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[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 21 Introduced in Senate (IS)]

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.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medical Education 
Trust Fund Act of 1997''.
    (b) Table of Contents.--The table of contents of 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.

SEC. 2. MEDICAL EDUCATION TRUST FUND.

    The Social Security Act (42 U.S.C. 300 et seq.) is amended by 
adding after title XX the following new title:

               ``TITLE XXI--MEDICAL EDUCATION TRUST FUND

                      ``table of contents of title

        ``Sec. 2101. Establishment of Trust Fund.
        ``Sec. 2102. Payments to medical schools.
        ``Sec. 2103. Payments to teaching hospitals.

``SEC. 2101. ESTABLISHMENT OF TRUST FUND.

    ``(a) In General.--There is established in the Treasury of the 
United States a fund to be known as the Medical Education Trust Fund 
(in this title referred to as the `Trust Fund'), consisting of the 
following accounts:
            ``(1) The Medical School Account.
            ``(2) The Medicare Teaching Hospital Indirect Account.
            ``(3) The Medicare Teaching Hospital Direct Account.
            ``(4) The Non-Medicare Teaching Hospital Indirect Account.
            ``(5) The Non-Medicare Teaching Hospital Direct Account.
Each such account shall consist of such amounts as are allocated and 
transferred to such account under this section, sections 1876(a)(7), 
1886(j) and 1931, and section 4503 of the Internal Revenue Code of 
1986. Amounts in the accounts of the Trust Fund shall remain available 
until expended.
    ``(b) Expenditures From Trust Fund.--Amounts in the accounts of the 
Trust Fund are available to the Secretary for making payments under 
sections 2102 and 2103.
    ``(c) Investment.--
            ``(1) In general.--The Secretary of the Treasury shall 
        invest amounts in the accounts of the Trust Fund which the 
        Secretary determines are not required to meet current 
        withdrawals from the Trust Fund. Such investments may be made 
        only in interest-bearing obligations of the United States. For 
        such purpose, such obligations may be acquired on original 
        issue at the issue price, or by purchase of outstanding 
        obligations at the market price.
            ``(2) Sale of obligations.--The Secretary of the Treasury 
        may sell at market price any obligation acquired under 
        paragraph (1).
            ``(3) Availability of income.--Any interest derived from 
        obligations held in each such account, and proceeds from any 
        sale or redemption of such obligations, are hereby appropriated 
        to such account.
    ``(d) Monetary Gifts to Trust Fund.--There are appropriated to the 
Trust Fund such amounts as may be unconditionally donated to the 
Federal Government as gifts to the Trust Fund. Such amounts shall be 
allocated and transferred to the accounts described in subsection (a) 
in the same proportion as the amounts in each of the accounts bears to 
the total amount in all the accounts of the Trust Fund.

``SEC. 2102. PAYMENTS TO MEDICAL SCHOOLS.

    ``(a) Federal Payments to Medical Schools for Certain Costs.--
            ``(1) In general.--In the case of a medical school that in 
        accordance with paragraph (2) submits to the Secretary an 
        application for fiscal year 1998 or any subsequent fiscal year, 
        the Secretary shall make payments for such year to the medical 
        school for the purpose specified in paragraph (3). The 
        Secretary shall make such payments from the Medical School 
        Account in an amount determined in accordance with subsection 
        (b), and may administer the payments as a contract, grant, or 
        cooperative agreement.
            ``(2) Application for payments.--For purposes of paragraph 
        (1), an application for payments under such paragraph for a 
        fiscal year is in accordance with this paragraph if--
                    ``(A) the medical school involved submits the 
                application not later than the date specified by the 
                Secretary; and
                    ``(B) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this section.
            ``(3) Purpose of payments.--The purpose of payments under 
        paragraph (1) is to assist medical schools in maintaining and 
        developing quality educational programs in an increasingly 
        competitive health care system.
    ``(b) Availability of Trust Fund for Payments; Annual Amount of 
Payments.--
            ``(1) Availability of trust fund for payments.--The 
        following amounts shall be available for a fiscal year for 
        making payments under subsection (a) from the amount allocated 
        and transferred to the Medical School Account under sections 
        1876(a)(7), 1886(j), 1931, 2101 (c)(3) and (d), and section 
        4503 of the Internal Revenue Code of 1986:
                    ``(A) In the case of fiscal year 1998, 
                $200,000,000.
                    ``(B) In the case of fiscal year 1999, 
                $300,000,000.
                    ``(C) In the case of fiscal year 2000, 
                $400,000,000.
                    ``(D) In the case of fiscal year 2001, 
                $500,000,000.
                    ``(E) In the case of fiscal year 2002, 
                $600,000,000.
                    ``(F) In the case of each subsequent fiscal year, 
                the amount specified in this paragraph in the previous 
                fiscal year updated through the midpoint of the year by 
                the estimated percentage change in the general health 
                care inflation factor (as defined in subsection (d)) 
                during the 12-month period ending at that midpoint, 
                with appropriate adjustments to reflect previous 
                underestimations or overestimations under this 
                subparagraph in the projected health care inflation 
                factor.
            ``(2) Amount of payments for medical schools.--
                    ``(A) In general.--Subject to the annual amount 
                available under paragraph (1) for a fiscal year, the 
                amount of payments required under subsection (a) to be 
                made to a medical school that submits to the Secretary 
                an application for such year in accordance with 
                subsection (a)(2) is an amount equal to an amount 
                determined by the Secretary in accordance with 
                subparagraph (B).
                    ``(B) Development of formula.--The Secretary shall 
                develop a formula for allocation of funds to medical 
                schools under this section consistent with the purpose 
                described in subsection (a)(3).
    ``(c) Medical School Defined.--For purposes of this section, the 
term `medical school' means a school of medicine (as defined in section 
799 of the Public Health Service Act) or a school of osteopathic 
medicine (as defined in such section).
    ``(d) General Health Care Inflation Factor.--The term `general 
health care inflation factor' means the consumer price index for 
medical services as determined by the Bureau of Labor Statistics.

