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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1019 Introduced in Senate (IS)]

110th CONGRESS
  1st Session
                                S. 1019

To provide comprehensive reform of the health care system of the United 
                    States, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             March 28, 2007

   Mr. Coburn (for himself, Mr. Burr, Mr. Chambliss, and Mr. Inhofe) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To provide comprehensive reform of the health care system of the United 
                    States, 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 ``Universal Health 
Care Choice and Access Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
                    TITLE I--PREVENTION AND WELLNESS

Sec. 101. Strategic approach to outcome-based prevention.
Sec. 102. State grants for outcome-based prevention effort.
Sec. 103. Keeping the food stamp program focused on nutrition.
Sec. 104. Immunizations.
TITLE II--TAX INCENTIVES TO ENCOURAGE PURCHASE OF HEALTH CARE INSURANCE

                  Subtitle A--Health Savings Accounts

Sec. 201. Expansion of health savings accounts.
Sec. 202. Exception to requirement for employers to make comparable 
                            health savings account contributions.
                   Subtitle B--MediChoice Tax Rebates

Sec. 211. Refundable credit for health insurance coverage.
Sec. 212. Advance payment of credit for purchasers of qualified health 
                            insurance.
Sec. 213. Termination of employer-provided health care coverage 
                            exclusion.
               TITLE III--HEALTH INSURANCE MODERNIZATION

                      Subtitle A--Employee Choice

Sec. 301. Clarification of definition of group health plan under HIPAA.
                   Subtitle B--Access to Health Care

Sec. 311. State high risk pools.
Sec. 312. Federally qualified health centers.
           Subtitle C--Interstate Market for Health Insurance

Sec. 321. Short title.
Sec. 322. Specification of constitutional authority for enactment of 
                            law.
Sec. 323. Findings.
Sec. 324. Cooperative governing of individual health insurance 
                            coverage.
Sec. 325. Severability.
             TITLE IV--IMPROVEMENTS TO THE MEDICARE PROGRAM

                   Subtitle A--MediChoice for Seniors

Sec. 401. Setting the benchmark equal to the national average bid.
Sec. 402. Enhancement of beneficiary rebates.
Sec. 403. Alternative benefit design to original medicare fee-for-
                            service benefits.
Sec. 404. Medicare advantage HSA plans.
Sec. 405. Review of adjustment mechanism used under the Medicare 
                            Advantage program.
    Subtitle B--Enhancements to the Medicare Fee-For-Service Program

Sec. 411. Elimination of annual indexing of income thresholds for 
                            reduced part B premium subsidies.
Sec. 412. Authority to adjust amount of Medicare part B premium to 
                            reward positive health behavior.
Sec. 413. Recapture of Medicare DSH funds.
Sec. 414. Price transparency requirements for Medicare providers.
                   Subtitle C--Value-Based Purchasing

Sec. 421. Repeal of physician ownership referral prohibitions based on 
                            compensation arrangements.
Sec. 422. Revision of designated health services subject to ownership 
                            referral prohibition.
Sec. 423. Exceptions to ownership referral prohibitions.
Sec. 424. Effective date.
     Subtitle D--Securing Medicare's Future for Tomorrow's Seniors

Sec. 431. Medical Retirement Accounts.
                  TITLE V--KEEPING MEDICAID ON MISSION

Sec. 501. Restructuring of Medicaid funding.
Sec. 502. Medicaid Advantage program.
Sec. 503. High performance bonuses.
             TITLE VI--ADMINISTRATIVE HEALTH CARE TRIBUNALS

Sec. 601. State grants to create administrative health care tribunals.
                TITLE VII--HEALTH INFORMATION TECHNOLOGY

 Subtitle A--Assisting the Development of Health Information Technology

Sec. 701. Purpose.
Sec. 702. Health record banking.
Sec. 703. Application of Federal and State security and confidentiality 
                            standards.
   Subtitle B--Promoting the Use of Health Information Technology to 
                     Better Coordinate Health Care

Sec. 711. Safe harbors to antikickback civil penalties and criminal 
                            penalties for provision of health 
                            information technology and training 
                            services.
Sec. 712. Exception to limitation on certain physician referrals (under 
                            stark) for provision of health information 
                            technology and training services to health 
                            care professionals.
Sec. 713. Rules of construction regarding use of consortia.
                       TITLE VIII--MISCELLANEOUS

Sec. 801. Dedication of Medicaid and revenue savings to strengthening 
                            the financial solvency of the Federal 
                            Hospital Insurance Trust Fund.
Sec. 802. Health care choice for veterans.
Sec. 803. Health care choice for Indians.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Nine out of 10 Americans think the United States health 
        care system needs fundamental changes.
            (2) The United States spends approximately 16 percent of 
        its Gross Domestic Product on health care and experts estimate 
        that percentage will rise to 20 percent by 2015.
            (3) The Federal Government spends more on health care than 
        it does on national defense.
            (4) As much as $1 out of every $4 health care dollars do 
        not go towards making Americans healthy.
            (5) Nearly 75 percent of American health care spending goes 
        toward the treatment of chronic diseases. Five preventable 
        chronic diseases (heart disease, cancer, stroke, chronic 
        obstructive pulmonary disease, and diabetes) cause two-thirds 
        of American deaths.
            (6) Since 2000, premiums for family health coverage have 
        increased by 87 percent, compared with cumulative inflation of 
        18 percent and cumulative wage growth of 20 percent. During 
        this same period, the percentage of employers offering health 
        benefits has fallen from 69 percent to 61 percent, and the 
        percentage of workers covered by their own employer also has 
        fallen. The current employer-based system offers little choice 
        in health plans to employees: 88 percent of American firms 
        offer only 1 health plan type.
            (7) Medicaid was designed as a safety net to ensure that 
        the poorest Americans have access to health care at a cost of 
        $1,000,000,000 in its first year. Today, more than 1 out of 
        every 6 Americans is in Medicaid at a total cost of more than 
        $338,000,000,000 in 2006. The program is expected to cost 
        nearly $5,000,000,000,000 over the next decade. In 2003, for 
        the first time ever, Medicaid spending replaced education as 
        the largest component of State budgets, consuming 22 percent of 
        State spending.
            (8) The unfunded liabilities of the Medicare Program over 
        the next 75 years are estimated to be $32,100,000,000,000 and 
        $70,500,000,000,000 on the infinite horizon. The Federal 
        Hospital Insurance Trust Fund is projected to be exhausted by 
        2018. Without any change in the program, Medicare will consume 
        23.1 percent of all Federal income taxes by 2020 and 37.5 
        percent of all Federal income taxes by 2030. Under the current 
        system, physician reimbursements will be cut by 34 percent by 
        the year 2015, leading to decreased access to physicians' 
        services for seniors.
            (9) Our current civil justice system is adversely affecting 
        patient access to health care services, better patient care, 
        and cost-efficient health care, in that the health care 
        liability system is a costly and ineffective mechanism for 
        resolving claims of health care liability and compensating 
        injured patients, and is a deterrent to the sharing of 
        information among health care professionals which impedes 
        efforts to improve patient safety and quality of care. 
        Economists estimate that between 5 and 9 percent of health care 
        spending is related to defensive medicine.
            (10) The adoption of health information technology will 
        significantly reduce health care spending while simultaneously 
        increasing the quality of health care.

                    TITLE I--PREVENTION AND WELLNESS

SEC. 101. STRATEGIC APPROACH TO OUTCOME-BASED PREVENTION.

    (a) Interagency Coordinating Committee.--
            (1) In general.--The Secretary of Health and Human Services 
        (referred to in this title as the ``Secretary'') shall convene 
        an interagency coordinating committee to develop a national 
        strategic plan for prevention. The Secretary shall serve as the 
        chairperson of the committee.
            (2) Composition.--In carrying out paragraph (1), the 
        Secretary shall include the participation of--
                    (A) the Director of the National Institutes of 
                Health;
                    (B) The Director of the Centers for Disease Control 
                and Prevention;
                    (C) the Administrator of the Agency for Healthcare 
                Research and Quality;
                    (D) the Administrator of the Substance Abuse and 
                Mental Health Services Administration;
                    (E) the Administrator of the Health Resources and 
                Services Administration;
                    (F) the Secretary of Agriculture;
                    (G) the Director of the Centers for Medicare & 
                Medicaid Services;
                    (H) the Administrator of the Environmental 
                Protection Agency;
                    (I) the Director of the Indian Health Service;
                    (J) the Administrator of the Administration on 
                Aging;
                    (K) the Secretary of Veterans Affairs;
                    (L) the Secretary of Defense;
                    (M) the Secretary of Education; and
                    (N) the Secretary of Labor.
            (3) Report and plan.--Not later than 1 year after the date 
        of enactment of this Act, the Secretary, acting through the 
        coordinating committee convened under paragraph (1), shall 
        submit to Congress a report concerning the recommendation of 
        the committee for health promotion and disease prevention 
        activities. Such report shall include a specific strategic plan 
        that shall include--
                    (A) a list of national priorities on health 
                promotion and disease prevention to address lifestyle 
                behavior modification (smoking cessation, proper 
                nutrition, and appropriate exercise) and the prevention 
                measures for the 5 leading disease killers in the 
                United States;
                    (B) specific science-based initiatives to achieve 
                the measurable goals of Healthy People 2010 regarding 
                nutrition, exercise, and smoking cessation, and 
                targeting the 5 leading disease killers in the United 
                States;
                    (C) specific plans for consolidating Federal health 
                programs and Centers that exist to promote healthy 
                behavior and reduce disease risk (including eliminating 
                programs and offices determined to be ineffective in 
                meeting the priority goals of Health People 2010), that 
                include transferring the nutrition guideline 
                development responsibility from the Secretary of 
                Agriculture to the Director of the Centers for Disease 
                Control and Prevention;
                    (D) specific plans to ensure that all Federal 
                health care programs are fully coordinated with 
                science-based prevention recommendations promulgated by 
                the Director of the Centers for Disease Control and 
                Prevention;
                    (E) specific plans to ensure that all non-
                Department of Health and Human Services prevention 
                programs are based on the science-based guidelines 
                developed by the Centers for Disease Control and 
                Prevention under subparagraph (D); and
                    (F) a list of new non-Federal and non-government 
                partners identified by the committee to build Federal 
                capacity in health promotion and disease prevention 
                efforts.
            (4) Annual request to give testimony.--The Secretary shall 
        annually request an opportunity to testify before Congress 
        concerning the progress made by the United States in meeting 
        the outcome-based standards of Healthy People 2010 with respect 
        to disease prevention and measurable outcomes and effectiveness 
        of Federal programs related to this goal.
            (5) Periodic reviews.--The Secretary shall conduct periodic 
        reviews, not less than every 5 years, and grading of every 
        Federal disease prevention and health promotion initiatives, 
        programs, and agencies. Such reviews shall be evaluated based 
        on effectiveness in meeting metrics-based goals with an 
        analysis posted on such agencies' public Internet websites.
    (b) Federal Messaging on Health Promotion and Disease Prevention.--
            (1) Media campaigns.--
                    (A) In general.--Not later than 1 year after the 
                date of enactment of this Act, the Secretary, acting 
                through the Director of the Centers for Disease Control 
                and Prevention, shall establish and implement a 
                national science-based media campaign on health 
                promotion and disease prevention.
                    (B) Requirements of campaign.--The campaign 
                implemented under subparagraph (A)--
                            (i) shall be designed to address proper 
                        nutrition, regular exercise, smoking cessation, 
                        obesity reduction, the 5 leading disease 
                        killers in the United States, and secondary 
                        prevention through disease screening promotion;
                            (ii) shall be carried out through 
                        competitively bid contracts awarded to entities 
                        providing for the professional production and 
                        design of such campaign;
                            (iii) may include the use of television, 
                        radio, Internet, and other commercial marketing 
                        venues and may be targeted to specific age 
                        groups based on peer-reviewed social research;
                            (iv) shall not be duplicative of any other 
                        Federal efforts relating to health promotion 
                        and disease prevention; and
                            (v) may include the use of humor and 
                        nationally-recognized positive role models.
                    (C) Evaluation.--The Secretary shall ensure that 
                the campaign implemented under subparagraph (A) is 
                subject to an independent evaluation every 2 years and 
                shall report every 2 years to Congress on the 
                effectiveness of such campaigns towards meeting 
                science-based metrics.
            (2) Website.--The Secretary, in consultation with private-
        sector experts, shall maintain or enter into a contract to 
        maintain an Internet website to provide science-based 
        information on guidelines for nutrition, regular exercise, 
        obesity reduction, smoking cessation, and specific chronic 
        disease prevention. Such website shall be designed to provide 
        information to health care providers and consumers.
            (3) Dissemination of information through providers.--The 
        Secretary, acting through the Centers for Disease Control and 
        Prevention, shall develop and implement a plan for the 
        dissemination of health promotion and disease prevention 
        information consistent with national priorities described in 
        the strategic and implementing plan under subsection (a)(3)(A), 
        through health care providers who participate in Federal 
        programs, including programs administered by the Indian Health 
        Service, the Department of Veterans Affairs, the Department of 
        Defense, and the Health Resources and Services Administration, 
        and the Medicare and Medicaid Programs.
            (4) Personalized prevention plans.--
                    (A) Contract.--The Secretary, acting through the 
                Director of the Centers for Disease Control and 
                Prevention, shall enter into a contract with a 
                qualified entity for the development and operation of a 
                Federal Internet website personalized prevention plan 
                tool.
                    (B) Use.--The website developed under subparagraph 
                (A) shall be designed to be used as a source of the 
                most up-to-date scientific evidence relating to disease 
                prevention for use by individuals. Such website shall 
                contain a component that enables an individual to 
                determine their disease risk (based on personal health 
                and family history, BMI, and other relevant 
                information) relating to the 5 leading diseases in the 
                United States, and obtain personalized suggestions for 
                preventing such diseases.
            (5) Internet portal.--The Secretary shall establish an 
        Internet portal for accessing risk-assessment tools developed 
        and maintained by private and academic entities.
            (6) Priority funding.--Funding for the activities 
        authorized under this section shall take priority over funding 
        from the Centers for Disease Control and Prevention provided 
        for grants to States and other entities for similar purposes 
        and goals as provided for in this section. Not to exceed 
        $500,000,000 shall be expended on the campaigns and activities 
        required under this Act.

SEC. 102. STATE GRANTS FOR OUTCOME-BASED PREVENTION EFFORT.

    (a) In General.--If the Secretary determines that it is essential 
to meeting the national priorities described in the plan required under 
section 101(a)(3)(A), the Secretary may award grants to States for the 
conduct of specific health promotion and disease prevention activities.
    (b) Eligibility.--To be eligible to receive a grant under 
subsection (a), a State shall submit to the Secretary an application at 
such time, in such manner, and containing such information as the 
Secretary may require, including a strategic plan that shall--
            (1) describe the specific health promotion and disease 
        prevention activities to be carried out under this grant;
            (2) include a list of the barriers that exist within the 
        State to meeting specific goals of Healthy People 2010;
            (3) include targeted demographic indicators and measurable 
        objectives with respect to health promotion and disease 
        prevention;
            (4) contain a set of process outcomes and milestones, based 
        on the process outcomes and milestones developed by the 
        Secretary, for measuring the effectiveness of activities 
        carried out under the grant in the State; and
            (5) outline the manner in which interventions to be carried 
        out under this grant will reduce morbidity and mortality within 
        the State over a 5-year period (or over a 10-year period, if 
        the Secretary determines such period appropriate for adequately 
        measuring progress).
    (c) Process Outcomes and Milestones.--
            (1) In general.--The Secretary shall develop process 
        outcomes and milestones to be used to measure the effectiveness 
        of activities carried out under a grant under this section by a 
        State.
            (2) Determinations.--If, beginning 2 years after the date 
        on which a grant is awarded to a State under this section, the 
        Secretary determines that the State is failing to make adequate 
        progress in meeting the outcomes and milestones contained in 
        the State plan under subsection (b)(4), the Secretary shall 
        provide the State with technical assistance on how to make such 
        progress. Such technical assistance shall continue for a period 
        of 2 years.
            (3) Continued failure to meet objectives.--If after the 
        expiration of the 2-year period described in paragraph (2), the 
        Secretary determines that the State is failing to make adequate 
        progress in meeting the outcomes and milestones contained in 
        the State plan under subsection (b)(4) over a 5-year period, 
        the Secretary shall terminate all funding to the State under a 
        grant under this section.
    (d) Regional Activities.--A State may use an amount, not to exceed 
15 percent of the total grant amount to such State, to carry out 
regional activities in conjunction with other States.
    (e) Targeted Activities.--A State may use grant funds to target 
specific populations within the State to achieve specific outcomes 
described in Healthy People 2010.
    (f) Innovative Incentive Structures.--The Secretary may award 
grants to States for the purposes of developing innovative incentive 
structures to encourage individuals to adopt specific prevention 
behaviors such as reducing their body mass index or for smoking 
cessation.
    (g) Wellness Bonuses.--
            (1) In general.--The Secretary shall award wellness bonus 
        payments to at least 5, but not more than 10, States that 
        demonstrate the greatest progress in reducing disease rates and 
        risk factors and increasing heathy behaviors.
            (2) Requirement.--To be eligible to receive a bonus payment 
        under paragraph (1), a State shall demonstrate--
                    (A) the progress described in paragraph (1); and
                    (B) that the State has met a specific floor for 
                progress outlined in the science-based metrics of 
                Healthy People 2010.
            (3) Use of payments.--Bonus payments under this subsection 
        may only be used by a State for the purposes of health 
        promotion and disease prevention.
            (4) Funding.--Out of funds appropriated to the Director of 
        the Centers for Disease Control and Prevention for each fiscal 
        year beginning with fiscal year 2008, the Director shall give 
        priority to using $50,000,000 of such funds to make bonus 
        payments under this subsection.
    (h) Administrative Expenses.--A State may use not more than 5 
percent of the amount of a grant under this section to carry out 
administrative activities.
    (i) State.--In this section, the term ``State'' means the 50 
States, the District of Columbia, the Commonwealth of Puerto Rico, 
Guam, Samoa, the United States Virgin Islands, and the Commonwealth of 
the Northern Mariana Islands.
    (j) Authorization of Appropriations.--Funding for the activities 
authorized under this section shall take priority over funding from the 
Centers for Disease Control and Prevention provided for grants to 
States and other entities for similar purposes and goals as provided 
for in this section, not to exceed $300,000,000 for each fiscal year.

SEC. 103. KEEPING THE FOOD STAMP PROGRAM FOCUSED ON NUTRITION.

    (a) Counseling Brochure.--The Director of the Centers for Disease 
Control and Prevention shall develop, and the Secretary of Agriculture 
shall distribute to each individual and family enrolled in the Food 
Stamp Program under the Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), 
a science-based nutrition counseling brochure.
    (b) Limitations on Food Stamp Purchases.--
            (1) In general.--Not later than 6 months after the date of 
        enactment of this Act, the Secretary of Agriculture shall, 
        based on scientific, peer-reviewed recommendations provided by 
        a Commission that includes public health, medical, and 
        nutrition experts and the Director of the Centers for Disease 
        Control and Prevention, develop lists of foods that do not meet 
        science-based standards for proper nutrition and that may not 
        be purchased under the food stamp program. Such list shall be 
        updated on an annual basis to ensure the most current science-
        based recommendations are applied to the food stamp program.
            (2) Automated enforcement.--The Secretary of Agriculture 
        shall, through regulations, ensure that the limitations on food 
        purchases under paragraph (1) is enforced through the food 
        stamp program's automated system.
            (3) Implementation.--The Secretary of Agriculture shall 
        promulgate the regulations described in paragraph (2) by the 
        date that is not later than 1 year after the date of enactment 
        of this section.

