I 

111TH CONGRESS 

2D SESSION H. R. 5444 

To amend the Internal Revenue Code of 1986 to repeal the Patient Protection 

and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 and to replace it with provisions reforming the health 

care system by putting patients back in charge of health care. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 27, 2010 

Mr. PAUL introduced the following bill; which was referred to the Committee 

on Energy and Commerce, and in addition to the Committees on Appropriations, House Administration, Ways and Means, Education and Labor, 

Natural Resources, the Judiciary, and Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such 

provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to repeal 

the Patient Protection and Affordable Care Act and the 

Health Care and Education Reconciliation Act of 2010 

and to replace it with provisions reforming the health 

care system by putting patients back in charge of health 

care. 

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

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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

3 ‘‘Private Option Health Care Act’’. 

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

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Repeal of Patient Protection and Affordable Care Act and Health Care 

and Education Reconciliation Act of 2010. 

Sec. 3. Refundable credit for health care costs. 

Sec. 4. Disposition of unused health benefits in cafeteria plans and flexible 

spending arrangements. 

Sec. 5. Strengthening health savings accounts. 

Sec. 6. Repeal of 7.5 percent threshold on deduction for medical expenses. 

Sec. 7. Purchase of health insurance across State lines. 

Sec. 8. Facilitation of importation of drugs approved by Food and Drug Administration. 

Sec. 9. Credit for purchase by patient of insurance against negative outcomes 

resulting from surgery. 

Sec. 10. Exclusion from gross income for medical malpractice awards granted 

in binding arbitration. 

6 SEC. 2. REPEAL OF PATIENT PROTECTION AND AFFORD7 ABLE CARE ACT AND HEALTH CARE AND 

8 EDUCATION RECONCILIATION ACT OF 2010. 

9 (a) PPACA.—Effective as of the enactment of the 

10 Patient Protection and Affordable Care Act, such Act is 

11 repealed, and the provisions of law amended or repealed 

12 by such Act are restored or revised as if such Act had 

13 not been enacted. 

14 (b) REPEAL OF HCERA.—Effective as of the enact15 ment of the Health Care and Education Reconciliation Act 

16 of 2010, such Act is repealed, and the provisions of law 

17 amended or repealed by such Act are restored or revised 

18 as if such Act had not been enacted. 

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1 SEC. 3. REFUNDABLE CREDIT FOR HEALTH CARE COSTS. 

2 (a) IN GENERAL.—Section 35 of the Internal Rev3 enue Code of 1986 (relating to health insurance costs of 

4 eligible individuals) is amended to read as follows: 

5 ‘‘SEC. 35. HEALTH INSURANCE COSTS. 

6 ‘‘(a) IN GENERAL.—In the case of an individual, 

7 there shall be allowed as a credit against the tax imposed 

8 by this subtitle an amount equal to the sum of— 

9 ‘‘(1) the amount paid by the taxpayer for insur10 ance which constitutes medical care for the taxpayer 

11 and the taxpayer’s spouse and dependents, plus 

12 ‘‘(2) the amount contributed to a health savings 

13 account of the individual (or the individual’s 

14 spouse). 

15 ‘‘(b) LIMITATION.—The credit allowed by subsection 

16 (a) for the taxable year shall not exceed the sum of— 

17 ‘‘(1) the taxpayer’s net income tax for the tax18 able year, plus 

19 ‘‘(2) the taxpayer’s Social Security taxes (as de20 fined in section 24(d)) for such taxable year. 

21 For purposes of paragraph (1), the term ‘net income tax’ 

22 means the sum of the regular tax liability plus the tax 

23 imposed by section 55, reduced by the credits allowable 

24 under this part (other than this subpart). 

25 ‘‘(c) DENIAL OF DOUBLE BENEFIT.— 

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1 ‘‘(1) IN GENERAL.—Any amount allowed as a 

2 credit under this section shall not be taken into ac3 count in determining the amount of any deduction 

4 under this chapter. 

