‘‘(2) foregoes a health benefit plan operated,

23 sponsored, or contributed to, by the individual’s em24 ployer or former employer (or the employer or

25 former employer of the individual’s spouse) where

26 such plan was the individual’s primary insurer.
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1 ‘‘(b) If an individual makes an election under sub2 section (a), such individual shall be entitled to payment

3 under this title only if such individual remains enrolled

4 with an arrangement or organization described in such

5 subsection.’’

6 (2) EFFECTIVE DATE.—The amendment made

7 by paragraph (1) shall apply with respect to individ8 uals who become entitled to benefits under part A of

9 title XVIII of the Social Security Act on or after Oc10 tober 1, 1994.

11 (b) ELECTION FOR CURRENT ELIGIBLES.—

12 (1) ENROLLMENT WITH A PRIVATE HEALTH

13 CARE ARRANGEMENT OR ELIGIBLE ORGANIZA14 TION.—

15 (A) IN GENERAL.—If an individual is enti16 tled to benefits under part A of title XVIII of

17 the Social Security Act on or before September

18 30, 1994, such individual may elect to enroll

19 with a private health care arrangement under

20 section 1893 of such Act or an eligible organi21 zation under section 1876 of such Act only if

22 such election is made on or before March 31,

23 1995.

24 (B) PAYMENT.—If an individual makes an

25 election under subparagraph (A), such individ-
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1 ual shall be entitled to payment under title

2 XVIII of the Social Security Act only if such

3 individual remains enrolled with an arrange4 ment or organization described in such subpara5 graph.

6 (2) DECISION TO RETURN TO FEE FOR SERVICE

7 PLAN.—If an individual is enrolled with an eligible

8 organization under section 1876 of the Social Secu9 rity Act (42 U.S.C. 1395mm) on or before Septem10 ber 30, 1994, such individual may terminate the in11 dividual’s enrollment with such organization on or

12 before March 31, 1995, without being subject to the

13 payment limitation described in paragraph (1)(B).

14 (3) EFFECTIVE DATE.—This subsection shall

15 take effect on October 1, 1994.

16 SEC. 952. HEALTH CARE COVERAGE UNDER A PRIVATE

17 HEALTH CARE ARRANGEMENT.

18 (a) IN GENERAL.—Part C of title XVIII of the Social

19 Security Act (42 U.S.C. 1395x et seq.) is amended by add20 ing at the end the following new section:

21 ‘‘PAYMENTS TO PRIVATE HEALTH CARE ARRANGEMENTS

22 ‘‘SEC. 1893. (a) PAYMENTS.—

23 ‘‘(1) IN GENERAL.—The Secretary shall make

24 payment as specified in subsection (c) for each indi25 vidual who is enrolled with a private health care ar26 rangement.
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1 ‘‘(2) SOLE PAYMENTS.—Payments to an indi2 vidual under this section shall be in lieu of the

3 amounts that would otherwise be payable pursuant

4 to sections 1814(b) and 1833(a).

5 ‘‘(b) CERTIFICATION.—

6 ‘‘(1) IN GENERAL.—An individual who is en7 rolled with a private health care arrangement shall

8 certify to the Secretary, by not later than December

9 15 of each year, the individual’s enrollment for the

10 coming calendar year. Such certification shall indi11 cate the individual’s annual premium amount.

12 ‘‘(2) FAILURE TO CERTIFY.—For purposes of

13 determining payment under subsection (c), an indi14 vidual who fails to provide the certification described

15 in paragraph (1) shall be deemed to be enrolled with

16 the private health care arrangement at the same

17 premium for which the Secretary last received a cer18 tification.

19 ‘‘(c) PAYMENT AMOUNT SPECIFIED.—

20 ‘‘(1) PRIVATE HEALTH CARE ARRANGEMENT.—

21 ‘‘(A) IN GENERAL.—In January of each

22 year, the Secretary shall pay the private health

23 care arrangement certified by the individual

24 under subsection (b)(1), the lesser of—
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•S 1807 IS

1 ‘‘(i) the individual’s annual premium

2 amount, or

3 ‘‘(ii) the per capita amount specified

4 under paragraph (2).

5 ‘‘(B) RETURN OF PAYMENT.—In the event

6 of the death of an individual, the private health

7 care arrangement certified by the individual

8 under subsection (b)(1) shall reimburse the Sec9 retary for a prorated portion of the amount re10 ceived under subparagraph (A), less any

11 amount expended by the private health care ar12 rangement for the health care expenses for such

13 individual. Such amount (if any) shall be depos14 ited in the Federal Hospital Insurance Trust

15 Fund and the Federal Supplementary Medical

16 Insurance Trust Fund in the same proportion

17 as such payment was paid by each trust fund

18 under subsection (e).

19 ‘‘(2) PER CAPITA AMOUNT.—

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

21 annually determine, and shall announce (in a

22 manner intended to provide notice to interested

23 parties) not later than September 7 before the

24 calendar year concerned, the per capita amount.
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1 ‘‘(B) DETERMINATION OF PER CAPITA

2 RATE OF PAYMENT.—The per capita amount

3 for each group of individuals (based on resi4 dency, age, and gender) is equal to—

5 ‘‘(i) the total estimated government

6 expenditures for all benefits under parts A

7 and B of this title in the coming calendar

8 year for such group (excluding any pre9 miums, deductibles, and copayments paid

10 by individuals for benefits under part B),

11 divided by

12 ‘‘(ii) the total estimated number of in13 dividuals in such group expected to be enti14 tled to benefits under part A and enrolled

15 in part B in the coming calendar year.

16 ‘‘(3) ADDITIONAL AMOUNTS FOR CERTAIN INDI17 VIDUALS.—

18 ‘‘(A) LOW-COST PLANS.—The Secretary

19 shall pay annually to an individual enrolled with

20 a private health care arrangement one-half of

21 the excess (if any) of—

22 ‘‘(i) the per capita amount under

23 paragraph (2), over

24 ‘‘(ii) the annual premium for the indi25 vidual’s private health care arrangement
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•S 1807 IS

1 (or in the case of a private health care ar2 rangement that is a catastrophic health in3 surance plan, the annual premium for such

4 plan and the annual deductible amount for

5 such plan).

6 ‘‘(B) LONG TERM CARE PLAN.—The Sec7 retary shall pay annually to an individual who

8 has received payment under subparagraph (A)

9 and is enrolled with a long term care plan, an

10 additional payment equal to the amount re11 ceived by such individual under subparagraph

12 (A).

13 ‘‘(d) DEFINITIONS.—For purposes of this section:

14 ‘‘(1) CATASTROPHIC HEALTH INSURANCE

15 PLAN.—The term ‘catastrophic health insurance

16 plan’ has the meaning given to such term by section

17 220(c)(2)(A) of the Internal Revenue Code of 1986.

18 ‘‘(2) LONG TERM CARE PLAN.—The term ‘long

19 term care plan’ means a plan which covers services

20 of the type identified in section 1931(e)(3).

21 ‘‘(3) MEDICAL SAVINGS ACCOUNT.—The term

22 ‘medical savings account’ has the meaning given to

23 such term by section 220(d)(1) of the Internal Reve24 nue Code of 1986.
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•S 1807 IS

1 ‘‘(4) PRIVATE HEALTH CARE ARRANGEMENT.—

2 The term ‘private health care arrangement’ means—

3 ‘‘(A) any arrangement which offers at least

4 the health care services described in section

5 1876(b)(2)(A), or

6 ‘‘(B) a catastrophic health insurance plan

7 in connection with a medical savings account.

8 ‘‘(e) SOURCE OF PAYMENT.—The payment to an in9 dividual under this section shall be made from the Federal

10 Hospital Insurance Trust Fund and the Federal Supple11 mentary Medical Insurance Trust Fund. The proportion

12 of the payment to be paid by each trust fund shall be de13 termined each year by the Secretary based on the relative

14 proportion of government expenditures that benefits from

15 each fund contribute to the per capita amount determined

16 under subsection (b)(2)(B).’’