``SEC. 2103. PAYMENTS TO TEACHING HOSPITALS.

    ``(a) Formula Payments to Eligible Entities.--
            ``(1) In general.--In the case of any fiscal year beginning 
        after September 30, 1997, the Secretary shall make payments to 
        each eligible entity that, in accordance with paragraph (2), 
        submits to the Secretary an application for such fiscal year. 
        Such payments shall be made from the Trust Fund, and the total 
        of the payments to the eligible entity for the fiscal year 
        shall equal the sum of the amounts determined under subsections 
        (b), (c), (d), and (e).
            ``(2) Application.--For purposes of paragraph (1), an 
        application shall contain such information as may be necessary 
        for the Secretary to make payments under such paragraph to an 
        eligible entity during a fiscal year. An application shall be 
        treated as submitted in accordance with this paragraph if it is 
        submitted not later than the date specified by the Secretary, 
        and is made in such form and manner as the Secretary may 
        require.
            ``(3) Periodic payments.--Payments under paragraph (1) to 
        an eligible entity for a fiscal year shall be made 
        periodically, at such intervals and in such amounts as the 
        Secretary determines to be appropriate (subject to applicable 
        Federal law regarding Federal payments).
            ``(4) Administrator of programs.--The Secretary shall carry 
        out responsibility under this title by acting through the 
        Administrator of the Health Care Financing Administration.
            ``(5) Eligible entity.--For purposes of this title, the 
        term `eligible entity', with respect to any fiscal year, 
        means--
                    ``(A) for payment under subsections (b) and (c), an 
                entity which would be eligible to receive payments for 
                such fiscal year under--
                            ``(i) section 1886(d)(5)(B), if such 
                        payments had not been terminated for discharges 
                        occurring after September 30, 1997;
                            ``(ii) section 1886(h), if such payments 
                        had not been terminated for cost reporting 
                        periods beginning after September 30, 1997; or
                            ``(iii) both sections; or
                    ``(B) for payment under subsections (d) and (e)--
                            ``(i) an entity which meets the requirement 
                        of subparagraph (A); or
                            ``(ii) an entity which the Secretary 
                        determines should be considered an eligible 
                        entity.
    ``(b) Determination of Amount From Medicare Teaching Hospital 
Indirect Account.--
            ``(1) In general.--The amount determined for an eligible 
        entity for a fiscal year under this subsection is the amount 
        equal to the applicable percentage of the total amount 
        allocated and transferred to the Medicare Teaching Hospital 
        Indirect Account under sections 1876(a)(7) and 1886(j)(1), and 
        subsections (c)(3) and (d) of section 2101 for such fiscal 
        year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage for any fiscal year is equal to 
        the percentage of the total payments which would have been made 
        to the eligible entity in such fiscal year under section 
        1886(d)(5)(B) if--
                    ``(A) such payments had not been terminated for 
                discharges occurring after September 30, 1997; and
                    ``(B) such payments included payments for 
                individuals enrolled in a plan under section 1876, 
                except that for fiscal years 1998, 1999, and 2000, only 
the applicable percentage (as defined in section 1876(a)(7)(B)) of such 
payments shall be taken into account.
    ``(c) Determination of Amount From Medicare Teaching Hospital 
Direct Account.--
            ``(1) In general.--The amount determined for an eligible 
        entity for a fiscal year under this subsection is the amount 
        equal to the applicable percentage of the total amount 
        allocated and transferred to the Medicare Teaching Hospital 
        Direct Account under sections 1876(a)(7) and 1886(j)(2), and 
        subsections (c)(3) and (d) of section 2101 for such fiscal 
        year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage for any fiscal year is equal to 
        the percentage of the total payments which would have been made 
        to the eligible entity in such fiscal year under section 
        1886(h) if--
                    ``(A) such payments had not been terminated for 
                cost reporting periods beginning after September 30, 
                1997; and
                    ``(B) such payments included payments for 
                individuals enrolled in a plan under section 1876, 
                except that for fiscal years 1998, 1999, and 2000, only 
                the applicable percentage (as defined in section 
                1876(a)(7)(B)) of such payments shall be taken into 
                account.
    ``(d) Determination of Amount From Non-Medicare Teaching Hospital 
Indirect Account.--
            ``(1) In general.--The amount determined for an eligible 
        entity for a fiscal year under this subsection is the amount 
        equal to the applicable percentage of the total amount 
        allocated and transferred to the Non-Medicare Teaching Hospital 
        Indirect Account for such fiscal year under section 1931, 
        subsections (c)(3) and (d) of section 2101, and section 4503 of 
        the Internal Revenue Code of 1986.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage for any fiscal year for an 
        eligible entity is equal to the percentage of the total 
        payments which, as determined by the Secretary, would have been 
        made in such fiscal year under section 1886(d)(5)(B) if--
                    ``(A) such payments had not been terminated for 
                discharges occurring after September 30, 1997; and
                    ``(B) non-medicare patients were taken into account 
                in lieu of medicare patients.
    ``(e) Determination of Amount From Non-Medicare Teaching Hospital 
Direct Account.--
            ``(1) In general.--The amount determined for an eligible 
        entity for a fiscal year under this subsection is the amount 
        equal to the applicable percentage of the total amount 
        allocated and transferred to the Non-Medicare Teaching Hospital 
        Direct Account for such fiscal year under section 1931, 
        subsections (c)(3) and (d) of section 2101, and section 4503 of 
        the Internal Revenue Code of 1986.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage for any fiscal year for an 
        eligible entity is equal to the percentage of the total 
        payments which, as determined by the Secretary, would have been 
        made in such fiscal year under section 1886(h) if--
                    ``(A) such payments had not been terminated for 
                cost reporting periods beginning after September 30, 
                1997; and
                    ``(B) non-medicare patients were taken into account 
                in lieu of medicare patients.''.

SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.

    (a) In General.--Section 1886 of the Social Security Act (42 U.S.C. 
1395ww) is amended--
            (1) in subsection (d)(5)(B), in the matter preceding clause 
        (i), by striking ``The Secretary shall provide'' and inserting 
        the following: ``For discharges occurring before October 1, 
        1997, the Secretary shall provide'';
            (2) in subsection (h)--
                    (A) in paragraph (1), in the first sentence, by 
                striking ``the Secretary shall provide'' and inserting 
                ``the Secretary shall, subject to paragraph (6), 
                provide''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(6) Limitation.--
                    ``(A) In general.--The authority to make payments 
                under this subsection shall not apply with respect to--
                            ``(i) cost reporting periods beginning 
                        after September 30, 1997; and
                            ``(ii) any portion of a cost reporting 
                        period beginning on or before such date which 
                        occurs after such date.
                    ``(B) Rule of construction.--This paragraph may not 
                be construed as authorizing any payment under section 
                1861(v) with respect to graduate medical education.''; 
                and
            (3) by adding at the end the following new subsection:
    ``(j) Transfers to Medical Education Trust Fund.--
            ``(1) Indirect costs of medical education.--
                    ``(A) Transfer.--
                            ``(i) In general.--From the Federal 
                        Hospital Insurance Trust Fund, the Secretary 
                        shall, for fiscal year 1998 and each subsequent 
                        fiscal year, transfer to the Medical Education 
                        Trust Fund an amount equal to the amount 
                        estimated by the Secretary under subparagraph 
                        (B).
                            ``(ii) Allocation.--Of the amount 
                        transferred under clause (i)--
                                    ``(I) there shall be allocated and 
                                transferred to the Medical School 
                                Account an amount which bears the same 
                                ratio to the total amount available 
                                under section 2102(b)(1) for the fiscal 
                                year (reduced by the balance in such 
                                account at the end of the preceding 
                                fiscal year) as the amount transferred 
                                under clause (i) bears to the total 
                                amounts transferred to the Medical 
                                Education Trust Fund under title XXI 
                                (excluding amounts transferred under 
                                subsections (c)(3) and (d) of section 
                                2101) for such fiscal year; and
                                    ``(II) the remainder shall be 
                                allocated and transferred to the 
                                Medicare Teaching Hospital Indirect 
                                Account.
                    ``(B) Determination of amounts.--The Secretary 
                shall make an estimate for each fiscal year involved of 
                the nationwide total of the amounts that would have 
                been paid under subsection (d)(5)(B) to hospitals 
                during the fiscal year if such payments had not been 
                terminated for discharges occurring after September 30, 
                1997.
            ``(2) Direct costs of medical education.--
                    ``(A) Transfer.--
                            ``(i) In general.--From the Federal 
                        Hospital Insurance Trust Fund and the Federal 
                        Supplementary Medical Insurance Trust Fund, the 
                        Secretary shall, for fiscal year 1998 and each 
                        subsequent fiscal year, transfer to the Medical 
                        Education Trust Fund an amount equal to the 
                        amount estimated by the Secretary under 
                        subparagraph (B).
                            ``(ii) Allocation.--Of the amount 
