II 

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. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Universal Health Care Choice and Access Act’’. 

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

7 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. 


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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. 


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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. 

1 SEC. 2. FINDINGS. 

2 Congress makes the following findings: 


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1 (1) Nine out of 10 Americans think the United 

2 States health care system needs fundamental 

3 changes. 

4 (2) The United States spends approximately 16 

5 percent of its Gross Domestic Product on health 

6 care and experts estimate that percentage will rise 

7 to 20 percent by 2015. 

8 (3) The Federal Government spends more on 

9 health care than it does on national defense. 

10 (4) As much as $1 out of every $4 health care 

11 dollars do not go towards making Americans 

12 healthy. 

13 (5) Nearly 75 percent of American health care 

14 spending goes toward the treatment of chronic dis15 eases. Five preventable chronic diseases (heart dis16 ease, cancer, stroke, chronic obstructive pulmonary 

17 disease, and diabetes) cause two-thirds of American 

18 deaths. 

19 (6) Since 2000, premiums for family health cov20 erage have increased by 87 percent, compared with 

21 cumulative inflation of 18 percent and cumulative 

22 wage growth of 20 percent. During this same period, 

23 the percentage of employers offering health benefits 

24 has fallen from 69 percent to 61 percent, and the 

25 percentage of workers covered by their own employer 


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1 also has fallen. The current employer-based system 

2 offers little choice in health plans to employees: 88 

3 percent of American firms offer only 1 health plan 

4 type. 

5 (7) Medicaid was designed as a safety net to 

6 ensure that the poorest Americans have access to 

7 health care at a cost of $1,000,000,000 in its first 

8 year. Today, more than 1 out of every 6 Americans 

9 is in Medicaid at a total cost of more than 

10 $338,000,000,000 in 2006. The program is expected 

11 to cost nearly $5,000,000,000,000 over the next dec12 ade. In 2003, for the first time ever, Medicaid 

13 spending replaced education as the largest compo14 nent of State budgets, consuming 22 percent of 

15 State spending. 

16 (8) The unfunded liabilities of the Medicare 

17 Program over the next 75 years are estimated to be 

18 $32,100,000,000,000 and $70,500,000,000,000 on 

19 the infinite horizon. The Federal Hospital Insurance 

20 Trust Fund is projected to be exhausted by 2018. 

21 Without any change in the program, Medicare will 

22 consume 23.1 percent of all Federal income taxes by 

23 2020 and 37.5 percent of all Federal income taxes 

24 by 2030. Under the current system, physician reim25 bursements will be cut by 34 percent by the year 


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1 2015, leading to decreased access to physicians’ 

2 services for seniors. 

3 (9) Our current civil justice system is adversely 

4 affecting patient access to health care services, bet5 ter patient care, and cost-efficient health care, in 

6 that the health care liability system is a costly and 

7 ineffective mechanism for resolving claims of health 

8 care liability and compensating injured patients, and 

9 is a deterrent to the sharing of information among 

10 health care professionals which impedes efforts to 

11 improve patient safety and quality of care. Econo12 mists estimate that between 5 and 9 percent of 

13 health care spending is related to defensive medicine. 

14 (10) The adoption of health information tech15 nology will significantly reduce health care spending 

16 while simultaneously increasing the quality of health 

17 care. 

18 TITLE I—PREVENTION AND 

19 WELLNESS 

20 SEC. 101. STRATEGIC APPROACH TO OUTCOME-BASED PRE21 VENTION. 

22 (a) INTERAGENCY COORDINATING COMMITTEE.— 

23 (1) IN GENERAL.—The Secretary of Health and 

24 Human Services (referred to in this title as the 

25 ‘‘Secretary’’) shall convene an interagency coordiVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 nating committee to develop a national strategic 

2 plan for prevention. The Secretary shall serve as the 

3 chairperson of the committee. 

4 (2) COMPOSITION.—In carrying out paragraph 

5 (1), the Secretary shall include the participation 

6 of— 

7 (A) the Director of the National Institutes 

8 of Health; 

9 (B) The Director of the Centers for Dis10 ease Control and Prevention; 

11 (C) the Administrator of the Agency for 

12 Healthcare Research and Quality; 

13 (D) the Administrator of the Substance 

14 Abuse and Mental Health Services Administra15 tion; 

16 (E) the Administrator of the Health Re17 sources and Services Administration; 

18 (F) the Secretary of Agriculture; 

19 (G) the Director of the Centers for Medi20 care & Medicaid Services; 

21 (H) the Administrator of the Environ22 mental Protection Agency; 

23 (I) the Director of the Indian Health Serv24 ice; 


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1 (J) the Administrator of the Administra2 tion on Aging; 

3 (K) the Secretary of Veterans Affairs; 

4 (L) the Secretary of Defense; 

5 (M) the Secretary of Education; and 

6 (N) the Secretary of Labor. 