SEC. 104. IMMUNIZATIONS.

    (a) Purchase of Vaccines.--Notwithstanding any other provision of 
law, a State may use amounts provided under section 317 of the Public 
Health Service Act (42 U.S.C. 247b) for immunization programs to 
purchase vaccines for use in health care provider offices and schools.
    (b) Technical Assistance and Reduction in Funding.--If a State does 
not achieve a benchmark of 80 percent coverage within the State for 
Centers for Disease Control and Prevention-recommended vaccines, the 
Director of the Centers shall provide technical assistance to the State 
for a period of 2 years. If after the expiration of such 2-year period 
the State continues to fail to achieve such benchmark, the Secretary 
shall reduce funding provided under section 317 of the Public Health 
Service Act to such State by 5 percent.
    (c) Bonus Grant.--A State achieving a benchmark of 90 percent or 
greater coverage within the State for Centers for Disease Control and 
Prevention-recommended vaccines shall be eligible for a bonus grant 
from amounts appropriated under subsection (d).
    (d) Authorization of Appropriations.--Out of funds appropriated to 
the Director of the Centers for Disease Control and Prevention for each 
fiscal year beginning with fiscal year 2008, there shall be made 
available to carry out this section, $50,000,000 for each fiscal year.
    (e) Funding for Section 317.--Section 317(j)(1) of the Public 
Health Service Act (42 U.S.C. 247b(j)(1)) is amended by striking 
``2005'' and inserting ``2010''.

TITLE II--TAX INCENTIVES TO ENCOURAGE PURCHASE OF HEALTH CARE INSURANCE

                  Subtitle A--Health Savings Accounts

SEC. 201. EXPANSION OF HEALTH SAVINGS ACCOUNTS.

    (a) Increase in Monthly Contribution Limit.--
            (1) In general.--Paragraph (2) of section 223(b) of the 
        Internal Revenue Code of 1986 (relating to limitations) is 
        amended to read as follows:
            ``(2) Monthly limitation.--
                    ``(A) In general.--In the case of an eligible 
                individual who has coverage under a high deductible 
                health plan, the monthly limitation for any month of 
                such coverage is \1/12\ of the sum of--
                            ``(i) the greater of--
                                    ``(I) the sum of the annual 
                                deductible and the other annual out-of-
                                pocket expenses (other than for 
                                premiums) required to be paid under the 
                                plan by the eligible individual for 
                                covered benefits, or
                                    ``(II) in the case of an eligible 
                                individual who has--
                                            ``(aa) self-only coverage 
                                        under a high deductible health 
                                        plan as of the first day of 
                                        such month, $2,250, or
                                            ``(bb) family coverage 
                                        under a high deductible health 
                                        plan as of the first day of 
                                        such month, $4,500, and
                            ``(ii) in the case of an eligible 
                        individual who has coverage under a qualified 
                        long-term care insurance contract (as defined 
                        in section 7702B(b)), the lesser of--
                                    ``(I) the annual premium for such 
                                coverage, or
                                    ``(II) $1,000.
                    ``(B) Special rules relating to out-of-pocket 
                expenses.--
                            ``(i) Reduction for separate plan.--The 
                        annual out-of-pocket expenses taken into 
                        account under subparagraph (A)(i)(I) with 
                        respect to any eligible individual shall be 
                        reduced by any out-of-pocket expense payable 
                        under a separate plan covering the individual.
                            ``(ii) Secretarial authority.--The 
                        Secretary may by regulations provide that 
                        annual out-of-pocket expenses will not be taken 
                        into account under subparagraph (A)(i)(I) to 
                        the extent that there is only a remote 
                        likelihood that such amounts will be required 
                        to be paid.''.
            (2) Application of special rules for married individuals.--
        Paragraph (5) of section 223(b) of such Code (relating to 
        limitations) is amended to read as follows:
            ``(5) Special rules for married individuals.--
                    ``(A) In general.--In the case of individuals who 
                are married to each other and who are both eligible 
                individuals, the limitation under paragraph (1) for 
                each spouse shall be equal to the spouse's applicable 
                share of the combined marital limit.
                    ``(B) Combined marital limit.--For purposes of 
                subparagraph (A), the combined marital limit is the 
                excess (if any) of--
                            ``(i) the lesser of--
                                    ``(I) subject to subparagraph (C), 
                                the sum of the limitations computed 
                                separately under paragraph (1) for each 
                                spouse (including any additional 
                                contribution amount under paragraph 
                                (3)), or
                                    ``(II) the dollar amount in effect 
                                under subsection (c)(2)(A)(ii)(II), 
                                over
                            ``(ii) the aggregate amount paid to Archer 
                        MSAs of such spouses for the taxable year.
                    ``(C) Special rule where both spouses have family 
                coverage.--For purposes of subparagraph (B)(i)(I), if 
                either spouse has family coverage which covers both 
                spouses, both spouses shall be treated as having only 
                such coverage (and if both spouses each have such 
                coverage under different plans, shall be treated as 
                having only family coverage with the plan with respect 
                to which the lowest amount is determined under 
                paragraph (2)(A)(i)(I)).
                    ``(D) Applicable share.--For purposes of 
                subparagraph (A), a spouse's applicable share is \1/2\ 
                of the combined marital limit unless both spouses agree 
                on a different division.
                    ``(E) Couples not married entire year.--The 
                Secretary shall prescribe rules for the application of 
                this paragraph in the case of any taxable year for 
                which the individuals were not married to each other 
                during all months included in the taxable year, 
                including rules which allow individuals in appropriate 
                cases to take into account coverage prior to marriage 
                in computing the combined marital limit for purposes of 
                this paragraph.''.
            (3) Self-only coverage.--Paragraph (4) of section 223(c) of 
        such Code (relating to definitions and special rules) is 
        amended to read as follows:
            ``(4) Coverage.--
                    ``(A) Family coverage.--The term `family coverage' 
                means any coverage other than self-only coverage.
                    ``(B) Self-only coverage.--If more than 1 
                individual is covered by a high deductible health plan 
                but only 1 of the individuals is an eligible 
                individual, the coverage shall be treated as self-only 
                coverage.''.
            (4) Conforming amendments.--
                    (A) Section 223(b)(3)(A) of such Code is amended by 
                striking ``subparagraphs (A) and (B) of''.
                    (B) Section 223(d)(1)(A)(ii)(I) of such Code is 
                amended by striking ``subsection (b)(2)(B)(ii)'' and 
                inserting ``subsection (c)(2)(A)(ii)(II)''.
                    (C) Clause (ii) of section 223(c)(2)(D) of such 
                Code is amended to read as follows:
                            ``(ii) Certain items disregarded in 
                        computing monthly limitation.--Such plan's 
                        annual deductible, and such plan's annual out-
                        of-pocket limitation, for services provided 
                        outside of such network shall not be taken into 
                        account for purposes of subsection (b)(2).''
                    (D) Subsection (g) of section 223 of such Code is 
                amended to read as follows:
    ``(g) Cost-of-Living Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2008, each dollar amount 
        contained in subsections (b)(2)(A) and (c)(2)(A) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under paragraph (2) for the calendar year in which such 
                taxable year begins.
            ``(2) Cost-of-living adjustment.--For purposes of paragraph 
        (1), the cost-of-living adjustment for any calendar year is the 
        percentage (if any) by which--
                    ``(A) the GDP for the preceding calendar year, 
                exceeds
                    ``(B) the GDP--
                            ``(i) for calendar year 1997, in the case 
                        of each dollar amount in subsection 
                        (b)(2)(A)(i),
                            ``(ii) for calendar year 2007, in the case 
                        of the dollar amount in subsection 
                        (b)(2)(A)(ii), and
                            ``(iii) for calendar year 2003 in the case 
                        of each dollar amount in subsection (c)(2)(A).
            ``(3) GDP for any calendar year.--For purposes of paragraph 
        (2), the GDP for any calendar year is the average of the chain-
        weighted price index for the gross domestic product as of the 
        close of the 12-month period ending on March 31 of such 
        calendar year.
            ``(4) Chain-weighted price index for the gross domestic 
        product.--For purposes of paragraph (3), the term `chain-
        weighted price index for the gross domestic product' means the 
        last chain-weighted price index for the gross domestic product 
        published by the Department of Commerce.
            ``(5) Rounding.--Any increase determined under paragraph 
        (1) shall be rounded to the nearest multiple of $50.''.
    (b) Use of Account for Individual High Deductible Health Plan 
Premiums.--Section 223(d)(2)(C) of the Internal Revenue Code of 1986 
(relating to exceptions) is amended by striking ``or'' at the end of 
clause (iii), by striking the period at the end of clause (iv) and 
inserting ``, or'', and by adding at the end the following new clause:
                            ``(v) a high deductible health plan, but 
                        only if--
                                    ``(I) the plan is not a group 
                                health plan (as defined in section 
                                5000(b)(1) without regard to section 
                                5000(d)), and
                                    ``(II) the expenses are for 
                                coverage for a month with respect to 
                                which the account beneficiary is an 
                                eligible individual by reason of the 
                                coverage under the plan.
                For purposes of clause (v), an arrangement which 
                constitutes individual health insurance shall not be 
                treated as a group health plan, notwithstanding that an 
                employer or employee organization negotiates the cost 
                of benefits of such arrangement.''.
    (c) Safe Harbor for Absence of Maintenance of Chronic Disease.--
Section 223(c)(2)(C) of the Internal Revenue Code of 1986 (safe harbor 
for absence of preventive care deductible) is amended--
            (1) by inserting ``or maintenance of chronic disease, or 
        both'' after ``the Secretary)'', and
            (2) by inserting ``or maintenance of chronic disease'' in 
        the heading after ``preventive care''.
    (d) Clarification of Treatment of Capitated Primary Care Payments 
as Amounts Paid for Medical Care.--Section 213(d) of the Internal 
Revenue Code of 1986 (relating to definitions) is amended by adding at 
the end the following new paragraph:
            ``(12) Treatment of capitated primary care payments.--
        Capitated primary care payments shall be treated as amounts 
        paid for medical care.''.
    (e) Special Rule for Individuals Eligible for Veterans or Indian 
Health Benefits.--Section 223(c)(1) of the Internal Revenue Code of 
1986 (defining eligible individual) is amended by adding at the end the 
following new subparagraph:
                    ``(C) Special rule for individuals eligible for 
                veterans or indian health benefits.--For purposes of 
                subparagraph (A)(ii), an individual shall not be 
                treated as covered under a health plan described in 
                such subparagraph merely because the individual 
                receives periodic hospital care or medical services 
                under any law administered by the Secretary of Veterans 
                Affairs or the Bureau of Indian Affairs.''.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2007.
            (2) Capitated primary care payments.--The amendment made by 
        subsection (d) shall apply to amounts paid before, on, or after 
        the date of the enactment of this Act.

SEC. 202. EXCEPTION TO REQUIREMENT FOR EMPLOYERS TO MAKE COMPARABLE 
              HEALTH SAVINGS ACCOUNT CONTRIBUTIONS.

    (a) Greater Employer-Provided Contributions to HSAs for Chronically 
Ill Employees Treated as Meeting Comparability Requirements.--
Subsection (b) of section 4980G of the Internal Revenue Code of 1986 
(relating to failure of employer to make comparable health savings 
account contributions) is amended to read as follows:
    ``(b) Rules and Requirements.--
            ``(1) In general.--Except as provided in paragraph (2), 
        rules and requirements similar to the rules and requirements of 
        section 4980E shall apply for purposes of this section.
            ``(2) Treatment of employer-provided contributions to hsas 
        for chronically ill employees.--For purposes of this section--
                    ``(A) In general.--Any contribution by an employer 
                to a health savings account of an employee who is (or 
                the spouse or any dependent of the employee who is) a 
                chronically ill individual in an amount which is 
                greater than a contribution to a health savings account 
                of a comparable participating employee who is not a 
                chronically ill individual shall not fail to be 
                considered a comparable contribution.
                    ``(B) Nondiscrimination requirement.--Subparagraph 
                (A) shall not apply unless the excess employer 
                contributions described in subparagraph (A) are the 
                same for all chronically ill individuals who are 
                similarly situated.
                    ``(C) Chronically ill individual.--For purposes of 
                this paragraph, the term `chronically ill individual' 
                means any individual whose qualified medical expenses 
                for any taxable year are more than 50 percent greater 
                than the average qualified medical expenses of all 
                employees of the employer for such year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

                   Subtitle B--MediChoice Tax Rebates

SEC. 211. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. MEDICHOICE TAX REBATES.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle an amount 
equal to the amount paid during the taxable year for qualified health 
insurance for the taxpayer and the taxpayer's spouse or dependent.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowed as a credit under 
        subsection (a) to the taxpayer for the taxable year shall not 
        exceed the sum of the monthly limitations for coverage months 
        during such taxable year for the individual referred to in 
        subsection (a) for whom the taxpayer paid during the taxable 
        year any amount for coverage under qualified health insurance.
            ``(2) Monthly limitation.--
                    ``(A) In general.--The monthly limitation for an 
                individual for each coverage month of such individual 
                during the taxable year is the amount equal to \1/12\ 
                of the qualified health insurance amount.
                    ``(B) Qualified health insurance amount.--For 
                purposes of this paragraph, the qualified health 
                insurance amount is--
                            ``(i) $2,000 if such individual is the 
                        taxpayer,
                            ``(ii) $2,000 if such individual is the 
                        spouse of the taxpayer, the taxpayer and such 
                        spouse are married as of the first day of such 
                        month, and the taxpayer files a joint return 
                        for the taxable year, or
                            ``(iii) $500 if such individual is an 
                        individual for whom a deduction under section 
                        151(c) is allowable to the taxpayer for such 
                        taxable year.
                    ``(C) Limitation on dependents.--Not more than 2 
                individuals may be taken into account by the taxpayer 
                under subparagraph (B)(iii).
            ``(3) Coverage month.--For purposes of this subsection--
                    ``(A) In general.--The term `coverage month' means, 
                with respect to an individual, any month if--
                            ``(i) as of the first day of such month 
                        such individual is covered by qualified health 
                        insurance, and
                            ``(ii) the premium for coverage under such 
                        insurance for such month is paid by the 
                        taxpayer.
                    ``(B) Medicare.--Such term shall not include any 
                month with respect to an individual if, as of the first 
                day of such month, such individual has not made an 
                election to establish and maintain a Medical Retirement 
                Account under section 252(a)(2) of the Social Security 
                Act and is entitled to benefits under title XVIII of 
                the Social Security Act.
                    ``(C) Certain other coverage.--Such term shall not 
                include any month during a taxable year with respect to 
                an individual if, at any time during such year, any 
                benefit is provided to such individual under--
                            ``(i) chapter 55 of title 10, United States 
                        Code,
                            ``(ii) chapter 17 of title 38, United 
                        States Code, or
                            ``(iii) any medical care program under the 
                        Indian Health Care Improvement Act.
                    ``(D) Prisoners.--Such term shall not include any 
                month with respect to an individual if, as of the first 
                day of such month, such individual is imprisoned under 
                Federal, State, or local authority.
                    ``(E) Insufficient presence in united states.--Such 
                term shall not include any month during a taxable year 
                with respect to an individual if such individual is 
                present in the United States on fewer than 183 days 
                during such year (determined in accordance with section 
                7701(b)(7)).
    ``(c) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means any health plan (within the meaning of section 223(c)(2)) 
        determined without regard to any annual deductible requirement.
            ``(2) Annual wellness exam.--Such term shall include an 
        annual wellness exam fee not to exceed $150 ($100 in the case 
        of an annual child wellness exam) if such exam is not covered 
        by the insurance.
    ``(d) Archer MSA and Health Savings Account Contributions.--
            ``(1) In general.--If a deduction would (but for paragraph 
        (2)) be allowed under section 220 or 223 to the taxpayer for a 
        payment for the taxable year to the Archer MSA or health 
        savings account of an individual, subsection (a) shall be 
        applied by treating such payment as a payment for qualified 
        health insurance for such individual.
            ``(2) Denial of double benefit.--No deduction shall be 
        allowed under section 220 or 223 for that portion of the 
        payments otherwise allowable as a deduction under section 220 
        or 223 for the taxable year which is equal to the amount of 
        credit allowed for such taxable year by reason of this 
        subsection.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit shall be allowed under subsection (a) only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(2) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(3) Denial of double benefit.--No credit shall be allowed 
        under subsection (a) if the credit under section 35 is allowed 
        and no credit shall be allowed under 35 if a credit is allowed 
        under this section.
            ``(4) Coordination with deduction for health insurance 
        costs.--In the case of a taxpayer who is eligible to deduct any 
        amount under section 162(l) or 213 for the taxable year, this 
        section shall apply only if the taxpayer elects not to claim 
        any amount as a deduction under such section for such year.
            ``(5) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.
            ``(6) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2008, each dollar 
                amount contained in subsection (b)(2)(B) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under subparagraph (B) for the 
                        calendar year in which such taxable year 
                        begins.
                    ``(B) Cost-of-living adjustment.--For purposes of 
                subparagraph (A), the cost-of-living adjustment for any 
                calendar year is the percentage (if any) by which--
                            ``(i) the GDP for the preceding calendar 
                        year, exceeds
                            ``(ii) the GDP for calendar year 2007.
                    ``(C) GDP for any calendar year.--For purposes of 
                subparagraph (B), the GDP for any calendar year is the 
                average of the chain-weighted price index for the gross 
                domestic product as of the close of the 12-month period 
                ending on March 31 of such calendar year.
                    ``(D) Chain-weighted price index for the gross 
                domestic product.--For purposes of subparagraph (C), 
                the term `chain-weighted price index for the gross 
                domestic product' means the last chain-weighted price 
                index for the gross domestic product published by the 
                Department of Commerce.
                    ``(E) Rounding.--Any increase determined under 
                subparagraph (A) shall be rounded to the nearest 
                multiple of $50.''.
    (b) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of the Internal Revenue Code of 1986 (relating to 
        information concerning transactions with other persons) is 
        amended by inserting after section 6050V the following new 
        section:

``SEC. 6050W. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH 
              INSURANCE.