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

18 subsection (a) shall apply to payments made on or after

19 October 1, 1994.
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1 TITLE X—ENHANCED EFFI2 CIENCY THROUGH PAPER3 WORK REDUCTION

4 SEC. 1001. FEDERAL PAPERWORK REDUCTION AND EFFI5 CIENCY REQUIREMENTS.

6 (a) IN GENERAL.—The Secretary of Health and

7 Human Services (hereafter referred to in this title as the

8 ‘‘Secretary’’) shall, in consultation with the Director of the

9 Office of Management and Budget, the Secretary of Veter10 ans Affairs, the Secretary of Defense, the Director of Per11 sonnel Management, and other appropriate Federal offi12 cials, adopt standards to reduce the administrative and

13 paperwork burdens of all Federal health care programs

14 by—

15 (1) 50 percent within the 2-year period follow16 ing the date of the enactment of this Act, and

17 (2) an additional 50 percent reduction from the

18 balance specified in (1) over a subsequent 3-year pe19 riod,

20 for a total reduction of 75 percent over the 5-year period

21 following the date of the enactment of this Act.

22 (b) INITIAL REDUCTION.—In order to achieve a pa23 perwork reduction described in subsection (a)(1), the Sec24 retary, shall adopt standards for Federal health care pro25 grams relating to each of the following:
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1 (1) Data elements for use in paper and elec2 tronic claims processing under health insurance

3 plans, as well as for use in utilization review and

4 management of care (including data fields, formats,

5 and medical nomenclature, and including plan bene6 fit and insurance information).

7 (2) Uniform claims forms (including uniform

8 procedure and bill codes for use with such forms and

9 including information on other health insurance

10 plans that may be liable for benefits).

11 (3) Uniform electronic transmission of the data

12 elements (for purposes of billing and utilization re13 view).

14 Standards under paragraph (3) relating to electronic

15 transmission of data elements for claims for services shall

16 supersede (to the extent specified in such standards) the

17 standards adopted under paragraph (2) relating to the

18 submission of paper claims for such services. Standards

19 under paragraph (3) shall include protections to assure

20 the confidentiality of patient-specific information and to

21 protect against the unauthorized use and disclosure of in22 formation.

23 (c) SUBSEQUENT REDUCTION.—In order to achieve

24 a further paperwork reduction described in subsection

25 (a)(2), the Secretary shall modify by regulation the stand-
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•S 1807 IS

1 ards adopted under subsection (b). The modification of the

2 standards may include such recommendations as reported

3 by the Standardized Form Commission in section 1003,

4 or any other provisions necessary to meet the goals for

5 reduction in the paperwork burden of Federal health care

6 programs.

7 (d) DEFINITION.—For purposes of this section, the

8 term ‘‘Federal health care program’’ means all Federal

9 programs related to health care, including programs de10 scribed in—

11 (1) title XVIII or XIX of the Social Security

12 Act,

13 (2) the Public Health Service Act,

14 (3) chapter 55 of title 10, United States Code,

15 (4) chapter 17 of title 38, United States Code,

16 (5) chapter 89 of title 5, United States Code,

17 or

18 (6) the Indian Health Care Improvement Act.

19 SEC. 1002. STATE PAPERWORK REDUCTION AND EFFI20 CIENCY REQUIREMENTS.

21 (a) IN GENERAL.—In order to be eligible for Federal

22 funds in connection with any State-administered health

23 care program, each State shall standardize the processing

24 of paper and electronic claims to reduce the administrative

25 and paperwork burdens on such programs by 75 percent
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•S 1807 IS

1 during the 5-year period following the date of the enact2 ment of this Act.

3 (b) ENFORCEMENT.—

4 (1) INTERIM EVALUATION.—If at the end of the

5 4-year period following the date of the enactment of

6 this Act the Secretary determines that a State has

7 not achieved substantial progress toward the reduc8 tions required under subsection (a), the Secretary

9 shall notify such State regarding the proportion of

10 required reductions achieved and the further reduc11 tion necessary to achieve compliance with subsection

12 (a).

13 (2) FINAL COMPLIANCE.—If at the end of the

14 5-year period following the date of the enactment of

15 this Act the Secretary determines that a State has

16 not achieved the reductions required under sub17 section (a), the Secretary shall reduce Federal pay18 ments for health care programs administered by

19 such State by 10 percent. For each year that such

20 State fails to comply with the requirements of sub21 section (a), Federal payments for health care pro22 grams administered by the State shall be reduced by

23 an additional 10 percent.

24 (3) WAIVERS OF PAYMENT REDUCTIONS.—Any

25 State subject to a reduction in Federal payments
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•S 1807 IS

1 under paragraph (2) may appeal to the Secretary for

2 a 1-year waiver of such reduction. In granting such

3 a waiver, the Secretary shall make a determination

4 of the good faith effort of such State to comply with

5 the requirements of subsection (a), taking into ac6 count the technical, practical, and financial capabili7 ties of the State in meeting such requirements.

8 SEC. 1003. STANDARDIZED FORMS COMMISSION.

9 (a) IN GENERAL.—

10 (1) ESTABLISHMENT.—Not later than 12

11 months after the date of the enactment of this Act,

12 the Secretary shall establish a Standardized Forms

13 Commission (hereafter referred to in this section as

14 the ‘‘Commission’’) which shall make recommenda15 tions on the standardization of paper and electronic

16 claims processing so as to reduce the paperwork bur17 den associated with, and enhance the efficiency and

18 productivity of, such claims processing.

19 (2) MEMBERSHIP.—

20 (A) IN GENERAL.—The Commission shall

21 be composed of at least 12 but not more than

22 20 representatives of private health care provid23 ers and private insurers.

24 (B) CHAIR.—The Secretary shall appoint a

25 Chair of the Commission.
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1 (3) REPORT ON FINDINGS AND RECOMMENDA2 TIONS.—Not later than 24 months after the date of

3 the enactment of this Act, the Chair of the Commis4 sion shall report to the Secretary on the findings

5 and recommendations of the Commission.

6 (4) PROHIBITION OF COMPENSATION.—Mem7 bers of the Commission shall serve without pay ex8 cept for reimbursement for travel expenses, includ9 ing per diem in lieu of subsistence, in accordance

10 with sections 5702 and 5703 of title 5, United

11 States Code.

12 (5) STAFF OF FEDERAL AGENCIES.—Upon re13 quest of the Chair, the head of any Federal depart14 ment or agency shall detail any of the personnel of

15 that department or agency to the Commission to as16 sist it in carrying out its duties under this section.

17 (6) OBTAINING OFFICIAL DATA.—The Commis18 sion may secure directly from any department or

19 agency of the United States information necessary

20 to enable it to carry out this section.

21 (7) ADMINISTRATIVE SUPPORT SERVICES.—

22 Upon request of the Chair, the Administrator of

23 General Services shall provide to the Commission the

24 administrative support services necessary for the
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1 Commission to carry out its responsibilities under

2 this section.

3 (b) LEGISLATIVE PROPOSAL.—

4 (1) IN GENERAL.—

5 (A) DEVELOPMENT OF IMPLEMENTING

6 BILL.—Not later than 3 months after the Com7 mission has submitted its findings and rec8 ommendations to the Secretary, the Secretary

9 shall take such recommendations and submit

10 them to Congress in the form of an implement11 ing bill which contains the provisions necessary

12 or appropriate to implement the recommenda13 tions by either repealing or amending existing

14 laws or providing new statutory authority.

15 (B) CONSIDERATION OF IMPLEMENTING

16 BILL.—The implementing bill described in sub17 paragraph (A) shall be considered by Congress

18 under the procedures for consideration de19 scribed in paragraph (2).

20 (2) CONGRESSIONAL CONSIDERATION.—

21 (A) RULES OF HOUSE OF REPRESENTA22 TIVES AND SENATE.—This paragraph is en23 acted by Congress—

24 (i) as an exercise of the rulemaking

25 power of the House of Representatives and
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1 the Senate, respectively, and as such is

2 deemed a part of the rules of each House,

3 respectively, but applicable only with re4 spect to the procedure to be followed in

5 that House in the case of an implementing

6 bill described in paragraph (1)(A), and su7 persedes other rules only to the extent that

8 such rules are inconsistent therewith; and

9 (ii) with full recognition of the con10 stitutional right of either House to change

11 the rules (so far as relating to the proce12 dure of that House) at any time, in the

13 same manner and to the same extent as in

14 the case of any other rule of that House.

