II

106TH CONGRESS

1ST SESSION S. 210

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

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

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 1999’’.

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

7 this Act 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 XXI the following new title:

4 ‘‘TITLE XXII—MEDICAL EDUCATION TRUST

5 FUND

6 ‘‘TABLE OF CONTENTS OF TITLE

‘‘Sec. 2201. Establishment of Trust Fund.

‘‘Sec. 2202. Payments to medical schools.

‘‘Sec. 2203. Payments to teaching hospitals.

7 ‘‘SEC. 2201. 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 1886(l) and 1936, and section 4503 of the
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1 Internal Revenue Code of 1986. Amounts in the accounts

2 of the Trust Fund shall remain available until expended.

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

4 Amounts in the accounts of the Trust Fund are available

5 to the Secretary for making payments under sections 2202

6 and 2203.

7 ‘‘(c) INVESTMENT.—

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

9 Treasury shall invest amounts in the accounts of the

10 Trust Fund which the Secretary determines are not

11 required to meet current withdrawals from the Trust

12 Fund. Such investments may be made only in inter13 est-bearing obligations of the United States. For

14 such purpose, such obligations may be acquired on

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

16 outstanding obligations at the market price.

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

18 the Treasury may sell at market price any obligation

19 acquired under paragraph (1).

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

21 derived from obligations held in each such account,

22 and proceeds from any sale or redemption of such

23 obligations, are hereby appropriated to such account.

24 ‘‘(d) MONETARY GIFTS TO TRUST FUND.—There are

25 appropriated to the Trust Fund such amounts as may be
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1 unconditionally donated to the Federal Government as

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

3 and transferred to the accounts described in subsection

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

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

6 the Trust Fund.

7 ‘‘SEC. 2202. PAYMENTS TO MEDICAL SCHOOLS.

8 ‘‘(a) FEDERAL PAYMENTS TO MEDICAL SCHOOLS

9 FOR CERTAIN COSTS.—

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

11 school that in accordance with paragraph (2) sub12 mits to the Secretary an application for fiscal year

13 2000 or any subsequent fiscal year, the Secretary

14 shall make payments for such year to the medical

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

16 The Secretary shall make such payments from the

17 Medical School Account in an amount determined in

18 accordance with subsection (b), and may administer

19 the payments as a contract, grant, or cooperative

20 agreement.

21 ‘‘(2) APPLICATION FOR PAYMENTS.—For pur22 poses of paragraph (1), an application for payments

23 under such paragraph for a fiscal year is in accord24 ance with this paragraph if—
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1 ‘‘(A) the medical school involved submits

2 the application not later than the date specified

3 by the Secretary; and

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

5 made in such manner, and contains such agree6 ments, assurances, and information as the Sec7 retary determines to be necessary to carry out

8 this section.

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

10 payments under paragraph (1) is to assist medical

11 schools in maintaining and developing quality edu12 cational programs in an increasingly competitive

13 health care system.

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

15 ANNUAL AMOUNT OF PAYMENTS.—

16 ‘‘(1) AVAILABILITY OF TRUST FUND FOR PAY17 MENTS.—The following amounts shall be available

18 for a fiscal year for making payments under sub19 section (a) from the amount allocated and trans20 ferred to the Medical School Account under sections

21 1886(l), 1936, 2201(c)(3), and 2201(d), and section

22 4503 of the Internal Revenue Code of 1986:

23 ‘‘(A) In the case of fiscal year 2000,

24 $200,000,000.
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1 ‘‘(B) In the case of fiscal year 2001,

2 $300,000,000.

3 ‘‘(C) In the case of fiscal year 2002,

4 $400,000,000.

5 ‘‘(D) In the case of fiscal year 2003,

6 $500,000,000.

7 ‘‘(E) In the case of fiscal year 2004,

8 $600,000,000.

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

10 year, the amount determined under this para11 graph for the previous fiscal year updated

12 through the midpoint of such previous fiscal

13 year by the estimated percentage change in the

14 general health care inflation factor (as defined

15 in subsection (d)) during the 12-month period

16 ending at that midpoint, with appropriate ad17 justments to reflect previous underestimations

18 or overestimations under this subparagraph in

19 the projected health care inflation factor.

20 ‘‘(2) AMOUNT OF PAYMENTS FOR MEDICAL

21 SCHOOLS.—

22 ‘‘(A) IN GENERAL.—Subject to the annual

23 amount available under paragraph (1) for a fis24 cal year, the amount of payments required

25 under subsection (a) to be made to a medical
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1 school that submits to the Secretary an applica2 tion for such year in accordance with subsection

3 (a)(2) is an amount equal to an amount deter4 mined by the Secretary in accordance with sub5 paragraph (B).

