II

105TH CONGRESS

1ST SESSION S. 21

To establish a medical education trust fund, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 21, 1997

Mr. MOYNIHAN introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To establish a medical education trust fund, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medical Education Trust Fund Act of 1997’’.

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

7 this title is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Medical Education Trust Fund.

Sec. 3. Amendments to medicare program.

Sec. 4. Amendments to medicaid program.

Sec. 5. Assessments on insured and self-insured health plans.

Sec. 6. Medical Education Advisory Commission.

Sec. 7. Demonstration projects.
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1 SEC. 2. MEDICAL EDUCATION TRUST FUND.

2 The Social Security Act (42 U.S.C. 300 et seq.) is

3 amended by adding after title XX the following new title:

4 ‘‘TITLE XXI—MEDICAL EDUCATION TRUST

5 FUND

6 ‘‘TABLE OF CONTENTS OF TITLE

‘‘Sec. 2101. Establishment of Trust Fund.

‘‘Sec. 2102. Payments to medical schools.

‘‘Sec. 2103. Payments to teaching hospitals.

7 ‘‘SEC. 2101. ESTABLISHMENT OF TRUST FUND.

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

9 Treasury of the United States a fund to be known as the

10 Medical Education Trust Fund (in this title referred to

11 as the ‘Trust Fund’), consisting of the following accounts:

12 ‘‘(1) The Medical School Account.

13 ‘‘(2) The Medicare Teaching Hospital Indirect

14 Account.

15 ‘‘(3) The Medicare Teaching Hospital Direct

16 Account.

17 ‘‘(4) The Non-Medicare Teaching Hospital In18 direct Account.

19 ‘‘(5) The Non-Medicare Teaching Hospital Di20 rect Account.

21 Each such account shall consist of such amounts as are

22 allocated and transferred to such account under this sec23 tion, sections 1876(a)(7), 1886(j) and 1931, and section
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1 4503 of the Internal Revenue Code of 1986. Amounts in

2 the accounts of the Trust Fund shall remain available

3 until expended.

4 ‘‘(b) EXPENDITURES FROM TRUST FUND.—

5 Amounts in the accounts of the Trust Fund are available

6 to the Secretary for making payments under sections 2102

7 and 2103.

8 ‘‘(c) INVESTMENT.—

9 ‘‘(1) IN GENERAL.—The Secretary of the

10 Treasury shall invest amounts in the accounts of the

11 Trust Fund which the Secretary determines are not

12 required to meet current withdrawals from the Trust

13 Fund. Such investments may be made only in inter14 est-bearing obligations of the United States. For

15 such purpose, such obligations may be acquired on

16 original issue at the issue price, or by purchase of

17 outstanding obligations at the market price.

18 ‘‘(2) SALE OF OBLIGATIONS.—The Secretary of

19 the Treasury may sell at market price any obligation

20 acquired under paragraph (1).

21 ‘‘(3) AVAILABILITY OF INCOME.—Any interest

22 derived from obligations held in each such account,

23 and proceeds from any sale or redemption of such

24 obligations, are hereby appropriated to such account.
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1 ‘‘(d) MONETARY GIFTS TO TRUST FUND.—There are

2 appropriated to the Trust Fund such amounts as may be

3 unconditionally donated to the Federal Government as

4 gifts to the Trust Fund. Such amounts shall be allocated

5 and transferred to the accounts described in subsection

6 (a) in the same proportion as the amounts in each of the

7 accounts bears to the total amount in all the accounts of

8 the Trust Fund.

9 ‘‘SEC. 2102. PAYMENTS TO MEDICAL SCHOOLS.

10 ‘‘(a) FEDERAL PAYMENTS TO MEDICAL SCHOOLS

11 FOR CERTAIN COSTS.—

12 ‘‘(1) IN GENERAL.—In the case of a medical

13 school that in accordance with paragraph (2) sub14 mits to the Secretary an application for fiscal year

15 1998 or any subsequent fiscal year, the Secretary

16 shall make payments for such year to the medical

17 school for the purpose specified in paragraph (3).

18 The Secretary shall make such payments from the

19 Medical School Account in an amount determined in

20 accordance with subsection (b), and may administer

21 the payments as a contract, grant, or cooperative

22 agreement.

23 ‘‘(2) APPLICATION FOR PAYMENTS.—For pur24 poses of paragraph (1), an application for payments
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1 under such paragraph for a fiscal year is in accord2 ance with this paragraph if—

3 ‘‘(A) the medical school involved submits

4 the application not later than the date specified

5 by the Secretary; and

6 ‘‘(B) the application is in such form, is

7 made in such manner, and contains such agree8 ments, assurances, and information as the Sec9 retary determines to be necessary to carry out

10 this section.

11 ‘‘(3) PURPOSE OF PAYMENTS.—The purpose of

12 payments under paragraph (1) is to assist medical

13 schools in maintaining and developing quality edu14 cational programs in an increasingly competitive

15 health care system.

16 ‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;

17 ANNUAL AMOUNT OF PAYMENTS.—

18 ‘‘(1) AVAILABILITY OF TRUST FUND FOR PAY19 MENTS.—The following amounts shall be available

20 for a fiscal year for making payments under sub21 section (a) from the amount allocated and trans22 ferred to the Medical School Account under sections

23 1876(a)(7), 1886(j), 1931, 2101 (c)(3) and (d), and

24 section 4503 of the Internal Revenue Code of 1986:
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1 ‘‘(A) In the case of fiscal year 1998,

2 $200,000,000.

3 ‘‘(B) In the case of fiscal year 1999,

4 $300,000,000.