5 ‘‘(2) COORDINATION WITH HEALTH SAVINGS

6 ACCOUNT CONTRIBUTIONS.—For purposes of para7 graph (1), amounts taken into account under sub8 section (a) for a taxable year shall be treated as 

9 being attributable to amounts paid for insurance to 

10 the extent of such payments.’’. 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) Section 223(b) of such Code, as amended by 

13 section 5, is amended by adding at the end the fol14 lowing new paragraph: 

15 ‘‘(4) COORDINATION WITH CREDIT FOR

16 HEALTH INSURANCE.—The limitation under para17 graph (1) shall be reduced by the amount treated as 

18 being taken into account under section 35(a)(2).’’. 

19 (2) Section 223(e)(3)(B) of such Code, as 

20 amended by section 5, is amended by inserting ‘‘nor 

21 treated as being taken into account under section 

22 35(a)(2)’’ before the period at the end. 

23 (3) Section 4973(g) of such Code is amended— 

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1 (A) in paragraph (1) by inserting ‘‘or a 

2 credit under section 35’’ after ‘‘section 223’’, 

3 and 

4 (B) in paragraph (2)(B)(i) by striking 

5 ‘‘maximum’’ and inserting ‘‘sum of the amount 

6 treated as being taken into account under sec7 tion 35(a)(2) plus the’’. 

8 (4) Section 162 of such Code is amended by 

9 striking subsection (l). 

10 (5) Chapter 77 of such Code is amended by 

11 striking section 7527 and by striking the item relat12 ing to section 7527 in the table of sections for such 

13 chapter. 

14 (6) Subpart B of part III of subchapter A of 

15 chapter 61 of such Code is amended by striking sec16 tion 6050T and by striking the item relating to sec17 tion 6050T in the table of sections for such chapter. 

18 (7) Section 6103(l) of such Code is amended by 

19 striking paragraph (18). 

20 (8) Section 6103(p) of such Code is amended— 

21 (A) in paragraph (3)(A) by striking ‘‘(17), 

22 or (18)’’ and inserting ‘‘or (17)’’, and 

23 (B) in paragraph (4) by striking ‘‘or (18)’’ 

24 after ‘‘any other person described in subsection 

25 (l)(10), (16)’’ each place it appears. 

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1 (9) Section 7213A(a)(1)(B) of such Code is 

2 amended by striking ‘‘subsection (l)(18) or (n) of 

3 section 6103’’ and inserting ‘‘section 6103(n)’’. 

4 (10) Section 6724(d)(1)(B) of such Code is 

5 amended by striking clause (xiii). 

6 (11) Section 6724(d)(2) of such Code is amend7 ed by striking subparagraph (DD). 

8 (12) The item relating to section 35 in the table 

9 of sections for subpart C of part IV of subchapter 

10 A of chapter 1 of such Code is amended to read as 

11 follows: 

‘‘Sec. 35. Health insurance costs.’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2009. 

15 SEC. 4. DISPOSITION OF UNUSED HEALTH BENEFITS IN 

16 CAFETERIA PLANS AND FLEXIBLE SPENDING 

17 ARRANGEMENTS. 

18 (a) IN GENERAL.—Section 125 of the Internal Rev19 enue Code of 1986 (relating to cafeteria plans) is amended 

20 by redesignating subsections (i) and (j) as subsections (j) 

21 and (k), respectively, and by inserting after subsection (h) 

22 the following: 

23 ‘‘(i) CARRYFORWARDS OR PAYMENTS OF CERTAIN

24 UNUSED HEALTH BENEFITS.— 

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

2 a plan or other arrangement shall not fail to be 

3 treated as a cafeteria plan solely because qualified 

4 benefits under such plan include a health flexible 

5 spending arrangement under which not more than 

6 $500 of unused health benefits may be— 

7 ‘‘(A) carried forward to the succeeding 

8 plan year of such health flexible spending ar9 rangement, or 

10 ‘‘(B) paid to or on behalf of an employee 

11 as compensation as of the end of such plan year 

12 or upon the termination of, or failure to re-en13 roll in, such plan or arrangement. 

14 ‘‘(2) DISTRIBUTION OF UNUSED HEALTH BENE15 FITS ON BEHALF OF EMPLOYEE.—For purposes of 

16 paragraph (1)(B), unused health benefits paid as 

17 compensation on behalf of an employee by the em18 ployer shall be— 

19 ‘‘(A) includible in gross income and wages 

20 of the employee, whether or not a deduction for 

21 such payment is allowable under this title to the 

22 employee, and 

23 ‘‘(B) excludable from— 

24 ‘‘(i) gross income to the extent pro25 vided under section 402(e), 457(a) (with 

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1 respect to contributions to an eligible de2 ferred compensation plan (as defined in 

3 section 457(b)) of an eligible employer de4 scribed in section 457(e)(1)(A)), or 220, 

5 and 

6 ‘‘(ii) wages to the extent otherwise 

7 provided for amounts so excludable. 