    ``(a) In General.--Any person who, in connection with a trade or 
business conducted by such person, receives payments during any 
calendar year from any individual for coverage of such individual or 
any other individual under creditable health insurance, shall make the 
return described in subsection (b) (at such time as the Secretary may 
by regulations prescribe) with respect to each individual from whom 
such payments were received.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                from whom payments described in subsection (a) were 
                received,
                    ``(B) the name, address, and TIN of each individual 
                who was provided by such person with coverage under 
                creditable health insurance by reason of such payments 
                and the period of such coverage, and
                    ``(C) such other information as the Secretary may 
                reasonably prescribe.
    ``(c) Creditable Health Insurance.--For purposes of this section, 
the term `creditable health insurance' means qualified health insurance 
(as defined in section 36(c)) other than, to the extent provided in 
regulations prescribed by the Secretary, any insurance covering an 
individual if no credit is allowable under section 36 with respect to 
such coverage.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required under subsection (b)(2)(A) to be set forth in such return a 
written statement showing--
            ``(1) the name and address of the person required to make 
        such return and the phone number of the information contact for 
        such person,
            ``(2) the aggregate amount of payments described in 
        subsection (a) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished, and
            ``(3) the information required under subsection (b)(2)(B) 
        with respect to such payments.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be made.
    ``(e) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) of such 
                Code (relating to definitions) is amended by 
                redesignating clauses (xv) through (xx) as clauses 
                (xvi) through (xxi), respectively, and by inserting 
                after clause (xi) the following new clause:
                            ``(xv) section 6050W (relating to returns 
                        relating to payments for qualified health 
                        insurance),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking the period at the end of 
                subparagraph (CC) and inserting ``, or'' and by adding 
                at the end the following new subparagraph:
                    ``(DD) section 6050W(d) (relating to returns 
                relating to payments for qualified health 
                insurance).''.
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 of such Code is 
        amended by inserting after the item relating to section 6050V 
        the following new item:

``Sec. 6050W. Returns relating to payments for qualified health 
                            insurance.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 36 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following new items:

``Sec. 36. MediChoice tax rebates.
``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 212. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS OF QUALIFIED HEALTH 
              INSURANCE.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following new section:

``SEC. 7529. ADVANCE PAYMENT OF MEDICHOICE TAX REBATES.

    ``(a) General Rule.--In the case of an eligible individual, the 
Secretary shall make payments to the provider of such individual's 
qualified health insurance equal to such individual's qualified health 
insurance credit advance amount with respect to such provider.
    ``(b) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual--
            ``(1) who purchases qualified health insurance (as defined 
        in section 36(c)), and
            ``(2) for whom a qualified health insurance credit 
        eligibility certificate is in effect.
    ``(c) Qualified Health Insurance Credit Eligibility Certificate.--
For purposes of this section, a qualified health insurance credit 
eligibility certificate is a statement furnished by an individual to 
the Secretary which--
            ``(1) certifies that the individual will be eligible to 
        receive the credit provided by section 36 for the taxable year,
            ``(2) estimates the amount of such credit for such taxable 
        year, and
            ``(3) provides such other information as the Secretary may 
        require for purposes of this section.
    ``(d) Qualified Health Insurance Credit Advance Amount.--For 
purposes of this section, the term `qualified health insurance credit 
advance amount' means, with respect to any provider of qualified health 
insurance, the Secretary's estimate of the amount of credit allowable 
under section 36 to the individual for the taxable year which is 
attributable to the insurance provided to the individual by such 
provider.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new item:

``Sec. 7529. Advance payment of MediChoice tax rebates.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 213. TERMINATION OF EMPLOYER-PROVIDED HEALTH CARE COVERAGE 
              EXCLUSION.

    (a) In General.--Section 106 of the Internal Revenue Code of 1986 
(relating to contributions by employer to accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(e) Termination of Employer-Provided Health Care Coverage 
Exclusion.--
            ``(1) In general.--The amount of any exclusion under 
        subsection (a) for any taxable year beginning after December 
        31, 2007, with respect to--
                    ``(A) any employer-provided coverage under an 
                accident or health plan which constitutes medical care, 
                and
                    ``(B) any employer contribution to an Archer MSA or 
                a health savings account which is treated by subsection 
                (b) or (d) as employer-provided coverage for medical 
                expenses under an accident or health plan,
        shall be zero.
            ``(2) Medical care defined.--For purposes of paragraph (1), 
        the term `medical care' has the meaning given to such term in 
        section 213(d) determined without regard to--
                    ``(A) paragraph (1)(C) thereof, and
                    ``(B) so much of paragraph (1)(D) thereof as 
                relates to qualified long-term care insurance.''.
    (b) Termination of Health Care Expense Reimbursement Under 
Cafeteria Plans.--Section 125 of the Internal Revenue Code of 1986 
(relating to cafeteria plans) is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(h) Termination.--This section shall not apply to health benefits 
coverage in any taxable year beginning after December 31, 2007.''.
    (c) Termination of Deduction for Health Insurance Costs of Self-
Employed Individuals.--The table contained in section 162(l)(1)(B) of 
the Internal Revenue Code of 1986 (relating to applicable percentage) 
is amended by striking ``and thereafter'' and inserting ``through 
2007''.
    (d) Payroll Taxes.--
            (1) In general.--Section 3121(a) of the Internal Revenue 
        Code of 1986 (defining wages) is amended by adding at the end 
        the following new sentence: ``In the case of any calendar year 
        beginning after December 31, 2007, paragraphs (2) and (4) shall 
        not apply to payments on account of sickness.''.
            (2) Railroad retirement.--Section 3231(e)(1) of such Code 
        (defining wages) is amended by adding at the end the following 
        new sentence: ``In the case of any calendar year beginning 
        after December 31, 2007, this paragraph shall not apply to 
        payments on account of sickness.''.
            (3) Unemployment.--Section 3306(b) of such Code (defining 
        wages) is amended by adding at the end the following new 
        sentence: ``In the case of any calendar year beginning after 
        December 31, 2007, paragraphs (2) and (4) shall not apply to 
        payments on account of sickness.''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2007.
            (2) Payroll taxes.--The amendments made by subsection (d) 
        shall apply to calendar years beginning after December 31, 
        2007.

               TITLE III--HEALTH INSURANCE MODERNIZATION

                      Subtitle A--Employee Choice

SEC. 301. CLARIFICATION OF DEFINITION OF GROUP HEALTH PLAN UNDER HIPAA.

    (a) ERISA.--Section 733(a)(1) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1191b(a)(1)) is amended by adding at 
the end the following: ``Such term does not include an arrangement 
maintained by an employer the sole effect of which is to provide 
reimbursement to employees for the purchase by such employees of health 
insurance coverage offered in the individual market (as defined in 
section 2791(e)(1)) of the Public Health Service Act), notwithstanding 
that the employer or an employee organization negotiates the cost or 
benefits of the arrangement.''.
    (b) PHSA.--Section 2791(a)(1) of the Public Health Service Act (42 
U.S.C. 300gg-91(a)(1)) is amended by adding at the end the following: 
``Such term does not include an arrangement maintained by an employer 
the sole effect of which is to provide reimbursement to employees for 
the purchase by such employees of health insurance coverage offered in 
the individual market, notwithstanding that the employer or an employee 
organization negotiates the cost or benefits of the arrangement.''.
    (c) IRC.--Section 9832(a) of the Internal Revenue Code of 1986 
(relating to definitions) is amended by inserting before the period the 
following: ``, except that such term does not include an arrangement 
maintained by an employer the sole effect of which is to provide 
reimbursement to employees for the purchase by such employees of health 
insurance coverage offered in the individual market (as defined in 
section 2791(e)(1)) of the Public Health Service Act), notwithstanding 
that the employer or an employee organization negotiates the cost or 
benefits of the arrangement.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2007.

                   Subtitle B--Access to Health Care

SEC. 311. STATE HIGH RISK POOLS.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, each State shall have established, and be operating, a 
qualified high risk pool (as defined for purposes of section 2745 of 
the Public Health Service Act (42 U.S.C. 300gg-45)) or a State-
designated alternative that ensures access to private health insurance 
for medically uninsurable individuals.
    (b) Bonus for Compliance.--
            (1) One-time payment.--If the Secretary of Health and Human 
        Services determines that a State has satisfied the requirement 
        of subsection (a) with respect to a fiscal year, the Secretary 
        shall increase the total amount of Federal payments made to the 
        State under section 1903(a) of the Social Security Act (42 
        U.S.C. 1396b(a)) for the succeeding fiscal year by an amount 
        equal to 1 percent of such payments (or, if such succeeding 
        fiscal year is fiscal year 2010 or any fiscal year thereafter, 
        by an amount equal to 1 percent of the State Medicaid 
        assistance allotment determined for the State for such 
        succeeding fiscal year under section 1939(b) of such Act). The 
        additional amount paid to a State for a fiscal year pursuant to 
        this paragraph shall be used for maintenance and operational 
        costs of a qualified high risk pool (as so defined) or a State-
        designated alternative that ensures access to private health 
        insurance for medically uninsurable individuals.
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated for any fiscal year such sums as may be 
        necessary to carry out this subsection.

SEC. 312. FEDERALLY QUALIFIED HEALTH CENTERS.

    (a) Evaluation.--Not later than 5 years after the date of enactment 
of this Act, and every 5 years thereafter, the Secretary of Health and 
Human Services shall evaluate the effect of federally qualified health 
centers on proximate rural hospitals.
    (b) Limitation on Grants.--Notwithstanding any other provision of 
law, if the Secretary of Health and Human Services determines, based on 
an evaluation conducted under subsection (a), that a federally 
qualified health center is having a detrimental effect on a private 
hospital facility, the Secretary may revoke a grant awarded by the 
Secretary to such health center or limit the scope of services of the 
health center under such a grant.

           Subtitle C--Interstate Market for Health Insurance

SEC. 321. SHORT TITLE.

    This subtitle may be cited as ``Health Care Choice Act of 2007''.

SEC. 322. SPECIFICATION OF CONSTITUTIONAL AUTHORITY FOR ENACTMENT OF 
              LAW.

    This subtitle is enacted pursuant to the power granted Congress 
under article I, section 8, clause 3, of the United States 
Constitution.

SEC. 323. FINDINGS.

    Congress finds the following:
            (1) The application of numerous and significant variations 
        in State law impacts the ability of insurers to offer, and 
        individuals to obtain, affordable individual health insurance 
        coverage, thereby impeding commerce in individual health 
        insurance coverage.
            (2) Individual health insurance coverage is increasingly 
        offered through the Internet, other electronic means, and by 
        mail, all of which are inherently part of interstate commerce.
            (3) In response to these issues, it is appropriate to 
        encourage increased efficiency in the offering of individual 
        health insurance coverage through a collaborative approach by 
        the States in regulating this coverage.
            (4) The establishment of risk-retention groups has provided 
        a successful model for the sale of insurance across State 
        lines, as the acts establishing those groups allow insurance to 
        be sold in multiple States but regulated by a single State.

SEC. 324. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE.

    (a) In General.--Title XXVII of the Public Health Service Act (42 
U.S.C. 300gg et seq.) is amended by adding at the end the following new 
part:

``PART D--COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE

``SEC. 2795. DEFINITIONS.

    ``In this part:
            ``(1) Primary state.--The term `primary State' means, with 
        respect to individual health insurance coverage offered by a 
        health insurance issuer, the State designated by the issuer as 
        the State whose covered laws shall govern the health insurance 
        issuer in the sale of such coverage under this part. An issuer, 
        with respect to a particular policy, may only designate 1 such 
        State as its primary State with respect to all such coverage it 
        offers. Such an issuer may not change the designated primary 
        State with respect to individual health insurance coverage once 
        the policy is issued, except that such a change may be made 
        upon renewal of the policy. With respect to such designated 
        State, the issuer is deemed to be doing business in that State.
            ``(2) Secondary state.--The term `secondary State' means, 
        with respect to individual health insurance coverage offered by 
        a health insurance issuer, any State that is not the primary 
        State. In the case of a health insurance issuer that is selling 
        a policy in, or to a resident of, a secondary State, the issuer 
        is deemed to be doing business in that secondary State.
            ``(3) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2), 
        except that such an issuer must be licensed in the primary 
        State and be qualified to sell individual health insurance 
        coverage in that State.
            ``(4) Individual health insurance coverage.--The term 
        `individual health insurance coverage' means health insurance 
        coverage offered in the individual market, as defined in 
        section 2791(e)(1).
            ``(5) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of this title for the State with respect to the 
        issuer.
            ``(6) Hazardous financial condition.--The term `hazardous 
        financial condition' means that, based on its present or 
        reasonably anticipated financial condition, a health insurance 
        issuer is unlikely to be able--
                    ``(A) to meet obligations to policyholders with 
                respect to known claims and reasonably anticipated 
                claims; or
                    ``(B) to pay other obligations in the normal course 
                of business.
            ``(7) Covered laws.--The term `covered laws' means the 
        laws, rules, regulations, agreements, and orders governing the 
        insurance business pertaining to--
                    ``(A) individual health insurance coverage issued 
                by a health insurance issuer;
                    ``(B) the offer, sale, and issuance of individual 
                health insurance coverage to an individual; and
                    ``(C) the provision to an individual in relation to 
                individual health insurance coverage of--
                            ``(i) health care and insurance related 
                        services;
                            ``(ii) management, operations, and 
                        investment activities of a health insurance 
                        issuer; and
                            ``(iii) loss control and claims 
                        administration for a health insurance issuer 
                        with respect to liability for which the issuer 
                        provides insurance.
            ``(8) State.--The term `State' means only the 50 States and 
        the District of Columbia.
            ``(9) Unfair claims settlement practices.--The term `unfair 
        claims settlement practices' means only the following 
        practices:
                    ``(A) Knowingly misrepresenting to claimants and 
                insured individuals relevant facts or policy provisions 
                relating to coverage at issue.
                    ``(B) Failing to acknowledge with reasonable 
                promptness pertinent communications with respect to 
                claims arising under policies.
                    ``(C) Failing to adopt and implement reasonable 
                standards for the prompt investigation and settlement 
                of claims arising under policies.
                    ``(D) Failing to effectuate prompt, fair, and 
                equitable settlement of claims submitted in which 
                liability has become reasonably clear.
                    ``(E) Refusing to pay claims without conducting a 
                reasonable investigation.
                    ``(F) Failing to affirm or deny coverage of claims 
                within a reasonable period of time after having 
                completed an investigation related to those claims.
            ``(10) Fraud and abuse.--The term `fraud and abuse' means 
        an act or omission committed by a person who, knowingly and 
        with intent to defraud, commits, or conceals any material 
        information concerning, 1 or more of the following:
                    ``(A) Presenting, causing to be presented or 
                preparing with knowledge or belief that it will be 
                presented to or by an insurer, a reinsurer, broker or 
                its agent, false information as part of, in support of 
                or concerning a fact material to 1 or more of the 
                following:
                            ``(i) An application for the issuance or 
                        renewal of an insurance policy or reinsurance 
                        contract.
                            ``(ii) The rating of an insurance policy or 
                        reinsurance contract.
                            ``(iii) A claim for payment or benefit 
                        pursuant to an insurance policy or reinsurance 
                        contract.
                            ``(iv) Premiums paid on an insurance policy 
                        or reinsurance contract.
                            ``(v) Payments made in accordance with the 
                        terms of an insurance policy or reinsurance 
                        contract.
                            ``(vi) A document filed with the 
                        commissioner or the chief insurance regulatory 
                        official of another jurisdiction.
                            ``(vii) The financial condition of an 
                        insurer or reinsurer.
                            ``(viii) The formation, acquisition, 
                        merger, reconsolidation, dissolution or 
                        withdrawal from 1 or more lines of insurance or 
                        reinsurance in all or part of a State by an 
                        insurer or reinsurer.
                            ``(ix) The issuance of written evidence of 
                        insurance.
                            ``(x) The reinstatement of an insurance 
                        policy.
                    ``(B) Solicitation or acceptance of new or renewal 
                insurance risks on behalf of an insurer reinsurer or 
                other person engaged in the business of insurance by a 
                person who knows or should know that the insurer or 
                other person responsible for the risk is insolvent at 
                the time of the transaction.
                    ``(C) Transaction of the business of insurance in 
                violation of laws requiring a license, certificate of 
                authority, or other legal authority for the transaction 
                of the business of insurance.
                    ``(D) Attempt to commit, aiding or abetting in the 
                commission of, or conspiracy to commit the acts or 
                omissions specified in this paragraph.

``SEC. 2796. APPLICATION OF LAW.