6 ‘‘(B) DEVELOPMENT OF FORMULA.—The

7 Secretary shall develop a formula for allocation

8 of funds to medical schools under this section

9 consistent with the purpose described in sub10 section (a)(3).

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

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

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

14 Service Act) or a school of osteopathic medicine (as de15 fined in such section).

16 ‘‘(d) GENERAL HEALTH CARE INFLATION FAC17 TOR.—The term ‘general health care inflation factor’

18 means the Consumer Price Index for Medical Services as

19 determined by the Bureau of Labor Statistics.

20 ‘‘SEC. 2203. PAYMENTS TO TEACHING HOSPITALS.

21 ‘‘(a) FORMULA PAYMENTS TO ELIGIBLE ENTI22 TIES.—

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

24 year beginning after September 30, 1999, the Sec25 retary shall make payments to each eligible entity
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1 that, in accordance with paragraph (2), submits to

2 the Secretary an application for such fiscal year.

3 Such payments shall be made from the Trust Fund,

4 and the total of the payments to the eligible entity

5 for the fiscal year shall equal the sum of the

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

7 and (e) with respect to such entity.

8 ‘‘(2) APPLICATION.—For purposes of para9 graph (1), an application shall contain such informa10 tion as may be necessary for the Secretary to make

11 payments under such paragraph to an eligible entity

12 during a fiscal year. An application shall be treated

13 as submitted in accordance with this paragraph if it

14 is submitted not later than the date specified by the

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

16 the Secretary may require.

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

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

19 shall be made periodically, at such intervals and in

20 such amounts as the Secretary determines to be ap21 propriate (subject to applicable Federal law regard22 ing Federal payments).

23 ‘‘(4) ADMINISTRATOR OF PROGRAMS.—The Sec24 retary shall carry out responsibility under this title
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1 by acting through the Administrator of the Health

2 Care Financing Administration.

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

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

5 fiscal year, means—

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

7 and (c), an entity which would be eligible to re8 ceive payments for such fiscal year under—

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

10 payments had not been terminated for dis11 charges occurring after September 30,

12 1999;

13 ‘‘(ii) section 1886(h), if such pay14 ments had not been terminated for cost re15 porting periods beginning after September

16 30, 1999; or

17 ‘‘(iii) both sections; or

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

19 and (e)—

20 ‘‘(i) an entity which meets the re21 quirement of subparagraph (A); or

22 ‘‘(ii) an entity which the Secretary de23 termines should be considered an eligible

24 entity.
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1 ‘‘(b) DETERMINATION OF AMOUNT FROM MEDICARE

2 TEACHING HOSPITAL INDIRECT ACCOUNT.—

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

4 an eligible entity for a fiscal year under this sub5 section is the amount equal to the applicable per6 centage of the total amount allocated and trans7 ferred to the Medicare Teaching Hospital Indirect

8 Account under section 1886(l)(1), and subsections

9 (c)(3) and (d) of section 2201 for such fiscal year.

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

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

12 fiscal year is equal to the percentage of the total

13 payments which would have been made to the eligi14 ble entity in such fiscal year under section

15 1886(d)(5)(B) if such payments had not been termi16 nated for discharges occurring after September 30,

17 1999.

18 ‘‘(c) DETERMINATION OF AMOUNT FROM MEDICARE

19 TEACHING HOSPITAL DIRECT ACCOUNT.—

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

21 an eligible entity for a fiscal year under this sub22 section is the amount equal to the applicable per23 centage of the total amount allocated and trans24 ferred to the Medicare Teaching Hospital Direct Ac-
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1 count under section 1886(l)(2), and subsections

2 (c)(3) and (d) of section 2201 for such fiscal year.

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

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

5 fiscal year is equal to the percentage of the total

6 payments which would have been made to the eligi7 ble entity in such fiscal year under section 1886(h)

8 if such payments had not been terminated for cost

9 reporting periods beginning after September 30,

10 1999.

11 ‘‘(d) DETERMINATION OF AMOUNT FROM NON12 MEDICARE TEACHING HOSPITAL INDIRECT ACCOUNT.—

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

14 an eligible entity for a fiscal year under this sub15 section is the amount equal to the applicable per16 centage of the total amount allocated and trans17 ferred to the Non-Medicare Teaching Hospital Indi18 rect Account for such fiscal year under section 1936,

19 subsections (c)(3) and (d) of section 2201, and sec20 tion 4503 of the Internal Revenue Code of 1986.