8 ‘‘(3) HEALTH FLEXIBLE SPENDING ARRANGE9 MENT.—For purposes of this subsection, the term 

10 ‘health flexible spending arrangement’ means a flexi11 ble spending arrangement (as defined in section 

12 106(c)) that is a qualified benefit and only permits 

13 reimbursement for expenses for medical care (as de14 fined in section 213(d)(1)) (without regard to sub15 paragraphs (C) and (D) thereof). 

16 ‘‘(4) UNUSED HEALTH BENEFITS.—For pur17 poses of this subsection, the term ‘unused health 

18 benefits’ means the excess of— 

19 ‘‘(A) the maximum amount of reimburse20 ment allowable during a plan year under a 

21 health flexible spending arrangement, over 

22 ‘‘(B) the actual amount of reimbursement 

23 during such year under such arrangement.’’. 

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

2 subsection (a) shall apply to taxable years beginning after 

3 December 31, 2009. 

4 SEC. 5. STRENGTHENING HEALTH SAVINGS ACCOUNTS. 

5 (a) REPEAL OF REQUIREMENT FOR COVERAGE

6 UNDER HIGH DEDUCTIBLE HEALTH PLAN.— 

7 (1) IN GENERAL.—Section 223 of the Internal 

8 Revenue Code of 1986 (relating to health savings ac9 counts) is amended by striking subsections (a), (b), 

10 and (c) and inserting the following: 

11 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi12 vidual, there shall be allowed as a deduction for the tax13 able year an amount equal to the aggregate amount paid 

14 in cash during such taxable year by or on behalf of such 

15 individual to a health savings account of such individual. 

16 ‘‘(b) LIMITATIONS.— 

17 ‘‘(1) IN GENERAL.—The amount allowable as a 

18 deduction to a taxpayer under subsection (a) for the 

19 taxable year shall not exceed $8,000 ($16,000 in the 

20 case of a joint return). 

21 ‘‘(2) COORDINATION WITH OTHER CONTRIBU22 TIONS.—The limitation which would (but for this 

23 paragraph) apply under this subsection to a tax24 payer for any taxable year shall be reduced (but not 

25 below zero) by the sum of— 

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1 ‘‘(A) the aggregate amount paid for such 

2 taxable year to Archer MSAs of the taxpayer, 

3 and 

4 ‘‘(B) the aggregate amount contributed to 

5 health savings accounts of the taxpayer which is 

6 excludable from the taxpayer’s gross income for 

7 such taxable year under section 106(d) (and 

8 such amount shall not be allowed as a deduc9 tion under subsection (a)). 

10 ‘‘(3) DENIAL OF DEDUCTION TO DEPEND11 ENTS.—No deduction shall be allowed under this 

12 section to any individual with respect to whom a de13 duction under section 151 is allowable to another 

14 taxpayer for a taxable year beginning in the cal15 endar year in which such individual’s taxable year 

16 begins.’’. 

17 (2) CONFORMING AMENDMENTS.— 

18 (A) Section 223 of such Code is amended 

19 by redesignating subsections (d), (e), (f), (g), 

20 and (h) as subsections (c), (d), (e), (f), and (g), 

21 respectively. 

22 (B) Section 223(f) of such Code (as redes23 ignated by subparagraph (A)) is amended to 

24 read as follows: 

25 ‘‘(f) COST-OF-LIVING ADJUSTMENT.— 

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

2 year beginning in a calendar year after 2010, each 

3 dollar amount in subsection (b)(1) shall be increased 

4 by an amount equal to— 

5 ‘‘(A) such dollar amount, multiplied by 

6 ‘‘(B) the cost-of-living adjustment deter7 mined under section 1(f)(3) for the calendar 

8 year in which such taxable year begins, deter9 mined by substituting ‘calendar year 2009’ for 

10 ‘calendar year 1992’ in subparagraph (B) 

11 thereof. 