5 ‘‘(C) In the case of fiscal year 2000,

6 $400,000,000.

7 ‘‘(D) In the case of fiscal year 2001,

8 $500,000,000.

9 ‘‘(E) In the case of fiscal year 2002,

10 $600,000,000.

11 ‘‘(F) In the case of each subsequent fiscal

12 year, the amount specified in this paragraph in

13 the previous fiscal year updated through the

14 midpoint of the year by the estimated percent15 age change in the general health care inflation

16 factor (as defined in subsection (d)) during the

17 12-month period ending at that midpoint, with

18 appropriate adjustments to reflect previous

19 underestimations or overestimations under this

20 subparagraph in the projected health care infla21 tion factor.

22 ‘‘(2) AMOUNT OF PAYMENTS FOR MEDICAL

23 SCHOOLS.—
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1 ‘‘(A) IN GENERAL.—Subject to the annual

2 amount available under paragraph (1) for a fis3 cal year, the amount of payments required

4 under subsection (a) to be made to a medical

5 school that submits to the Secretary an applica6 tion for such year in accordance with subsection

7 (a)(2) is an amount equal to an amount deter8 mined by the Secretary in accordance with sub9 paragraph (B).

10 ‘‘(B) DEVELOPMENT OF FORMULA.—The

11 Secretary shall develop a formula for allocation

12 of funds to medical schools under this section

13 consistent with the purpose described in sub14 section (a)(3).

15 ‘‘(c) MEDICAL SCHOOL DEFINED.—For purposes of

16 this section, the term ‘medical school’ means a school of

17 medicine (as defined in section 799 of the Public Health

18 Service Act) or a school of osteopathic medicine (as de19 fined in such section).

20 ‘‘(d) GENERAL HEALTH CARE INFLATION FAC21 TOR.—The term ‘general health care inflation factor’

22 means the consumer price index for medical services as

23 determined by the Bureau of Labor Statistics.
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1 ‘‘SEC. 2103. PAYMENTS TO TEACHING HOSPITALS.

2 ‘‘(a) FORMULA PAYMENTS TO ELIGIBLE ENTI3 TIES.—

4 ‘‘(1) IN GENERAL.—In the case of any fiscal

5 year beginning after September 30, 1997, the Sec6 retary shall make payments to each eligible entity

7 that, in accordance with paragraph (2), submits to

8 the Secretary an application for such fiscal year.

9 Such payments shall be made from the Trust Fund,

10 and the total of the payments to the eligible entity

11 for the fiscal year shall equal the sum of the

12 amounts determined under subsections (b), (c), (d),

13 and (e).

14 ‘‘(2) APPLICATION.—For purposes of para15 graph (1), an application shall contain such informa16 tion as may be necessary for the Secretary to make

17 payments under such paragraph to an eligible entity

18 during a fiscal year. An application shall be treated

19 as submitted in accordance with this paragraph if it

20 is submitted not later than the date specified by the

21 Secretary, and is made in such form and manner as

22 the Secretary may require.

23 ‘‘(3) PERIODIC PAYMENTS.—Payments under

24 paragraph (1) to an eligible entity for a fiscal year

25 shall be made periodically, at such intervals and in
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1 such amounts as the Secretary determines to be ap2 propriate (subject to applicable Federal law regard3 ing Federal payments).

4 ‘‘(4) ADMINISTRATOR OF PROGRAMS.—The Sec5 retary shall carry out responsibility under this title

6 by acting through the Administrator of the Health

7 Care Financing Administration.

8 ‘‘(5) ELIGIBLE ENTITY.—For purposes of this

9 title, the term ‘eligible entity’, with respect to any

10 fiscal year, means—

11 ‘‘(A) for payment under subsections (b)

12 and (c), an entity which would be eligible to re13 ceive payments for such fiscal year under—

14 ‘‘(i) section 1886(d)(5)(B), if such

15 payments had not been terminated for dis16 charges occurring after September 30,

17 1997;

18 ‘‘(ii) section 1886(h), if such pay19 ments had not been terminated for cost re20 porting periods beginning after September

21 30, 1997; or

22 ‘‘(iii) both sections; or

23 ‘‘(B) for payment under subsections (d)

24 and (e)—
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1 ‘‘(i) an entity which meets the re2 quirement of subparagraph (A); or

3 ‘‘(ii) an entity which the Secretary de4 termines should be considered an eligible

5 entity.

6 ‘‘(b) DETERMINATION OF AMOUNT FROM MEDICARE

7 TEACHING HOSPITAL INDIRECT ACCOUNT.—

8 ‘‘(1) IN GENERAL.—The amount determined for

9 an eligible entity for a fiscal year under this sub10 section is the amount equal to the applicable per11 centage of the total amount allocated and trans12 ferred to the Medicare Teaching Hospital Indirect

13 Account under sections 1876(a)(7) and 1886(j)(1),

14 and subsections (c)(3) and (d) of section 2101 for

15 such fiscal year.

16 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

17 of paragraph (1), the applicable percentage for any

18 fiscal year is equal to the percentage of the total

19 payments which would have been made to the eligi20 ble entity in such fiscal year under section

21 1886(d)(5)(B) if—

22 ‘‘(A) such payments had not been termi23 nated for discharges occurring after September

24 30, 1997; and
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1 ‘‘(B) such payments included payments for

2 individuals enrolled in a plan under section

3 1876, except that for fiscal years 1998, 1999,

4 and 2000, only the applicable percentage (as

5 defined in section 1876(a)(7)(B)) of such pay6 ments shall be taken into account.