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

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

23 fiscal year for an eligible entity is equal to the per24 centage of the total payments which, as determined
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1 by the Secretary, would have been made in such fis2 cal year under section 1886(d)(5)(B) if—

3 ‘‘(A) such payments had not been termi4 nated for discharges occurring after September

5 30, 1999; and

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

7 into account in lieu of medicare patients.

8 ‘‘(e) DETERMINATION OF AMOUNT FROM NON9 MEDICARE TEACHING HOSPITAL DIRECT ACCOUNT.—

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

11 an eligible entity for a fiscal year under this sub12 section is the amount equal to the applicable per13 centage of the total amount allocated and trans14 ferred to the Non-Medicare Teaching Hospital Di15 rect Account for such fiscal year under section 1936,

16 subsections (c)(3) and (d) of section 2201, and sec17 tion 4503 of the Internal Revenue Code of 1986.

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

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

20 fiscal year for an eligible entity is equal to the per21 centage of the total payments which, as determined

22 by the Secretary, would have been made in such fis23 cal year under section 1886(h) if—
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1 ‘‘(A) such payments had not been termi2 nated for cost reporting periods beginning after

3 September 30, 1999; and

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

5 into account in lieu of medicare patients.’’.

6 SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.

7 Section 1886 of the Social Security Act (42 U.S.C.

8 1395ww) is amended—

9 (1) in subsection (d)(5)(B), in the matter pre10 ceding clause (i), by striking ‘‘The Secretary shall

11 provide’’ and inserting the following: ‘‘For dis12 charges occurring before October 1, 1999, the Sec13 retary shall provide’’;

14 (2) in subsection (d)(11)(C), by inserting after

15 ‘‘paragraph (5)(B)’’ ‘‘(notwithstanding that pay16 ments under paragraph (5)(B) are terminated for

17 discharges occurring after September 30, 1999)’’;

18 (3) in subsection (h)—

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

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

21 inserting ‘‘the Secretary shall, subject to para22 graph (7), provide’’; and

23 (B) by adding at the end the following:

24 ‘‘(7) LIMITATION.—
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1 ‘‘(A) IN GENERAL.—The authority to

2 make payments under this subsection (other

3 than payments made under paragraphs (3)(D)

4 and (6)) shall not apply with respect to—

5 ‘‘(i) cost reporting periods beginning

6 after September 30, 1999; and

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

8 period beginning on or before such date

9 which occurs after such date.

10 ‘‘(B) RULE OF CONSTRUCTION.—This

11 paragraph may not be construed as authorizing

12 any payment under section 1861(v) with re13 spect to graduate medical education.’’; and

14 (4) by adding at the end the following:

15 ‘‘(l) TRANSFERS TO MEDICAL EDUCATION TRUST

16 FUND.—

17 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU18 CATION.—

19 ‘‘(A) TRANSFER.—

20 ‘‘(i) IN GENERAL.—From the Federal

21 Hospital Insurance Trust Fund, the Sec22 retary shall, for fiscal year 2000 and each

23 subsequent fiscal year, transfer to the

24 Medical Education Trust Fund an amount
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1 equal to the amount estimated by the Sec2 retary under subparagraph (B).

3 ‘‘(ii) ALLOCATION.—Of the amount

4 transferred under clause (i)—

5 ‘‘(I) there shall be allocated and

6 transferred to the Medical School Ac7 count of such Trust Fund an amount

8 which bears the same ratio to the

9 total amount available under section

10 2202(b)(1) for the fiscal year (re11 duced by the balance in such account

12 at the end of the preceding fiscal

13 year) as the amount transferred under

14 clause (i) bears to the total amounts

15 transferred to such Trust Fund under

16 title XXII (excluding amounts trans17 ferred under subsections (c)(3) and

18 (d) of section 2201) for such fiscal

19 year; and

20 ‘‘(II) the remainder shall be allo21 cated and transferred to the Medicare

22 Teaching Hospital Indirect Account of

23 such Trust Fund.

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

25 Secretary shall make an estimate for each fiscal
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1 year involved of the nationwide total of the

2 amounts that would have been paid under sub3 section (d)(5)(B) to hospitals during the fiscal

4 year if such payments had not been terminated

5 for discharges occurring after September 30,

6 1999.