                        transferred under clause (i)--
                                    ``(I) there shall be allocated and 
                                transferred to the Medical School 
                                Account an amount which bears the same 
                                ratio to the total amount available 
                                under section 2102(b)(1) for the fiscal 
                                year (reduced by the balance in such 
                                account at the end of the preceding 
                                fiscal year) as the amount transferred 
                                under clause (i) bears to the total 
                                amounts transferred to the Medical 
                                Education Trust Fund under title XXI 
                                (excluding amounts transferred under 
                                subsections (c)(3) and (d) of section 
                                2101) for such fiscal year; and
                                    ``(II) the remainder shall be 
                                allocated and transferred to the 
                                Medicare Teaching Hospital Direct 
                                Account.
                    ``(B) Determination of amounts.--For each hospital, 
                the Secretary shall make an estimate for the fiscal 
                year involved of the amount that would have been paid 
                under subsection (h) to the hospital during the fiscal 
year if such payments had not been terminated for cost reporting 
periods beginning after September 30, 1997.
                    ``(C) Allocation between funds.--In providing for a 
                transfer under subparagraph (A) for a fiscal year, the 
                Secretary shall provide for an allocation of the 
                amounts involved between part A and part B (and the 
                trust funds established under the respective parts) as 
                reasonably reflects the proportion of direct graduate 
                medical education costs of hospitals associated with 
                the provision of services under each respective 
                part.''.
    (b) Medicare HMO's.--Section 1876(a) of the Social Security Act (42 
U.S.C. 1395mm(a)) is amended by inserting after paragraph (6) the 
following new paragraph:
    ``(7)(A) In determining the adjusted average per capita cost under 
paragraph (4) for fiscal years after 1997, the Secretary shall not take 
into account the applicable percentage of costs under sections 
1886(d)(5)(B) (indirect costs of medical education) and 1886(h) (direct 
graduate medical education costs).
    ``(B) For purposes of subparagraph (A), the applicable percentage 
is--
            ``(i) for fiscal year 1998, 25 percent;
            ``(ii) for fiscal year 1999, 50 percent;
            ``(iii) for fiscal year 2000, 75 percent; and
            ``(iv) for fiscal year 2001 and each subsequent fiscal 
        year, 100 percent.
    ``(C)(i) There is appropriated and transferred to the Medical 
Education Trust Fund each fiscal year an amount equal to the aggregate 
amounts not taken into account under paragraph (4) by reason of 
subparagraph (A).
    ``(ii) Of the amounts transferred under clause (i)--
            ``(I) there shall be allocated and transferred to the 
        Medical School Account an amount which bears the same ratio to 
        the total amount available under section 2102(b)(1) for the 
        fiscal year (reduced by the balance in such account at the end 
        of the preceding fiscal year) as the amount transferred under 
        clause (i) bears to the total amounts transferred to the 
        Medical Education Trust Fund under section 2101 (excluding 
        amounts transferred under subsections (c)(3) and (d) of such 
        section) for such fiscal year; and
            ``(II) the remainder shall be allocated and transferred to 
        the Medicare Teaching Hospital Indirect Account under such 
        section and the Medicare Teaching Hospital Direct Account under 
        such section in the same proportion as the amounts attributable 
        to the costs under sections 1886(d)(5)(B) and 1886(h) were of 
        the amounts transferred under clause (i).
    ``(iii) The Secretary shall make payments under clause (i) from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund, in the same manner as the Secretary 
determines under section 1886(j).''.

SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended--
            (1) by redesignating section 1931 as section 1932; and
            (2) by inserting after section 1930, the following new 
        section:

                    ``transfer of funds to accounts

    ``Sec. 1931. (a) Transfer of Funds.--
            ``(1) In general.--For fiscal year 1998 and each subsequent 
        fiscal year, the Secretary shall transfer to the Medical 
        Education Trust Fund an amount equal to the amount determined 
        under subsection (b).
            ``(2) Allocation.--Of the amount transferred under 
        paragraph (1)--
                    ``(A) there shall be allocated and transferred to 
                the Medical School Account an amount which bears the 
                same ratio to the total amount available under section 
                2102(b)(1) for the fiscal year (reduced by the balance 
                in such account at the end of the preceding fiscal 
                year) as the amount transferred under paragraph (1) 
                bears to the total amounts transferred to the Medical 
                Education Trust Fund under title XXI (excluding amounts 
                transferred under subsections (c)(3) and (d) of section 
                2101) for such fiscal year; and
                    ``(B) the remainder shall be allocated and 
                transferred to the Non-Medicare Teaching Hospital 
                Indirect Account and the Non-Medicare Teaching Hospital 
                Direct Account, in the same proportion as the amounts 
                transferred to each account under section 1886(j) 
                relate to the total amounts transferred under such 
                section for such fiscal year.
    ``(b) Amount Determined.--
            ``(1) Outlays for acute medical services during preceding 
        fiscal year.--Beginning with fiscal year 1998, the Secretary 
        shall determine 5 percent of the total amount of Federal 
        outlays made under this title for acute medical services, as 
        defined in paragraph (2), for the preceding fiscal year.
            ``(2) Acute medical services defined.--The term `acute 
        medical services' means items and services described in section 
        1905(a) other than the following:
                    ``(A) Nursing facility services (as defined in 
                section 1905(f)).
                    ``(B) Intermediate care facility for the mentally 
                retarded services (as defined in section 1905(d)).
                    ``(C) Personal care services (as described in 
                section 1905(a)(24)).
                    ``(D) Private duty nursing services (as referred to 
                in section 1905(a)(8)).
                    ``(E) Home or community-based services furnished 
                under a waiver granted under subsection (c), (d), or 
                (e) of section 1915.
                    ``(F) Home and community care furnished to 
                functionally disabled elderly individuals under section 
                1929.
                    ``(G) Community supported living arrangements 
                services under section 1930.
                    ``(H) Case-management services (as described in 
                section 1915(g)(2)).
                    ``(I) Home health care services (as referred to in 
                section 1905(a)(7)), clinic services, and 
                rehabilitation services that are furnished to an 
                individual who has a condition or disability that 
                qualifies the individual to receive any of the services 
                described in a previous subparagraph.
                    ``(J) Services furnished in an institution for 
                mental diseases (as defined in section 1905(i)).
    ``(c) Entitlement.--This section constitutes budget authority in 
advance of appropriations Acts and represents the obligation of the 
Federal Government to provide for the payment to the Non-Medicare 
Teaching Hospital Indirect Account, the Non-Medicare Teaching Hospital 
Direct Account, and the Medical School Account of amounts determined in 
accordance with subsections (a) and (b).''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective on and after October 1, 1997.

SEC. 5. ASSESSMENTS ON INSURED AND SELF-INSURED HEALTH PLANS.

    (a) General Rule.--Subtitle D of the Internal Revenue Code of 1986 
(relating to miscellaneous excise taxes) is amended by adding after 
chapter 36 the following new chapter:

                ``CHAPTER 37--HEALTH RELATED ASSESSMENTS

                              ``Subchapter A. Insured and self-insured 
                                        health plans.

         ``Subchapter A--Insured and Self-Insured 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.

``SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED ADMINISTRATIVE 
              SERVICES.