7 ‘‘(c) DETERMINATION OF AMOUNT FROM MEDICARE

8 TEACHING HOSPITAL DIRECT ACCOUNT.—

9 ‘‘(1) IN GENERAL.—The amount determined for

10 an eligible entity for a fiscal year under this sub11 section is the amount equal to the applicable per12 centage of the total amount allocated and trans13 ferred to the Medicare Teaching Hospital Direct Ac14 count under sections 1876(a)(7) and 1886(j)(2), and

15 subsections (c)(3) and (d) of section 2101 for such

16 fiscal year.

17 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

18 of paragraph (1), the applicable percentage for any

19 fiscal year is equal to the percentage of the total

20 payments which would have been made to the eligi21 ble entity in such fiscal year under section 1886(h)

22 if—

23 ‘‘(A) such payments had not been termi24 nated for cost reporting periods beginning after

25 September 30, 1997; and
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1 ‘‘(B) such payments included payments for

2 individuals enrolled in a plan under section

3 1876, except that for fiscal years 1998, 1999,

4 and 2000, only the applicable percentage (as

5 defined in section 1876(a)(7)(B)) of such pay6 ments shall be taken into account.

7 ‘‘(d) DETERMINATION OF AMOUNT FROM NON-MED8 ICARE TEACHING HOSPITAL INDIRECT ACCOUNT.—

9 ‘‘(1) IN GENERAL.—The amount determined for

10 an eligible entity for a fiscal year under this sub11 section is the amount equal to the applicable per12 centage of the total amount allocated and trans13 ferred to the Non-Medicare Teaching Hospital Indi14 rect Account for such fiscal year under section 1931,

15 subsections (c)(3) and (d) of section 2101, and sec16 tion 4503 of the Internal Revenue Code of 1986.

17 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

18 of paragraph (1), the applicable percentage for any

19 fiscal year for an eligible entity is equal to the per20 centage of the total payments which, as determined

21 by the Secretary, would have been made in such fis22 cal year under section 1886(d)(5)(B) if—

23 ‘‘(A) such payments had not been termi24 nated for discharges occurring after September

25 30, 1997; and
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1 ‘‘(B) non-medicare patients were taken

2 into account in lieu of medicare patients.

3 ‘‘(e) DETERMINATION OF AMOUNT FROM NON-MED4 ICARE TEACHING HOSPITAL DIRECT ACCOUNT.—

5 ‘‘(1) IN GENERAL.—The amount determined for

6 an eligible entity for a fiscal year under this sub7 section is the amount equal to the applicable per8 centage of the total amount allocated and trans9 ferred to the Non-Medicare Teaching Hospital Di10 rect Account for such fiscal year under section 1931,

11 subsections (c)(3) and (d) of section 2101, and sec12 tion 4503 of the Internal Revenue Code of 1986.

13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

14 of paragraph (1), the applicable percentage for any

15 fiscal year for an eligible entity is equal to the per16 centage of the total payments which, as determined

17 by the Secretary, would have been made in such fis18 cal year under section 1886(h) if—

19 ‘‘(A) such payments had not been termi20 nated for cost reporting periods beginning after

21 September 30, 1997; and

22 ‘‘(B) non-medicare patients were taken

23 into account in lieu of medicare patients.’’.
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1 SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.

2 (a) IN GENERAL.—Section 1886 of the Social Secu3 rity Act (42 U.S.C. 1395ww) is amended—

4 (1) in subsection (d)(5)(B), in the matter pre5 ceding clause (i), by striking ‘‘The Secretary shall

6 provide’’ and inserting the following: ‘‘For dis7 charges occurring before October 1, 1997, the Sec8 retary shall provide’’;

9 (2) in subsection (h)—

10 (A) in paragraph (1), in the first sentence,

11 by striking ‘‘the Secretary shall provide’’ and

12 inserting ‘‘the Secretary shall, subject to para13 graph (6), provide’’; and

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

15 paragraph:

16 ‘‘(6) LIMITATION.—

17 ‘‘(A) IN GENERAL.—The authority to

18 make payments under this subsection shall not

19 apply with respect to—

20 ‘‘(i) cost reporting periods beginning

21 after September 30, 1997; and

22 ‘‘(ii) any portion of a cost reporting

23 period beginning on or before such date

24 which occurs after such date.

25 ‘‘(B) RULE OF CONSTRUCTION.—This

26 paragraph may not be construed as authorizing
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1 any payment under section 1861(v) with re2 spect to graduate medical education.’’; and

3 (3) by adding at the end the following new sub4 section:

5 ‘‘(j) TRANSFERS TO MEDICAL EDUCATION TRUST

6 FUND.—

7 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU8 CATION.—

9 ‘‘(A) TRANSFER.—

10 ‘‘(i) IN GENERAL.—From the Federal

11 Hospital Insurance Trust Fund, the Sec12 retary shall, for fiscal year 1998 and each

13 subsequent fiscal year, transfer to the

14 Medical Education Trust Fund an amount

15 equal to the amount estimated by the Sec16 retary under subparagraph (B).