15 (B) INTRODUCTION AND REFERRAL.—On

16 the day on which the implementing bill de17 scribed in paragraph (1)(A) is transmitted to

18 the House of Representatives and the Senate,

19 such bill shall be introduced (by request) in the

20 House of Representatives by the Majority Lead21 er of the House, for himself and the Minority

22 Leader of the House, or by Members of the

23 House designated by the Majority Leader and

24 Minority Leader of the House and shall be in25 troduced (by request) in the Senate by the Ma-
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•S 1807 IS

1 jority Leader of the Senate, for himself and the

2 Minority Leader of the Senate, or by Members

3 of the Senate designated by the Majority Lead4 er and Minority Leader of the Senate. If either

5 House is not in session on the day on which the

6 implementing bill is transmitted, the bill shall

7 be introduced in the House, as provided in the

8 preceding sentence, on the first day thereafter

9 on which the House is in session. The imple10 menting bill introduced in the House of Rep11 resentatives and the Senate shall be referred to

12 the appropriate committees of each House.

13 (C) AMENDMENTS PROHIBITED.—No

14 amendment to an implementing bill shall be in

15 order in either the House of Representatives or

16 the Senate and no motion to suspend the appli17 cation of this paragraph shall be in order in ei18 ther House, nor shall it be in order in either

19 House for the Presiding Officer to entertain a

20 request to suspend the application of this para21 graph by unanimous consent.

22 (D) PERIOD FOR COMMITTEE AND FLOOR

23 CONSIDERATION.—

24 (i) IN GENERAL.—Except as provided

25 in clause (ii), if the committee or commit-
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•S 1807 IS

1 tees of either House to which an imple2 menting bill has been referred have not re3 ported it at the close of the 45th day after

4 its introduction, such committee or com5 mittees shall be automatically discharged

6 from further consideration of the imple7 menting bill and it shall be placed on the

8 appropriate calendar. A vote on final pas9 sage of the implementing bill shall be

10 taken in each House on or before the close

11 of the 45th day after the implementing bill

12 is reported by the committees or committee

13 of that House to which it was referred, or

14 after such committee or committees have

15 been discharged from further consideration

16 of the implementing bill. If prior to the

17 passage by 1 House of an implementing

18 bill of that House, that House receives the

19 same implementing bill from the other

20 House then—

21 (I) the procedure in that House

22 shall be the same as if no implement23 ing bill had been received from the

24 other House; but
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•S 1807 IS

1 (II) the vote on final passage

2 shall be on the implementing bill of

3 the other House.

4 (ii) COMPUTATION OF DAYS.—For

5 purposes of clause (i), in computing a

6 number of days in either House, there

7 shall be excluded—

8 (I) the days on which either

9 House is not in session because of an

10 adjournment of more than 3 days to

11 a day certain, or an adjournment of

12 the Congress sine die, and

13 (II) any Saturday and Sunday

14 not excluded under subclause (I) when

15 either House is not in session.

16 (E) FLOOR CONSIDERATION IN THE

17 HOUSE OF REPRESENTATIVES.—

18 (i) MOTION TO PROCEED.—A motion

19 in the House of Representatives to proceed

20 to the consideration of an implementing

21 bill shall be highly privileged and not de22 batable. An amendment to the motion shall

23 not be in order, nor shall it be in order to

24 move to reconsider the vote by which the

25 motion is agreed to or disagreed to.
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1 (ii) DEBATE.—Debate in the House of

2 Representatives on an implementing bill

3 shall be limited to not more than 20 hours,

4 which shall be divided equally between

5 those favoring and those opposing the bill.

6 A motion further to limit debate shall not

7 be debatable. It shall not be in order to

8 move to recommit an implementing bill or

9 to move to reconsider the vote by which an

10 implementing bill is agreed to or disagreed

11 to.

12 (iii) MOTION TO POSTPONE.—Motions

13 to postpone, made in the House of Rep14 resentatives with respect to the consider15 ation of an implementing bill, and motions

16 to proceed to the consideration of other

17 business, shall be decided without debate.

18 (iv) APPEALS.—All appeals from the

19 decisions of the Chair relating to the appli20 cation of the Rules of the House of Rep21 resentatives to the procedure relating to an

22 implementing bill shall be decided without

23 debate.

24 (v) GENERAL RULES APPLY.—Except

25 to the extent specifically provided in the
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•S 1807 IS

1 preceding provisions of this subparagraph,

2 consideration of an implementing bill shall

3 be governed by the Rules of the House of

4 Representatives applicable to other bills

5 and resolutions in similar circumstances.

6 (F) FLOOR CONSIDERATION IN THE SEN7 ATE.—

8 (i) MOTION TO PROCEED.—A motion in

9 the Senate to proceed to the consideration

10 of an implementing bill shall be privileged

11 and not debatable. An amendment to the

12 motion shall not be in order, nor shall it be

13 in order to move to reconsider the vote by

14 which the motion is agreed to or disagreed

15 to.

16 (ii) GENERAL DEBATE.—Debate in

17 the Senate on an implementing bill, and all

18 debatable motions and appeals in connec19 tion therewith, shall be limited to not more

20 than 20 hours. The time shall be equally

21 divided between, and controlled by, the

22 Majority Leader and the Minority Leader

23 or their designees.

24 (iii) DEBATE OF MOTIONS AND AP25 PEALS.—Debate in the Senate on any de-
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•S 1807 IS

1 batable motion or appeal in connection

2 with an implementing bill shall be limited

3 to not more than 1 hour, to be equally di4 vided between, and controlled by, the

5 mover and the manager of the implement6 ing bill, except that in the event the man7 ager of the implementing bill is in favor of

8 any such motion or appeal, the time in op9 position thereto, shall be controlled by the

10 Minority Leader or his designee. Such

11 leaders, or either of them, may, from time

12 under their control on the passage of an

13 implementing bill, allot additional time to

14 any Senator during the consideration of

15 any debatable motion or appeal.

16 (iv) OTHER MOTIONS.—A motion in

17 the Senate to further limit debate is not

18 debatable. A motion to recommit an imple19 menting bill is not in order.

20 (c) FAILURE TO COMPLY WITH RECOMMENDATIONS

21 ENACTED.—A health care provider or health care insurer

22 that fails to comply with any recommendations of the

23 Commission that are enacted in accordance with sub24 section (b) and that are applicable to such provider or in25 surer shall be ineligible for payments of claims submitted
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•S 1807 IS

1 under any provision of the Social Security Act or the Pub2 lic Health Service Act.

3 TITLE XI—MEANINGFUL

4 MEDICAL LIABILITY REFORM

5 SEC. 1101. APPLICABILITY AND PREEMPTION.

6 (a) APPLICABILITY.—This title shall apply with re7 spect to any medical malpractice liability claim and to any

8 medical malpractice liability action brought in any State

9 or Federal court, except that this title shall not apply to

10 a claim or action for damages arising from a vaccine-relat11 ed injury or death to the extent that title XXI of the Pub12 lic Health Service Act applies to the claim or action.

13 (b) PREEMPTION.—

14 (1) IN GENERAL.—The provisions of this title

15 shall preempt any State or local law to the extent

16 such law is inconsistent with the limitations con17 tained in such provisions. The provisions of this title

18 shall not preempt any State law that provides for

19 defenses or places limitations on a person’s liability

20 in addition to those contained in this title, places

21 greater limitations on the amount of attorneys’ fees

22 and expenses that can be collected, or otherwise im23 poses greater restrictions than those provided in this

24 title.
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•S 1807 IS

1 (2) NEGOTIATED LIABILITY.—The provisions of

2 this title shall preempt any Federal, State or local

3 law to the extent that such law prohibits a health

4 care provider and a purchaser of health care from

5 voluntarily entering into a contractual agreement in

6 which the provider offers reduced fees for medical

7 services in exchange for a prearranged limit on the

8 amount of any award in a medical malpractice liabil9 ity action resulting from the provision of such serv10 ices or a limit on the cause of action that may be

11 maintained with respect to such services.

12 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

13 OF LAW OR VENUE.—Nothing in subsection (b) shall be

14 construed to—

15 (1) waive or affect any defense of sovereign im16 munity asserted by any State under any provision of

17 law;

18 (2) waive or affect any defense of sovereign im19 munity asserted by the United States;

20 (3) affect the applicability of any provision of

21 the Foreign Sovereign Immunities Act of 1976;

22 (4) preempt State choice-of-law rules with re23 spect to claims brought by a foreign nation or a citi24 zen of a foreign nation; or
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1 (5) affect the right of any court to transfer

2 venue or to apply the law of a foreign nation or to

3 dismiss a claim of a foreign nation or of a citizen

4 of a foreign nation on the ground of inconvenient

5 forum.