12 ‘‘(2) ROUNDING.—If any increase under para13 graph (1) is not a multiple of $50, such increase 

14 shall be rounded to the nearest multiple of $50.’’. 

15 (C) Section 26(b)(2)(S) of such Code is 

16 amended by striking ‘‘section 223(f)(4)’’ and 

17 inserting ‘‘section 223(e)(4)’’. 

18 (D) Each of the following sections of such 

19 Code is amended by striking ‘‘section 223(d)’’ 

20 and inserting ‘‘section 223(c)’’: 

21 (i) Section 35(g)(3). 

22 (ii) Section 106(d)(1). 

23 (iii) Section 220(f)(5)(A). 

24 (iv) Section 848(e)(1)(B)(v). 

25 (v) Section 4973(a)(5). 

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1 (vi) Section 4973(g). 

2 (vii) Section 4975(c)(6). 

3 (viii) Section 4975(e)(1)(E). 

4 (ix) Section 6051(a)(12). 

5 (E) Section 4973(g) of such Code is 

6 amended— 

7 (i) in paragraph (1) by striking ‘‘sec8 tion 223(f)(5)’’ and inserting ‘‘section 

9 223(e)(5)’’, 

10 (ii) in paragraph (2)(A) by striking 

11 ‘‘section 223(f)(2)’’ and inserting ‘‘section 

12 223(e)(2)’’, and 

13 (iii) in the matter following paragraph 

14 (2) by striking ‘‘section 223(f)(3)’’ and in15 serting ‘‘section 223(e)(3)’’. 

16 (F) Section 4975(c)(6) of such Code is 

17 amended by striking ‘‘section 223(e)(2)’’ and 

18 inserting ‘‘section 223(d)(2)’’. 

19 (G) Section 6693(a)(2)(C) of such Code is 

20 amended by striking ‘‘section 223(h)’’ and in21 serting ‘‘section 223(g)’’. 

22 (b) DEDUCTION ALLOWED FOR PREMIUM PAYMENTS

23 FOR HIGH DEDUCTIBLE POLICIES.—Section 223(c)(2)(C) 

24 of such Code (as amended by subsection (a)) is amended 

25 by striking ‘‘or’’ at the end of clause (iii), by striking the 

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1 period at the end of clause (iv) and inserting ‘‘, or’’, and 

2 by inserting after clause (iv) the following new clause: 

3 ‘‘(v) a high deductible health plan.’’. 

4 (c) PURCHASE OF MEDIGAP POLICIES PER5 MITTED.—Clause (iv) of section 223(c)(2)(C) of such 

6 Code (as amended by this section) is amended by striking 

7 ‘‘other than’’ and inserting ‘‘, including’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2009. 

11 SEC. 6. REPEAL OF 7.5 PERCENT THRESHOLD ON DEDUC12 TION FOR MEDICAL EXPENSES. 

13 (a) IN GENERAL.—Subsection (a) of section 213 of 

14 the Internal Revenue Code of 1986 (relating to deduction 

15 for medical expenses) is amended by striking ‘‘to the ex16 tent that such expenses exceed 7.5 percent of adjusted 

17 gross income’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2009. 

21 SEC. 7. PURCHASE OF HEALTH INSURANCE ACROSS STATE 

22 LINES. 

23 Notwithstanding any other Federal or State law, any 

24 individual residing in a State in the United States may 

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1 ance issuer located in any other such State so long as such 

2 issuer is in compliance withal relevant laws of the State 

3 of its incorporation (or the State where it is domiciled or 

4 primarily does business). 

5 SEC. 8. FACILITATION OF IMPORTATION OF DRUGS AP6 PROVED BY FOOD AND DRUG ADMINISTRA7 TION. 

8 (a) IN GENERAL.—Chapter VIII of the Federal 

9 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.) 

10 is amended— 

11 (1) by striking section 804; and 

12 (2) in section 801(d)— 

13 (A) by striking paragraph (2); and 

14 (B) by striking ‘‘(d)(1)’’ and all that fol15 lows through the end of paragraph (1) and in16 serting the following: 

17 ‘‘(d)(1)(A) A person who meets applicable legal re18 quirements to be an importer of drugs described in sub19 paragraph (B) may import such a drug (without regard 

20 to whether the person is a manufacturer of the drug) if 

21 the person submits to the Secretary an application to im22 port the drug and the Secretary approves the application. 