17 ‘‘(ii) ALLOCATION.—Of the amount

18 transferred under clause (i)—

19 ‘‘(I) there shall be allocated and

20 transferred to the Medical School Ac21 count an amount which bears the

22 same ratio to the total amount avail23 able under section 2102(b)(1) for the

24 fiscal year (reduced by the balance in
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1 such account at the end of the preced2 ing fiscal year) as the amount trans3 ferred under clause (i) bears to the

4 total amounts transferred to the Med5 ical Education Trust Fund under title

6 XXI (excluding amounts transferred

7 under subsections (c)(3) and (d) of

8 section 2101) for such fiscal year; and

9 ‘‘(II) the remainder shall be allo10 cated and transferred to the Medicare

11 Teaching Hospital Indirect Account.

12 ‘‘(B) DETERMINATION OF AMOUNTS.—The

13 Secretary shall make an estimate for each fiscal

14 year involved of the nationwide total of the

15 amounts that would have been paid under sub16 section (d)(5)(B) to hospitals during the fiscal

17 year if such payments had not been terminated

18 for discharges occurring after September 30,

19 1997.

20 ‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—

21 ‘‘(A) TRANSFER.—

22 ‘‘(i) IN GENERAL.—From the Federal

23 Hospital Insurance Trust Fund and the

24 Federal Supplementary Medical Insurance

25 Trust Fund, the Secretary shall, for fiscal
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1 year 1998 and each subsequent fiscal year,

2 transfer to the Medical Education Trust

3 Fund an amount equal to the amount esti4 mated by the Secretary under subpara5 graph (B).

6 ‘‘(ii) ALLOCATION.—Of the amount

7 transferred under clause (i)—

8 ‘‘(I) there shall be allocated and

9 transferred to the Medical School Ac10 count an amount which bears the

11 same ratio to the total amount avail12 able under section 2102(b)(1) for the

13 fiscal year (reduced by the balance in

14 such account at the end of the preced15 ing fiscal year) as the amount trans16 ferred under clause (i) bears to the

17 total amounts transferred to the Med18 ical Education Trust Fund under title

19 XXI (excluding amounts transferred

20 under subsections (c)(3) and (d) of

21 section 2101) for such fiscal year; and

22 ‘‘(II) the remainder shall be allo23 cated and transferred to the Medicare

24 Teaching Hospital Direct Account.
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1 ‘‘(B) DETERMINATION OF AMOUNTS.—For

2 each hospital, the Secretary shall make an esti3 mate for the fiscal year involved of the amount

4 that would have been paid under subsection (h)

5 to the hospital during the fiscal year if such

6 payments had not been terminated for cost re7 porting periods beginning after September 30,

8 1997.

9 ‘‘(C) ALLOCATION BETWEEN FUNDS.—In

10 providing for a transfer under subparagraph

11 (A) for a fiscal year, the Secretary shall provide

12 for an allocation of the amounts involved be13 tween part A and part B (and the trust funds

14 established under the respective parts) as rea15 sonably reflects the proportion of direct grad16 uate medical education costs of hospitals associ17 ated with the provision of services under each

18 respective part.’’.

19 (b) MEDICARE HMO’S.—Section 1876(a) of the So20 cial Security Act (42 U.S.C. 1395mm(a)) is amended by

21 inserting after paragraph (6) the following new paragraph:

22 ‘‘(7)(A) In determining the adjusted average per cap23 ita cost under paragraph (4) for fiscal years after 1997,

24 the Secretary shall not take into account the applicable

25 percentage of costs under sections 1886(d)(5)(B) (indirect
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1 costs of medical education) and 1886(h) (direct graduate

2 medical education costs).

3 ‘‘(B) For purposes of subparagraph (A), the applica4 ble percentage is—

5 ‘‘(i) for fiscal year 1998, 25 percent;

6 ‘‘(ii) for fiscal year 1999, 50 percent;

7 ‘‘(iii) for fiscal year 2000, 75 percent; and

8 ‘‘(iv) for fiscal year 2001 and each subsequent

9 fiscal year, 100 percent.

10 ‘‘(C)(i) There is appropriated and transferred to the

11 Medical Education Trust Fund each fiscal year an amount

12 equal to the aggregate amounts not taken into account

13 under paragraph (4) by reason of subparagraph (A).

14 ‘‘(ii) Of the amounts transferred under clause (i)—

15 ‘‘(I) there shall be allocated and transferred to

16 the Medical School Account an amount which bears

17 the same ratio to the total amount available under

18 section 2102(b)(1) for the fiscal year (reduced by

19 the balance in such account at the end of the pre20 ceding fiscal year) as the amount transferred under

21 clause (i) bears to the total amounts transferred to

22 the Medical Education Trust Fund under section

23 2101 (excluding amounts transferred under sub24 sections (c)(3) and (d) of such section) for such fis25 cal year; and
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1 ‘‘(II) the remainder shall be allocated and

2 transferred to the Medicare Teaching Hospital Indi3 rect Account under such section and the Medicare

4 Teaching Hospital Direct Account under such sec5 tion in the same proportion as the amounts attrib6 utable to the costs under sections 1886(d)(5)(B) and

7 1886(h) were of the amounts transferred under

8 clause (i).

9 ‘‘(iii) The Secretary shall make payments under

10 clause (i) from the Federal Hospital Insurance Trust

11 Fund and the Federal Supplementary Medical Insurance

12 Trust Fund, in the same manner as the Secretary deter13 mines under section 1886(j).’’.

14 SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.

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

16 Act (42 U.S.C. 1396 et seq.) is amended—

17 (1) by redesignating section 1931 as section

18 1932; and

19 (2) by inserting after section 1930, the follow20 ing new section:

21 ‘‘TRANSFER OF FUNDS TO ACCOUNTS

22 ‘‘SEC. 1931. (a) TRANSFER OF FUNDS.—

23 ‘‘(1) IN GENERAL.—For fiscal year 1998 and

24 each subsequent fiscal year, the Secretary shall

25 transfer to the Medical Education Trust Fund an
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1 amount equal to the amount determined under sub2 section (b).