6 (d) FEDERAL COURT JURISDICTION NOT ESTAB7 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

8 this title shall be construed to establish any jurisdiction

9 in the district courts of the United States over medical

10 malpractice liability actions on the basis of section 1331

11 or 1337 of title 28, United States Code.

12 SEC. 1102. STATUTE OF LIMITATIONS.

13 (a) IN GENERAL.—Except as provided in subsection

14 (b), no medical malpractice liability action shall be initi15 ated after the expiration of the 2-year period that begins

16 on the later of the date that the alleged injury that is the

17 subject of the claim was discovered, or the date on which

18 such injury should reasonably have been discovered. In no

19 event shall any such action be initiated after the expiration

20 of the 4-year period that begins on the date on which the

21 alleged injury occurred.

22 (b) EXCEPTION FOR CERTAIN MINORS.—In the case

23 of an alleged injury suffered by a minor who has not at24 tained 6 years of age, no medical malpractice liability ac25 tion shall be initiated after the expiration of the 2-year
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•S 1807 IS

1 period that begins on the date on which the alleged injury

2 was discovered, or the date on which such injury should

3 reasonably have been discovered. In no event shall any

4 such action be initiated after the expiration of the 4-year

5 period that begins on the date on which the alleged injury

6 occurred, or the date on which the minor attains 8 years

7 of age, whichever is later.

8 SEC. 1103. SCOPE OF LIABILITY.

9 (a) IN GENERAL.—With respect to economic and

10 noneconomic damages, the liability of each defendant in

11 a medical malpractice liability action shall be several only

12 and may not be joint. Such a defendant shall be liable

13 only for the amount of economic or noneconomic damages

14 allocated to the defendant in direct proportion to such de15 fendant’s percentage of fault or responsibility for the in16 jury suffered by the claimant.

17 (b) DETERMINATION OF PERCENTAGE OF LIABIL18 ITY.—The trier of fact in a medical malpractice liability

19 action shall determine the extent of each defendant’s fault

20 or responsibility for the economic or noneconomic damages

21 suffered by the claimant, and shall assign a percentage

22 of responsibility for such injury to each such defendant.
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1 SEC. 1104. DISCOVERY; FAILURE TO MAKE OR COOPERATE

2 IN DISCOVERY.

3 (a) IN GENERAL.—All requests for discovery pursu4 ant to a medical malpractice liability action shall identify

5 the relevant portion of the complaint, answer or other

6 pleading to which responses to the discovery requests are

7 expected to relate.

8 (b) FEES AND EXPENSES.—With respect to any mo9 tion for an order compelling discovery that is made pursu10 ant to a medical malpractice liability action, the court

11 shall award the prevailing party reasonable fees and other

12 expenses incurred by that party in bringing or defending

13 against the motion, including reasonable attorney fees, un14 less the court finds that the position of the unsuccessful

15 party was substantially justified or that special cir16 cumstances make such an award unjust.

17 SEC. 1105. LIMITATION ON NONECONOMIC DAMAGES.

18 The total amount of noneconomic damages that may

19 be awarded to a claimant and the members of the claim20 ant’s family for losses resulting from the injury which is

21 the subject of a medical malpractice liability action may

22 not exceed $250,000, regardless of the number of parties

23 against whom the action is brought or the number of ac24 tions brought with respect to such injury.
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1 SEC. 1106. TREATMENT OF PAYMENTS FOR FUTURE ECO2 NOMIC LOSSES.

3 (a) PROHIBITING SINGLE LUMP-SUM PAYMENT.—In

4 any medical malpractice liability action in which the dam5 ages awarded for any economic losses to be incurred after

6 the date on which the judgment is entered exceeds

7 $100,000, a defendant may not be required to pay such

8 damages in a single, lump-sum payment, but shall be per9 mitted to make such payments periodically based on pro10 jections of the amount of damages expected to be incurred

11 by the claimant at appropriate intervals, as determined by

12 the court.

13 (b) USE OF ANNUITIES OR TRUSTS.—The court may

14 require that a defendant in a medical malpractice liability

15 action purchase an annuity or fund a reversionary trust

16 to make periodic payments under subsection as provided

17 for in subsection (a) if the court determines that a reason18 able basis exists for concluding that the defendant may

19 be unable or otherwise fail to make the required periodic

20 payments.

21 (c) REQUIREMENT OF PERIODIC PAYMENT AS FINAL

22 ORDER.—A judgment of a court awarding periodic pay23 ments under this section may not be reopened at any time

24 to contest, amend, or modify the schedule or amount of

25 the payments in the absence of fraud or any other basis
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1 under which a party may obtain relief from a final judg2 ment.

3 SEC. 1107. TREATMENT OF COSTS AND ATTORNEY’S FEES.

4 (a) COSTS AND FEES, GENERALLY.—

5 (1) COURT DISCRETION.—A court in a medical

6 malpractice liability action may, as a condition of

7 the initiation of such an action, require an undertak8 ing for the payment of the costs associated with

9 such action, including reasonable attorneys’ fees.

10 (2) PAYMENT OF COSTS.—If a judgment in a

11 medical malpractice liability action is rendered

12 against a party to such action, upon a motion by the

13 prevailing party to such action, the court shall re14 quire the party against whom the judgment was ren15 dered to pay to such prevailing party the costs and

16 fees incurred by such prevailing party under the ac17 tion, including reasonable attorneys’ fees and other

18 expenses. The court may waive the application of

19 this paragraph if the court finds that the position

20 maintained by the party against whom such judg21 ment was rendered under such action was substan22 tially justified or that special circumstances make

23 such an award unjust.

24 (3) APPLICATION FOR RECOVERY OF COSTS.—

25 A party to a medical malpractice liability action who
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1 is seeking an award of costs and fees as provided for

2 in paragraph (2) shall, not later than 30 days after

3 the date on which the final, nonappealable judgment

4 in entered with respect to such action, submit to the

5 appropriate court an application for the recovery of

6 costs and fees. Such application shall contain—

7 (A) a certification that the submitting

8 party is a prevailing party and is eligible to re9 ceive costs and fees under paragraph (2);

10 (B) a description of the amount of costs

11 and fees sought, including an itemized state12 ment from any attorney or expert witness rep13 resenting or appearing on behalf of such party

14 stating the actual time expended and the rate

15 at which fees and other expenses were com16 puted; and

17 (C) a description of the reasons why the

18 position of the party against whom the judg19 ment was rendered was not substantially justi20 fied.

21 In determining whether or not the position of the

22 nonprevailing party was substantially justified the

23 court shall consider only the record presented in the

24 action maintained for the costs and fees.
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1 (4) AMOUNT OF AWARD.—In making a decision

2 on an application submitted under paragraph (3),

3 the court may—

4 (A) assess the amount to be awarded

5 under this subsection against the party against

6 whom the judgment was rendered or against

7 the attorney (or attorneys) of such party; and

8 (B) reduce the amount to be awarded pur9 suant to this subsection, or deny an award, to

10 the extent that the prevailing party, during the

11 course of the proceedings, engaged in conduct

12 which unnecessarily and unreasonably length13 ened the time for, or increased the costs of, the

14 final resolution of the matter in controversy.

15 (b) ATTORNEY’S FEES.—

16 (1) CONTINGENCY FEES.—An attorney who

17 represents, on a contingency fee basis, a claimant in

18 a medical malpractice liability claim may not charge,

19 demand, receive, or collect for services rendered in

20 connection with such claim in excess of the following

21 amount recovered by judgment or settlement under

22 such claim:

23 (A) 25 percent of the first $150,000 (or

24 portion thereof) recovered; plus
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1 (B) 15 percent of any amount in excess of

2 $150,000 recovered.

3 (2) RECORDS.—

4 (A) IN GENERAL.—With respect to a medi5 cal malpractice liability action, in order to re6 ceive an award of attorneys’ fees as provided

7 for in this title, the attorney of record of a

8 party to such action shall have maintained ac9 curate, complete records of hours worked on the

10 action regardless of the fee arrangement en11 tered into by the attorney with such party, in12 cluding records of other attorneys, legal staff,

13 expert witnesses and others who worked on the

14 action on behalf of such attorney.

15 (B) CALCULATION.—The court shall deter16 mine the amount of reasonable attorneys’ fees

17 and expenses that shall be awarded in a medical

18 malpractice liability action under this title on

19 the basis of an hourly rate or as a percentage

20 of the total damages awarded under such action

21 for economic and noneconomic losses. Such

22 amount shall be indexed to account for infla23 tion. The amount of attorneys’ fees and ex24 penses as determined by the court may not ex-
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1 ceed an amount that would be considered rea2 sonable based on the following:

3 (i) The time, labor, and skill nec4 essary to properly perform the legal serv5 ices required by the action.