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

8 ‘‘(A) TRANSFER.—

9 ‘‘(i) IN GENERAL.—From the Federal

10 Hospital Insurance Trust Fund and the

11 Federal Supplementary Medical Insurance

12 Trust Fund, the Secretary shall, for fiscal

13 year 2000 and each subsequent fiscal year,

14 transfer to the Medical Education Trust

15 Fund an amount equal to the amount esti16 mated by the Secretary under subpara17 graph (B).

18 ‘‘(ii) ALLOCATION.—Of the amount

19 transferred under clause (i)—

20 ‘‘(I) there shall be allocated and

21 transferred to the Medical School Ac22 count of such Trust Fund an amount

23 which bears the same ratio to the

24 total amount available under section

25 2202(b)(1) for the fiscal year (re-
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1 duced by the balance in such account

2 at the end of the preceding fiscal

3 year) as the amount transferred under

4 clause (i) bears to the total amounts

5 transferred to such Trust Fund under

6 title XXII (excluding amounts trans7 ferred under subsections (c)(3) and

8 (d) of section 2201) for such fiscal

9 year; and

10 ‘‘(II) the remainder shall be allo11 cated and transferred to the Medicare

12 Teaching Hospital Direct Account of

13 such Trust Fund.

14 ‘‘(B) DETERMINATION OF AMOUNTS.—For

15 each hospital, the Secretary shall make an esti16 mate for the fiscal year involved of the amount

17 that would have been paid under subsection (h)

18 to the hospital during the fiscal year if such

19 payments had not been terminated for cost re20 porting periods beginning after September 30,

21 1999.

22 ‘‘(C) ALLOCATION BETWEEN FUNDS.—In

23 providing for a transfer under subparagraph

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

25 for an allocation of the amounts involved be-
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1 tween part A and part B (and the trust funds

2 established under the respective parts) as rea3 sonably reflects the proportion of direct grad4 uate medical education costs of hospitals associ5 ated with the provision of services under each

6 respective part.’’.

7 SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.

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

9 Act (42 U.S.C. 1396 et seq.) is amended by adding at

10 the end the following:

11 ‘‘TRANSFER OF FUNDS TO ACCOUNTS

12 ‘‘SEC. 1936. (a) TRANSFER OF FUNDS.—

13 ‘‘(1) IN GENERAL.—For fiscal year 2000 and

14 each subsequent fiscal year, the Secretary shall

15 transfer to the Medical Education Trust Fund es16 tablished under title XXII an amount equal to the

17 amount determined under subsection (b).

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

19 under paragraph (1)—

20 ‘‘(A) there shall be allocated and trans21 ferred to the Medical School Account of such

22 Trust Fund an amount which bears the same

23 ratio to the total amount available under sec24 tion 2202(b)(1) for the fiscal year (reduced by

25 the balance in such account at the end of the

26 preceding fiscal year) as the amount transferred
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1 under paragraph (1) bears to the total amounts

2 transferred to such Trust Fund (excluding

3 amounts transferred under subsections (c)(3)

4 and (d) of section 2201) for such fiscal year;

5 and

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

7 transferred to the Non-Medicare Teaching Hos8 pital Indirect Account and the Non-Medicare

9 Teaching Hospital Direct Account of such

10 Trust Fund, in the same proportion as the

11 amounts transferred to each account under sec12 tion 1886(l) relate to the total amounts trans13 ferred under such section for such fiscal year.

14 ‘‘(b) AMOUNT DETERMINED.—

15 ‘‘(1) OUTLAYS FOR ACUTE MEDICAL SERVICES

16 DURING PRECEDING FISCAL YEAR.—Beginning with

17 fiscal year 2000, the Secretary shall determine 5

18 percent of the total amount of Federal outlays made

19 under this title for acute medical services, as defined

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

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

22 The term ‘acute medical services’ means items and

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

24 following:
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1 ‘‘(A) Nursing facility services (as defined

2 in section 1905(f)).

3 ‘‘(B) Intermediate care facility for the

4 mentally retarded services (as defined in section

5 1905(d)).

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

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

8 ‘‘(D) Private duty nursing services (as re9 ferred to in section 1905(a)(8)).

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

11 furnished under a waiver granted under sub12 section (c), (d), or (e) of section 1915.

13 ‘‘(F) Home and community care furnished

14 to functionally disabled elderly individuals

15 under section 1929.

16 ‘‘(G) Community supported living arrange17 ments services under section 1930.