3 ‘‘(2) ALLOCATION.—Of the amount transferred

4 under paragraph (1)—

5 ‘‘(A) there shall be allocated and trans6 ferred to the Medical School Account an

7 amount which bears the same ratio to the total

8 amount available under section 2102(b)(1) for

9 the fiscal year (reduced by the balance in such

10 account at the end of the preceding fiscal year)

11 as the amount transferred under paragraph (1)

12 bears to the total amounts transferred to the

13 Medical Education Trust Fund under title XXI

14 (excluding amounts transferred under sub15 sections (c)(3) and (d) of section 2101) for

16 such fiscal year; and

17 ‘‘(B) the remainder shall be allocated and

18 transferred to the Non-Medicare Teaching Hos19 pital Indirect Account and the Non-Medicare

20 Teaching Hospital Direct Account, in the same

21 proportion as the amounts transferred to each

22 account under section 1886(j) relate to the total

23 amounts transferred under such section for

24 such fiscal year.

25 ‘‘(b) AMOUNT DETERMINED.—
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1 ‘‘(1) OUTLAYS FOR ACUTE MEDICAL SERVICES

2 DURING PRECEDING FISCAL YEAR.—Beginning with

3 fiscal year 1998, the Secretary shall determine 5

4 percent of the total amount of Federal outlays made

5 under this title for acute medical services, as defined

6 in paragraph (2), for the preceding fiscal year.

7 ‘‘(2) ACUTE MEDICAL SERVICES DEFINED.—

8 The term ‘acute medical services’ means items and

9 services described in section 1905(a) other than the

10 following:

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

12 in section 1905(f)).

13 ‘‘(B) Intermediate care facility for the

14 mentally retarded services (as defined in section

15 1905(d)).

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

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

18 ‘‘(D) Private duty nursing services (as re19 ferred to in section 1905(a)(8)).

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

21 furnished under a waiver granted under sub22 section (c), (d), or (e) of section 1915.

23 ‘‘(F) Home and community care furnished

24 to functionally disabled elderly individuals

25 under section 1929.
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1 ‘‘(G) Community supported living arrange2 ments services under section 1930.

3 ‘‘(H) Case-management services (as de4 scribed in section 1915(g)(2)).

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

6 to in section 1905(a)(7)), clinic services, and re7 habilitation services that are furnished to an in8 dividual who has a condition or disability that

9 qualifies the individual to receive any of the

10 services described in a previous subparagraph.

11 ‘‘(J) Services furnished in an institution

12 for mental diseases (as defined in section

13 1905(i)).

14 ‘‘(c) ENTITLEMENT.—This section constitutes budget

15 authority in advance of appropriations Acts and rep16 resents the obligation of the Federal Government to pro17 vide for the payment to the Non-Medicare Teaching Hos18 pital Indirect Account, the Non-Medicare Teaching Hos19 pital Direct Account, and the Medical School Account of

20 amounts determined in accordance with subsections (a)

21 and (b).’’.

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

23 subsection (a) shall be effective on and after October 1,

24 1997.
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1 SEC. 5. ASSESSMENTS ON INSURED AND SELF-INSURED

2 HEALTH PLANS.

3 (a) GENERAL RULE.—Subtitle D of the Internal Rev4 enue Code of 1986 (relating to miscellaneous excise taxes)

5 is amended by adding after chapter 36 the following new

6 chapter:

7 ‘‘CHAPTER 37—HEALTH RELATED

8 ASSESSMENTS

‘‘SUBCHAPTER A. Insured and self-insured health plans.

9 ‘‘Subchapter A—Insured and Self-Insured

10 Health Plans

‘‘Sec. 4501. Health insurance and health-related administrative

services.

‘‘Sec. 4502. Self-insured health plans.

‘‘Sec. 4503. Transfer to accounts.

‘‘Sec. 4504. Definitions and special rules.

11 ‘‘SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED

12 ADMINISTRATIVE SERVICES.

13 ‘‘(a) IMPOSITION OF TAX.—There is hereby im14 posed—

15 ‘‘(1) on each taxable health insurance policy, a

16 tax equal to 1.5 percent of the premiums received

17 under such policy, and

18 ‘‘(2) on each amount received for health-related

19 administrative services, a tax equal to 1.5 percent of

20 the amount so received.

21 ‘‘(b) LIABILITY FOR TAX.—
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1 ‘‘(1) HEALTH INSURANCE.—The tax imposed

2 by subsection (a)(1) shall be paid by the issuer of

3 the policy.

4 ‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV5 ICES.—The tax imposed by subsection (a)(2) shall

6 be paid by the person providing the health-related

7 administrative services.

8 ‘‘(c) TAXABLE HEALTH INSURANCE POLICY.—For

9 purposes of this section—

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided in this section, the term ‘taxable health insur12 ance policy’ means any insurance policy providing

13 accident or health insurance with respect to individ14 uals residing in the United States.

15 ‘‘(2) EXEMPTION OF CERTAIN POLICIES.—The

16 term ‘taxable health insurance policy’ does not in17 clude any insurance policy if substantially all of the

18 coverage provided under such policy relates to—

19 ‘‘(A) liabilities incurred under workers’

20 compensation laws,

21 ‘‘(B) tort liabilities,

22 ‘‘(C) liabilities relating to ownership or use

23 of property,

24 ‘‘(D) credit insurance, or
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1 ‘‘(E) such other similar liabilities as the

2 Secretary may specify by regulations.

3 ‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES

4 OTHER COVERAGE.—In the case of any taxable

5 health insurance policy under which amounts are

6 payable other than for accident or health coverage,

7 in determining the amount of the tax imposed by

8 subsection (a)(1) on any premium paid under such

9 policy, there shall be excluded the amount of the

10 charge for the nonaccident or nonhealth coverage

11 if—

12 ‘‘(A) the charge for such nonaccident or

13 nonhealth coverage is either separately stated in

14 the policy, or furnished to the policyholder in a

15 separate statement, and

16 ‘‘(B) such charge is reasonable in relation

17 to the total charges under the policy.