6 (ii) The novelty and difficultly of the

7 questions involved in the action.

8 (iii) The likelihood, if apparent to the

9 client, that the acceptance of employment

10 with respect to the client’s action will pre11 clude other employment by the attorney.

12 (iv) The fee customarily charged in

13 the locality for similar legal services.

14 (v) The amount involved in the action

15 and the results obtained.

16 (vi) The time limitations imposed by

17 the client or by the circumstances of the

18 action.

19 (vii) The nature and length of the

20 professional relationship between the attor21 ney and the client.

22 (viii) The experience, reputation, and

23 ability of the attorney performing the serv24 ices in connection with the action.
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1 SEC. 1108. CONTRIBUTION AND INDEMNIFICATION.

2 (a) RECOVERY.—With respect to a medical mal3 practice liability action, each nonsettling party may re4 cover contribution and indemnification from any other

5 such nonsettling party who, if joined in the original action,

6 would have been liable for such damages.

7 (b) RELEASE, DISMISSAL, SETTLEMENT.—A party

8 who is released or dismissed (with or without prejudice)

9 from, or who, in good faith prior to a verdict or judgment,

10 settles a medical malpractice liability action shall, upon

11 the execution of the release, dismissal or settlement agree12 ment, be discharged from all claims for contribution or

13 indemnification brought by nonsettling or other settling

14 parties to such action. Any party to such action who as15 serts a lack of good faith shall have the burden of proof

16 concerning such good faith issue.

17 SEC. 1109. COLLATERAL SOURCES.

18 (a) IN GENERAL.—The total amount of damages re19 ceived by a claimant in a medical malpractice liability ac20 tion shall be reduced, in accordance with subsection (b),

21 by any other payment that has been made, or that will

22 be made, to such claimant to compensate such claimant

23 for an injury that was part of such action, including pay24 ments—

25 (1) under Federal or State disability or sickness

26 programs;
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1 (2) under Federal, State, or private health in2 surance programs;

3 (3) under private disability insurance programs;

4 (4) under employer wage continuation pro5 grams; and

6 (5) from any other source that are intended to

7 compensate such claimant for such injury.

8 (b) AMOUNT OF REDUCTION.—The amount by which

9 an award of damages to a claimant for an injury shall

10 be reduced under subsection (a) shall be—

11 (1) the total amount of any payments (other

12 than such award) that have been made, or that will

13 be made, to such claimant to compensate such

14 claimant for such injury; and

15 (2) the amount paid by such claimant (or by

16 the spouse, parent, or legal guardian of such claim17 ant) to secure the payments described in paragraph

18 (1).

19 SEC. 1110. DAMAGES RELATING TO MEDICAL PRODUCT LI20 ABILITY CLAIMS.

21 (a) IN GENERAL.—Noneconomic damages may not

22 be awarded with respect to any medical product liability

23 claim alleged against a medical product producer if—

24 (1) the drug or device that is the subject of

25 such claim—
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1 (A) was subject to approval under section

2 505, or premarket approval under section 515,

3 of the Federal Food, Drug, and Cosmetic Act

4 by the Food and Drug Administration with re5 spect to—

6 (i) the safety of the formulation or

7 performance of the aspect of the drug or

8 device; or

9 (ii) the adequacy of the packaging or

10 labeling of the drug or device, and

11 (B) was approved by the Food and Drug

12 Administration; or

13 (2) the drug or device is generally recognized as

14 safe and effective pursuant to conditions established

15 by the Food and Drug Administration and applica16 ble regulations, including packaging and labeling

17 regulations.

18 (b) EXCEPTION IN CASE OF WITHHELD INFORMA19 TION, MISREPRESENTATION, OR ILLEGAL PAYMENT.—

20 The provisions of subsection (a) shall not apply if it is

21 determined on the basis of clear and convincing evidence

22 that the medical product producer—

23 (1) withheld from or misrepresented to the

24 Food and Drug Administration information concern25 ing such drug or device that is required to be sub-
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•S 1807 IS

1 mitted under the Federal Food, Drug, and Cosmetic

2 Act or section 352 of the Public Health Service Act

3 and that is material and relevant to the action in4 volved; or

5 (2) made an illegal payment to an official of the

6 Food and Drug Administration for the purpose of

7 securing approval of the drug or device.

8 (c) DEFINITION.—As used in this section, the term

9 ‘‘clear and convincing evidence’’ is that measure or degree

10 of proof that will produce in the mind of the trier of fact

11 a firm belief or conviction as to the truth of the allegations

12 sought to be established, except that such measure or de13 gree of proof is more than that required under preponder14 ance of the evidence, but less than that required for proof

15 beyond a reasonable doubt.

16 SEC. 1111. CLASS ACTIONS.

17 (a) RECOVERY BY NAMED CLAIMANTS IN CLASS AC18 TIONS.—In any medical malpractice liability action that

19 is certified as a class action pursuant to Rule 23 of the

20 Federal Rules of Civil Procedure, the share of damages

21 under any final judgment or any settlement that is award22 ed to any party serving as a representative claimant shall

23 be calculated in the same manner as the shares of the

24 final judgment or settlement awarded to all other members

25 of the claimant class. The preceding sentence may not be
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1 construed to limit the award to a representative claimant

2 of reasonable compensation, costs, and expenses relating

3 to the representation of the class.

4 (b) PROHIBITION OF CONFLICTS OF INTEREST.—In

5 any medical malpractice liability action that is certified as

6 a class action pursuant to Rule 23 of the Federal Rules

7 of Civil Procedure, if a party is represented by any attor8 ney who has a beneficial interest in the subject of the liti9 gation, the court shall make a determination of whether

10 such interest constitutes a conflict of interest sufficient to

11 disqualify the attorney from representing the party.

12 (c) RECEIPT OF REFERRAL FEES.—In any medical

13 liability action that is certified as a class action pursuant

14 to Rule 23 of the Federal Rules of Civil Procedure, an

15 attorney may not represent the class if the attorney has

16 paid or is obligated to pay a fee to a third party who as17 sisted the attorney in obtaining the representation of any

18 party to the action. An attorney who knowingly violates

19 this subsection shall be barred from representing the party

20 in such action or any action to which this title applies.

21 SEC. 1112. DEFINITIONS.

22 (1) CLAIMANT.—The term ‘‘claimant’’ means

23 any person who alleges a medical malpractice liabil24 ity claim, and any person on whose behalf such a

25 claim is alleged, including the decedent in the case
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1 of an action brought through or on behalf of an es2 tate.

3 (2) COMMERCIAL LOSS.—The term ‘‘commercial

4 loss’’ means loss, including damage to the product

5 itself, which is not harm described in subparagraph

6 (A) or (B) of paragraph (5), and which is of a kind

7 for which there is a remedy under applicable con8 tract or commercial law.

9 (3) ECONOMIC DAMAGES.—The term ‘‘economic

10 damages’’ means damages paid to compensate an in11 dividual for hospital and other medical expenses, lost

12 wages, lost employment, and other pecuniary losses.

13 (4) HEALTH CARE PROFESSIONAL.—The term

14 ‘‘health care professional’’ means any individual who

15 provides health care services in a State and who is

16 required by the laws or regulations of the State to

17 be licensed or certified by the State to provide such

18 services in the State.

19 (5) HARM.—The term ‘‘harm’’ means—

20 (A) the personal physical illness, injury, or

21 death of a claimant;

22 (B) the mental anguish or emotional harm

23 of a claimant that is caused by or causing the

24 claimant personal physical illness or injury; or
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1 (C) the physical damage caused by a medi2 cal product to property other than the medical

3 product itself.

4 Such term does not include commercial loss or loss

5 or damage to a medical product.

6 (6) HEALTH CARE PROVIDER.—The term

7 ‘‘health care provider’’ means any organization or

8 institution that is engaged in the delivery of health

9 care services in a State and that is required by the

10 laws or regulations of the State to be licensed or cer11 tified by the State to engage in the delivery of such

12 services in the State.

13 (7) INJURY.—The term ‘‘injury’’ means any ill14 ness, disease, or other harm that is the subject of

15 a medical malpractice liability action or a medical

16 malpractice liability claim.