7 (3) REPORT AND PLAN.—Not later than 1 year 

8 after the date of enactment of this Act, the Sec9 retary, acting through the coordinating committee 

10 convened under paragraph (1), shall submit to Con11 gress a report concerning the recommendation of the 

12 committee for health promotion and disease preven13 tion activities. Such report shall include a specific 

14 strategic plan that shall include— 

15 (A) a list of national priorities on health 

16 promotion and disease prevention to address 

17 lifestyle behavior modification (smoking ces18 sation, proper nutrition, and appropriate exer19 cise) and the prevention measures for the 5 

20 leading disease killers in the United States; 

21 (B) specific science-based initiatives to 

22 achieve the measurable goals of Healthy People 

23 2010 regarding nutrition, exercise, and smoking 

24 cessation, and targeting the 5 leading disease 

25 killers in the United States; 


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1 (C) specific plans for consolidating Federal 

2 health programs and Centers that exist to pro3 mote healthy behavior and reduce disease risk 

4 (including eliminating programs and offices de5 termined to be ineffective in meeting the pri6 ority goals of Health People 2010), that include 

7 transferring the nutrition guideline development 

8 responsibility from the Secretary of Agriculture 

9 to the Director of the Centers for Disease Con10 trol and Prevention; 

11 (D) specific plans to ensure that all Fed12 eral health care programs are fully coordinated 

13 with science-based prevention recommendations 

14 promulgated by the Director of the Centers for 

15 Disease Control and Prevention; 

16 (E) specific plans to ensure that all non17 Department of Health and Human Services 

18 prevention programs are based on the science19 based guidelines developed by the Centers for 

20 Disease Control and Prevention under subpara21 graph (D); and 

22 (F) a list of new non-Federal and non-gov23 ernment partners identified by the committee to 

24 build Federal capacity in health promotion and 

25 disease prevention efforts. 


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1 (4) ANNUAL REQUEST TO GIVE TESTIMONY.— 

2 The Secretary shall annually request an opportunity 

3 to testify before Congress concerning the progress 

4 made by the United States in meeting the outcome5 based standards of Healthy People 2010 with re6 spect to disease prevention and measurable outcomes 

7 and effectiveness of Federal programs related to this 

8 goal. 

9 (5) PERIODIC REVIEWS.—The Secretary shall 

10 conduct periodic reviews, not less than every 5 years, 

11 and grading of every Federal disease prevention and 

12 health promotion initiatives, programs, and agencies. 

13 Such reviews shall be evaluated based on effective14 ness in meeting metrics-based goals with an analysis 

15 posted on such agencies’ public Internet websites. 

16 (b) FEDERAL MESSAGING ON HEALTH PROMOTION

17 AND DISEASE PREVENTION.— 

18 (1) MEDIA CAMPAIGNS.— 

19 (A) IN GENERAL.—Not later than 1 year 

20 after the date of enactment of this Act, the Sec21 retary, acting through the Director of the Cen22 ters for Disease Control and Prevention, shall 

23 establish and implement a national science24 based media campaign on health promotion and 

25 disease prevention. 


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1 (B) REQUIREMENTS OF CAMPAIGN.—The 

2 campaign implemented under subparagraph 

3 (A)— 

4 (i) shall be designed to address proper 

5 nutrition, regular exercise, smoking ces6 sation, obesity reduction, the 5 leading dis7 ease killers in the United States, and sec8 ondary prevention through disease screen9 ing promotion; 

10 (ii) shall be carried out through com11 petitively bid contracts awarded to entities 

12 providing for the professional production 

13 and design of such campaign; 

14 (iii) may include the use of television, 

15 radio, Internet, and other commercial mar16 keting venues and may be targeted to spe17 cific age groups based on peer-reviewed so18 cial research; 

19 (iv) shall not be duplicative of any 

20 other Federal efforts relating to health 

21 promotion and disease prevention; and 

22 (v) may include the use of humor and 

23 nationally-recognized positive role models. 