    ``(a) Imposition of Tax.--There is hereby imposed--
            ``(1) on each taxable health insurance policy, a tax equal 
        to 1.5 percent of the premiums received under such policy, and
            ``(2) on each amount received for health-related 
        administrative services, a tax equal to 1.5 percent of the 
        amount so received.
    ``(b) Liability for Tax.--
            ``(1) Health insurance.--The tax imposed by subsection 
        (a)(1) shall be paid by the issuer of the policy.
            ``(2) Health-related administrative services.--The tax 
        imposed by subsection (a)(2) shall be paid by the person 
        providing the health-related administrative services.
    ``(c) Taxable Health Insurance Policy.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided in this 
        section, the term `taxable health insurance policy' means any 
        insurance policy providing accident or health insurance with 
        respect to individuals residing in the United States.
            ``(2) Exemption of certain policies.--The term `taxable 
        health insurance policy' does not include any insurance policy 
        if substantially all of the coverage provided under such policy 
        relates to--
                    ``(A) liabilities incurred under workers' 
                compensation laws,
                    ``(B) tort liabilities,
                    ``(C) liabilities relating to ownership or use of 
                property,
                    ``(D) credit insurance, or
                    ``(E) such other similar liabilities as the 
                Secretary may specify by regulations.
            ``(3) Special rule where policy provides other coverage.--
        In the case of any taxable health insurance policy under which 
        amounts are payable other than for accident or health coverage, 
        in determining the amount of the tax imposed by subsection 
        (a)(1) on any premium paid under such policy, there shall be 
        excluded the amount of the charge for the nonaccident or 
        nonhealth coverage if--
                    ``(A) the charge for such nonaccident or nonhealth 
                coverage is either separately stated in the policy, or 
                furnished to the policyholder in a separate statement, 
                and
                    ``(B) such charge is reasonable in relation to the 
                total charges under the policy.
        In any other case, the entire amount of the premium paid under 
        such policy shall be subject to tax under subsection (a)(1).
            ``(4) Treatment of prepaid health coverage arrangements.--
                    ``(A) In general.--In the case of any arrangement 
                described in subparagraph (B)--
                            ``(i) such arrangement shall be treated as 
                        a taxable health insurance policy,
                            ``(ii) the payments or premiums referred to 
                        in subparagraph (B)(i) shall be treated as 
                        premiums received for a taxable health 
                        insurance policy, and
                            ``(iii) the person referred to in 
                        subparagraph (B)(i) shall be treated as the 
                        issuer.
                    ``(B) Description of arrangements.--An arrangement 
                is described in this subparagraph if under such 
                arrangement--
                            ``(i) fixed payments or premiums are 
                        received as consideration for any person's 
                        agreement to provide or arrange for the 
                        provision of accident or health coverage to 
                        residents of the United States, regardless of 
                        how such coverage is provided or arranged to be 
                        provided, and
                            ``(ii) substantially all of the risks of 
                        the rates of utilization of services is assumed 
                        by such person or the provider of such 
                        services.
    ``(d) Health-Related Administrative Services.--For purposes of this 
section, the term `health-related administrative services' means--
            ``(1) the processing of claims or performance of other 
        administrative services in connection with accident or health 
        coverage under a taxable health insurance policy if the charge 
        for such services is not included in the premiums under such 
        policy, and
            ``(2) processing claims, arranging for provision of 
        accident or health coverage, or performing other administrative 
        services in connection with an applicable self-insured health 
        plan (as defined in section 4502(c)) established or maintained 
        by a person other than the person performing the services.
For purposes of paragraph (1), rules similar to the rules of subsection 
(c)(3) shall apply.

``SEC. 4502. SELF-INSURED HEALTH PLANS.

    ``(a) Imposition of Tax.--In the case of any applicable self-
insured health plan, there is hereby imposed a tax for each month equal 
to 1.5 percent of the sum of--
            ``(1) the accident or health coverage expenditures for such 
        month under such plan, and
            ``(2) the administrative expenditures for such month under 
        such plan to the extent such expenditures are not subject to 
        tax under section 4501.
In determining the amount of expenditures under paragraph (2), rules 
similar to the rules of subsection (d)(3) apply.
    ``(b) Liability for Tax.--
            ``(1) In general.--The tax imposed by subsection (a) shall 
        be paid by the plan sponsor.
            ``(2) Plan sponsor.--For purposes of paragraph (1), the 
        term `plan sponsor' means--
                    ``(A) the employer in the case of a plan 
                established or maintained by a single employer,
                    ``(B) the employee organization in the case of a 
                plan established or maintained by an employee 
                organization, or
                    ``(C) in the case of--
                            ``(i) a plan established or maintained by 2 
                        or more employers or jointly by 1 or more 
                        employers and 1 or more employee organizations,
                            ``(ii) a voluntary employees' beneficiary 
                        association under section 501(c)(9), or
                            ``(iii) any other association plan,
                the association, committee, joint board of trustees, or 
                other similar group of representatives of the parties 
                who establish or maintain the plan.
    ``(c) Applicable Self-Insured Health Plan.--For purposes of this 
section, the term `applicable self-insured health plan' means any plan 
for providing accident or health coverage if any portion of such 
coverage is provided other than through an insurance policy.
    ``(d) Accident or Health Coverage Expenditures.--For purposes of 
this section--
            ``(1) In general.--The accident or health coverage 
        expenditures of any applicable self-insured health plan for any 
        month are the aggregate expenditures paid in such month for 
        accident or health coverage provided under such plan to the 
        extent such expenditures are not subject to tax under section 
        4501.
            ``(2) Treatment of reimbursements.--In determining accident 
        or health coverage expenditures during any month of any 
        applicable self-insured health plan, reimbursements (by 
        insurance or otherwise) received during such month shall be 
        taken into account as a reduction in accident or health 
        coverage expenditures.
            ``(3) Certain expenditures disregarded.--Paragraph (1) 
        shall not apply to any expenditure for the acquisition or 
        improvement of land or for the acquisition or improvement of 
        any property to be used in connection with the provision of 
        accident or health coverage which is subject to the allowance 
        under section 167, except that, for purposes of paragraph (1), 
        allowances under section 167 shall be considered as 
        expenditures.