17 (8) MEDICAL MALPRACTICE LIABILITY AC18 TION.—The term ‘‘medical malpractice liability ac19 tion’’ means a civil action brought in a State or Fed20 eral court against a health care provider or health

21 care professional in which the plaintiff alleges a

22 medical malpractice liability claim, but does not in23 clude any action in which the plaintiff’s sole allega24 tion is an allegation of an intentional tort.
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1 (9) MEDICAL MALPRACTICE LIABILITY

2 CLAIM.—The term ‘‘medical malpractice liability

3 claim’’ means a claim in which the claimant alleges

4 that injury was caused by the provision of (or the

5 failure to provide) health care services or the use of

6 a medical product.

7 (10) MEDICAL PRODUCT.—

8 (A) IN GENERAL.—The term ‘‘medical

9 product’’ means, with respect to the allegation

10 of a claimant, a drug (as defined in section

11 201(g)(1) of the Federal Food, Drug, and Cos12 metic Act (21 U.S.C. 321(g)(1)) or a medical

13 device (as defined in section 201(h) of the Fed14 eral Food, Drug, and Cosmetic Act (21 U.S.C.

15 321(h)) if—

16 (i) such drug or device was subject to

17 premarket approval under section 505,

18 507, or 515 of the Federal Food, Drug,

19 and Cosmetic Act (21 U.S.C. 355, 357, or

20 360e) or section 351 of the Public Health

21 Service Act (42 U.S.C. 262) with respect

22 to the safety of the formulation or per23 formance of the aspect of such drug or de24 vice which is the subject of the claimant’s

25 allegation or the adequacy of the packag-
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1 ing or labeling of such drug or device, and

2 such drug or device is approved by the

3 Food and Drug Administration; or

4 (ii) the drug or device is generally rec5 ognized as safe and effective under regula6 tions issued by the Secretary of Health

7 and Human Services under section 201(p)

8 of the Federal Food, Drug, and Cosmetic

9 Act (21 U.S.C. 321(p)).

10 (B) EXCEPTION IN CASE OF MISREPRE11 SENTATION OR FRAUD.—Notwithstanding sub12 paragraph (A), the term ‘‘medical product’’

13 shall not include any product described in such

14 subparagraph if the claimant shows that the

15 product is approved by the Food and Drug Ad16 ministration for marketing as a result of with17 held information, misrepresentation, or an ille18 gal payment by manufacturer of the product.

19 (11) NONECONOMIC DAMAGES.—The term

20 ‘‘noneconomic damages’’ means damages paid to

21 compensate an individual for losses for physical and

22 emotional pain, suffering, inconvenience, physical

23 impairment, mental anguish, emotional distress, dis24 figurement, loss of enjoyment of life, loss of society

25 and companionship, loss of consortium, injury to
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1 reputation, humiliation, and other noneconomic in2 jury.

3 (12) PERSON.—The term ‘‘person’’ means any

4 individual, corporation, company, association, firm,

5 partnership, society, joint stock company, or any

6 other entity, including any governmental entity.

7 SEC. 1113. SEVERABILITY.

8 If any provision of this title or the application of any

9 provision to any person or circumstance is held invalid,

10 the remainder of this title and the application of such pro11 visions to any other person or circumstance shall not be

12 affected by such invalidation.

13 SEC. 1114. EFFECTIVE DATE.

14 This title shall apply to all medical malpractice liabil15 ity actions commenced on or after the date of enactment

16 of this Act.

17 TITLE XII—ANTITRUST

18 REFORMS

19 SEC. 1201. ESTABLISHMENT OF LIMITED EXEMPTION PRO20 GRAM FOR HEALTH CARE JOINT VENTURES.

21 (a) ESTABLISHMENT.—

22 (1) IN GENERAL.—Not later than 6 months

23 after the date of the enactment of this Act, the At24 torney General, after consultation with the Secretary

25 of Health and Human Services and the Interagency
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1 Advisory Committee on Competition, Antitrust Pol2 icy, and Health Care, shall promulgate specific

3 guidelines under which a health care joint venture

4 may submit an application requesting that the At5 torney General provide the entities participating in

6 the joint venture with an exemption under which

7 (notwithstanding any other provision of law)—

8 (A) monetary recovery on a claim under

9 the antitrust laws shall be limited to actual

10 damages if the claim results from conduct with11 in the scope of the joint venture that occurs

12 while the exemption is in effect; and

13 (B) the conduct of the entity in making or

14 performing a contract to carry out the joint

15 venture shall not be deemed illegal per se under

16 the antitrust laws but shall be judged on the

17 basis of its reasonableness, taking into account

18 all relevant factors affecting competition, in19 cluding (but not limited to) effects on competi20 tion in properly defined, relevant research, de21 velopment, product, process, and service mar22 kets (taking into consideration worldwide capac23 ity to the extent that it may be appropriate in

24 the circumstances).
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1 (2) DEADLINE FOR RESPONSE.—The Attorney

2 General, after consultation with the Secretary and

3 the Advisory Committee, shall approve or disapprove

4 the application of a health care joint venture for an

5 exemption under this subsection not later than 30

6 days after the Attorney General receives the joint

7 venture’s application.

8 (3) PROVIDING REASONS FOR DISAPPROVAL.—

9 If the Attorney General disapproves the application

10 of a health care joint venture for an exemption

11 under this subsection, the Attorney General shall

12 provide the joint venture with a statement explaining

13 the reasons for the Attorney General’s disapproval.

14 (b) REQUIREMENTS FOR APPROVAL.—For purposes

15 of subsection (a), the Attorney General shall approve the

16 application of a health care joint venture for an exemption

17 under subsection (a) if an entity participating in the joint

18 venture submits to the Attorney General an application

19 not later than 30 days after the entity has entered into

20 a written agreement to participate in the joint venture (or

21 not later than 30 days after the date of the enactment

22 of this Act in the case of a joint venture in effect as of

23 such date) that contains the following information and as24 surances:
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1 (1) The identities of the parties to the joint

2 venture.

3 (2) The nature, objectives, and planned activi4 ties of the joint venture.

5 (3) Assurances that the entities participating in

6 the joint venture shall notify the Attorney General

7 of any changes in the information described in para8 graphs (1) and (2) during the period for which the

9 exemption is in effect.

10 (c) REVOCATION OF EXEMPTION.—

11 (1) IN GENERAL.—The Attorney General, after

12 consultation with the Secretary, may revoke an ex13 emption provided to a health care joint venture

14 under this section if, at any time during which the

15 exemption is in effect, the Attorney General finds

16 that the joint venture no longer meets the applicable

17 requirements for approval under subsection (b), ex18 cept that the Attorney General may not revoke such

19 an exemption if the failure of the health care joint

20 venture to meet such requirements is merely tech21 nical in nature.

22 (2) TIMING.—The revocation of an exemption

23 under paragraph (1) shall apply only to conduct of

24 the health care joint venture occurring after the ex25 emption is no longer in effect.
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1 (d) WITHDRAWAL OF APPLICATION.—Any party that

2 submits an application under this section may withdraw

3 such application at any time before the Attorney General’s

4 response to the application.

5 (e) REQUIREMENTS RELATING TO NOTICE AND PUB6 LICATION OF EXEMPTIONS AND RELATED INFORMA7 TION.—

8 (1) PUBLICATION OF APPROVED APPLICATIONS

9 FOR EXEMPTIONS IN FEDERAL REGISTER.—

10 (A) IN GENERAL.—With respect to each

11 exemption for a health care joint venture pro12 vided under subsection (a), the Attorney Gen13 eral (acting jointly with the Secretary) shall—

14 (i) prepare a notice with respect to

15 the joint venture that identifies the parties

16 to the venture and that describes the

17 planned activities of the venture;

18 (ii) submit the notice to the entities

19 participating in the joint venture; and

20 (iii) after submitting the notice to

21 such entities (but not later than 30 days

22 after approving the application for the ex23 emption for the joint venture), publish the

24 notice in the Federal Register.
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1 (B) EFFECT OF PUBLICATION.—An ex2 emption provided by the Attorney General

3 under subsection (a) shall take effect as of the

4 date of the publication in the Federal Register

5 of the notice with respect to the exemption pur6 suant to subparagraph (A).