    ``(a) In General.--The covered laws of the primary State shall 
apply to individual health insurance coverage offered by a health 
insurance issuer in the primary State and in any secondary State, but 
only if the coverage and issuer comply with the conditions of this 
section with respect to the offering of coverage in any secondary 
State.
    ``(b) Exemptions From Covered Laws in a Secondary State.--Except as 
provided in this section, a health insurance issuer with respect to its 
offer, sale, renewal, and issuance of individual health insurance 
coverage in any secondary State is exempt from any covered laws of the 
secondary State (and any rules, regulations, agreements, or orders 
sought or issued by such State under or related to such covered laws) 
to the extent that such laws would--
            ``(1) make unlawful, or regulate, directly or indirectly, 
        the operation of the health insurance issuer operating in the 
        secondary State, except that any secondary State may require 
        such an issuer--
                    ``(A) to pay, on a nondiscriminatory basis, 
                applicable premium and other taxes (including high risk 
                pool assessments) which are levied on insurers and 
                surplus lines insurers, brokers, or policyholders under 
                the laws of the State;
                    ``(B) to register with and designate the State 
                insurance commissioner as its agent solely for the 
                purpose of receiving service of legal documents or 
                process;
                    ``(C) to submit to an examination of its financial 
                condition by the State insurance commissioner in any 
                State in which the issuer is doing business to 
                determine the issuer's financial condition, if--
                            ``(i) the State insurance commissioner of 
                        the primary State has not done an examination 
                        within the period recommended by the National 
                        Association of Insurance Commissioners; and
                            ``(ii) any such examination is conducted in 
                        accordance with the examiners' handbook of the 
                        National Association of Insurance Commissioners 
                        and is coordinated to avoid unjustified 
                        duplication and unjustified repetition;
                    ``(D) to comply with a lawful order issued--
                            ``(i) in a delinquency proceeding commenced 
                        by the State insurance commissioner if there 
                        has been a finding of financial impairment 
                        under subparagraph (C); or
                            ``(ii) in a voluntary dissolution 
                        proceeding;
                    ``(E) to comply with an injunction issued by a 
                court of competent jurisdiction, upon a petition by the 
                State insurance commissioner alleging that the issuer 
                is in hazardous financial condition;
                    ``(F) to participate, on a nondiscriminatory basis, 
                in any insurance insolvency guaranty association or 
                similar association to which a health insurance issuer 
                in the State is required to belong;
                    ``(G) to comply with any State law regarding fraud 
                and abuse (as defined in section 2795(10)), except that 
                if the State seeks an injunction regarding the conduct 
                described in this subparagraph, such injunction must be 
                obtained from a court of competent jurisdiction; or
                    ``(H) to comply with any State law regarding unfair 
                claims settlement practices (as defined in section 
                2795(9));
            ``(2) require any individual health insurance coverage 
        issued by the issuer to be countersigned by an insurance agent 
        or broker residing in that Secondary State; or
            ``(3) otherwise discriminate against the issuer issuing 
        insurance in both the primary State and in any secondary State.
    ``(c) Clear and Conspicuous Disclosure.--A health insurance issuer 
shall provide the following notice, in 12-point bold type, in any 
insurance coverage offered in a secondary State under this part by such 
a health insurance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the name of the 
health insurance issuer, the name of the primary State, and the name of 
the secondary State, respectively, for the coverage concerned:
`This policy is issued by _____ and is governed by the laws and 
regulations of the State of _____, and it has met all the laws of that 
State as determined by that State's Department of Insurance. This 
policy may be less expensive than others because it is not subject to 
all of the insurance laws and regulations of the State of _____, 
including coverage of some services or benefits mandated by the law of 
the State of _____. Additionally, this policy is not subject to all of 
the consumer protection laws or restrictions on rate changes of the 
State of _____. As with all insurance products, before purchasing this 
policy, you should carefully review the policy and determine what 
health care services the policy covers and what benefits it provides, 
including any exclusions, limitations, or conditions for such services 
or benefits.'.
    ``(d) Prohibition on Certain Reclassifications and Premium 
Increases.--
            ``(1) In general.--For purposes of this section, a health 
        insurance issuer that provides individual health insurance 
        coverage to an individual under this part in a primary or 
        secondary State may not upon renewal--
                    ``(A) move or reclassify the individual insured 
                under the health insurance coverage from the class such 
                individual is in at the time of issue of the contract 
                based on the health-status related factors of the 
                individual; or
                    ``(B) increase the premiums assessed the individual 
                for such coverage based on a health-status related 
                factor or change of a health-status related factor or 
                the past or prospective claim experience of the insured 
                individual.
            ``(2) Construction.--Nothing in paragraph (1) shall be 
        construed to prohibit a health insurance issuer--
                    ``(A) from terminating or discontinuing coverage or 
                a class of coverage in accordance with subsections (b) 
                and (c) of section 2742;
                    ``(B) from raising premium rates for all 
                policyholders within a class based on claims 
                experience;
                    ``(C) from changing premiums or offering discounted 
                premiums to individuals who engage in wellness 
                activities at intervals prescribed by the issuer, if 
                such premium changes or incentives--
                            ``(i) are disclosed to the consumer in the 
                        insurance contract;
                            ``(ii) are based on specific wellness 
                        activities that are not applicable to all 
                        individuals; and
                            ``(iii) are not obtainable by all 
                        individuals to whom coverage is offered;
                    ``(D) from reinstating lapsed coverage; or
                    ``(E) from retroactively adjusting the rates 
                charged an individual insured individual if the initial 
                rates were set based on material misrepresentation by 
                the individual at the time of issue.
    ``(e) Prior Offering of Policy in Primary State.--A health 
insurance issuer may not offer for sale individual health insurance 
coverage in a secondary State unless that coverage is currently offered 
for sale in the primary State.
    ``(f) Licensing of Agents or Brokers for Health Insurance 
Issuers.--Any State may require that a person acting, or offering to 
act, as an agent or broker for a health insurance issuer with respect 
to the offering of individual health insurance coverage obtain a 
license from that State, except that a State may not impose any 
qualification or requirement which discriminates against a nonresident 
agent or broker.
    ``(g) Documents for Submission to State Insurance Commissioner.--
Each health insurance issuer issuing individual health insurance 
coverage in both primary and secondary States shall submit--
            ``(1) to the insurance commissioner of each State in which 
        it intends to offer such coverage, before it may offer 
        individual health insurance coverage in such State--
                    ``(A) a copy of the plan of operation or 
                feasibility study or any similar statement of the 
                policy being offered and its coverage (which shall 
                include the name of its primary State and its principal 
                place of business);
                    ``(B) written notice of any change in its 
                designation of its primary State; and
                    ``(C) written notice from the issuer of the 
                issuer's compliance with all the laws of the primary 
                State; and
            ``(2) to the insurance commissioner of each secondary State 
        in which it offers individual health insurance coverage, a copy 
        of the issuer's quarterly financial statement submitted to the 
        primary State, which statement shall be certified by an 
        independent public accountant and contain a statement of 
        opinion on loss and loss adjustment expense reserves made by--
                    ``(A) a member of the American Academy of 
                Actuaries; or
                    ``(B) a qualified loss reserve specialist.
    ``(h) Power of Courts To Enjoin Conduct.--Nothing in this section 
shall be construed to affect the authority of any Federal or State 
court to enjoin--
            ``(1) the solicitation or sale of individual health 
        insurance coverage by a health insurance issuer to any person 
        or group who is not eligible for such insurance; or
            ``(2) the solicitation or sale of individual health 
        insurance coverage by, or operation of, a health insurance 
        issuer that is in hazardous financial condition.
    ``(i) State Powers To Enforce State Laws.--
            ``(1) In general.--Subject to the provisions of subsection 
        (b)(1)(G) (relating to injunctions) and paragraph (2), nothing 
        in this section shall be construed to affect the authority of 
        any State to make use of any of its powers to enforce the laws 
        of such State with respect to which a health insurance issuer 
        is not exempt under subsection (b).
            ``(2) Courts of competent jurisdiction.--If a State seeks 
        an injunction regarding the conduct described in paragraphs (1) 
        and (2) of subsection (h), such injunction must be obtained 
        from a Federal or State court of competent jurisdiction.
    ``(j) States' Authority To Sue.--Nothing in this section shall 
affect the authority of any State to bring action in any Federal or 
State court.
    ``(k) Generally Applicable Laws.--Nothing in this section shall be 
construed to affect the applicability of State laws generally 
applicable to persons or corporations.

``SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY 
              SELL INTO SECONDARY STATES.

    ``A health insurance issuer may not offer, sell, or issue 
individual health insurance coverage in a secondary State if the 
primary State does not meet the following requirements:
            ``(1) The State insurance commissioner must use a risk-
        based capital formula for the determination of capital and 
        surplus requirements for all health insurance issuers.
            ``(2) The State must have legislation or regulations in 
        place establishing an independent review process for 
        individuals who are covered by individual health insurance 
        coverage unless the issuer provides an independent review 
        mechanism functionally equivalent (as determined by the primary 
        State insurance commissioner or official) to that prescribed in 
        the `Health Carrier External Review Model Act' of the National 
        Association of Insurance Commissioners for all individuals who 
        purchase insurance coverage under the terms of this part.

``SEC. 2798. ENFORCEMENT.

    ``(a) In General.--Subject to subsection (b), with respect to 
specific individual health insurance coverage the primary State for 
such coverage has sole jurisdiction to enforce the primary State's 
covered laws in the primary State and any secondary State.
    ``(b) Secondary State's Authority.--Nothing in subsection (a) shall 
be construed to affect the authority of a secondary State to enforce 
its laws as set forth in the exception specified in section 2796(b)(1).
    ``(c) Court Interpretation.--In reviewing action initiated by the 
applicable secondary State authority, the court of competent 
jurisdiction shall apply the covered laws of the primary State.
    ``(d) Notice of Compliance Failure.--In the case of individual 
health insurance coverage offered in a secondary State that fails to 
comply with the covered laws of the primary State, the applicable State 
authority of the secondary State may notify the applicable State 
authority of the primary State.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individual health insurance coverage offered, issued, or sold 
after the date of the enactment of this Act.

SEC. 325. SEVERABILITY.

    If any provision of this subtitle or the application of such 
provision to any person or circumstance is held to be unconstitutional, 
the remainder of this subtitle and the application of the provisions of 
such to any other person or circumstance shall not be affected.

             TITLE IV--IMPROVEMENTS TO THE MEDICARE PROGRAM

                   Subtitle A--MediChoice for Seniors

SEC. 401. SETTING THE BENCHMARK EQUAL TO THE NATIONAL AVERAGE BID.

    (a) Setting Benchmark.--
            (1) Local plans.--Section 1853 of the Social Security Act 
        (42 U.S.C. 1395w-23) is amended--
                    (A) in subsection (j)(1)(A)--
                            (i) by striking ``beginning with 2007'' and 
                        inserting ``for 2007 and 2008''; and
                            (ii) by inserting ``(or, beginning with 
                        2009, an amount equal to the national average 
                        MA statutory non-drug monthly bid amount 
                        computed under subsection (l))'' after ``for 
                        the area''; and
                            (iii) by inserting ``and adjusted as 
                        appropriate (for years beginning with 2009) 
                        using the geographic adjustment methodology 
                        established under subsection (m)'' before ``; 
                        or''; and
                    (B) by adding at the end the following new 
                subsections:
    ``(l) Computation of National Average MA Statutory Non-Drug Monthly 
Bid Amount.--
            ``(1) In general.--For each year (beginning with 2009) the 
        Secretary shall compute a national average MA statutory non-
        drug monthly bid amount equal to the average of the unadjusted 
        MA statutory non-drug monthly bid amount (as defined in section 
        1854(b)(2)(E)) for each MA plan, including an MA regional plan.
            ``(2) Weighted average.--The national average MA statutory 
        non-drug monthly bid amount computed under subparagraph (A) 
        shall be a weighted average, with the weight for each plan 
        being equal to the average number of beneficiaries enrolled 
        under such plan in the previous year.
    ``(m) Methodology for Geographically Adjusting the National Average 
MA Statutory Non-Drug Monthly Bid Amount.--
            ``(1) In general.--Subject to paragraph (2), the Secretary 
        shall establish an appropriate methodology for adjusting the 
        amount of the national average MA statutory non-drug monthly 
        bid amount in a year to take into account, in a budget neutral 
        manner, variations in input costs based on the provision of 
        items and services in different geographic areas.
            ``(2) Maximize plan participation.--The Secretary shall 
        establish the methodology under paragraph (1) in a manner that 
        maximizes participation of plans in the program under this 
        part.''.
            (2) Regional plans.--Section 1858(f)(1) of the Social 
        Security Act (42 U.S.C. 1395w-27a(f)(1)) is amended to read as 
        follows:
            ``(1) Computation for regions.--For purposes of section 
        1853(j)(2) and this section, subject to subsection (e), the 
        term `MA region-specific non-drug monthly benchmark amount' 
        means, with respect to an MA region for a month in a year--
                    ``(A) for 2006, 2007, and 2008, the sum of the 2 
                components described in paragraph (2) for the region 
                and year; and
                    ``(B) for 2009 and each subsequent year, the 
                national average MA statutory non-drug monthly bid 
                amount computed under section 1853(l) as adjusted as 
                appropriate using the geographic adjustment methodology 
                established under section 1853(m).
        The Secretary shall compute such benchmark amount for each MA 
        region before the beginning of each annual, coordinated 
        election period under section 1851(e)(3)(B) for each year 
        (beginning with 2006)''.
            (3) Conforming amendments.--1853(b)(1)(B) of the Social 
        Security Act (42 U.S.C. 1395w-23(b)(1)(B)) is amended--
                    (A) in clause (i)(I), by inserting ``and the MA 
                area-specific non-drug monthly benchmark amount under 
                subsection (j), including the geographic adjusters 
                under subsection (l) to be used in computing such 
                amount, for each MA payment area for the year'' before 
                the period at the end; and
                    (B) in clause (ii), by inserting ``, including the 
                geographic adjusters under section 1853(l) to be used 
                in computing such amount'' before the period at the 
                end.
    (b) Study and Report to Congress.--
            (1) Review.--Not less frequently that once every five 
        years, the Secretary of Health and Human Services shall conduct 
        a review that compares--
                    (A) the national average MA statutory non-drug 
                monthly bid amount (as determined under subsection (l) 
                of section 1853 of the Social Security Act (42 U.S.C. 
                1395w-23), as added by subsection (a)); and
                    (B) the average per capita cost for the United 
                States, as estimated by the Secretary under section 
                1876(a)(4) of such Act (42 U.S.C. 1395mm(a)(4)).
            (2) Report to congress.--The Secretary of Health and Human 
        Services shall submit a report to Congress on each review 
        conducted under paragraph (1).

SEC. 402. ENHANCEMENT OF BENEFICIARY REBATES.

    Section 1854(b)(1)(C)(i) of the Social Security Act (42 U.S.C. 
1395w-24(b)(1)(C)(i)) is amended by inserting ``(or 100 percent in the 
case of plan years beginning on or after January 1, 2009)'' after ``75 
percent''.

SEC. 403. ALTERNATIVE BENEFIT DESIGN TO ORIGINAL MEDICARE FEE-FOR-
              SERVICE BENEFITS.

    Part C of title XVIII of the Social Security Act is amended by 
adding at the end the following new section:

   ``alternative benefit design to original medicare fee-for-service 
                                benefits

    ``Sec. 1860C-2.  (a) Benefits.--
            ``(1) In general.--Notwithstanding the provisions of this 
        part and subject to paragraph (2), beginning with 2009, under 
        procedures established by the Secretary, a Medicare Advantage 
        plan offered by a Medicare Advantage organization may provide 
        different benefits than those required under section 1852(a) so 
        long as the Secretary finds that the benefit design meets 
        requirements under the Employee Retirement Income Security Act 
        of 1974 or that the benefit design may be offered in any State 
        under applicable State law.
            ``(2) Requirement.--A Medicare Advantage organization may 
        not offer an alternative benefit design plan described in 
        paragraph (1) for a year unless the organization also offers a 
        Medicare Advantage plan that is not an alternative benefit 
        design plan described in paragraph (1) for the year. Such plan 
        is not required to be offered in the same area as the 
        alternative benefit design plan described in paragraph (1).
    ``(b) Special Rules.--The following rules shall apply to an 
alternative benefit design plan described in subsection (a)(1):
            ``(1) Payment to plans for non-drug benefits.--Payment to 
        an organization for benefits under the plan (other than 
        prescription drug benefits) shall be determined in the same 
        manner as payments are determined under clauses (i) and (ii) of 
        section 1853(a)(1)(B), except that in applying such clauses the 
        monthly bid amount described in paragraph (2)(B)(i) of this 
        subsection shall be substituted for the unadjusted MA statutory 
        non-drug monthly bid amount.
            ``(2) Submission of bids.--Notwithstanding paragraph (6) of 
        section 1854(a), the information required to be submitted under 
        such section is as follows:
                    ``(A) The monthly aggregate bid amount for the 
                provision of all items and services under the plan, 
                which amount shall be based on average revenue 
                requirements (as used for purposes of section 1302(8) 
                of the Public Health Service Act) in the payment area 
                for an enrollee with a national average risk profile 
                for the factors described in section 1853(a)(1)(C) (as 
                specified by the Secretary).
                    ``(B) The proportions of such bid amount that are 
                attributable to--
                            ``(i) the provision of items and services 
                        other than prescription drug coverage; and
                            ``(ii) the provision of basic prescription 
                        drug coverage and supplemental prescription 
                        drug coverage.
                    ``(C) The actuarial basis for determining the 
                amount under subparagraph (A) and the proportions 
                described in subparagraph (B) and such additional 
                information as the Secretary may require to verify such 
                actuarial bases and the projected number of enrollees 
                in each MA local area.
                    ``(D) A description of deductibles, coinsurance, 
                and copayments applicable under the plan and the 
                actuarial value of such deductibles, coinsurance, and 
                copayments, described in section 1854(e)(4)(A).
                    ``(E) With respect to qualified prescription drug 
                coverage, the information required under section 1860D-
                4, as incorporated under section 1860D-11(b)(2), with 
                respect to such coverage.
            ``(3) Premium.--In determining the monthly amount (if any) 
        of the premium charged to an individual enrolled in the plan--
                    ``(A) section 1854(b) shall be applied by 
                substituting the monthly bid amount described in 
                paragraph (2)(B)(i) of this subsection for the 
                unadjusted MA statutory non-drug monthly bid amount; 
                and
                    ``(B) subparagraphs (C) and (D) of paragraph (2) of 
                such section shall not apply.
    ``(c) Application.--
            ``(1) No affect on special benefit rules for regional 
        plans.--The provisions of this section shall not affect the 
        special benefit rules for MA regional plans under section 
        1852(a)(6).
            ``(2) No effect on prescription drug coverage.--The 
        provisions of this section shall not effect the provision of 
        prescription drug coverage under this part.
            ``(3) Bid not taken into account when determining the 
        national average ma statutory non-drug monthly bid amount.--The 
        bid for an alternative benefit design plan described in 
        subsection (a)(1) shall not be taken into account when 
        computing the national average MA statutory non-drug monthly 
        bid amount under section 1853(l).
    ``(d) Waiver.--To facilitate the offering of alternative benefit 
design plans described in subsection (a)(1) under this part, the 
Secretary may waiver or modify requirements under this part.''.

SEC. 404. MEDICARE ADVANTAGE HSA PLANS.

    (a) Providing Medicare Advantage HSA Plans as a Type of Plan Under 
the Medicare Advantage Program.--Section 1851(a)(2) of the Social 
Security Act (42 U.S.C. 1395w-21(a)(2)) is amended by adding at the end 
the following new subparagraph:
                    ``(D) Combination of hsa plan and contributions to 
                hsa.--A Medicare Advantage HSA plan, as defined in 
                section 1859(b)(7), and a contribution into a Medicare 
                Advantage health savings account (HSA).''.
    (b) Definition of Medicare Advantage HSA Plan.--Section 1859(b) of 
the Social Security Act (42 U.S.C. 1395w-28(b)) is amended by adding at 
the end the following new paragraph:
            ``(7) Medicare advantage hsa plan.--
                    ``(A) In general.--The term `Medicare Advantage HSA 
                plan' means a Medicare Advantage plan that--
                            ``(i) is a high deductible health plan (as 
                        defined in section 223(c)(2) of the Internal 
                        Revenue Code of 1986, including the application 
                        of subparagraphs (C) and (D) of such section);
                            ``(ii) has a service area of--
                                    ``(I) not less than an entire State 
                                or territory; or
                                    ``(II) in the case of the District 
                                of Columbia, not less than the District 
                                of Columbia and 1 contiguous State;
                            ``(iii) provides reimbursement for at least 
                        the items and services described in section 
                        1852(a)(1) in a year but only after the 
                        enrollee incurs countable expenses (as 
                        specified under the plan) equal to the amount 
                        of the annual deductible (as determined under 
                        section 223(c)(2)(A)(i) of the Internal Revenue 
                        Code of 1986);
                            ``(iv) counts as such expenses (for 
                        purposes of such deductible) at least all 
                        amounts that would have been payable under 
                        parts A and B, and that would have been payable 
                        by the enrollee as deductibles, coinsurance, or 
                        copayments, if the enrollee had elected to 
                        receive benefits through the provisions of such 
                        parts; and
                            ``(v) provides, after such deductible is 
                        met for a year and for all subsequent expenses 
                        for items and services referred to in clause 
                        (iii) in the year, for a level of reimbursement 
                        that is not less than--
                                    ``(I) 100 percent of such expenses, 
                                or
                                    ``(II) 100 percent of the amounts 
                                that would have been paid (without 
                                regard to any deductibles or 
                                coinsurance) under parts A and B with 
                                respect to such expenses,
                        whichever is less.''.
    (c) Special Rules for HSA Plans.--Part C of title XVIII of the 
Social Security Act is amended by inserting after section 1858 the 
following new section:

            ``special rules for medicare advantage hsa plans

    ``Sec. 1858A.  (a) In General.--Except for the modifications 
described in the succeeding provisions of this section, a Medicare 
Advantage HSA plan shall be treated in the same manner as an MSA plan 
is treated under this title.
    ``(b) Special Payment Rules.--
            ``(1) In general.--Section 1853(e) shall be applied--
                    ``(A) in the heading, by substituting `HSA' for 
                `MSA';
                    ``(B) in paragraph (1)--
                            ``(i) by substituting `HSA premium (as 
                        defined in section 1858A(b)(2))' for `MSA 
                        premium (as defined in section 1854(b)(2)(C))'; 
                        and
                            ``(ii) by substituting `HSA' for `MSA' each 
                        place it appears;
                    ``(C) in paragraph (2)--
                            ``(i) in the heading, by substituting 
                        `health' for `medical';
                            ``(ii) in the matter preceding subparagraph 
                        (A), by substituting `a Medicare Advantage HSA 
                        plan' for `an MSA plan';
                            ``(iii) in subparagraph (A), by 
                        substituting `HSA (as defined in section 138(b) 
                        of the Internal Revenue Code of 1986)' for `MSA 
                        (as defined in section 138(b)(2) of the 
                        Internal Revenue Code of 1986)'; and
                            ``(iv) in subparagraph (B), by substituting 
                        `HSA' for `MSA' each place it appears; and
                    ``(D) without regard to paragraph (3) (requiring a 
                lump-sum deposit of a medical savings account 
                contribution during the first month election is 
                effective).
            ``(2) Definition of medicare advantage monthly hsa 
        premium.--The term `Medicare Advantage monthly HSA premium' has 
        the same meaning given the term `Medicare Advantage monthly MSA 
        premium' under section 1854(b)(2)(D).
    ``(c) Treatment of Medicare Advantage HSA Plans Under Part D.--
Rules with respect to prescription drug coverage under part D for MSA 
plans shall not apply to a Medicare Advantage HSA plan. For purposes of 
part D, a Medicare Advantage HSA plan shall be treated in the same 
manner as a coordinated care plan (as described in section 
1851(a)(2)(A)(i)) is treated under such part.''.
    (d) Tax Treatment of Medicare Advantage HSA Plans.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by inserting after 
        section 139A the following new section:

``SEC. 139B. MEDICARE ADVANTAGE HSA.