18 In any other case, the entire amount of the premium

19 paid under such policy shall be subject to tax under

20 subsection (a)(1).

21 ‘‘(4) TREATMENT OF PREPAID HEALTH COV22 ERAGE ARRANGEMENTS.—

23 ‘‘(A) IN GENERAL.—In the case of any ar24 rangement described in subparagraph (B)—
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1 ‘‘(i) such arrangement shall be treated

2 as a taxable health insurance policy,

3 ‘‘(ii) the payments or premiums re4 ferred to in subparagraph (B)(i) shall be

5 treated as premiums received for a taxable

6 health insurance policy, and

7 ‘‘(iii) the person referred to in sub8 paragraph (B)(i) shall be treated as the is9 suer.

10 ‘‘(B) DESCRIPTION OF ARRANGEMENTS.—

11 An arrangement is described in this subpara12 graph if under such arrangement—

13 ‘‘(i) fixed payments or premiums are

14 received as consideration for any person’s

15 agreement to provide or arrange for the

16 provision of accident or health coverage to

17 residents of the United States, regardless

18 of how such coverage is provided or ar19 ranged to be provided, and

20 ‘‘(ii) substantially all of the risks of

21 the rates of utilization of services is as22 sumed by such person or the provider of

23 such services.
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1 ‘‘(d) HEALTH-RELATED ADMINISTRATIVE SERV2 ICES.—For purposes of this section, the term ‘health-re3 lated administrative services’ means—

4 ‘‘(1) the processing of claims or performance of

5 other administrative services in connection with acci6 dent or health coverage under a taxable health in7 surance policy if the charge for such services is not

8 included in the premiums under such policy, and

9 ‘‘(2) processing claims, arranging for provision

10 of accident or health coverage, or performing other

11 administrative services in connection with an appli12 cable self-insured health plan (as defined in section

13 4502(c)) established or maintained by a person

14 other than the person performing the services.

15 For purposes of paragraph (1), rules similar to the rules

16 of subsection (c)(3) shall apply.

17 ‘‘SEC. 4502. SELF-INSURED HEALTH PLANS.

18 ‘‘(a) IMPOSITION OF TAX.—In the case of any appli19 cable self-insured health plan, there is hereby imposed a

20 tax for each month equal to 1.5 percent of the sum of—

21 ‘‘(1) the accident or health coverage expendi22 tures for such month under such plan, and

23 ‘‘(2) the administrative expenditures for such

24 month under such plan to the extent such expendi25 tures are not subject to tax under section 4501.
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1 In determining the amount of expenditures under para2 graph (2), rules similar to the rules of subsection (d)(3)

3 apply.

4 ‘‘(b) LIABILITY FOR TAX.—

5 ‘‘(1) IN GENERAL.—The tax imposed by sub6 section (a) shall be paid by the plan sponsor.

7 ‘‘(2) PLAN SPONSOR.—For purposes of para8 graph (1), the term ‘plan sponsor’ means—

9 ‘‘(A) the employer in the case of a plan es10 tablished or maintained by a single employer,

11 ‘‘(B) the employee organization in the case

12 of a plan established or maintained by an em13 ployee organization, or

14 ‘‘(C) in the case of—

15 ‘‘(i) a plan established or maintained

16 by 2 or more employers or jointly by 1 or

17 more employers and 1 or more employee

18 organizations,

19 ‘‘(ii) a voluntary employees’ bene20 ficiary association under section 501(c)(9),

21 or

22 ‘‘(iii) any other association plan,

23 the association, committee, joint board of trust24 ees, or other similar group of representatives of

25 the parties who establish or maintain the plan.
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1 ‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—

2 For purposes of this section, the term ‘applicable self-in3 sured health plan’ means any plan for providing accident

4 or health coverage if any portion of such coverage is pro5 vided other than through an insurance policy.

6 ‘‘(d) ACCIDENT OR HEALTH COVERAGE EXPENDI7 TURES.—For purposes of this section—

8 ‘‘(1) IN GENERAL.—The accident or health cov9 erage expenditures of any applicable self-insured

10 health plan for any month are the aggregate expend11 itures paid in such month for accident or health cov12 erage provided under such plan to the extent such

13 expenditures are not subject to tax under section

14 4501.

15 ‘‘(2) TREATMENT OF REIMBURSEMENTS.—In

16 determining accident or health coverage expenditures

17 during any month of any applicable self-insured

18 health plan, reimbursements (by insurance or other19 wise) received during such month shall be taken into

20 account as a reduction in accident or health coverage

21 expenditures.

22 ‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—

23 Paragraph (1) shall not apply to any expenditure for

24 the acquisition or improvement of land or for the ac25 quisition or improvement of any property to be used
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1 in connection with the provision of accident or

2 health coverage which is subject to the allowance

3 under section 167, except that, for purposes of para4 graph (1), allowances under section 167 shall be

5 considered as expenditures.

6 ‘‘SEC. 4503. TRANSFER TO ACCOUNTS.