7 (2) WAIVER OF DISCLOSURE REQUIREMENTS

8 FOR INFORMATION RELATING TO APPLICATIONS FOR

9 EXEMPTIONS.—

10 (A) IN GENERAL.—All information and

11 documentary material submitted as part of an

12 application of a health care joint venture for an

13 exemption under subsection (a), together with

14 any other information obtained by the Attorney

15 General, the Secretary, or the Advisory Com16 mittee in the course of any investigation, ad17 ministrative proceeding, or case with respect to

18 a potential violation of the antitrust laws by the

19 joint venture with respect to which the exemp20 tion applies, shall be exempt from disclosure

21 under section 552 of title 5, United States

22 Code, and shall not be made publicly available

23 by any agency of the United States to which

24 such section applies, except as relevant to a law

25 enforcement investigation or in a judicial or ad-
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1 ministrative proceeding in which such informa2 tion and material is subject to any protective

3 order.

4 (B) EXCEPTION FOR INFORMATION IN5 CLUDED IN FEDERAL REGISTER NOTICE.—Sub6 paragraph (A) shall not apply with respect to

7 information contained in a notice published in

8 the Federal Register pursuant to paragraph

9 (1).

10 (3) USE OF INFORMATION TO SUPPORT OR AN11 SWER CLAIMS UNDER ANTITRUST LAWS.—

12 (A) IN GENERAL.—Except as provided in

13 subparagraph (B), the fact of disclosure of con14 duct under an application for an exemption

15 under subsection (a) and the fact of publication

16 of a notice in the Federal Register under para17 graph (1) shall be admissible into evidence in

18 any judicial or administrative proceeding for the

19 sole purpose of establishing that a person is en20 titled to the protections provided by an exemp21 tion granted under subsection (a).

22 (B) EFFECT OF REJECTED APPLICA23 TION.—If the Attorney General denies, in whole

24 or in part, an application for an exemption

25 under subsection (a), or revokes an exemption
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1 under such section, neither the negative deter2 mination nor the statement of reasons therefor

3 shall be admissible into evidence in any admin4 istrative or judicial proceeding for the purpose

5 of supporting or answering any claim under the

6 antitrust laws.

7 SEC. 1202. ISSUANCE OF HEALTH CARE CERTIFICATES OF

8 PUBLIC ADVANTAGE.

9 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

10 Attorney General, after consultation with the Secretary

11 and the Advisory Committee, shall issue in accordance

12 with this section a certificate of public advantage to each

13 eligible health care joint venture that complies with the

14 requirements in effect under this section on or after the

15 expiration of the 1-year period that begins on the date

16 of the enactment of this Act (without regard to whether

17 or not the Attorney General has promulgated regulations

18 to carry out this section by such date). Such venture, and

19 the parties to such venture, shall not be liable under any

20 of the antitrust laws for conduct described in such certifi21 cate and engaged in by such venture if such conduct oc22 curs while such certificate is in effect.

23 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

24 CERTIFICATES.—
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1 (1) STANDARDS TO BE MET.—The Attorney

2 General shall issue a certificate to an eligible health

3 care joint venture if the Attorney General finds

4 that—

5 (A) the benefits that are likely to result

6 from carrying out the venture outweigh the re7 duction in competition (if any) that is likely to

8 result from the venture, and

9 (B) such reduction in competition is rea10 sonably necessary to obtain such benefits.

11 (2) FACTORS TO BE CONSIDERED.—

12 (A) WEIGHING OF BENEFITS AGAINST RE13 DUCTION IN COMPETITION.—For purposes of

14 making the finding described in paragraph

15 (1)(A), the Attorney General shall consider

16 whether the venture is likely —

17 (i) to maintain or to increase the

18 quality of health care,

19 (ii) to increase access to health care,

20 (iii) to achieve cost efficiencies that

21 will be passed on to health care consumers,

22 such as economies of scale, reduced trans23 action costs, and reduced administrative

24 costs,
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1 (iv) to preserve the operation of

2 health care facilities located in underserved

3 geographical areas,

4 (v) to improve utilization of health

5 care resources, and

6 (vi) to reduce inefficient health care

7 resource duplication.

8 (B) NECESSITY OF REDUCTION IN COM9 PETITION.—For purposes of making the finding

10 described in paragraph (1)(B), the Attorney

11 General shall consider—

12 (i) the ability of the providers of

13 health care services that are (or likely to

14 be) affected by the health care joint ven15 ture and the entities responsible for mak16 ing payments to such providers to nego17 tiate societally optimal payment and serv18 ice arrangements,

19 (ii) the effects of the health care joint

20 venture on premiums and other charges

21 imposed by the entities described in clause

22 (i), and

23 (iii) the availability of equally effi24 cient, less restrictive alternatives to achieve
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1 the benefits that are intended to be

2 achieved by carrying out the venture.

3 (c) ESTABLISHMENT OF CRITERIA AND PROCE4 DURES.—Subject to subsections (d) and (e), not later than

5 1 year after the date of the enactment of this Act, the

6 Attorney General and the Secretary shall establish jointly

7 by rule the criteria and procedures applicable to the issu8 ance of certificates under subsection (a). The rules shall

9 specify the form and content of the application to be sub10 mitted to the Attorney General to request a certificate,

11 the information required to be submitted in support of

12 such application, the procedures applicable to denying and

13 to revoking a certificate, and the procedures applicable to

14 the administrative appeal (if such appeal is authorized by

15 rule) of the denial and the revocation of a certificate. Such

16 information may include the terms of the health care joint

17 venture (in the case of a venture in existence as of the

18 time of the application) and implementation plan for the

19 joint venture.

20 (d) ELIGIBLE HEALTH CARE JOINT VENTURE.—To

21 be an eligible health care joint venture for purposes of this

22 section, a health care joint venture shall submit to the At23 torney General an application that complies with the rules

24 in effect under subsection (c) and that includes—
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1 (1) an agreement by the parties to the venture

2 that the venture will not foreclose competition by en3 tering into contracts that prevent health care provid4 ers from providing health care in competition with

5 the venture,

6 (2) an agreement that the venture will submit

7 to the Attorney General annually a report that de8 scribes the operations of the venture and informa9 tion regarding the impact of the venture on health

10 care and on competition in health care, and

11 (3) an agreement that the parties to the ven12 ture will notify the Attorney General and the Sec13 retary of the termination of the venture not later

14 than 30 days after such termination occurs.

15 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

16 Not later than 30 days after an eligible health care joint

17 venture submits to the Attorney General an application

18 that complies with the rules in effect under subsection (c)

19 and with subsection (d), the Attorney General shall issue

20 or deny the issuance of such certificate. If, before the expi21 ration of such 30-day period, the Attorney General fails

22 to issue or deny the issuance of such certificate, the Attor23 ney General shall be deemed to have issued such certifi24 cate.
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1 (f) REVOCATION OF CERTIFICATE.—Whenever the

2 Attorney General finds that a health care joint venture

3 with respect to which a certificate is in effect does not

4 meet the standards specified in subsection (b), the Attor5 ney General shall revoke such certificate.

6 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

7 (1) DENIAL AND REVOCATION OF CERTIFI8 CATES.—If the Attorney General denies an applica9 tion for a certificate or revokes a certificate, the At10 torney General shall include in the notice of denial

11 or revocation a statement of the reasons relied upon

12 for the denial or revocation of such certificate.

13 (2) JUDICIAL REVIEW.—

14 (A) AFTER ADMINISTRATIVE PROCEED15 ING.—(i) If the Attorney General denies an ap16 plication submitted or revokes a certificate is17 sued under this section after an opportunity for

18 hearing on the record, then any party to the

19 health care joint venture involved may com20 mence a civil action, not later than 60 days

21 after receiving notice of the denial or revoca22 tion, in an appropriate district court of the

23 United States for review of the record of such

24 denial or revocation.
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1 (ii) As part of the Attorney General’s an2 swer, the Attorney General shall file in such

3 court a certified copy of the record on which

4 such denial or revocation is based. The findings

5 of fact of the Attorney General may be set aside

6 only if found to be unsupported by substantial

7 evidence in such record taken as a whole.

8 (B) DENIAL OR REVOCATION WITHOUT AD9 MINISTRATIVE PROCEEDING.—If the Attorney

10 General denies an application submitted or re11 vokes a certificate issued under this section

12 without an opportunity for hearing on the

13 record, then any party to the health care joint

14 venture involved may commence a civil action,

15 not later than 60 days after receiving notice of

16 the denial or revocation, in an appropriate dis17 trict court of the United States for de novo re18 view of such denial or revocation.