    ``(a) Exclusion.--Gross income shall not include--
            ``(1) any payment to the Medicare Advantage HSA of an 
        individual by the Secretary of Health and Human Services under 
        part C of title XVIII of the Social Security Act,
            ``(2) any amount contributed to such Medicare Advantage HSA 
        by or on behalf of the individual under section 223, including 
        the individual's employer as described in section 106(d), and
            ``(3) an amount equal to any one-time qualified rollover 
        from any of the individual's health savings accounts, health 
        reimbursement accounts, flexible spending accounts, and medical 
        savings accounts (including any Medicare Advantage MSA).
    ``(b) Medicare Advantage HSA.--For purposes of this section, the 
term `Medicare Advantage HSA' means a health savings account (as 
defined in section 223(d))--
            ``(1) which is designated as a Medicare Advantage HSA,
            ``(2) with respect to which no contribution may be made 
        other than--
                    ``(A) a contribution described in subsection (a), 
                or
                    ``(B) a trustee-to-trustee transfer described in 
                subsection (c)(4),
            ``(3) the governing instrument of which provides that 
        trustee-to-trustee transfers described in subsection (c)(4) may 
        be made to and from such account, and
            ``(4) which is established in connection with an HSA plan 
        described in section 1859(b)(7) of the Social Security Act.
    ``(c) Special Rules for Distributions.--
            ``(1) Distributions for qualified medical expenses.--In 
        applying section 223 to a Medicare Advantage HSA, qualified 
        medical expenses shall not include amounts paid for medical 
        care for any individual other than the account holder.
            ``(2) Penalty for distributions from medicare advantage hsa 
        not used for qualified medical expenses if minimum balance not 
        maintained.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a Medicare Advantage HSA which is not 
                used exclusively to pay the qualified medical expenses 
                of the account holder shall be increased by 50 percent 
                of the excess (if any) of--
                            ``(i) the amount of such payment or 
                        distribution, over
                            ``(ii) the excess (if any) of--
                                    ``(I) the fair market value of the 
                                assets in such HSA as of the close of 
                                the calendar year preceding the 
                                calendar year in which the taxable year 
                                begins, over
                                    ``(II) an amount equal to 60 
                                percent of the deductible under the 
                                Medicare Advantage HSA plan covering 
                                the account holder as of January 1 of 
                                the calendar year in which the taxable 
                                year begins.
                        Section 223(f)(4) shall not apply to any 
                        payment or distribution from a Medicare 
                        Advantage HSA.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                if the payment or distribution is made on or after the 
                date the account holder--
                            ``(i) becomes disabled within the meaning 
                        of section 72(m)(7), or
                            ``(ii) dies.
                    ``(C) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all Medicare Advantage HSAs of the 
                        account holder shall be treated as 1 account,
                            ``(ii) all payments and distributions not 
                        used exclusively to pay the qualified medical 
                        expenses of the account holder during any 
                        taxable year shall be treated as 1 
                        distribution, and
                            ``(iii) any distribution of property shall 
                        be taken into account at its fair market value 
                        on the date of the distribution.
            ``(3) Withdrawal of erroneous contributions.--Section 
        223(f)(2) and paragraph (2) of this subsection shall not apply 
        to any payment or distribution from a Medicare Advantage HSA to 
        the Secretary of Health and Human Services of an erroneous 
        contribution to such HSA and of the net income attributable to 
        such contribution.
            ``(4) Trustee-to-trustee transfers.--Section 223(f)(2) and 
        paragraph (2) of this subsection shall not apply to any 
        trustee-to-trustee transfer from a Medicare Advantage HSA of an 
        account holder to another Medicare Advantage HSA of such 
        account holder.
    ``(d) Special Rules for Treatment of Account After Death of Account 
Holder.--In applying section 223(f)(8)(A) to an account which was a 
Medicare Advantage HSA of a decedent, the rules of section 223(f) shall 
apply in lieu of the rules of subsection (c) of this section with 
respect to the spouse as the account holder of such Medicare Advantage 
HSA.
    ``(e) Reports.--In the case of a Medicare Advantage HSA, the report 
under section 223(h)--
            ``(1) shall include the fair market value of the assets in 
        such Medicare Advantage HSA as of the close of each calendar 
        year, and
            ``(2) shall be furnished to the account holder--
                    ``(A) not later than January 31 of the calendar 
                year following the calendar year to which such reports 
                relate, and
                    ``(B) in such manner as the Secretary prescribes in 
                such regulations.''.
            (2) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 of such Code is amended by 
        inserting after the item relating to section 139A the following 
        new item:

``Sec. 139B. Medicare Advantage HSA.''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2009.

SEC. 405. REVIEW OF ADJUSTMENT MECHANISM USED UNDER THE MEDICARE 
              ADVANTAGE PROGRAM.

    (a) Review.--Not later than 1 year after the date of enactment of 
this Act, the Secretary of Health and Human Services shall conduct a 
review of the adjustment mechanism used to adjust payments to Medicare 
Advantage organizations under section 1853(a)(1)(C) of the Social 
Security Act (42 U.S.C. 1395w-23(a)(1)(C)). The Secretary shall take 
into account the results of such review in making payments to Medicare 
Advantage organizations for plan years beginning on or after January 1, 
2009.
    (b) Consultation.--In conducting the review under subsection (a), 
the Secretary of Health and Human Services shall consult with industry 
representatives and other individuals and organizations that the 
Secretary determines appropriate.

    Subtitle B--Enhancements to the Medicare Fee-For-Service Program

SEC. 411. ELIMINATION OF ANNUAL INDEXING OF INCOME THRESHOLDS FOR 
              REDUCED PART B PREMIUM SUBSIDIES.

    Paragraph (5) of section 1839(i) of the Social Security Act (42 
U.S.C. 1395r(i)) is repealed.

SEC. 412. AUTHORITY TO ADJUST AMOUNT OF MEDICARE PART B PREMIUM TO 
              REWARD POSITIVE HEALTH BEHAVIOR.

    Section 1839 of the Social Security Act (42 U.S.C. 1395r) is 
amended--
            (1) in subsection (a)(2), by striking ``and (i)'' and 
        inserting ``(i), and (j)''; and
            (2) by adding at the end the following new subsection:
    ``(j)(1) With respect to the monthly premium amount for months 
after December 2008, the Secretary may adjust (under procedures 
established by the Secretary) the amount of such premium for an 
individual based on whether or not the individual participates in 
certain healthy behaviors, such as weight management, exercise, 
nutrition counseling, refraining from tobacco use, designating a health 
home, and other behaviors determined appropriate by the Secretary.
    ``(2) In making the adjustments under paragraph (1) for a month, 
the Secretary shall ensure that the total amount of premiums to be paid 
under this part for the month is equal to the total amount of premiums 
that would have been paid under this part for the month if no such 
adjustments had been made, as estimated by the Secretary.''.

SEC. 413. RECAPTURE OF MEDICARE DSH FUNDS.

    (a) In General.--Section 1886(d)(5)(F)(i) of the Social Security 
Act (42 U.S.C. 1395ww(d)(5)(F)(i)) is amended by inserting ``and before 
January 1, 2010,'' after ``May 1, 1986,''.
    (b) Savings to Part A Trust Fund.--The savings to the Federal 
Hospital Insurance Trust Fund under section 1817 of the Social Security 
Act (42 U.S.C. 1395i) by reason of the amendment made by paragraph (1) 
shall be used to strengthen the financial solvency of such Trust Fund.

SEC. 414. PRICE TRANSPARENCY REQUIREMENTS FOR MEDICARE PROVIDERS.

    (a) Transparency.--Title XVIII of the Social Security Act is 
amended by adding at the end the following new section:

                   ``price transparency requirements

    ``Sec. 1898.  (a) Pre-Treatment Disclosure.--A provider of services 
(as defined in section 1861(u)) and a supplier (as defined in section 
1861(d)) shall provide to each individual (regardless of whether or not 
the individual is a beneficiary under this title) who is scheduled to 
receive a treatment (or to begin a course of treatment) that is not for 
an emergency medical condition the estimated price that the provider of 
services or supplier will charge for the treatment (or course of 
treatment). Such price shall be determined at the time of scheduling.
    ``(b) Post-Treatment Disclosure.--A provider of services (as so 
defined) and a supplier (as so defined) shall include with any bill 
that includes the charges for a treatment with respect to an individual 
(regardless of whether or not the individual is a beneficiary under 
this title), an itemized list of component charges for such treatment, 
including charges for drugs and medical equipment involved, as 
determined at the time of billing. With respect to each item included 
on such list, the provider of services or supplier shall include the 
price charged for the item.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to providers of services and suppliers on and after January 1, 
2009.

                   Subtitle C--Value-Based Purchasing

SEC. 421. REPEAL OF PHYSICIAN OWNERSHIP REFERRAL PROHIBITIONS BASED ON 
              COMPENSATION ARRANGEMENTS.

    (a) In General.--Section 1877(a)(2) of the Social Security Act (42 
U.S.C. 1395nn(a)(2)) is amended by striking ``is--'' and all that 
follows through ``equity,'' and inserting the following: ``is (except 
as provided in subsection (c)) an ownership or investment interest in 
the entity through equity,''.
    (b) Conforming Amendments.--Section 1877 of the Social Security Act 
(42 U.S.C. 1395nn) is amended as follows:
            (1) In subsection (b)--
                    (A) in the heading, by striking ``to Both Ownership 
                and Compensation Arrangement Prohibitions'' and 
                inserting ``Where Financial Relationship Exists''; and
                    (B) by redesignating paragraphs (4) and (5) as 
                paragraphs (7) and (8).
            (2) In subsection (c)--
                    (A) by amending the heading to read as follows: 
                ``Exception for Ownership or Investment Interest in 
                Publicly Traded Securities and Mutual Funds''; and
                    (B) in the matter preceding paragraph (1), by 
                striking ``subsection (a)(2)(A)'' and inserting 
                ``subsection (a)(2)''.
            (3) In subsection (d)--
                    (A) by striking the heading and the matter 
                preceding paragraph (1);
                    (B) in paragraph (3), by striking ``paragraph (1)'' 
                and inserting ``paragraph (4)''; and
                    (C) by redesignating paragraphs (1), (2), and (3) 
                as paragraphs (4), (5), and (6), and by transferring 
                and inserting such paragraphs after paragraph (3) of 
                subsection (b).
            (4) By striking subsection (e).
            (5) In subsection (f)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``ownership, investment, and compensation'' 
                and inserting ``ownership and investment''; and
                    (B) in paragraph (2)--
                            (i) by striking ``subsection (a)(2)(A)'' 
                        and all that follows through ``subsection 
                        (a)(2)(B)),'' and inserting ``subsection 
                        (a)(2)),''; and
                            (ii) in paragraph (2), by striking ``or who 
                        have such a compensation relationship with the 
                        entity''.
            (6) In subsection (h)--
                    (A) by striking paragraphs (1), (2), and (3);
                    (B) in paragraph (4)(A)--
                            (i) by striking clauses (iv) and (vi);
                            (ii) in clause (iii), by adding ``and'' at 
                        the end;
                            (iii) by redesignating clause (v) as clause 
                        (iv); and
                            (iv) in clause (iv), as redesignated by 
                        clause (iii), by striking ``, and'' and 
                        inserting a period;
                    (C) in paragraph (4)(B), by striking ``rules.--'' 
                and all that follows through ``(ii) Faculty'' and 
                inserting ``rules for faculty''; and
                    (D) by adding at the end of paragraph (4) the 
                following new subparagraph:
                    ``(C) Member of a group.--A physician is a `member' 
                of a group if the physician is an owner or a bona fide 
                employee, or both, of the group.''.

SEC. 422. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO OWNERSHIP 
              REFERRAL PROHIBITION.

    (a) In General.--Section 1877(h)(6) of the Social Security Act (42 
U.S.C. 1395nn(h)(6)) is amended by striking subparagraphs (B) through 
(K) and inserting the following:
                    ``(B) Parenteral and enteral nutrients, equipment, 
                and supplies.
                    ``(C) Radiology services, including magnetic 
                resonance imaging, computerized tomography, and 
                ultrasound services.
                    ``(D) Outpatient physical or occupational therapy 
                services.''.
    (b) Conforming Amendments.--
            (1) Section 1877(b)(2) of the Social Security Act (42 
        U.S.C. 1395nn(b)(2)), in the matter preceding subparagraph (A), 
        is amended by striking ``services'' and all that follows 
        through ``supplies)--'' and inserting ``services--''.
            (2) Section 1877(h)(5)(C) of the Social Security Act (42 
        U.S.C. 1395nn(h)(5)(C)) is amended--
                    (A) by striking ``, a request by a radiologist for 
                diagnostic radiology services, and a request by a 
                radiation oncologist for radiation therapy,'' and 
                inserting ``and a request by a radiologist for magnetic 
                resonance imaging or for computerized tomography''; and
                    (B) by striking ``radiologist, or radiation 
                oncologist'' and inserting ``or radiologist''.

SEC. 423. EXCEPTIONS TO OWNERSHIP REFERRAL PROHIBITIONS.

    (a) Revisions to Exception for In-Office Ancillary Services.--
            (1) Repeal of site-of-service requirement.--Section 1877 of 
        the Social Security Act (42 U.S.C. 1395nn) is amended--
                    (A) in subsection (b)(2), by striking subparagraph 
                (A) and inserting the following new subparagraph:
                    ``(A) that are furnished personally by the 
                referring physician, personally by a physician who is a 
                member of the same group practice as the referring 
                physician, or personally by individuals who are under 
                the general supervision of the physician or of another 
                physician in the group practice; and'', and
                    (B) in subsection (h), by adding at the end 
                following new paragraph:
            ``(8) General supervision.--An individual is considered to 
        be under the `general supervision' of a physician if the 
        physician (or group practice of which the physician is a 
        member) is legally responsible for the services performed by 
        the individual and for ensuring that the individual meets 
        licensure and certification requirements, if any, applicable 
        under other provisions of law, regardless of whether or not the 
        physician is physically present when the individual furnishes 
        an item or service.''.
            (2) Clarification of treatment of physician owners of group 
        practice.--Section 1877(b)(2)(B) of the Social Security Act (42 
        U.S.C. 1395nn(b)(2)(B)) is amended by striking ``physician or 
        such group practice'' and inserting ``physician, such group 
        practice, or the physician owners of such group practice''.
            (3) Conforming amendment.--The heading of section 
        1877(b)(2) of the Social Security Act (42 U.S.C. 1395nn(b)(2)) 
        is amended by striking ``In-office ancillary services'' and 
        inserting ``Ancillary services furnished personally or through 
        group practice''.
    (b) Clarification of Exception for Services Furnished in a Rural 
Area.--Paragraph (5)(A) of section 1877(b) of the Social Security Act 
(42 U.S.C. 1395nn(b)), as transferred by section 421(b)(3)(C), is 
amended by striking ``substantially all'' and inserting ``not less than 
75 percent''.
    (c) Revision of Exception for Certain Managed Care Arrangements.--
Section 1877(b)(3) of the Social Security Act (42 U.S.C. 1395nn(b)(3)) 
is amended--
            (1) in the heading by inserting ``; managed care 
        arrangements'' after ``Prepaid plans'';
            (2) in the matter preceding subparagraph (A), by striking 
        ``organization--'' and inserting ``organization, directly or 
        through contractual arrangements with other entities, to 
        individuals enrolled with the organization--'';
            (3) in subparagraph (A), by inserting ``or part C'' after 
        ``section 1876'';
            (4) in subparagraph (D), by striking ``or'' at the end;
            (5) in subparagraph (E), by striking the period at the end 
        and inserting ``or which provides or arranges for the provision 
        of health care items or services pursuant to a written 
        agreement between the organization and an individual or entity 
        if the written agreement places the individual or entity at 
        substantial financial risk for the cost or utilization of the 
        items or services which the individual or entity is obligated 
        to provide, whether through a withhold, capitation, incentive 
        pool, per diem payment, or any other similar risk arrangement 
        which places the individual or entity at substantial financial 
        risk, or''; and
            (6) by adding at the end the following new subparagraph:
                    ``(E) with a contract with a State to provide 
                services under the State plan under title XIX (in 
                accordance with section 1903(m)).''.
    (d) New Exception for Shared Facility Services.--
            (1) In general.--Section 1877(b) of the Social Security Act 
        (42 U.S.C. 1395nn(b)), as amended by paragraphs (1)(B) and 
        (3)(C) of section 421(b), is amended--
                    (A) by redesignating paragraphs (4) through (8) as 
                paragraphs (5) through (9); and
                    (B) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) Shared facility services.--In the case of a 
        designated health service consisting of a shared facility 
        service of a shared facility--
                    ``(A) that is furnished--
                            ``(i) personally by the referring physician 
                        who is a shared facility physician or 
                        personally by an individual directly employed 
                        by or under the general supervision of such a 
                        physician;
                            ``(ii) by a shared facility in a building 
                        in which the referring physician furnishes 
                        substantially all of the services of the 
                        physician that are unrelated to the furnishing 
                        of shared facility services; and
                            ``(iii) to a patient of a shared facility 
                        physician; and
                    ``(B) that is billed by the referring physician or 
                a group practice of which the physician is a member.''.
            (2) Definitions.--Section 1877(h) of the Social Security 
        Act (42 U.S.C. 1395nn(h)), as amended by section 421(b)(6), is 
        amended by inserting before paragraph (4) the following new 
        paragraph:
            ``(1) Shared facility related definitions.--
                    ``(A) Shared facility service.--The term `shared 
                facility service' means, with respect to a shared 
                facility, a designated health service furnished by the 
                facility to patients of shared facility physicians.
                    ``(B) Shared facility.--The term `shared facility' 
                means an entity that furnishes shared facility services 
                under a shared facility arrangement.
                    ``(C) Shared facility physician.--The term `shared 
                facility physician' means, with respect to a shared 
                facility, a physician (or a group practice of which the 
                physician is a member) who has a financial relationship 
                under a shared facility arrangement with the facility.
                    ``(D) Shared facility arrangement.--The term 
                `shared facility arrangement' means, with respect to 
                the provision of shared facility services in a 
                building, a financial arrangement--
                            ``(i) which is only between physicians who 
                        are providing services (unrelated to shared 
                        facility services) in the same building;
                            ``(ii) in which the overhead expenses of 
                        the facility are shared, in accordance with 
                        methods previously determined by the physicians 
                        in the arrangement, among the physicians in the 
                        arrangement; and
                            ``(iii) which, in the case of a 
                        corporation, is wholly owned and controlled by 
                        shared facility physicians.''.
    (e) New Exception for Services Furnished in Communities With No 
Alternative Providers.--Section 1877(b) of the Social Security Act (42 
U.S.C. 1395nn(b)), as amended by paragraphs (1)(B) and (3)(C) of 
section 421(b) and subsection (d)(1), is amended--
            (1) by redesignating paragraphs (5) through (9) as 
        paragraphs (6) through (10); and
            (2) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) No alternative providers in area.--In the case of a 
        designated health service furnished in any area with respect to 
        which the Secretary determines that individuals residing in the 
        area do not have reasonable access to such a designated health 
        service for which subsection (a)(1) does not apply.''.
    (f) New Exception for Services Furnished in Ambulatory Surgical 
Centers.--Section 1877(b) of the Social Security Act (42 U.S.C. 
1395nn(b)), as amended by paragraphs (1)(B) and (3)(C) of section 
421(b), subsection (d)(1), and subsection (e)(1), is amended--
            (1) by redesignating paragraphs (6) through (10) as 
        paragraphs (7) through (11); and
            (2) by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) Services furnished in ambulatory surgical centers.--
        In the case of a designated health service furnished in an 
        ambulatory surgical center described in section 
        1832(a)(2)(F)(i).''.
    (g) New Exception for Services Furnished in Renal Dialysis 
Facilities.--Section 1877(b) of the Social Security Act (42 U.S.C. 
1395nn(b)), as amended by paragraphs (1)(B) and (3)(C) of section 
421(b), subsection (d)(1), subsection (e)(1), and subsection (f), is 
amended--
            (1) by redesignating paragraphs (7) through (11) as 
        paragraphs (8) through (12); and
            (2) by inserting after paragraph (6) the following new 
        paragraph:
            ``(7) Services furnished in renal dialysis facilities.--In 
        the case of a designated health service furnished in a renal 
        dialysis facility under section 1881.''.
    (h) New Exception for Services Furnished in a Hospice.--Section 
1877(b) of the Social Security Act (42 U.S.C. 1395nn(b)), as amended by 
paragraphs (1)(B) and (3)(C) of section 421(b), subsection (d)(1), 
subsection (e)(1), subsection (f), and subsection (g), is amended--
            (1) by redesignating paragraphs (8) through (12) as 
        paragraphs (9) through (13); and
            (2) by inserting after paragraph (7) the following new 
        paragraph:
            ``(8) Services furnished by a hospice program.--In the case 
        of a designated health service furnished by a hospice program 
        (as defined in section 1861(dd)(2)).''.
    (i) New Exception for Services Furnished in a Comprehensive 
Outpatient Rehabilitation Facility.--Section 1877(b) of the Social 
Security Act (42 U.S.C. 1395nn(b)), as amended by paragraphs (1)(B) and 
(3)(C) of section 421(b), subsection (d)(1), subsection (e)(1), 
subsection (f), subsection (g), and subsection (h), is amended--
            (1) by redesignating paragraphs (9) through (13) as 
        paragraphs (10) through (14); and
            (2) by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Services furnished in a comprehensive outpatient 
        rehabilitation facility.--In the case of a designated health 
        service furnished in a comprehensive outpatient rehabilitation 
        facility (as defined in section 1861(cc)(2)).''.
    (j) Definition of Referral.--Section 1877(h)(5)(A) of the Social 
Security Act (42 U.S.C. 1395nn(h)(5)(A)) is amended--
            (1) by striking ``an item or service'' and inserting ``a 
        designated health service''; and
            (2) by striking ``the item or service'' and inserting ``the 
        designated health service''.
    (k) Conforming Amendment.--Section 1877(g)(6)(B) of the Social 
Security Act (42 U.S.C. 1395nn(g)(6)(B)) is amended by striking 
``subsection (b)(4)'' and inserting ``subsection (b)(13)''.
    (l) Transparency.--The Secretary of Health and Human Services shall 
establish procedures for requiring a physician making a referral to an 
entity that would have been prohibited under section 1877 of the Social 
Security Act (42 U.S.C. 1395nn) if the amendments made by this section 
had not been made to disclose to the individual being referred the 
financial relationship that the physician has with the entity.