24 (C) EVALUATION.—The Secretary shall en25 sure that the campaign implemented under subVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 paragraph (A) is subject to an independent 

2 evaluation every 2 years and shall report every 

3 2 years to Congress on the effectiveness of such 

4 campaigns towards meeting science-based 

5 metrics. 

6 (2) WEBSITE.—The Secretary, in consultation 

7 with private-sector experts, shall maintain or enter 

8 into a contract to maintain an Internet website to 

9 provide science-based information on guidelines for 

10 nutrition, regular exercise, obesity reduction, smok11 ing cessation, and specific chronic disease preven12 tion. Such website shall be designed to provide infor13 mation to health care providers and consumers. 

14 (3) DISSEMINATION OF INFORMATION

15 THROUGH PROVIDERS.—The Secretary, acting 

16 through the Centers for Disease Control and Preven17 tion, shall develop and implement a plan for the dis18 semination of health promotion and disease preven19 tion information consistent with national priorities 

20 described in the strategic and implementing plan 

21 under subsection (a)(3)(A), through health care pro22 viders who participate in Federal programs, includ23 ing programs administered by the Indian Health 

24 Service, the Department of Veterans Affairs, the De25 partment of Defense, and the Health Resources and 


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1 Services Administration, and the Medicare and Med2 icaid Programs. 

3 (4) PERSONALIZED PREVENTION PLANS.— 

4 (A) CONTRACT.—The Secretary, acting 

5 through the Director of the Centers for Disease 

6 Control and Prevention, shall enter into a con7 tract with a qualified entity for the development 

8 and operation of a Federal Internet website 

9 personalized prevention plan tool. 

10 (B) USE.—The website developed under 

11 subparagraph (A) shall be designed to be used 

12 as a source of the most up-to-date scientific evi13 dence relating to disease prevention for use by 

14 individuals. Such website shall contain a compo15 nent that enables an individual to determine 

16 their disease risk (based on personal health and 

17 family history, BMI, and other relevant infor18 mation) relating to the 5 leading diseases in the 

19 United States, and obtain personalized sugges20 tions for preventing such diseases. 

21 (5) INTERNET PORTAL.—The Secretary shall 

22 establish an Internet portal for accessing risk-assess23 ment tools developed and maintained by private and 

24 academic entities. 


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1 (6) PRIORITY FUNDING.—Funding for the ac2 tivities authorized under this section shall take pri3 ority over funding from the Centers for Disease Con4 trol and Prevention provided for grants to States 

5 and other entities for similar purposes and goals as 

6 provided for in this section. Not to exceed 

7 $500,000,000 shall be expended on the campaigns 

8 and activities required under this Act. 

9 SEC. 102. STATE GRANTS FOR OUTCOME-BASED PREVEN10 TION EFFORT. 

11 (a) IN GENERAL.—If the Secretary determines that 

12 it is essential to meeting the national priorities described 

13 in the plan required under section 101(a)(3)(A), the Sec14 retary may award grants to States for the conduct of spe15 cific health promotion and disease prevention activities. 

16 (b) ELIGIBILITY.—To be eligible to receive a grant 

17 under subsection (a), a State shall submit to the Secretary 

18 an application at such time, in such manner, and con19 taining such information as the Secretary may require, in20 cluding a strategic plan that shall— 

21 (1) describe the specific health promotion and 

22 disease prevention activities to be carried out under 

23 this grant; 


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1 (2) include a list of the barriers that exist with2 in the State to meeting specific goals of Healthy 

3 People 2010; 

4 (3) include targeted demographic indicators and 

5 measurable objectives with respect to health pro6 motion and disease prevention; 

7 (4) contain a set of process outcomes and mile8 stones, based on the process outcomes and mile9 stones developed by the Secretary, for measuring the 

10 effectiveness of activities carried out under the grant 

11 in the State; and 

12 (5) outline the manner in which interventions to 

13 be carried out under this grant will reduce morbidity 

14 and mortality within the State over a 5-year period 

15 (or over a 10-year period, if the Secretary deter16 mines such period appropriate for adequately meas17 uring progress). 

18 (c) PROCESS OUTCOMES AND MILESTONES.— 

19 (1) IN GENERAL.—The Secretary shall develop 

20 process outcomes and milestones to be used to meas21 ure the effectiveness of activities carried out under 

22 a grant under this section by a State. 