``SEC. 4503. TRANSFER TO ACCOUNTS.

    ``For fiscal year 1998 and each subsequent fiscal year, there are 
hereby appropriated and transferred to the Medical Education Trust Fund 
amounts equivalent to taxes received in the Treasury under sections 
4501 and 4502, of which--
            ``(1) there shall be allocated and transferred to the 
        Medical School Account an amount which bears the same ratio to 
        the total amount available under section 2102(b)(1) for the 
        fiscal year (reduced by the balance in such account at the end 
        of the preceding fiscal year) as the amount transferred to the 
        Medical Education Trust Fund under title XXI of the Social 
        Security Act under this section bears to the total amounts 
        transferred to such Trust Fund (excluding amounts transferred 
        under subsections (c)(3) and (d) of section 2101 of such Act) 
        for such fiscal year; and
            ``(2) the remainder shall be allocated and transferred to 
        the Non-Medicare Teaching Hospital Indirect Account and the 
        Non-Medicare Teaching Hospital Direct Account, in the same 
        proportion as the amounts transferred to such account under 
        section 1886(j) relate to the total amounts transferred under 
        such section for such fiscal year.
Such amounts shall be transferred in the same manner as under section 
9601.

``SEC. 4504. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions.--For purposes of this subchapter--
            ``(1) Accident or health coverage.--The term `accident or 
        health coverage' means any coverage which, if provided by an 
        insurance policy, would cause such policy to be a taxable 
        health insurance policy (as defined in section 4501(c)).
            ``(2) Insurance policy.--The term `insurance policy' means 
        any policy or other instrument whereby a contract of insurance 
        is issued, renewed, or extended.
            ``(3) Premium.--The term `premium' means the gross amount 
        of premiums and other consideration (including advance 
        premiums, deposits, fees, and assessments) arising from 
        policies issued by a person acting as the primary insurer, 
        adjusted for any return or additional premiums paid as a result 
        of endorsements, cancellations, audits, or retrospective 
        rating. Amounts returned where the amount is not fixed in the 
        contract but depends on the experience of the insurer or the 
        discretion of management shall not be included in return 
        premiums.
            ``(4) United states.--The term `United States' includes any 
        possession of the United States.
    ``(b) Treatment of Governmental Entities.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) the term `person' includes any governmental 
                entity, and
                    ``(B) notwithstanding any other law or rule of law, 
                governmental entities shall not be exempt from the 
                taxes imposed by this subchapter except as provided in 
                paragraph (2).
            ``(2) Exempt governmental programs.--In the case of an 
        exempt governmental program--
                    ``(A) no tax shall be imposed under section 4501 on 
                any premium received pursuant to such program or on any 
                amount received for health-related administrative 
                services pursuant to such program, and
                    ``(B) no tax shall be imposed under section 4502 on 
                any expenditures pursuant to such program.
            ``(3) Exempt governmental program.--For purposes of this 
        subchapter, the term `exempt governmental program' means--
                    ``(A) the insurance programs established by parts A 
                and B of title XVIII of the Social Security Act,
                    ``(B) the medical assistance program established by 
                title XIX of the Social Security Act,
                    ``(C) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to individuals (or the spouses and dependents 
                thereof) by reason of such individuals being--
                            ``(i) members of the Armed Forces of the 
                        United States, or
                            ``(ii) veterans, and
                    ``(D) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to members of Indian tribes (as defined in 
                section 4(d) of the Indian Health Care Improvement 
                Act).
    ``(c) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter shall be 
covered over to any possession of the United States.''.
    (b) Clerical Amendment.--The table of chapters for subtitle D of 
the Internal Revenue Code of 1986 is amended by inserting after the 
item relating to chapter 36 the following new item:

                              ``Chapter 37. Health related 
                                        assessments.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to premiums received, and expenses incurred, with 
respect to coverage for periods after September 30, 1997.

SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.