SEC. 424. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to referrals made 
on or after the date of the enactment of this Act, regardless of 
whether or not regulations are promulgated to carry out such 
amendments.

     Subtitle D--Securing Medicare's Future for Tomorrow's Seniors

SEC. 431. MEDICAL RETIREMENT ACCOUNTS.

    (a) In General.--Title II of the Social Security Act (42 U.S.C. 401 
et seq.) is amended--
            (1) by inserting before section 201 the following:

                    ``PART A--INSURANCE BENEFITS'';

            and
            (2) by adding at the end the following:

                 ``PART B--MEDICAL RETIREMENT ACCOUNTS

``SEC. 251. MEDICAL RETIREMENT ACCOUNT FUND.

    ``(a) Establishment.--
            ``(1) In general.--There shall be established and 
        maintained in the Treasury of the United States a Medical 
        Retirement Account Fund in the same manner as the Thrift 
        Savings Fund under section 8437 of title 5, United States Code 
        (excluding paragraphs (4) and (5) of subsection (c) thereof).
            ``(2) Contents of fund.--There is hereby appropriated to 
        the Medical Retirement Account Fund amounts equivalent to--
                    ``(A) the contributions received in the Treasury 
                under sections 3101(b), 3111(b), and 1401(b) of the 
                Internal Revenue Code of 1986 with respect to each 
                eligible individual on and after the date of an 
                election under section 252(a)(2), and
                    ``(B) the aggregate of the contributions described 
                in subparagraphs (B)(, (C), and (D) of section 
                252(c)(1) with respect to such eligible individuals.
    ``(b) Investment of Medical Retirement Account Fund.--Amounts in 
the Medical Retirement Account Fund shall be invested in the same 
manner as amounts in the Thrift Savings Fund are invested under section 
8438 of title 5, United States Code.
    ``(c) Accounting and Information.--The Executive Director of the 
Medical Retirement Account Board shall maintain accounts and provide 
information in the same manner as the Executive Director of the Thrift 
Savings Fund is required to maintain accounts and provide information 
with respect to the Thrift Savings Fund under section 8439 of title 5, 
United States Code.

``SEC. 252. MEDICAL RETIREMENT ACCOUNTS.

    ``(a) Establishment.--
            ``(1) In general.--Within 30 days after receiving the first 
        contribution under subsection (c) with respect to an eligible 
        individual, the Medical Retirement Account Board shall 
        establish a Medical Retirement Account for such individual in 
        the Medical Retirement Account Fund. Each account shall be 
        identified to the account holder by means of the account 
        holder's social security account number.
            ``(2) Eligible individual.--For purposes of this part, the 
        term `eligible individual' means any individual who, under 
        regulations prescribed by the Secretary of Health and Human 
        Services, makes an irrevocable election on or after the 
        effective date of this part to renounce eligibility under the 
        Medicare Program under title XVIII and establish a Medical 
        Retirement Account.
    ``(b) Treatment of Account.--Except as provided in this section, a 
Medical Retirement Account shall be treated for purposes of the 
Internal Revenue Code of 1986 in the same manner as a health savings 
account under section 223 of such Code (determined without regard to 
subsections (d)(1)(A)((ii) and (d)(2)(B) thereof).
    ``(c) Contributions.--
            ``(1) In general.--The Medical Retirement Account Board 
        shall credit to the Medical Retirement Account of an eligible 
        individual--
                    ``(A) except as provided in paragraph (2), an 
                amount equal to the sum of any amounts transferred to 
                the Medical Retirement Account Fund under section 
                251(a)(2)(A) which are attributable to the 
                contributions paid by or on behalf of such individual 
                under sections 3101(b), 3111(b), and 1401(b) of the 
                Internal Revenue Code of 1986, plus
                    ``(B) at the time of such individual's retirement 
                date determined under subsection (d)(1), an amount 
                equal to the sum of any amounts transferred to the 
                Federal Hospital Insurance Trust Fund under section 
                1817 which is attributable to such contributions paid 
                on average by or on behalf of individuals in the same 
                age cohort as such eligible individual under sections 
                3101(b), 3111(b), and 1401(b) of the Internal Revenue 
                Code of 1986 (including any Trust Fund earnings on such 
                amount), plus
                    ``(C) any amount contributed to such Medical 
                Retirement Account by the eligible individual or the 
                eligible individual's employer, including, in the case 
                of an eligible individual who is a State government 
                employee, any contribution under an applicable State 
                law, to the extent the aggregate amount of 
                contributions under this subparagraph for any calendar 
                year does not exceed $10,000, adjusted for inflation in 
                the same manner as the applicable dollar amount under 
                section 402(g)(1)(B) of the Internal Revenue Code of 
                1986, and reduced in the same manner as under section 
                408A(c)(3) of such Code, plus
                    ``(D) an amount equal to any one-time qualified 
                rollover at the time of such individual's retirement 
                from any of the eligible individual's health savings 
                accounts, health reimbursement accounts, flexible 
                spending accounts, and medical savings accounts.
            ``(2) Redistribution.--Not later than 90 days after the end 
        of each taxable year, the Secretary shall transfer such portion 
        of the contributions paid under section 3111(b) or 1401(b) of 
        the Internal Revenue Code of 1986 by or on behalf of eligible 
        individuals whose wages or net earnings from self-employment 
        exceed the contribution and benefit base under section 230 for 
        such taxable year to Medical Retirement Accounts of eligible 
        individuals whose wages and net earnings from self-employment 
        do not exceed such base for such taxable year in an amount per 
        each Medical Retirement Account so as not to exceed 2.9 percent 
        of the national average salary for each such Account.
    ``(d) Distributions.--
            ``(1) In general.--Except as provided in paragraph (2), 
        distributions may only be made from a Medical Retirement 
        Account of an eligible individual on and after the date the 
        eligible individual attains--
                    ``(A) retirement age (as determined under section 
                216), or
                    ``(B) if elected by such individual, early 
                retirement age, but only if such individual presents 
                proof of the purchase of a lifetime catastrophic health 
                insurance policy upon such election.
            ``(2) Distribution in the event of death before the date of 
        initial distribution.--If the eligible individual dies before 
        the date determined under paragraph (1), the balance in such 
        individual's Medical Retirement Account shall be distributed in 
        a lump sum, under rules established by the Medical Retirement 
        Account Board--
                    ``(A) to the Medical Retirement Account of a 
                surviving spouse of such individual, and
                    ``(B) in the case there is no surviving spouse or 
                such spouse waives the right to such funds, to the 
                Medical Retirement Accounts of the eligible 
                individual's heirs.
            ``(3) Divorce.--The Medical Retirement Account Board shall 
        issue regulations which provide that, in the case of an 
        eligible individual with a Medical Retirement Account who 
        becomes divorced after at least 10 years of marriage to the 
        same spouse, contributions to the Account during the marriage 
        and earnings on the Account during the marriage shall be 
        divided evenly between the Account of such individual and a 
        Medical Retirement Account of such individual's former spouse.

``SEC. 253. MEDICAL RETIREMENT ACCOUNT BOARD.

    ``(a) In General.--There shall be established and maintained in the 
Social Security Administration a Medical Retirement Account Board in 
the same manner as the Federal Retirement Thrift Investment Board under 
subchapter VII of chapter 84 of title 5, United States Code.
    ``(b) Executive Director.--The Medical Retirement Account Board 
shall appoint an Executive Director in the same manner and with the 
same functions as the Executive Director of the Thrift Savings Board 
under section 8474 of title 5, United States Code.''.
    (b) Tax Treatment of Certain Contributions to Medical Retirement 
Accounts.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986, as amended by this Act, is 
        amended by inserting after section 139B the following new 
        section:

``SEC. 139C. MEDICAL RETIREMENT ACCOUNT CONTRIBUTIONS.

    ``Gross income shall not include any contribution to a Medical 
Retirement Account specified under section 252(c) of the Social 
Security Act or any earnings on such contributions.''.
            (2) Clerical amendment.--The table of section for part III 
        of subchapter B of chapter 1 of such Code, as amended by this 
        Act, is amended by inserting after the item relating to section 
        139B the following new item:

``Sec. 139C. Medical Retirement Account contributions.''.
    (c) Conforming Amendments to the Medicare Program.--
            (1) Part a entitlement.--Section 1811 of the Social 
        Security Act (42 U.S.C. 1395d) is amended by adding at the end 
        the following new sentence: ``On and after the effective date 
        of part B of title II, the entitlement under the preceding 
        sentence shall only apply to an individual who is not an 
        eligible individual (as defined in section 252(a)(2)).''.
            (2) Part a trust fund.--The third sentence of section 1817 
        of the Social Security Act (42 U.S.C. 1395i) is amended in each 
        of paragraphs (1) and (2) by inserting ``subject to section 
        251(a)(2)(A),'' before ``the taxes imposed''.
            (3) Part b eligibility.--Section 1836 of the Social 
        Security Act (42 U.S.C. 1395o) is amended by adding at the end 
        the following new sentence: ``On and after the effective date 
        of part B of title II, the eligibility under the preceding 
        sentence shall only apply to an individual who is not an 
        eligible individual (as defined in section 252(a)(2)).''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on January 1, 
        2009.
            (2) Internal revenue code.--The amendments made by 
        subsection (b) shall apply to taxable years beginning after 
        December 31, 2008.

                  TITLE V--KEEPING MEDICAID ON MISSION

SEC. 501. RESTRUCTURING OF MEDICAID FUNDING.

    Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is 
amended--
            (1) by redesignating section 1939 as section 1940; and
            (2) by inserting after section 1938, the following:

                  ``medicaid modernized and on mission

    ``Sec. 1939.  (a) State Medicaid Assistance Allotments.--
Notwithstanding any other provision of this title, beginning with 
fiscal year 2010, and for each fiscal year thereafter--
            ``(1) no State shall receive a payment under section 
        1903(a); and
            ``(2) only in the case of a State with a State plan under 
        this title that satisfies the conditions described in 
        subsection (c), the Secretary shall pay such State the State 
        Medicaid assistance allotment for the State determined under 
        subsection (b).
    ``(b) Determination of Amount of Allotments.--
            ``(1) In general.--Subject to paragraphs (4) and (5), the 
        State Medicaid assistance allotment payable to a State (other 
        than a State referred to in subparagraph (B)(ii)) for a fiscal 
        year shall be the amount that bears the same ratio to the 
        amount appropriated under subsection (f) for the fiscal year 
        (reduced by the amount of the allotments made under paragraph 
        (2)), as the ratio of--
                    ``(A) the sum of--
                            ``(i) the population of the State;
                            ``(ii) the number of individuals residing 
                        in the State whose family income does not 
                        exceed the poverty line (as defined in section 
                        2110(c)(5) applicable to a family of the size 
                        involved);
                            ``(iii) the number of individuals residing 
                        in the State who are full-benefit dual eligible 
                        individuals (as defined in section 1935(c)(6)); 
                        and
                            ``(iv) the number of disabled individuals 
                        residing in the State; to
                    ``(B) the sum of the amounts determined under 
                subparagraph (A).
            ``(2) Allotments to territories.--
                    ``(A) In general.--Subject to paragraphs (4) and 
                (5), the State Medicaid assistance allotment payable to 
                a commonwealth or territory referred to in subparagraph 
                (B) for a fiscal year shall be the amount that bears 
                the same ratio to 0.25 percent of the amount 
                appropriated under subsection (f) for the fiscal year, 
                as the percentage specified in subparagraph (B)) for 
                the commonwealth or territory bears to the sum of such 
                percentages for all such commonwealths and territories 
                so described.
                    ``(B) Percentage.--The percentage specified in this 
                subparagraph for--
                            ``(i) Puerto Rico is 91.6 percent,
                            ``(ii) Guam is 3.5 percent,
                            ``(iii) the Virgin Islands is 2.6 percent,
                            ``(iv) American Samoa is 1.2 percent, and
                            ``(v) the Northern Mariana Islands is 1.1 
                        percent.
            ``(3) Determination of population and number of 
        individuals.--The Secretary shall determine the State 
        populations and numbers of individuals described in paragraph 
        (1) on the basis of the most recent American Community Survey 
        of the Bureau of the Census (or, until such data is available, 
        on the basis of the 3 most recent Annual Social and Economic 
        Supplements of the Current Population Survey of the Bureau of 
        the Census) and such other data as the Secretary determines is 
        necessary.
            ``(4) Phase-in; transition assistance.--
                    ``(A) Phased-in change in funding amounts.--
                Notwithstanding paragraph (1) and (2), subject to 
                subparagraph (B), the State Medicaid assistance 
                allotment determined for a State for each of fiscal 
                years 2010 through 2013 shall be the amount equal to 
                the following:
                            ``(i) Fiscal year 2010.--In the case of 
                        fiscal year 2010, the amount equal to the sum 
                        of--
                                    ``(I) 80 percent of the amount paid 
                                to the State under section 1903(a) for 
                                fiscal year 2006; and
                                    ``(II) 20 percent of the amount of 
                                the State Medicaid assistance allotment 
                                that would be paid to the State under 
                                paragraph (1) or (2) (as applicable) 
                                without regard to this paragraph.
                            ``(ii) Fiscal year 2011.--In the case of 
                        fiscal year 2011, the amount equal to the sum 
                        of--
                                    ``(I) 60 percent of the amount paid 
                                to the State under section 1903(a) for 
                                fiscal year 2006; and
                                    ``(II) 40 percent of the amount of 
                                the State Medicaid assistance allotment 
                                that would be paid to the State under 
                                paragraph (1) or (2) (as applicable) 
                                without regard to this paragraph.
                            ``(iii) Fiscal year 2012.--In the case of 
                        fiscal year 2012, the amount equal to the sum 
                        of--
                                    ``(I) 40 percent of the amount paid 
                                to the State under section 1903(a) for 
                                fiscal year 2006; and
                                    ``(II) 60 percent of the amount of 
                                the State Medicaid assistance allotment 
                                that would be paid to the State under 
                                paragraph (1) or (2) (as applicable) 
                                without regard to this paragraph.
                            ``(iv) Fiscal year 2013.--In the case of 
                        fiscal year 2013, the amount equal to the sum 
                        of--
                                    ``(I) 20 percent of the amount paid 
                                to the State under section 1903(a) for 
                                fiscal year 2006; and
                                    ``(II) 80 percent of the amount of 
                                the State Medicaid assistance allotment 
                                that would be paid to the State under 
                                paragraph (1) or (2) (as applicable) 
                                without regard to this paragraph.
                    ``(B) Transition assistance.--The State Medicaid 
                assistance allotment paid to a State for any of fiscal 
                years 2010 through 2014 shall not be less than the 
                approximate total amount paid to the State under 
                section 1903(a) for fiscal year 2006.
    ``(c) Conditions Described.--For purposes of subsection (a), the 
conditions described in this subsection are the following:
            ``(1) Populations covered.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                State uses its State Medicaid assistance allotment to 
                provide medical assistance (subject, notwithstanding 
                section 1916 or 1916A, to payment of premiums or other 
                cost-sharing charges (set on a sliding scale based on 
                income) that the State may determine) only for 
                populations of individuals--
                            ``(i) who are eligible for medical 
                        assistance under the State plan on January 1, 
                        2008; or
                            ``(ii) whose family income does not exceed 
                        133 percent of the poverty line (as defined in 
                        section 2110(c)(5)).
                    ``(B) Priority for mandatory populations.--In 
                determining the populations eligible for medical 
                assistance under the State plan in accordance with 
                subparagraph (A), the State shall give priority to 
                making populations described in section 
                1902(a)(10)(A)(i) eligible for such assistance.
                    ``(C) Option to risk-adjust premiums.--With respect 
                to populations covered in accordance with this 
                paragraph, a State may impose risk-adjusted premiums 
                based on chronic disease conditions.
            ``(2) Benefits.--
                    ``(A) In general.--The State does not provide 
                medical assistance for purposes of any item or service 
                that is not described in section 1905(a) as in effect 
                on January 1, 2008 or authorized to be provided by any 
                State under a waiver approved under section 1115, 1915, 
                or otherwise, as in effect on January 1, 2008.
                    ``(B) Health promotion and disease prevention.--At 
                State option, the State implements initiatives designed 
                to educate the population of the State with respect to 
                health promotion and disease prevention of the top 3 
                lethal diseases for the State.
            ``(3) Matching requirement.--The State provides non-Federal 
        matching funds of not less than $1 for every $3 of Federal 
        funds received under this section.
            ``(4) Limitation on administrative expenditures.--The total 
        amount of reasonable costs incurred by the State to administer 
        the State plan for a fiscal year shall not exceed the amount 
        equal to 3 percent of the State Medicaid assistance allotment 
        paid to the State under this section for such fiscal year.
            ``(5) Application of restrictions on use of funds.--The 
        restrictions on the use of Federal funds appropriated to carry 
        out this title contained in title V of division F of the 
        Consolidated Appropriations Act, 2005, shall apply to the State 
        Medicaid assistance allotments paid to States under this 
        section for fiscal year 2010 and each fiscal year thereafter in 
        the same manner as such restrictions apply to amounts 
        appropriated under division F of such Act.
            ``(6) Promotion of price and quality transparency in the 
        private market.--The State provides an assurance that the State 
        has implemented initiatives--
                    ``(A) to promote price and quality transparency 
                with respect to each type of health insurance offered 
                by health insurance issuers in the State; and
                    ``(B) to ensure that any provider of a health care 
                item or service that is paid for (in whole or in part) 
                with Federal or State funds publishes price information 
                with respect to such item or service and makes the 
                information readily available to consumers.
            ``(7) Annual report on health coverage.--The State submits 
        annual reports to the Secretary that--
                    ``(A) describe the State's expenditure of the State 
                Medicaid assistance allotment;
                    ``(B) include--
                            ``(i) the number of individuals provided 
                        medical assistance through such allotment;
                            ``(ii) the average per beneficiary spending 
                        of the allotment with respect to--
                                    ``(I) acute care; and
                                    ``(II) long-term care; and
                    ``(C) the number of individuals in the State who 
                are enrolled in private health coverage.
    ``(d) Option To Subsidize Purchase of Private Market Coverage.--
            ``(1) In general.--Subject to paragraph (4), a State may 
        elect to permit individuals eligible for medical assistance in 
        accordance with subsection (c)(1) to opt-out of enrollment 
        under the State plan (on a risk-adjusted basis) in return for 
        payment on the individual's behalf of the individual health 
        insurance purchase subsidy amount determined under paragraph 
        (2) to an issuer of health insurance coverage within the 
        private market.
            ``(2) Individual health insurance purchase subsidy.--For 
        purposes of paragraph (1), the individual health insurance 
        purchase subsidy amount determined under this paragraph is 
        equal to the actuarial average cost of providing coverage under 
        the State plan under this title to all enrollees in such plan.
            ``(3) Authority to combine subsidy with refundable credit 
        for health insurance coverage.--Payment of an individual health 
        insurance purchase subsidy on behalf of an individual under 
        this subsection shall not be taken into account for purposes of 
        determining the amount the individual is allowed as a credit 
        under section 36 of the Internal Revenue Code of 1986 for 
        qualified health insurance.
            ``(4) Enrollment information and assistance.--A State may 
        only make the election described in paragraph (1) if the 
        State--
                    ``(A) makes available to the individuals described 
                in paragraph (1) benefit enrollment counselors to 
                assist the individuals with selecting coverage within 
                the individual market; and
                    ``(B) has implemented procedures to ensure that 
                accurate and complete plan information is provided to 
                such individuals prior to their enrollment in a plan 
                within such market.
            ``(5) Facilitation of use of federal tax credit to elect 
        catastrophic or other private market coverage.--A State may 
        establish mechanisms to facilitate the enrollment of 
        individuals who elect to opt-out of the State plan in private 
        health insurance or in qualified health insurance for purposes 
        of such individuals being allowed a credit under section 36 of 
        the Internal Revenue Code of 1986.
    ``(e) Availability.--Amounts paid to a State under this section 
shall remain available for expenditure without fiscal year limitation.
    ``(f) Appropriations.--
            ``(1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are 
        appropriated for making State Medicaid assistance allotments to 
        States under this section--
                    ``(A) for fiscal year 2010, $212,000,000,000; and
                    ``(B) for each of fiscal years 2011 through 2017, 
                the amount appropriated under this subsection for the 
                preceding fiscal year, increased by the percentage 
                increase (if any) in the chain-weighted consumer price 
                index for all urban consumers (all items; United States 
                city average) for the previous fiscal year.
            ``(2) Additional appropriation for transition years; hold 
        harmless.--Out of any money in the Treasury of the United 
        States not otherwise appropriated, there are appropriated for 
        the period of fiscal years 2010 through 2014, $20,000,000,000, 
        for purposes of carrying out subsection (b)(4)(B).''.