23 (2) DETERMINATIONS.—If, beginning 2 years 

24 after the date on which a grant is awarded to a 

25 State under this section, the Secretary determines 


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1 that the State is failing to make adequate progress 

2 in meeting the outcomes and milestones contained in 

3 the State plan under subsection (b)(4), the Secretary 

4 shall provide the State with technical assistance on 

5 how to make such progress. Such technical assist6 ance shall continue for a period of 2 years. 

7 (3) CONTINUED FAILURE TO MEET OBJEC8 TIVES.—If after the expiration of the 2-year period 

9 described in paragraph (2), the Secretary determines 

10 that the State is failing to make adequate progress 

11 in meeting the outcomes and milestones contained in 

12 the State plan under subsection (b)(4) over a 5-year 

13 period, the Secretary shall terminate all funding to 

14 the State under a grant under this section. 

15 (d) REGIONAL ACTIVITIES.—A State may use an 

16 amount, not to exceed 15 percent of the total grant 

17 amount to such State, to carry out regional activities in 

18 conjunction with other States. 

19 (e) TARGETED ACTIVITIES.—A State may use grant 

20 funds to target specific populations within the State to 

21 achieve specific outcomes described in Healthy People 

22 2010. 

23 (f) INNOVATIVE INCENTIVE STRUCTURES.—The Sec24 retary may award grants to States for the purposes of de25 veloping innovative incentive structures to encourage indiVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 viduals to adopt specific prevention behaviors such as re2 ducing their body mass index or for smoking cessation. 

3 (g) WELLNESS BONUSES.— 

4 (1) IN GENERAL.—The Secretary shall award 

5 wellness bonus payments to at least 5, but not more 

6 than 10, States that demonstrate the greatest 

7 progress in reducing disease rates and risk factors 

8 and increasing heathy behaviors. 

9 (2) REQUIREMENT.—To be eligible to receive a 

10 bonus payment under paragraph (1), a State shall 

11 demonstrate— 

12 (A) the progress described in paragraph 

13 (1); and 

14 (B) that the State has met a specific floor 

15 for progress outlined in the science-based 

16 metrics of Healthy People 2010. 

17 (3) USE OF PAYMENTS.—Bonus payments 

18 under this subsection may only be used by a State 

19 for the purposes of health promotion and disease 

20 prevention. 

21 (4) FUNDING.—Out of funds appropriated to 

22 the Director of the Centers for Disease Control and 

23 Prevention for each fiscal year beginning with fiscal 

24 year 2008, the Director shall give priority to using 


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1 $50,000,000 of such funds to make bonus payments 

2 under this subsection. 

3 (h) ADMINISTRATIVE EXPENSES.—A State may use 

4 not more than 5 percent of the amount of a grant under 

5 this section to carry out administrative activities. 

6 (i) STATE.—In this section, the term ‘‘State’’ means 

7 the 50 States, the District of Columbia, the Common8 wealth of Puerto Rico, Guam, Samoa, the United States 

9 Virgin Islands, and the Commonwealth of the Northern 

10 Mariana Islands. 

11 (j) AUTHORIZATION OF APPROPRIATIONS.—Funding 

12 for the activities authorized under this section shall take 

13 priority over funding from the Centers for Disease Control 

14 and Prevention provided for grants to States and other 

15 entities for similar purposes and goals as provided for in 

16 this section, not to exceed $300,000,000 for each fiscal 

17 year. 

18 SEC. 103. KEEPING THE FOOD STAMP PROGRAM FOCUSED 

19 ON NUTRITION. 

20 (a) COUNSELING BROCHURE.—The Director of the 

21 Centers for Disease Control and Prevention shall develop, 

22 and the Secretary of Agriculture shall distribute to each 

23 individual and family enrolled in the Food Stamp Program 

24 under the Food Stamp Act of 1977 (7 U.S.C. 2011 et 

25 seq.), a science-based nutrition counseling brochure. 


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1 (b) LIMITATIONS ON FOOD STAMP PURCHASES.— 

2 (1) IN GENERAL.—Not later than 6 months 

3 after the date of enactment of this Act, the Sec4 retary of Agriculture shall, based on scientific, peer5 reviewed recommendations provided by a Commis6 sion that includes public health, medical, and nutri7 tion experts and the Director of the Centers for Dis8 ease Control and Prevention, develop lists of foods 

9 that do not meet science-based standards for proper 

10 nutrition and that may not be purchased under the 

11 food stamp program. Such list shall be updated on 

12 an annual basis to ensure the most current science13 based recommendations are applied to the food 

14 stamp program. 