    (a) Establishment.--There is hereby established an advisory 
commission to be known as the Medical Education Advisory Commission (in 
this section referred to as the ``Advisory Commission'').
    (b) Duties.--
            (1) In general.--The Advisory Commission shall--
                    (A) conduct a thorough study of all matters 
                relating to--
                            (i) the operation of the Medical Education 
                        Trust Fund established under section 2;
                            (ii) alternative and additional sources of 
                        graduate medical education funding;
                            (iii) alternative methodologies for 
                        compensating teaching hospitals for graduate 
                        medical education;
                            (iv) policies designed to maintain superior 
                        research and educational capacities in an 
                        increasing competitive health system;
                            (v) the role of medical schools in graduate 
                        medical education; and
                            (vi) policies designed to expand 
                        eligibility for graduate medical education 
                        payments to institutions other than teaching 
                        hospitals;
                    (B) develop recommendations, including the use of 
                demonstration projects, on the matters studied under 
                subparagraph (A) in consultation with the Secretary of 
                Health and Human Services and the entities described in 
                paragraph (2);
                    (C) not later than January 1999, submit an interim 
                report to the Committee on Finance of the Senate, the 
                Committee on Ways and Means of the House of 
                Representatives, and the Secretary of Health and Human 
                Services; and
                    (D) not later than January 2001, submit a final 
                report to the Committee on Finance of the Senate, the 
                Committee on Ways and Means of the House of 
                Representatives, and the Secretary of Health and Human 
                Services.
            (2) Entities described.--The entities described in this 
        paragraph are--
                    (A) other advisory groups, including the Council on 
                Graduate Medical Education, the Prospective Payment 
                Assessment Commission, and the Physician Payment Review 
                Commission;
                    (B) interested parties, including the Association 
                of American Medical Colleges, the Association of 
                Academic Health Centers, and the American Medical 
                Association;
                    (C) health care insurers, including managed care 
                entities; and
                    (D) other entities as determined by the Secretary 
                of Health and Human Services.
    (c) Number and Appointment.--The membership of the Advisory 
Commission shall include 9 individuals who are appointed to the 
Advisory Commission from among individuals who are not officers or 
employees of the United States. Such individuals shall be appointed by 
the Secretary of Health and Human Services, and shall include 
individuals from each of the following categories:
            (1) Physicians who are faculty members of medical schools.
            (2) Officers or employees of teaching hospitals.
            (3) Officers or employees of health plans.
            (4) Deans of medical schools.
            (5) Such other individuals as the Secretary determines to 
        be appropriate.
    (d) Terms.--
            (1) In general.--Except as provided in paragraph (2), 
        members of the Advisory Commission shall serve for the lesser 
        of the life of the Advisory Commission, or 4 years.
            (2) Service beyond term.--A member of the Advisory 
        Commission may continue to serve after the expiration of the 
        term of the member until a successor is appointed.
    (e) Vacancies.--If a member of the Advisory Commission does not 
serve the full term applicable under subsection (d), the individual 
appointed to fill the resulting vacancy shall be appointed for the 
remainder of the term of the predecessor of the individual.
    (f) Chair.--The Secretary of Health and Human Services shall 
designate an individual to serve as the Chair of the Advisory 
Commission.
    (g) Meetings.--The Advisory Commission shall meet not less than 
once during each 4-month period and shall otherwise meet at the call of 
the Secretary of Health and Human Services or the Chair.
    (h) Compensation and Reimbursement of Expenses.--Members of the 
Advisory Commission shall receive compensation for each day (including 
travel time) engaged in carrying out the duties of the Advisory 
Commission. Such compensation may not be in an amount in excess of the 
maximum rate of basic pay payable for level IV of the Executive 
Schedule under section 5315 of title 5, United States Code.
    (i) Staff.--
            (1) Staff director.--The Advisory Commission shall, without 
        regard to the provisions of title 5, United States Code, 
        relating to competitive service, appoint a Staff Director who 
        shall be paid at a rate equivalent to a rate established for 
        the Senior Executive Service under 5382 of title 5, United 
        States Code.
            (2) Additional staff.--The Secretary of Health and Human 
        Services shall provide to the Advisory Commission such 
        additional staff, information, and other assistance as may be 
        necessary to carry out the duties of the Advisory Commission.
    (j) Termination of the Advisory Commission.--The Advisory 
Commission shall terminate 90 days after the date on which the Advisory 
Commission submits its final report under subsection (b)(1)(D).
    (k) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.

SEC. 7. DEMONSTRATION PROJECTS.

    (a) Establishment.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish, by 
regulation, guidelines for the establishment and operation of 
demonstration projects which the Medical Education Advisory Commission 
recommends under subsection (b)(1)(B) of section 6.
    (b) Funding.--
            (1) In general.--For any fiscal year after 1997, amounts in 
        the Medical Education Trust Fund under title XXI of the Social 
        Security Act shall be available for use by the Secretary in the 
        establishment and operation of demonstration projects described 
        in subsection (a).
            (2) Funds available.--
                    (A) Limitation.--Not more than \1/10\ of 1 percent 
                of the funds in such trust fund shall be available for 
                the purposes of paragraph (1).
                    (B) Allocation.--Amounts under paragraph (1) shall 
                be paid from the accounts established under paragraphs 
                (2) through (5) of section 2101(a) of the Social 
                Security Act, in the same proportion as the amounts 
                transferred to such accounts bears to the total of 
                amounts transferred to all 4 such accounts for such 
                fiscal year.
    (c) Limitation.--Nothing in this section shall be construed to 
authorize any change in the payment methodology for teaching hospitals 
and medical schools established by this Act.
                                 <all>
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