18 ‘‘(H) Case-management services (as de19 scribed in section 1915(g)(2)).

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

21 to in section 1905(a)(7)), clinic services, and re22 habilitation services that are furnished to an in23 dividual who has a condition or disability that

24 qualifies the individual to receive any of the

25 services described in a previous subparagraph.
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1 ‘‘(J) Services furnished in an institution

2 for mental diseases (as defined in section

3 1905(i)).

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

5 authority in advance of appropriations Acts and rep6 resents the obligation of the Federal Government to pro7 vide for the payment to the Non-Medicare Teaching Hos8 pital Indirect Account, the Non-Medicare Teaching Hos9 pital Direct Account, and the Medical School Account of

10 amounts determined in accordance with subsections (a)

11 and (b).’’.

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

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

14 1999.

15 SEC. 5. ASSESSMENTS ON INSURED AND SELF-INSURED

16 HEALTH PLANS.

17 (a) GENERAL RULE.—Subtitle D of the Internal Rev18 enue Code of 1986 (relating to miscellaneous excise taxes)

19 is amended by adding after chapter 36 the following new

20 chapter:

21 ‘‘CHAPTER 37—HEALTH RELATED

22 ASSESSMENTS

‘‘SUBCHAPTER A. Insured and self-insured health plans.
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1 ‘‘Subchapter A—Insured and Self-Insured

2 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.

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

4 ADMINISTRATIVE SERVICES.

5 ‘‘(a) IMPOSITION OF TAX.—There is hereby

6 imposed—

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

8 tax equal to 1.5 percent of the premiums received

9 under such policy, and

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

11 administrative services, a tax equal to 1.5 percent of

12 the amount so received.

13 ‘‘(b) LIABILITY FOR TAX.—

14 ‘‘(1) HEALTH INSURANCE.—The tax imposed

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

16 the policy.

17 ‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV18 ICES.—The tax imposed by subsection (a)(2) shall

19 be paid by the person providing the health-related

20 administrative services.

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

22 purposes of this section—
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1 ‘‘(1) IN GENERAL.—Except as otherwise pro2 vided in this section, the term ‘taxable health insur3 ance policy’ means any insurance policy providing

4 accident or health insurance with respect to individ5 uals residing in the United States.

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

7 term ‘taxable health insurance policy’ does not in8 clude any insurance policy if substantially all of the

9 coverage provided under such policy relates to—

10 ‘‘(A) liabilities incurred under workers’

11 compensation laws,

12 ‘‘(B) tort liabilities,

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

14 of property,

15 ‘‘(D) credit insurance, or

16 ‘‘(E) such other similar liabilities as the

17 Secretary may specify by regulations.

18 ‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES

19 OTHER COVERAGE.—In the case of any taxable

20 health insurance policy under which amounts are

21 payable other than for accident or health coverage,

22 in determining the amount of the tax imposed by

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

24 policy, there shall be excluded the amount of the
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1 charge for the nonaccident or nonhealth coverage

2 if—

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

4 nonhealth coverage is either separately stated in

5 the policy, or furnished to the policyholder in a

6 separate statement, and

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

8 to the total charges under the policy.

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

10 paid under such policy shall be subject to tax under

11 subsection (a)(1).

12 ‘‘(4) TREATMENT OF PREPAID HEALTH COV13 ERAGE ARRANGEMENTS.—

14 ‘‘(A) IN GENERAL.—In the case of any ar15 rangement described in subparagraph (B)—

16 ‘‘(i) such arrangement shall be treated

17 as a taxable health insurance policy,

18 ‘‘(ii) the payments or premiums re19 ferred to in subparagraph (B)(i) shall be

20 treated as premiums received for a taxable

21 health insurance policy, and

22 ‘‘(iii) the person referred to in sub23 paragraph (B)(i) shall be treated as the

24 issuer.
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1 ‘‘(B) DESCRIPTION OF ARRANGEMENTS.—

2 An arrangement is described in this subpara3 graph if under such arrangement—

4 ‘‘(i) fixed payments or premiums are

5 received as consideration for any person’s

6 agreement to provide or arrange for the

7 provision of accident or health coverage to

8 residents of the United States, regardless

9 of how such coverage is provided or ar10 ranged to be provided, and

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

12 the rates of utilization of services is as13 sumed by such person or the provider of

14 such services.