19 (h) EXEMPTION.—A person shall not be liable under

20 any of the antitrust laws for conduct necessary—

21 (1) to prepare, agree to prepare, or attempt to

22 agree to prepare an application to request a certifi23 cate under this section, or
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1 (2) to attempt to enter into any health care

2 joint venture with respect to which such a certificate

3 is in effect.

4 SEC. 1203. INTERAGENCY ADVISORY COMMITTEE ON COM5 PETITION, ANTITRUST POLICY, AND HEALTH

6 CARE.

7 (a) ESTABLISHMENT.—There is hereby established

8 the Interagency Advisory Committee on Competition,

9 Antitrust Policy, and Health Care. The Advisory Commit10 tee shall be composed of—

11 (1) the Secretary of Health and Human Serv12 ices (or the designee of the Secretary);

13 (2) the Attorney General (or the designee of the

14 Attorney General);

15 (3) the Director of the Office of Management

16 and Budget (or the designee of the Director); and

17 (4) a representative of the Federal Trade Com18 mission.

19 (b) DUTIES.—The duties of the Advisory Committee

20 are—

21 (1) to discuss and evaluate competition and

22 antitrust policy, and their implications with respect

23 to the performance of health care markets;

24 (2) to analyze the effectiveness of health care

25 joint ventures receiving exemptions under the pro-
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1 gram established under section 1201(a) or certifi2 cates under section 1202 in reducing the costs of

3 and expanding access to the health care services that

4 are the subject of such ventures; and

5 (3) to make such recommendations to Congress

6 not later than 2 years after the date of the enact7 ment of this Act (and at such subsequent periods as

8 the Advisory Committee considers appropriate) re9 garding modifications to the program established

10 under section 1201(a) or to section 1202 as the Ad11 visory Committee considers appropriate, including

12 modifications relating to the costs to health care

13 providers of obtaining an exemption for a joint ven14 ture under such program.

15 SEC. 1204. DEFINITIONS.

16 For purposes of this title:

17 (1) The term ‘‘Advisory Committee’’ means the

18 Interagency Advisory Committee on Competition,

19 Antitrust Policy, and Health Care established under

20 section 1203.

21 (2) The term ‘‘antitrust laws’’—

22 (A) has the meaning given it in subsection

23 (a) of the first section of the Clayton Act (15

24 U.S.C. 12(a)), except that such term includes

25 section 5 of the Federal Trade Commission Act
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1 (15 U.S.C. 45) to the extent such section ap2 plies to unfair methods of competition; and

3 (B) includes any State law similar to the

4 laws referred to in subparagraph (A).

5 (3) The term ‘‘certificate’’ means a certificate

6 of public advantage authorized to be issued under

7 section 1202(a).

8 (4) The term ‘‘health care joint venture’’ means

9 an agreement (whether existing or proposed) be10 tween 2 or more providers of health care services

11 that is entered into solely for the purpose of sharing

12 in the provision of health care services and that in13 volves substantial integration or financial risk-shar14 ing between the parties, but does not include the ex15 changing of information, the entering into of any

16 agreement, or the engagement in any other conduct

17 that is not reasonably required to carry out such

18 agreement.

19 (5) The term ‘‘health care services’’ includes

20 services related to the delivery or administration of

21 health care services.

22 (6) The term ‘‘liable’’ means liable for any civil

23 or criminal violation of the antitrust laws.

24 (7) The term ‘‘provider of health care services’’

25 means any individual or entity that is engaged in the
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1 delivery of health care services in a State and that

2 is required by State law or regulation to be licensed

3 or certified by the State to engage in the delivery of

4 such services in the State.

5 TITLE XIII—EXPENDITURE TAR6 GETS FOR THE MEDICAID

7 AND MEDICARE PROGRAMS

8 SEC. 1301. DETERMINATION OF EXPENDITURES UNDER

9 THE MEDICAID AND MEDICARE PROGRAMS.

10 (a) DETERMINATION OF EXCESS EXPENDITURES.—

11 (1) IN GENERAL.—Not later than 30 days after

12 the end of each fiscal year beginning with fiscal year

13 1995, the Director of the Office of Management and

14 Budget (hereafter referred to in this title as the

15 ‘‘Director’’), in consultation with the Secretary, shall

16 determine the amount of medicaid excess expendi17 tures and medicare excess expenditures for such fis18 cal year.

19 (2) DEFINITIONS.—For purposes of this title—

20 (A) MEDICAID EXCESS EXPENDITURES.—

21 The term ‘‘medicaid excess expenditures’’ for a

22 fiscal year means the amount by which the Fed23 eral expenditures under the medicaid program

24 for such fiscal year exceed the target expendi-
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1 ture for such program as determined under

2 subsection (b)(1) for such fiscal year.

3 (B) MEDICARE EXCESS EXPENDITURES.—

4 The term ‘‘medicare excess expenditures’’ for a

5 fiscal year means the amount by which the ex6 penditures under the medicare program for

7 such fiscal year exceed the target expenditure

8 for such program as determined under sub9 section (b)(2) for such fiscal year.

10 (C) MEDICAID PROGRAM.—The term

11 ‘‘medicaid program’’ means the program under

12 title XIX of the Social Security Act.

13 (D) MEDICARE PROGRAM.—The term

14 ‘‘medicare program’’ means the program under

15 title XVIII of the Social Security Act.

16 (b) TARGET EXPENDITURES.—

17 (1) MEDICAID PROGRAM.—

18 (A) IN GENERAL.—The target expenditure

19 determined under this paragraph for the medic20 aid program for a fiscal year shall be an

21 amount equal to the applicable percentage of

22 the total Federal expenditures under the medic23 aid program for the previous fiscal year.
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1 (B) MEDICAID APPLICABLE PERCENT2 AGE.—For purposes of subparagraph (A), the

3 medicaid applicable percentage is—

4 (i) 106.8 percent for the determina5 tion with respect to fiscal year 1995;

6 (ii) 106.9 percent for the determina7 tion with respect to fiscal year 1996; and

8 (iii) 107 percent for the determination

9 with respect to fiscal year 1997 and suc10 ceeding fiscal years.

11 (2) MEDICARE PROGRAM.—

12 (A) IN GENERAL.—The target expenditure

13 determined under this paragraph for the medi14 care program for a fiscal year shall be an

15 amount equal to the applicable percentage of

16 the total expenditures under the medicare pro17 gram for the previous fiscal year.

18 (B) MEDICARE APPLICABLE PERCENT19 AGE.—For purposes of subparagraph (A), the

20 medicare applicable percentage is—

21 (i) 109.4 percent for the determina22 tion with respect to fiscal year 1995;

23 (ii) 108.9 percent for the determina24 tion with respect to fiscal year 1996;
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1 (iii) 108.5 percent for the determina2 tion with respect to fiscal year 1997; and

3 (iv) 108 percent for the determination

4 with respect to fiscal year 1998 and suc5 ceeding fiscal years.

6 SEC. 1302. DELAY OF HEALTH INSURANCE BENEFITS DUE

7 TO EXCESS EXPENDITURES.

8 (a) IN GENERAL.—If the Director determines that

9 there are medicaid or medicare excess expenditures for a

10 fiscal year under section 1301, any category of health in11 surance benefit described in subsection (b) that is effective

12 in the taxable or calendar year (whichever is applicable)

13 beginning after such fiscal year may be delayed until the

14 following year. This subsection shall be applied only to so

15 many of the categories of health insurance benefits de16 scribed in subsection (b) in the order in which such cat17 egories are listed such that the savings resulting from such

18 delay at least equal the costs of the medicaid and medicare

19 excess expenditures.

20 (b) HEALTH INSURANCE BENEFITS.—The categories

21 of health insurance benefits described in this subsection

22 are as follows:

23 (1) The tax credit under section 34A of the In24 ternal Revenue Code of 1986 applicable to individ-
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1 uals described in subparagraphs (C) and (D) of sec2 tion 34A(g)(1).

3 (2) The tax credit under section 34A of the In4 ternal Revenue Code of 1986 applicable to individ5 uals described in subparagraph (B) of section

6 34A(g)(1).

7 (3) The tax credit under section 34A of the In8 ternal Revenue Code of 1986 applicable to individ9 uals described in subparagraph (A) of section

10 34A(g)(1).

11 (4) The tax exclusion under section 106A of the

12 Internal Revenue Code of 1986.

13 (5) Assistance to individuals with preexisting

14 conditions in purchasing health insurance under sec15 tion 501.

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