SEC. 502. MEDICAID ADVANTAGE PROGRAM.

    Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.), as 
amended by section 501, is amended by--
            (1) redesignating section 1940 as section 1941; and
            (2) inserting after section 1939 the following new section:

                      ``medicaid advantage program

    ``Sec. 1940.  (a) Definitions.--In this section:
            ``(1) Medicaid advantage eligible individual.--The term 
        `Medicaid Advantage eligible individual' means an individual 
        who--
                    ``(A) is a full-benefit dual eligible individual 
                (as defined in section 1935(c)(6)); and
                    ``(B) resides in a participating State.
            ``(2) Participating state.--The term `participating State' 
        means a State that elects to offer a State Medicaid Advantage 
        program under this section.
            ``(3) Program.--The term `program' means a State Medicaid 
        Advantage program.
            ``(4) State medicaid advantage program.--The term `State 
        Medicaid Advantage program' means a program offered by a State 
        that provides individuals enrolled in the program a medical 
        home where they receive a seamless continuum of medical care 
        and care management that meets the following requirements:
                    ``(A) Operation.--The primary manager of the 
                program is the State.
                    ``(B) Integrated coverage.--The program provides 
                integrated health care benefits to Medicaid Advantage 
                eligible individuals.
    ``(b) Establishment.--
            ``(1) In general.--Beginning with fiscal year 2010, a State 
        may elect to provide benefits to Medicaid Advantage eligible 
        individuals who elect to enroll in a program established under 
        this section. Such benefits shall be provided instead of 
        benefits under title XVIII or under a State plan under this 
        title.
            ``(2) Enrollment.--
                    ``(A) In general.--A participating State shall 
                establish procedures to enroll Medicaid Advantage 
                eligible individuals in the program. Such procedures 
                shall ensure that a Medicaid Advantage eligible 
                individual may elect to not enroll and to disenroll 
                upon request from the program.
                    ``(B) Preservation of original medicare and 
                medicaid benefits.--Nothing in this section shall be 
                construed to limit the right of a Medicaid Advantage 
                eligible individual who is entitled to benefits under 
                title XVIII or under a State plan under this title to 
                receive such benefits if the individual elects to not 
                enroll or to disenroll from the program.
            ``(3) Payments.--
                    ``(A) In general.--The Secretary shall develop a 
                system for making risk-adjusted payments on a capitated 
                basis to participating States for the cost of providing 
                items and services to each individual enrolled in the 
                program that would, but for the application of this 
                section, be covered under--
                            ``(i) title XVIII, including the cost of 
                        providing qualified prescription drug coverage 
                        under part D of such title; or
                            ``(ii) a State plan under this title.
                    ``(B) Determination of payment amount.--The 
                Secretary shall use actuarial data and payment history 
                in determining the payment amount under such system 
                with respect to each individual enrolled in the 
                program, and shall adjust the payment amount to take 
                into account the comparative frailty of such 
                individuals and such other factors as the Secretary 
                determines to be appropriate.
                    ``(C) Update of payment system.--The Secretary 
                shall update the payment system developed under this 
                paragraph as appropriate.
                    ``(D) State procedures.--A participating State 
                shall establish such procedures for the submission of 
                claims and the transmission of data as the Secretary 
                determines appropriate in order to carry out the 
                payment system developed under this paragraph.
            ``(4) Scope of benefits.--A participating State shall 
        provide individuals enrolled in the program, regardless of the 
        source of payment and directly or under contracts with other 
        entities, at a minimum--
                    ``(A) all items and services covered under title 
                XVIII and all items and services covered under this 
                title, except that States shall have authority and 
                flexibility to design benefit packages that meet the 
                specific needs of Medicaid Advantage eligible 
                individuals, including the needs of such individuals 
                with mental illness;
                    ``(B) qualified prescription drug coverage (as 
                defined in section 1860D-2(a)(1)); and
                    ``(C) such other items and services as the State 
                determines appropriate.
    ``(c) Responsibilities of Participating States.--
            ``(1) Bidding process for health plans.--
                    ``(A) In general.--A participating State shall 
                establish procedures for health plans to participate in 
                a bidding process to enter into a contract under 
                paragraph (2) to provide services to Medicaid Advantage 
                eligible individuals under the program.
                    ``(B) Bid submission.--Each health plan 
                participating in the bidding process established under 
                paragraph (1) shall submit a bid representing the 
                estimated cost to such plans of providing Medicaid 
                Advantage eligible individuals the benefits described 
                in subsection (b)(4).
            ``(2) Contracts with health plans.--
                    ``(A) In general.--A participating State shall 
                enter into contracts with health plans, including 
                managed care health plans, in order to provide 
                integrated health care benefits to Medicaid Advantage 
                eligible individuals enrolled in the program.
                    ``(B) Responsibility for providing care.--Each 
                contract entered into under this paragraph shall 
                provide that the health plan is responsible for--
                            ``(i) providing the benefits described in 
                        subsection (b)(4) to individuals enrolled in 
                        the program;
                            ``(ii) collecting performance data on 
                        treatments and outcomes for each such 
                        individual; and
                            ``(iii) providing such data to the State 
                        for use in monitoring the program under this 
                        section.
                    ``(C) Ensuring quality and value.--
                            ``(i) Promoting competition.--A 
                        participating State shall provide incentives 
                        for health plans to compete with respect to the 
                        quality and value of the services provided to 
                        Medicaid Advantage eligible individuals who are 
                        enrolled in the program.
                            ``(ii) Rewarding efficiency.--A 
                        participating State may reward health plans 
                        that provide higher quality care at a reduced 
                        price under the program.
            ``(3) Choice of plans.--A participating State shall 
        establish procedures to allow Medicaid Advantage eligible 
        individuals to choose from among the competing plans that the 
        State enters into a contract with under paragraph (2).
            ``(4) Payment procedures.--A participating State shall 
        establish procedures with respect to payments in accordance 
        with subsection (b)(3)(D).
            ``(5) Monitoring and enforcement.--A participating State 
        shall share responsibility with the Secretary for--
                    ``(A) carefully monitoring health plans that the 
                State enters into a contract with under paragraph (2); 
                and
                    ``(B) bringing action against those health plans 
                that do not meet their obligations under such 
                contracts.
    ``(d) Federal Responsibilities.--
            ``(1) Payments to participating states.--The Secretary 
        shall provide for payments to participating States in 
        accordance with subsection (b)(3).
            ``(2) Monitoring and enforcement.--
                    ``(A) Goals.--The Secretary shall set and monitor 
                goals for programs.
                    ``(B) Monitoring and enforcement.--The Secretary 
                shall share responsibility with a participating State 
                for--
                            ``(i) carefully monitoring health plans 
                        that the State enters into a contract with 
                        under subsection (c)(2); and
                            ``(ii) bringing appropriate action against 
                        those health plans that do not meet their 
                        obligations under such contracts.
            ``(3) Access to prescription drug data.--
                    ``(A) In general.--Notwithstanding any provision of 
                law, the Secretary shall ensure that States have access 
                to prescription drug data submitted by prescription 
                drug plans and MA-PD plans under part D of title XVIII 
                for the purpose of carrying out the program under this 
                section.
                    ``(B) Safeguards.--The Secretary shall ensure that 
                States have in place appropriate safeguards to protect 
                against the unauthorized disclosure of data provided 
                under subparagraph (A).
    ``(e) Waivers of Requirements .--With respect to carrying out a 
State Medicaid Advantage program under this section, the following 
requirements of this title (and regulations relating to such 
requirements) shall not apply:
            ``(1) Section 1902(a)(1), relating to any requirement that 
        a program or benefits under such a program be provided in all 
        areas of a State.
            ``(2) Section 1902(a)(10), insofar as such section relates 
        to comparability of services among different population groups.
            ``(3) Sections 1902(a)(23) and 1915(b)(4), relating to 
        freedom of choice of providers under a program.
            ``(4) Section 1903(m)(2)(A), insofar as it restricts a 
        program from receiving prepaid capitation payments.
            ``(5) Such other provisions of this title that the 
        Secretary determines are inapplicable to carrying out a program 
        under this section.''.

SEC. 503. HIGH PERFORMANCE BONUSES.

    Section 1939 of the Social Security Act, as added by section 501, 
is amended by adding at the end the following:
    ``(g) Bonus To Reward High Performance States.--
            ``(1) In general.--In addition to the State Medicaid 
        assistance allotments paid to States in accordance with the 
        preceding provisions of this section, the Secretary shall make 
        a payment pursuant to this subsection to each State for each 
        bonus year for which the State is a high performing State.
            ``(2) Amount of payment.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall determine the amount of the payment 
                under this subsection to a high performing State for a 
                bonus year.
                    ``(B) Limitation.--The amount payable to a State 
                under this subsection for a bonus year shall not exceed 
                5 percent of the State Medicaid assistance allotment 
                paid to the State under subsection (a).
            ``(3) Use of funds.--Amounts paid to a State under this 
        subsection shall be used to facilitate the enrollment of 
        uninsured individuals who reside in the State in private health 
        insurance or to maintain the enrollment of individuals in such 
        health insurance.
            ``(4) Definitions.--As used in this paragraph:
                    ``(A) Bonus year.--The term `bonus year' means each 
                of fiscal years 2010 through 2017.
                    ``(B) High performing state.--The term `high 
                performing State' means, with respect to a bonus year, 
                a State that--
                            ``(i) with respect to, each of bonus years 
                        2010 and 2011, the Secretary determines that at 
                        least 90 percent of the total population of the 
                        State is enrolled in private health insurance 
                        coverage; and
                            ``(ii) with respect to each of bonus years 
                        2012 through 2017, the Secretary determines 
                        that--
                                    ``(I) at least 95 percent of the 
                                total population of the State is 
                                enrolled in private health insurance 
                                coverage; and
                                    ``(II) the State has satisfies the 
                                conditions in subsection (c).
            ``(5) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated for the period of fiscal years 2010 through 2017, 
        $5,000,000,000 for making payments under this subsection.''.

             TITLE VI--ADMINISTRATIVE HEALTH CARE TRIBUNALS

SEC. 601. STATE GRANTS TO CREATE ADMINISTRATIVE HEALTH CARE TRIBUNALS.

    Part P of title III of the Public Health Service Act (42 U.S.C. 
280g et seq.) is amended by adding at the end the following:

``SEC. 399R. STATE GRANTS TO CREATE ADMINISTRATIVE HEALTH CARE 
              TRIBUNALS.