15 ‘‘(d) HEALTH-RELATED ADMINISTRATIVE SERV16 ICES.—For purposes of this section, the term ‘health-re17 lated administrative services’ means—

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

19 other administrative services in connection with acci20 dent or health coverage under a taxable health in21 surance policy if the charge for such services is not

22 included in the premiums under such policy, and

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

24 of accident or health coverage, or performing other

25 administrative services in connection with an appli-
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1 cable self-insured health plan (as defined in section

2 4502(c)) established or maintained by a person

3 other than the person performing the services.

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

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

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

7 ‘‘(a) IMPOSITION OF TAX.—In the case of any appli8 cable self-insured health plan, there is hereby imposed a

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

10 ‘‘(1) the accident or health coverage expendi11 tures for such month under such plan, and

12 ‘‘(2) the administrative expenditures for such

13 month under such plan to the extent such expendi14 tures are not subject to tax under section 4501.

15 In determining the amount of expenditures under para16 graph (2), rules similar to the rules of subsection (d)(3)

17 apply.

18 ‘‘(b) LIABILITY FOR TAX.—

19 ‘‘(1) IN GENERAL.—The tax imposed by sub20 section (a) shall be paid by the plan sponsor.

21 ‘‘(2) PLAN SPONSOR.—For purposes of para22 graph (1), the term ‘plan sponsor’ means—

23 ‘‘(A) the employer in the case of a plan es24 tablished or maintained by a single employer,
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1 ‘‘(B) the employee organization in the case

2 of a plan established or maintained by an em3 ployee organization, or

4 ‘‘(C) in the case of—

5 ‘‘(i) a plan established or maintained

6 by 2 or more employers or jointly by 1 or

7 more employers and 1 or more employee

8 organizations,

9 ‘‘(ii) a voluntary employees’ bene10 ficiary association under section 501(c)(9),

11 or

12 ‘‘(iii) any other association plan,

13 the association, committee, joint board of trust14 ees, or other similar group of representatives of

15 the parties who establish or maintain the plan.

16 ‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—

17 For purposes of this section, the term ‘applicable self-in18 sured health plan’ means any plan for providing accident

19 or health coverage if any portion of such coverage is pro20 vided other than through an insurance policy.

21 ‘‘(d) ACCIDENT OR HEALTH COVERAGE EXPENDI22 TURES.—For purposes of this section—

23 ‘‘(1) IN GENERAL.—The accident or health cov24 erage expenditures of any applicable self-insured

25 health plan for any month are the aggregate expend-
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1 itures paid in such month for accident or health cov2 erage provided under such plan to the extent such

3 expenditures are not subject to tax under section

4 4501.

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

6 determining accident or health coverage expenditures

7 during any month of any applicable self-insured

8 health plan, reimbursements (by insurance or other9 wise) received during such month shall be taken into

10 account as a reduction in accident or health coverage

11 expenditures.

12 ‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—

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

14 the acquisition or improvement of land or for the ac15 quisition or improvement of any property to be used

16 in connection with the provision of accident or

17 health coverage which is subject to the allowance

18 under section 167, except that, for purposes of para19 graph (1), allowances under section 167 shall be

20 considered as expenditures.

21 ‘‘SEC. 4503. TRANSFER TO ACCOUNTS.

22 ‘‘For fiscal year 2000 and each subsequent fiscal

23 year, there are hereby appropriated and transferred to the

24 Medical Education Trust Fund under title XXII of the
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1 Social Security Act amounts equivalent to taxes received

2 in the Treasury under sections 4501 and 4502, of which—

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

4 the Medical School Account of such Trust Fund an

5 amount which bears the same ratio to the total

6 amount available under section 2202(b)(1) of such

7 Act for the fiscal year (reduced by the balance in

8 such account at the end of the preceding fiscal year)

9 as the amount transferred to such Trust Fund

10 under this section bears to the total amounts trans11 ferred to such Trust Fund (excluding amounts

12 transferred under subsections (c)(3) and (d) of sec13 tion 2201 of such Act) for such fiscal year; and

14 ‘‘(2) the remainder shall be allocated and trans15 ferred to the Non-Medicare Teaching Hospital Indi16 rect Account and the Non-Medicare Teaching Hos17 pital Direct Account of such Trust Fund, in the

18 same proportion as the amounts transferred to such

19 account under section 1886(l) of such Act relate to

20 the total amounts transferred under such section for

21 such fiscal year.

22 Such amounts shall be transferred in the same manner

23 as under section 9601.
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1 ‘‘SEC. 4504. DEFINITIONS AND SPECIAL RULES.