7 ‘‘For fiscal year 1998 and each subsequent fiscal

8 year, there are hereby appropriated and transferred to the

9 Medical Education Trust Fund amounts equivalent to

10 taxes received in the Treasury under sections 4501 and

11 4502, of which—

12 ‘‘(1) there shall be allocated and transferred to

13 the Medical School Account an amount which bears

14 the same ratio to the total amount available under

15 section 2102(b)(1) for the fiscal year (reduced by

16 the balance in such account at the end of the pre17 ceding fiscal year) as the amount transferred to the

18 Medical Education Trust Fund under title XXI of

19 the Social Security Act under this section bears to

20 the total amounts transferred to such Trust Fund

21 (excluding amounts transferred under subsections

22 (c)(3) and (d) of section 2101 of such Act) for such

23 fiscal year; and
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1 ‘‘(2) the remainder shall be allocated and trans2 ferred to the Non-Medicare Teaching Hospital Indi3 rect Account and the Non-Medicare Teaching Hos4 pital Direct Account, in the same proportion as the

5 amounts transferred to such account under section

6 1886(j) relate to the total amounts transferred

7 under such section for such fiscal year.

8 Such amounts shall be transferred in the same manner

9 as under section 9601.

10 ‘‘SEC. 4504. DEFINITIONS AND SPECIAL RULES.

11 ‘‘(a) DEFINITIONS.—For purposes of this sub12 chapter—

13 ‘‘(1) ACCIDENT OR HEALTH COVERAGE.—The

14 term ‘accident or health coverage’ means any cov15 erage which, if provided by an insurance policy,

16 would cause such policy to be a taxable health insur17 ance policy (as defined in section 4501(c)).

18 ‘‘(2) INSURANCE POLICY.—The term ‘insurance

19 policy’ means any policy or other instrument where20 by a contract of insurance is issued, renewed, or ex21 tended.

22 ‘‘(3) PREMIUM.—The term ‘premium’ means

23 the gross amount of premiums and other consider24 ation (including advance premiums, deposits, fees,

25 and assessments) arising from policies issued by a
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1 person acting as the primary insurer, adjusted for

2 any return or additional premiums paid as a result

3 of endorsements, cancellations, audits, or retrospec4 tive rating. Amounts returned where the amount is

5 not fixed in the contract but depends on the experi6 ence of the insurer or the discretion of management

7 shall not be included in return premiums.

8 ‘‘(4) UNITED STATES.—The term ‘United

9 States’ includes any possession of the United States.

10 ‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—

11 ‘‘(1) IN GENERAL.—For purposes of this sub12 chapter—

13 ‘‘(A) the term ‘person’ includes any gov14 ernmental entity, and

15 ‘‘(B) notwithstanding any other law or rule

16 of law, governmental entities shall not be ex17 empt from the taxes imposed by this subchapter

18 except as provided in paragraph (2).

19 ‘‘(2) EXEMPT GOVERNMENTAL PROGRAMS.—In

20 the case of an exempt governmental program—

21 ‘‘(A) no tax shall be imposed under section

22 4501 on any premium received pursuant to

23 such program or on any amount received for

24 health-related administrative services pursuant

25 to such program, and
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1 ‘‘(B) no tax shall be imposed under section

2 4502 on any expenditures pursuant to such

3 program.

4 ‘‘(3) EXEMPT GOVERNMENTAL PROGRAM.—For

5 purposes of this subchapter, the term ‘exempt gov6 ernmental program’ means—

7 ‘‘(A) the insurance programs established

8 by parts A and B of title XVIII of the Social

9 Security Act,

10 ‘‘(B) the medical assistance program es11 tablished by title XIX of the Social Security

12 Act,

13 ‘‘(C) any program established by Federal

14 law for providing medical care (other than

15 through insurance policies) to individuals (or

16 the spouses and dependents thereof) by reason

17 of such individuals being—

18 ‘‘(i) members of the Armed Forces of

19 the United States, or

20 ‘‘(ii) veterans, and

21 ‘‘(D) any program established by Federal

22 law for providing medical care (other than

23 through insurance policies) to members of In24 dian tribes (as defined in section 4(d) of the In25 dian Health Care Improvement Act).
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1 ‘‘(c) NO COVER OVER TO POSSESSIONS.—Notwith2 standing any other provision of law, no amount collected

3 under this subchapter shall be covered over to any posses4 sion of the United States.’’.

5 (b) CLERICAL AMENDMENT.—The table of chapters

6 for subtitle D of the Internal Revenue Code of 1986 is

7 amended by inserting after the item relating to chapter

8 36 the following new item:

‘‘CHAPTER 37. Health related assessments.’’

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

10 this section shall apply with respect to premiums received,

11 and expenses incurred, with respect to coverage for peri12 ods after September 30, 1997.

13 SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.

14 (a) ESTABLISHMENT.—There is hereby established

15 an advisory commission to be known as the Medical Edu16 cation Advisory Commission (in this section referred to as

17 the ‘‘Advisory Commission’’).

18 (b) DUTIES.—

19 (1) IN GENERAL.—The Advisory Commission

20 shall—

21 (A) conduct a thorough study of all mat22 ters relating to—

23 (i) the operation of the Medical Edu24 cation Trust Fund established under sec25 tion 2;
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1 (ii) alternative and additional sources

2 of graduate medical education funding;

3 (iii) alternative methodologies for

4 compensating teaching hospitals for grad5 uate medical education;

6 (iv) policies designed to maintain su7 perior research and educational capacities

8 in an increasing competitive health system;

9 (v) the role of medical schools in grad10 uate medical education; and

11 (vi) policies designed to expand eligi12 bility for graduate medical education pay13 ments to institutions other than teaching

14 hospitals;

15 (B) develop recommendations, including

16 the use of demonstration projects, on the mat17 ters studied under subparagraph (A) in con18 sultation with the Secretary of Health and

19 Human Services and the entities described in

20 paragraph (2);

21 (C) not later than January 1999, submit

22 an interim report to the Committee on Finance

23 of the Senate, the Committee on Ways and

24 Means of the House of Representatives, and the

25 Secretary of Health and Human Services; and
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1 (D) not later than January 2001, submit

2 a final report to the Committee on Finance of

3 the Senate, the Committee on Ways and Means

4 of the House of Representatives, and the Sec5 retary of Health and Human Services.