23 ‘‘(B) For purposes of subparagraph (A), the drugs 

24 described in this subparagraph are drugs that are subject 

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1 to section 503(b)(1) or that are composed wholly or partly 

2 of insulin. 

3 ‘‘(C) The Secretary shall approve an application 

4 under subparagraph (A) if the application demonstrates 

5 that the drug to be imported meets all requirements under 

6 this Act for the admission of the drug into the United 

7 States, including demonstrating that— 

8 ‘‘(i) an application for the drug has been ap9 proved under section 505, or as applicable, under 

10 section 351 of the Public Health Service Act; and 

11 ‘‘(ii) the drug is not adulterated or misbranded. 

12 ‘‘(D) Not later than 60 days after the date on which 

13 an application under subparagraph (A) is submitted to the 

14 Secretary, the Secretary shall— 

15 ‘‘(i) approve the application; or 

16 ‘‘(ii) refuse to approve the application and pro17 vide to the person who submitted the application the 

18 reason for such refusal. 

19 ‘‘(E) This paragraph may not be construed as affect20 ing any right secured by patent.’’. 

21 (b) CONFORMING AMENDMENTS.—Section 801(d) of 

22 the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

23 381(d)) is amended— 

24 (1) by redesignating paragraphs (3) and (4) as 

25 paragraphs (2) and (3), respectively; 

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1 (2) in subclause (III) of paragraph (2)(A)(i) (as 

2 redesignated by this subsection), by striking ‘‘para3 graph (4)’’ and inserting ‘‘paragraph (3)’’; and 

4 (3) in paragraph (3) (as redesignated by this 

5 subsection), by striking ‘‘paragraph (3)’’ each place 

6 such term appears and inserting ‘‘paragraph (2)’’. 

7 SEC. 9. CREDIT FOR PURCHASE BY PATIENT OF INSUR8 ANCE AGAINST NEGATIVE OUTCOMES RE9 SULTING FROM SURGERY. 

10 (a) IN GENERAL.—Subpart A of part IV of sub11 chapter A of chapter 1 of the Internal Revenue Code of 

12 1986 (relating to nonrefundable credits) is amended by 

13 inserting after section 25D the following new section: 

14 ‘‘SEC. 25E. COST OF INSURANCE PURCHASED BY PATIENT 

15 AGAINST NEGATIVE OUTCOMES RESULTING 

16 FROM SURGERY. 

17 ‘‘(a) IN GENERAL.—In the case of an individual, 

18 there shall be allowed as a credit against the tax imposed 

19 by this chapter for the taxable year an amount equal to 

20 the cost of negative outcomes insurance covering the indi21 vidual or the spouse or any dependent (as defined in sec22 tion 152) of the individual. 

23 ‘‘(b) NEGATIVE OUTCOMES INSURANCE.—For pur24 poses of this section, the term ‘negative outcomes insur25 ance’ means insurance covering any negative side effect 

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1 of surgery, including those caused by malpractice from the 

2 action or inaction of a physician.’’. 

3 (b) CONFORMING AMENDMENT.—The table of sec4 tions for such subpart A of such Code is amended by in5 serting after the item relating to section 25D the following 

6 new item: 

‘‘Sec. 25E. Cost of insurance purchased by patient against negative outcomes 

resulting from surgery.’’. 

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

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 SEC. 10. EXCLUSION FROM GROSS INCOME FOR MEDICAL 

11 MALPRACTICE AWARDS GRANTED IN BIND12 ING ARBITRATION. 

13 (a) IN GENERAL.—Section 104 of the Internal Rev14 enue Code of 1986 (relating to compensation for injuries 

15 or sickness) is amended by redesignated subsection (d) as 

16 subsection (e) and by inserting after subsection (c) the fol17 lowing new subsection: 

18 ‘‘(d) MEDICAL MALPRACTICE BINDING ARBITRATION

19 AWARDS.—In the case of damages awarded for medical 

20 malpractice in binding arbitration, gross income does not 

21 include such damages (whether for lost wages or other22 wise).’’. 

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

2 subsection (a) shall apply to damages awarded after the 

3 date of the enactment of this Act. 

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