2 ‘‘(a) DEFINITIONS.—For purposes of this

3 subchapter—

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

5 term ‘accident or health coverage’ means any cov6 erage which, if provided by an insurance policy,

7 would cause such policy to be a taxable health insur8 ance policy (as defined in section 4501(c)).

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

10 policy’ means any policy or other instrument where11 by a contract of insurance is issued, renewed, or ex12 tended.

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

14 the gross amount of premiums and other consider15 ation (including advance premiums, deposits, fees,

16 and assessments) arising from policies issued by a

17 person acting as the primary insurer, adjusted for

18 any return or additional premiums paid as a result

19 of endorsements, cancellations, audits, or retrospec20 tive rating. Amounts returned where the amount is

21 not fixed in the contract but depends on the experi22 ence of the insurer or the discretion of management

23 shall not be included in return premiums.

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

25 States’ includes any possession of the United States.

26 ‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—
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1 ‘‘(1) IN GENERAL.—For purposes of this

2 subchapter—

3 ‘‘(A) the term ‘person’ includes any gov4 ernmental entity, and

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

6 of law, governmental entities shall not be ex7 empt from the taxes imposed by this subchapter

8 except as provided in paragraph (2).

9 ‘‘(2) EXEMPT GOVERNMENTAL PROGRAMS.—

10 ‘‘(A) IN GENERAL.—In the case of an ex11 empt governmental program—

12 ‘‘(i) no tax shall be imposed under

13 section 4501 on any premium received pur14 suant to such program or on any amount

15 received for health-related administrative

16 services pursuant to such program, and

17 ‘‘(ii) no tax shall be imposed under

18 section 4502 on any expenditures pursuant

19 to such program.

20 ‘‘(B) EXEMPT GOVERNMENTAL PRO21 GRAM.—For purposes of this paragraph, the

22 term ‘exempt governmental program’ means—

23 ‘‘(i) the insurance programs estab24 lished by parts A and B of title XVIII of

25 the Social Security Act,
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1 ‘‘(ii) the medical assistance program

2 established by title XIX of the Social Secu3 rity Act,

4 ‘‘(iii) any program established by Fed5 eral law for providing medical care (other

6 than through insurance policies) to individ7 uals (or the spouses and dependents there8 of) by reason of such individuals being—

9 ‘‘(I) members of the Armed

10 Forces of the United States, or

11 ‘‘(II) veterans, and

12 ‘‘(iv) any program established by Fed13 eral law for providing medical care (other

14 than through insurance policies) to mem15 bers of Indian tribes (as defined in section

16 4(d) of the Indian Health Care Improve17 ment Act).

18 ‘‘(c) NO COVER OVER TO POSSESSIONS.—Notwith19 standing any other provision of law, no amount collected

20 under this subchapter shall be covered over to any posses21 sion of the United States.’’.

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

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

24 amended by inserting after the item relating to chapter

25 36 the following new item:

‘‘CHAPTER 37. Health related assessments.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to premiums received,

3 and expenses incurred, with respect to coverage for peri4 ods after September 30, 1999.

5 SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.

6 (a) ESTABLISHMENT.—There is hereby established

7 an advisory commission to be known as the Medical Edu8 cation Advisory Commission (in this section referred to as

9 the ‘‘Advisory Commission’’).

10 (b) DUTIES.—

11 (1) IN GENERAL.—The Advisory Commission

12 shall—

13 (A) conduct a thorough study of all mat14 ters relating to—

15 (i) the operation of the Medical Edu16 cation Trust Fund established under sec17 tion 2201 of the Social Security Act (as

18 added by section 2);

19 (ii) alternative and additional sources

20 of graduate medical education funding;

21 (iii) alternative methodologies for

22 compensating teaching hospitals for grad23 uate medical education;
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1 (iv) policies designed to maintain su2 perior research and educational capacities

3 in an increasing competitive health system;

4 (v) the role of medical schools in grad5 uate medical education;

6 (vi) policies designed to expand eligi7 bility for graduate medical education pay8 ments to children’s hospitals that operate

9 graduate medical education programs; and

10 (vii) policies designed to expand eligi11 bility for graduate medical education pay12 ments to institutions other than teaching

13 hospitals;

14 (B) develop recommendations, including

15 the use of demonstration projects, on the mat16 ters studied under subparagraph (A) in con17 sultation with the Secretary of Health and

18 Human Services and the entities described in

19 paragraph (2);

20 (C) not later than January 2001, submit

21 an interim report to the Committee on Finance

22 of the Senate, the Committee on Ways and

23 Means of the House of Representatives, and the

24 Secretary of Health and Human Services; and
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1 (D) not later than January 2003, 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 and