    ``(a) In General.--The Secretary may award grants to States for the 
development, implementation, and evaluation of administrative health 
care tribunals that comply with this section, for the resolution of 
disputes concerning injuries allegedly caused by health care providers.
    ``(b) Conditions for Demonstration Grants.--To be eligible to 
receive a grant under this section, a State shall submit to the 
Secretary an application at such time, in such manner, and containing 
such information as may be required by the Secretary. A grant shall be 
awarded under this section on such terms and conditions as the 
Secretary determines appropriate.
    ``(c) Representation by Counsel.--A State that receives a grant 
under this section may not preclude any party to a dispute before an 
administrative health care tribunal operated under such grant from 
obtaining legal representation during any review by the expert panel 
under subsection (d), the administrative health care tribunal under 
subsection (e), or a State court under subsection (f).
    ``(d) Expert Panel Review and Early Offer Guidelines.--
            ``(1) In general.--Prior to the submission of any dispute 
        concerning injuries allegedly caused by health care providers 
        to an administrative health care tribunal under this section, 
        such allegations shall first be reviewed by an expert panel.
            ``(2) Composition.--
                    ``(A) In general.--An expert panel under this 
                subsection shall be composed of 3 medical experts 
                (either physicians or health care professionals) and 3 
                attorneys to be appointed by the head of the State 
                agency responsible for health.
                    ``(B) Licensure and expertise.--Each physician or 
                health care professional appointed to an expert panel 
                under subparagraph (A) shall--
                            ``(i) be appropriately credentialed or 
                        licensed in 1 or more States to deliver health 
                        care services; and
                            ``(ii) typically treat the condition, make 
                        the diagnosis, or provide the type of treatment 
                        that is under review.
                    ``(C) Independence.--
                            ``(i) In general.--Subject to clause (ii), 
                        each individual appointed to an expert panel 
                        under this paragraph shall--
                                    ``(I) not have a material familial, 
                                financial, or professional relationship 
                                with a party involved in the dispute 
                                reviewed by the panel; and
                                    ``(II) not otherwise have a 
                                conflict of interest with such a party.
                            ``(ii) Exception.--Nothing in clause (i) 
                        shall be construed to prohibit an individual 
                        who has staff privileges at an institution 
                        where the treatment involved in the dispute was 
                        provided from serving as a member of an expert 
                        panel merely on the basis of such affiliation, 
                        if the affiliation is disclosed to the parties 
                        and neither party objects.
                    ``(D) Practicing health care professional in same 
                field.--
                            ``(i) In general.--In a dispute before an 
                        expert panel that involves treatment, or the 
                        provision of items or services--
                                    ``(I) by a physician, the medical 
                                experts on the expert panel shall be 
                                practicing physicians (allopathic or 
                                osteopathic) of the same or similar 
                                specialty as a physician who typically 
                                treats the condition, makes the 
                                diagnosis, or provides the type of 
                                treatment under review; or
                                    ``(II) by a health care 
                                professional other than a physician, at 
                                least two medical experts on the expert 
                                panel shall be practicing physicians 
                                (allopathic or osteopathic) of the same 
                                or similar specialty as the health care 
                                professional who typically treats the 
                                condition, makes the diagnosis, or 
                                provides the type of treatment under 
                                review, and, if determined appropriate 
                                by the State agency, the third medical 
                                expert shall be a practicing health 
                                care professional (other than such a 
                                physician) of such a same or similar 
                                specialty.
                            ``(ii) Practicing defined.--In this 
                        paragraph, the term `practicing' means, with 
                        respect to an individual who is a physician or 
                        other health care professional, that the 
                        individual provides health care services to 
                        individual patients on average at least 2 days 
                        a week.
                    ``(E) Pediatric expertise.--In the case of dispute 
                relating to a child, at least 1 medical expert on the 
                expert panel shall have expertise described in 
                subparagraph (D)(i) in pediatrics.
            ``(3) Determination.--After a review under paragraph (1), 
        an expert panel shall make a determination as to the liability 
        of the parties involved and compensation.
            ``(4) Acceptance.--If the parties to a dispute before an 
        expert panel under this subsection accept the determination of 
        the expert panel concerning liability and compensation, such 
        compensation shall be paid to the claimant and the claimant 
        shall agree to forgo any further action against the health care 
        providers involved.
            ``(5) Failure to accept.--If any party decides not to 
        accept the expert panel's determination, the matter shall be 
        referred to an administrative health care tribunal created 
        pursuant to this section.
    ``(e) Administrative Health Care Tribunals.--
            ``(1) In general.--Upon the failure of any party to accept 
        the determination of an expert panel under subsection (d), the 
        parties shall have the right to request a hearing concerning 
        the liability or compensation involved by an administrative 
        health care tribunal established by the State involved.
            ``(2) Requirements.--In establishing an administrative 
        health care tribunal under this section, a State shall--
                    ``(A) ensure that such tribunals are presided over 
                by special judges with health care expertise;
                    ``(B) provide authority to such judges to make 
                binding rulings, rendered in written decisions, on 
                standards of care, causation, compensation, and related 
                issues with reliance on independent expert witnesses 
                commissioned by the tribunal;
                    ``(C) establish negligence as the legal standard 
                for the tribunal;
                    ``(D) allow the admission into evidence of the 
                recommendation made by the expert panel under 
                subsection (d); and
                    ``(E) provide for an appeals process to allow for 
                review of decisions by State courts.
    ``(f) Review by State Court After Exhaustion of Administrative 
Remedies.--
            ``(1) Right to file.--If any party to a dispute before a 
        health care tribunal under subsection (e) is not satisfied with 
        the determinations of the tribunal, the party shall have the 
        right to file their claim in a State court of competent 
        jurisdiction.
            ``(2) Forfeit of awards.--Any party filing an action in a 
        State court in accordance with paragraph (1) shall forfeit any 
        compensation award made under subsection (e).
            ``(3) Admissibility.--The determinations of the expert 
        panel and the administrative health care tribunal pursuant to 
        subsections (d) and (e) with respect to a State court 
        proceeding under paragraph (1) shall be admissible into 
        evidence in any such State court proceeding.
    ``(g) Definition.--In this section, the term `health care provider' 
has the meaning given such term for purposes of part A of title VII.
    ``(h) Funding.--
            ``(1) One-time increase in medicaid payment.--In the case 
        of a State awarded a grant to carry out this section, the total 
        amount of Federal payments made to the State under section 
        1903(a) of the Social Security Act or section 1939(b)of such 
        Act (in the case of fiscal year 2010 or any fiscal year 
        thereafter) for the first fiscal year for which such grant is 
        awarded shall be increased by an amount equal to 1 percent of 
        of the total amount of such payments made to the State for the 
        preceding fiscal year under such 1903(a) or 1939(b) (as 
        applicable) for purposes of carrying out this section. Amounts 
        paid to a State pursuant to this subsection shall remain 
        available until expended.
            ``(2) Authorization of appropriations.--There are 
        authorized to be appropriated for any fiscal year such sums as 
        may be necessary for purposes of making payments to States 
        pursuant to paragraph (1).''.

                TITLE VII--HEALTH INFORMATION TECHNOLOGY

 Subtitle A--Assisting the Development of Health Information Technology

SEC. 701. PURPOSE.

    It is the purpose of this subtitle to promote the utilization of 
health record banking by improving the coordination of health 
information through an infrastructure for the secure and authorized 
exchange and use of healthcare information.

SEC. 702. HEALTH RECORD BANKING.

    (a) Establishment.--Not later than 1 year after the date of 
enactment of this Act, the Secretary of Health and Human Services shall 
promulgate regulations to provide for the certification and auditing of 
the banking of electronic medical records.
    (b) General Rights.--An individual who has a health record 
contained in a health record bank shall maintain ownership over the 
health record and shall have the right to review the contents of the 
record.

SEC. 703. APPLICATION OF FEDERAL AND STATE SECURITY AND CONFIDENTIALITY 
              STANDARDS.

    (a) In General.--Current Federal security and confidentiality 
standards and State security and confidentiality laws shall apply to 
this subtitle until such time as Congress acts to amend such standards.
    (b) Definitions.--In this section:
            (1) Current federal security and confidentiality 
        standards.--The term ``current Federal security and 
        confidentiality standards'' means the Federal privacy standards 
        established pursuant to section 264(c) of the Health Insurance 
        Portability and Accountability Act of 1996 (42 U.S.C. 1320d-2 
        note) and security standards established under section 1173(d) 
        of the Social Security Act (42 U.S.C. 1320d-2(d)).
            (2) State security and confidentiality laws.--The term 
        ``State security and confidentiality laws'' means State laws 
        and regulations relating to the privacy and confidentiality of 
        individually identifiable health information or to the security 
        of such information.
            (3) State.--The term ``State'' has the meaning given such 
        term for purposes of title XI of the Social Security Act, as 
        provided under section 1101(a) of such Act (42 U.S.C. 1301(a)).

   Subtitle B--Promoting the Use of Health Information Technology to 
                     Better Coordinate Health Care

SEC. 711. SAFE HARBORS TO ANTIKICKBACK CIVIL PENALTIES AND CRIMINAL 
              PENALTIES FOR PROVISION OF HEALTH INFORMATION TECHNOLOGY 
              AND TRAINING SERVICES.

    (a) For Civil Penalties.--Section 1128A of the Social Security Act 
(42 U.S.C. 1320a-7a) is amended--
            (1) in subsection (b), by adding at the end the following 
        new paragraph:
    ``(4) For purposes of this subsection, inducements to reduce or 
limit services described in paragraph (1) shall not include the 
practical or other advantages resulting from health information 
technology or related installation, maintenance, support, or training 
services.''; and
            (2) in subsection (i), by adding at the end the following 
        new paragraph:
            ``(8) The term `health information technology' means 
        hardware, software, license, right, intellectual property, 
        equipment, or other information technology (including new 
        versions, upgrades, and connectivity) designed or provided 
        primarily for the electronic creation, maintenance, or exchange 
        of health information to better coordinate care or improve 
        health care quality, efficiency, or research.''.
    (b) For Criminal Penalties.--Section 1128B of such Act (42 U.S.C. 
1320a-7b) is amended--
            (1) in subsection (b)(3)--
                    (A) in subparagraph (G), by striking ``and'' at the 
                end;
                    (B) in the subparagraph (H) added by section 237(d) 
                of the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2213)--
                            (i) by moving such subparagraph 2 ems to 
                        the left; and
                            (ii) by striking the period at the end and 
                        inserting a semicolon;
                    (C) in the subparagraph (H) added by section 431(a) 
                of such Act (117 Stat. 2287)--
                            (i) by redesignating such subparagraph as 
                        subparagraph (I);
                            (ii) by moving such subparagraph 2 ems to 
                        the left; and
                            (iii) by striking the period at the end and 
                        inserting ``; and''; and
                    (D) by adding at the end the following new 
                subparagraph:
            ``(J) any nonmonetary remuneration (in the form of health 
        information technology, as defined in section 1128A(i)(8), or 
        related installation, maintenance, support or training 
        services) made to a person by a specified entity (as defined in 
        subsection (g)) if--
                    ``(i) the provision of such remuneration is without 
                an agreement between the parties or legal condition 
                that--
                            ``(I) limits or restricts the use of the 
                        health information technology to services 
                        provided by the physician to individuals 
                        receiving services at the specified entity;
                            ``(II) limits or restricts the use of the 
                        health information technology in conjunction 
                        with other health information technology; or
                            ``(III) conditions the provision of such 
                        remuneration on the referral of patients or 
                        business to the specified entity;
                    ``(ii) such remuneration is arranged for in a 
                written agreement that is signed by the parties 
                involved (or their representatives) and that specifies 
                the remuneration solicited or received (or offered or 
                paid) and states that the provision of such 
                remuneration is made for the primary purpose of better 
                coordination of care or improvement of health quality, 
                efficiency, or research; and
                    ``(iii) the specified entity providing the 
                remuneration (or a representative of such entity) has 
                not taken any action to disable any basic feature of 
                any hardware or software component of such remuneration 
                that would permit interoperability.''; and
            (2) by adding at the end the following new subsection:
    ``(g) Specified Entity Defined.--For purposes of subsection 
(b)(3)(J), the term `specified entity' means an entity that is a 
hospital, group practice, prescription drug plan sponsor, a Medicare 
Advantage organization, or any other such entity specified by the 
Secretary, considering the goals and objectives of this section, as 
well as the goals to better coordinate the delivery of health care and 
to promote the adoption and use of health information technology.''.
    (c) Effective Date and Effect on State Laws.--
            (1) Effective date.--The amendments made by subsections (a) 
        and (b) shall take effect on the date that is 120 days after 
        the date of the enactment of this Act.
            (2) Preemption of state laws.--No State (as defined in 
        section 1101(a) of the Social Security Act (42 U.S.C. 1301(a)) 
        for purposes of title XI of such Act) shall have in effect a 
        State law that imposes a criminal or civil penalty for a 
        transaction described in section 1128A(b)(4) or section 
        1128B(b)(3)(J) of such Act, as added by subsections (a)(1) and 
        (b), respectively, if the conditions described in the 
        respective provision, with respect to such transaction, are 
        met.
    (d) Study and Report To Assess Effect of Safe Harbors on Health 
System.--
            (1) In general.--The Secretary of Health and Human Services 
        shall conduct a study to determine the impact of each of the 
        safe harbors described in paragraph (3). In particular, the 
        study shall examine the following:
                    (A) The effectiveness of each safe harbor in 
                increasing the adoption of health information 
                technology.
                    (B) The types of health information technology 
                provided under each safe harbor.
                    (C) The extent to which the financial or other 
                business relationships between providers under each 
                safe harbor have changed as a result of the safe harbor 
                in a way that adversely affects or benefits the health 
                care system or choices available to consumers.
                    (D) The impact of the adoption of health 
                information technology on health care quality, cost, 
                and access under each safe harbor.
            (2) Report.--Not later than 3 years after the effective 
        date described in subsection (c)(1), the Secretary of Health 
        and Human Services shall submit to Congress a report on the 
        study under paragraph (1).
            (3) Safe harbors described.--For purposes of paragraphs (1) 
        and (2), the safe harbors described in this paragraph are--
                    (A) the safe harbor under section 1128A(b)(4) of 
                such Act (42 U.S.C. 1320a-7a(b)(4)), as added by 
                subsection (a)(1); and
                    (B) the safe harbor under section 1128B(b)(3)(J) of 
                such Act (42 U.S.C. 1320a-7b(b)(3)(J)), as added by 
                subsection (b).

SEC. 712. EXCEPTION TO LIMITATION ON CERTAIN PHYSICIAN REFERRALS (UNDER 
              STARK) FOR PROVISION OF HEALTH INFORMATION TECHNOLOGY AND 
              TRAINING SERVICES TO HEALTH CARE PROFESSIONALS.

    (a) In General.--Section 1877(b) of the Social Security Act (42 
U.S.C. 1395nn(b)) is amended by adding at the end the following new 
paragraph:
            ``(6) Information technology and training services.--
                    ``(A) In general.--Any nonmonetary remuneration (in 
                the form of health information technology or related 
                installation, maintenance, support or training 
                services) made by a specified entity to a physician 
                if--
                            ``(i) the provision of such remuneration is 
                        without an agreement between the parties or 
                        legal condition that--
                                    ``(I) limits or restricts the use 
                                of the health information technology to 
                                services provided by the physician to 
                                individuals receiving services at the 
                                specified entity;
                                    ``(II) limits or restricts the use 
                                of the health information technology in 
                                conjunction with other health 
                                information technology; or
                                    ``(III) conditions the provision of 
                                such remuneration on the referral of 
                                patients or business to the specified 
                                entity;
                            ``(ii) such remuneration is arranged for in 
                        a written agreement that is signed by the 
                        parties involved (or their representatives) and 
                        that specifies the remuneration made and states 
                        that the provision of such remuneration is made 
                        for the primary purpose of better coordination 
                        of care or improvement of health quality, 
                        efficiency, or research; and
                            ``(iii) the specified entity (or a 
                        representative of such entity) has not taken 
                        any action to disable any basic feature of any 
                        hardware or software component of such 
                        remuneration that would permit 
                        interoperability.
                    ``(B) Health information technology defined.--For 
                purposes of this paragraph, the term `health 
                information technology' means hardware, software, 
                license, right, intellectual property, equipment, or 
                other information technology (including new versions, 
                upgrades, and connectivity) designed or provided 
                primarily for the electronic creation, maintenance, or 
                exchange of health information to better coordinate 
                care or improve health care quality, efficiency, or 
                research.
                    ``(C) Specified entity defined.--For purposes of 
                this paragraph, the term `specified entity' means an 
                entity that is a hospital, group practice, prescription 
                drug plan sponsor, a Medicare Advantage organization, 
                or any other such entity specified by the Secretary, 
                considering the goals and objectives of this section, 
                as well as the goals to better coordinate the delivery 
                of health care and to promote the adoption and use of 
                health information technology.''.
    (b) Effective Date; Effect on State Laws.--
            (1) Effective date.--The amendment made by subsection (a) 
        shall take effect on the date that is 120 days after the date 
        of the enactment of this Act.
            (2) Preemption of state laws.--No State (as defined in 
        section 1101(a) of the Social Security Act (42 U.S.C. 1301(a)) 
        for purposes of title XI of such Act) shall have in effect a 
        State law that imposes a criminal or civil penalty for a 
        transaction described in section 1877(b)(6) of such Act, as 
        added by subsection (a), if the conditions described in such 
        section, with respect to such transaction, are met.
    (c) Study and Report To Assess Effect of Exception on Health 
System.--
            (1) In general.--The Secretary of Health and Human Services 
        shall conduct a study to determine the impact of the exception 
        under section 1877(b)(6) of such Act (42 U.S.C. 1395nn(b)(6)), 
        as added by subsection (a). In particular, the study shall 
        examine the following:
                    (A) The effectiveness of the exception in 
                increasing the adoption of health information 
                technology.
                    (B) The types of health information technology 
                provided under the exception.
                    (C) The extent to which the financial or other 
                business relationships between providers under the 
                exception have changed as a result of the exception in 
                a way that adversely affects or benefits the health 
                care system or choices available to consumers.
                    (D) The impact of the adoption of health 
                information technology on health care quality, cost, 
                and access under the exception.
            (2) Report.--Not later than 3 years after the effective 
        date described in subsection (b)(1), the Secretary of Health 
        and Human Services shall submit to Congress a report on the 
        study under paragraph (1).

SEC. 713. RULES OF CONSTRUCTION REGARDING USE OF CONSORTIA.

    (a) Application to Safe Harbor From Criminal Penalties.--Section 
1128B(b)(3) of the Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is 
amended by adding after and below subparagraph (J), as added by section 
711(b)(1), the following: ``For purposes of subparagraph (J), nothing 
in such subparagraph shall be construed as preventing a specified 
entity, consistent with the specific requirements of such subparagraph, 
from forming a consortium composed of health care providers, payers, 
employers, and other interested entities to collectively purchase and 
donate health information technology, or from offering health care 
providers a choice of health information technology products in order 
to take into account the varying needs of such providers receiving such 
products.''.
    (b) Application to Stark Exception.--Paragraph (6) of section 
1877(b) of the Social Security Act (42 U.S.C. 1395nn(b)), as added by 
section 712(a), is amended by adding at the end the following new 
subparagraph:
                    ``(D) Rule of construction.--For purposes of 
                subparagraph (A), nothing in such subparagraph shall be 
                construed as preventing a specified entity, consistent 
                with the specific requirements of such subparagraph, 
                from--
                            ``(i) forming a consortium composed of 
                        health care providers, payers, employers, and 
                        other interested entities to collectively 
                        purchase and donate health information 
                        technology; or
                            ``(ii) offering health care providers a 
                        choice of health information technology 
                        products in order to take into account the 
                        varying needs of such providers receiving such 
                        products.''.

                       TITLE VIII--MISCELLANEOUS

SEC. 801. DEDICATION OF MEDICAID AND REVENUE SAVINGS TO STRENGTHENING 
              THE FINANCIAL SOLVENCY OF THE FEDERAL HOSPITAL INSURANCE 
              TRUST FUND.

    The third sentence of section 1817(a) of the Social Security Act 
(42 U.S.C. 1395(i)) is amended--
            (1) in paragraph (1), by striking ``and'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(3) the revenues made available as a result of the 
        amendments to title XIX and the Internal Revenue Code of 1986 
        made by the Universal Health Care Choice and Access Act (as 
        determined by the Secretary of the Treasury).''.

SEC. 802. HEALTH CARE CHOICE FOR VETERANS.

    Beginning not later than 2 years after the date of the enactment of 
this Act, the Secretary of Veterans Affairs shall--
            (1) permit veterans, and survivors and dependents of 
        veterans, who are eligible for health care and services under 
        the laws administered by the Secretary to receive such care and 
        services through such non-Department of Veterans Affairs 
        providers and facilities as the Secretary shall approve for 
        purposes of this section; and
            (2) pursuant to such procedures as the Secretary of Veteran 
        Affairs shall prescribe for purposes of this section, make 
        payments to such providers and facilities for the provision of 
        such care and services to veterans, and such survivors and 
        dependents, at such rates as the Secretary shall specify in 
        such procedures and in such manner so that the Secretary 
        ensures that the aggregate payments made by the Secretary to 
        such providers and facilities do not exceed the aggregate 
        amounts which the Secretary would have paid for such care and 
        services if this section had not been enacted.

SEC. 803. HEALTH CARE CHOICE FOR INDIANS.

    (a) In General.--Beginning not later than 2 years after the date of 
enactment of this Act, the Secretary of Health and Human Services 
shall--
            (1) permit Indians who are eligible for health care and 
        services under a health care program operated or financed by 
        the Indian Health Service or by an Indian Tribe, Tribal 
        Organization, or Urban Indian Organization (and any such other 
        individuals who are so eligible as the Secretary may specify), 
        to receive such care and services through such non- Indian 
        Health Service, Indian Tribe, Tribal Organization, or Urban 
        Indian Organization providers and facilities as the Secretary 
        shall approve for purposes of this section; and
            (2) pursuant to such procedures as the Secretary of Health 
        and Human Services shall prescribe for purposes of this 
        section, make payments to such providers and facilities for the 
        provision of such care and services to Indians and individuals 
        described in paragraph (1), at such rates as the Secretary 
        shall specify in such procedures and in such manner so that the 
        Secretary ensures that the aggregate payments made by the 
        Secretary to such providers and facilities do not exceed the 
        aggregate amounts which the Secretary would have paid for such 
        care and services if this section had not been enacted.
    (b) Definitions.--In this section, the terms ``Indian'', ``Indian 
Health Program'', ``Indian Tribe'', ``Tribal Organization'', and 
``Urban Indian Organization'' have the meanings given those terms in 
section 4 of the Indian Health Care Improvement Act.
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