6 (2) ENTITIES DESCRIBED.—The entities de7 scribed in this paragraph are—

8 (A) other advisory groups, including the

9 Council on Graduate Medical Education, the

10 Prospective Payment Assessment Commission,

11 and the Physician Payment Review Commis12 sion;

13 (B) interested parties, including the Asso14 ciation of American Medical Colleges, the Asso15 ciation of Academic Health Centers, and the

16 American Medical Association;

17 (C) health care insurers, including man18 aged care entities; and

19 (D) other entities as determined by the

20 Secretary of Health and Human Services.

21 (c) NUMBER AND APPOINTMENT.—The membership

22 of the Advisory Commission shall include 9 individuals

23 who are appointed to the Advisory Commission from

24 among individuals who are not officers or employees of

25 the United States. Such individuals shall be appointed by
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1 the Secretary of Health and Human Services, and shall

2 include individuals from each of the following categories:

3 (1) Physicians who are faculty members of

4 medical schools.

5 (2) Officers or employees of teaching hospitals.

6 (3) Officers or employees of health plans.

7 (4) Deans of medical schools.

8 (5) Such other individuals as the Secretary de9 termines to be appropriate.

10 (d) TERMS.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), members of the Advisory Commission

13 shall serve for the lesser of the life of the Advisory

14 Commission, or 4 years.

15 (2) SERVICE BEYOND TERM.—A member of the

16 Advisory Commission may continue to serve after

17 the expiration of the term of the member until a

18 successor is appointed.

19 (e) VACANCIES.—If a member of the Advisory Com20 mission does not serve the full term applicable under sub21 section (d), the individual appointed to fill the resulting

22 vacancy shall be appointed for the remainder of the term

23 of the predecessor of the individual.
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1 (f) CHAIR.—The Secretary of Health and Human

2 Services shall designate an individual to serve as the Chair

3 of the Advisory Commission.

4 (g) MEETINGS.—The Advisory Commission shall

5 meet not less than once during each 4-month period and

6 shall otherwise meet at the call of the Secretary of Health

7 and Human Services or the Chair.

8 (h) COMPENSATION AND REIMBURSEMENT OF EX9 PENSES.—Members of the Advisory Commission shall re10 ceive compensation for each day (including travel time) en11 gaged in carrying out the duties of the Advisory Commis12 sion. Such compensation may not be in an amount in ex13 cess of the maximum rate of basic pay payable for level

14 IV of the Executive Schedule under section 5315 of title

15 5, United States Code.

16 (i) STAFF.—

17 (1) STAFF DIRECTOR.—The Advisory Commis18 sion shall, without regard to the provisions of title

19 5, United States Code, relating to competitive serv20 ice, appoint a Staff Director who shall be paid at a

21 rate equivalent to a rate established for the Senior

22 Executive Service under 5382 of title 5, United

23 States Code.
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1 (2) ADDITIONAL STAFF.—The Secretary of

2 Health and Human Services shall provide to the Ad3 visory Commission such additional staff, informa4 tion, and other assistance as may be necessary to

5 carry out the duties of the Advisory Commission.

6 (j) TERMINATION OF THE ADVISORY COMMISSION.—

7 The Advisory Commission shall terminate 90 days after

8 the date on which the Advisory Commission submits its

9 final report under subsection (b)(1)(D).

10 (k) AUTHORIZATION OF APPROPRIATIONS.—There

11 are authorized to be appropriated such sums as may be

12 necessary to carry out the purposes of this section.

13 SEC. 7. DEMONSTRATION PROJECTS.

14 (a) ESTABLISHMENT.—The Secretary of Health and

15 Human Services (in this section referred to as the ‘‘Sec16 retary’’) shall establish, by regulation, guidelines for the

17 establishment and operation of demonstration projects

18 which the Medical Education Advisory Commission rec19 ommends under subsection (b)(1)(B) of section 6.

20 (b) FUNDING.—

21 (1) IN GENERAL.—For any fiscal year after

22 1997, amounts in the Medical Education Trust

23 Fund under title XXI of the Social Security Act
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1 shall be available for use by the Secretary in the es2 tablishment and operation of demonstration projects

3 described in subsection (a).

4 (2) FUNDS AVAILABLE.—

(A) LIMITATION.—Not more than 1 5 ⁄10 of 1

6 percent of the funds in such trust fund shall be

7 available for the purposes of paragraph (1).

8 (B) ALLOCATION.—Amounts under para9 graph (1) shall be paid from the accounts es10 tablished under paragraphs (2) through (5) of

11 section 2101(a) of the Social Security Act, in

12 the same proportion as the amounts transferred

13 to such accounts bears to the total of amounts

14 transferred to all 4 such accounts for such fis15 cal year.

16 (c) LIMITATION.—Nothing in this section shall be

17 construed to authorize any change in the payment meth18 odology for teaching hospitals and medical schools estab19 lished by this Act.

Æ