10 the Medicare Payment Advisory Commission;

11 (B) interested parties, including the Asso12 ciation of American Medical Colleges, the Asso13 ciation of Academic Health Centers, and the

14 American Medical Association;

15 (C) health care insurers, including man16 aged care entities; and

17 (D) other entities as determined by the

18 Secretary of Health and Human Services.

19 (c) NUMBER AND APPOINTMENT.—The membership

20 of the Advisory Commission shall include 9 individuals

21 who are appointed to the Advisory Commission from

22 among individuals who are not officers or employees of

23 the United States. Such individuals shall be appointed by

24 the Secretary of Health and Human Services, and shall

25 include individuals from each of the following categories:
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1 (1) Physicians who are faculty members of

2 medical schools.

3 (2) Officers or employees of teaching hospitals.

4 (3) Officers or employees of health plans.

5 (4) Deans of medical schools.

6 (5) Such other individuals as the Secretary de7 termines to be appropriate.

8 (d) TERMS.—

9 (1) IN GENERAL.—Except as provided in para10 graph (2), members of the Advisory Commission

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

12 Commission, or 4 years.

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

14 Advisory Commission may continue to serve after

15 the expiration of the term of the member until a

16 successor is appointed.

17 (e) VACANCIES.—If a member of the Advisory Com18 mission does not serve the full term applicable under sub19 section (d), the individual appointed to fill the resulting

20 vacancy shall be appointed for the remainder of the term

21 of the predecessor of the individual.

22 (f) CHAIR.—The Secretary of Health and Human

23 Services shall designate an individual to serve as the Chair

24 of the Advisory Commission.
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1 (g) MEETINGS.—The Advisory Commission shall

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

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

4 and Human Services or the Chair.

5 (h) COMPENSATION AND REIMBURSEMENT OF EX6 PENSES.—Members of the Advisory Commission shall re7 ceive compensation for each day (including travel time) en8 gaged in carrying out the duties of the Advisory Commis9 sion. Such compensation may not be in an amount in ex10 cess of the maximum rate of basic pay payable for level

11 IV of the Executive Schedule under section 5315 of title

12 5, United States Code.

13 (i) STAFF.—

14 (1) STAFF DIRECTOR.—The Advisory Commis15 sion shall, without regard to the provisions of title

16 5, United States Code, relating to competitive serv17 ice, appoint a Staff Director who shall be paid at a

18 rate equivalent to a rate established for the Senior

19 Executive Service under 5382 of title 5, United

20 States Code.

21 (2) ADDITIONAL STAFF.—The Secretary of

22 Health and Human Services shall provide to the Ad23 visory Commission such additional staff, informa24 tion, and other assistance as may be necessary to

25 carry out the duties of the Advisory Commission.
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1 (j) TERMINATION OF THE ADVISORY COMMISSION.—

2 The Advisory Commission shall terminate 90 days after

3 the date on which the Advisory Commission submits its

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

5 (k) AUTHORIZATION OF APPROPRIATIONS.—There

6 are authorized to be appropriated such sums as may be

7 necessary to carry out the purposes of this section.

8 SEC. 7. DEMONSTRATION PROJECTS.

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

10 Human Services (in this section referred to as the ‘‘Sec11 retary’’) shall establish, by regulation, guidelines for the

12 establishment and operation of demonstration projects

13 which the Medical Education Advisory Commission rec14 ommends under section 6(b)(1)(B).

15 (b) FUNDING.—

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

17 1999, amounts in the Medical Education Trust

18 Fund under title XXII of the Social Security Act

19 shall be available for use by the Secretary in the es20 tablishment and operation of demonstration projects

21 described in subsection (a).

22 (2) FUNDS AVAILABLE.—

(A) LIMITATION.—Not more than 1 23 ⁄10 of 1

24 percent of the funds in such Trust Fund shall

25 be available for the purposes of paragraph (1).
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1 (B) ALLOCATION.—Amounts under para2 graph (1) shall be paid from the accounts es3 tablished under paragraphs (2) through (5) of

4 section 2201(a) of the Social Security Act, in

5 the same proportion as the amounts transferred

6 to such accounts bears to the total of amounts

7 transferred to all 4 such accounts for such fis8 cal year.

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

10 construed to authorize any change in the payment meth11 odology for teaching hospitals and medical schools estab12 lished by the amendments made by this Act.

Æ