15 (2) AUTOMATED ENFORCEMENT.—The Sec16 retary of Agriculture shall, through regulations, en17 sure that the limitations on food purchases under 

18 paragraph (1) is enforced through the food stamp 

19 program’s automated system. 

20 (3) IMPLEMENTATION.—The Secretary of Agri21 culture shall promulgate the regulations described in 

22 paragraph (2) by the date that is not later than 1 

23 year after the date of enactment of this section. 


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1 SEC. 104. IMMUNIZATIONS. 

2 (a) PURCHASE OF VACCINES.—Notwithstanding any 

3 other provision of law, a State may use amounts provided 

4 under section 317 of the Public Health Service Act (42 

5 U.S.C. 247b) for immunization programs to purchase vac6 cines for use in health care provider offices and schools. 

7 (b) TECHNICAL ASSISTANCE AND REDUCTION IN

8 FUNDING.—If a State does not achieve a benchmark of 

9 80 percent coverage within the State for Centers for Dis10 ease Control and Prevention-recommended vaccines, the 

11 Director of the Centers shall provide technical assistance 

12 to the State for a period of 2 years. If after the expiration 

13 of such 2-year period the State continues to fail to achieve 

14 such benchmark, the Secretary shall reduce funding pro15 vided under section 317 of the Public Health Service Act 

16 to such State by 5 percent. 

17 (c) BONUS GRANT.—A State achieving a benchmark 

18 of 90 percent or greater coverage within the State for Cen19 ters for Disease Control and Prevention-recommended 

20 vaccines shall be eligible for a bonus grant from amounts 

21 appropriated under subsection (d). 

22 (d) AUTHORIZATION OF APPROPRIATIONS.—Out of 

23 funds appropriated to the Director of the Centers for Dis24 ease Control and Prevention for each fiscal year beginning 

25 with fiscal year 2008, there shall be made available to 

26 carry out this section, $50,000,000 for each fiscal year. 


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1 (e) FUNDING FOR SECTION 317.—Section 317(j)(1) 

2 of the Public Health Service Act (42 U.S.C. 247b(j)(1)) 

3 is amended by striking ‘‘2005’’ and inserting ‘‘2010’’. 

4 TITLE II—TAX INCENTIVES TO 

5 ENCOURAGE PURCHASE OF 

6 HEALTH CARE INSURANCE 

7 Subtitle A—Health Savings 

8 Accounts 

9 SEC. 201. EXPANSION OF HEALTH SAVINGS ACCOUNTS. 

10 (a) INCREASE IN MONTHLY CONTRIBUTION LIMIT.— 

11 (1) IN GENERAL.—Paragraph (2) of section 

12 223(b) of the Internal Revenue Code of 1986 (relat13 ing to limitations) is amended to read as follows: 

14 ‘‘(2) MONTHLY LIMITATION.— 

15 ‘‘(A) IN GENERAL.—In the case of an eligi16 ble individual who has coverage under a high 

17 deductible health plan, the monthly limitation 

for any month of such coverage is 1 18 ⁄12 of the 

19 sum of— 

20 ‘‘(i) the greater of— 

21 ‘‘(I) the sum of the annual de22 ductible and the other annual out-of23 pocket expenses (other than for pre24 miums) required to be paid under the 


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1 plan by the eligible individual for cov2 ered benefits, or 

3 ‘‘(II) in the case of an eligible in4 dividual who has— 

5 ‘‘(aa) self-only coverage 

6 under a high deductible health 

7 plan as of the first day of such 

8 month, $2,250, or 

9 ‘‘(bb) family coverage under 

10 a high deductible health plan as 

11 of the first day of such month, 

12 $4,500, and 

13 ‘‘(ii) in the case of an eligible indi14 vidual who has coverage under a qualified 

15 long-term care insurance contract (as de16 fined in section 7702B(b)), the lesser of— 

17 ‘‘(I) the annual premium for 

18 such coverage, or 

19 ‘‘(II) $1,000. 

20 ‘‘(B) SPECIAL RULES RELATING TO OUT21 OF-POCKET EXPENSES.— 

22 ‘‘(i) REDUCTION FOR SEPARATE

23 PLAN.—The annual out-of-pocket expenses 

24 taken into account under subparagraph 

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1 vidual shall be reduced by any out-of-pock2 et expense payable under a separate plan 

3 covering the individual. 

4 ‘‘(ii) SECRETARIAL AUTHORITY.—The 

5 Secretary may by regulations provide that 

6 annual out-of-pocket expenses will not be 

7 taken into account under subparagraph 

8 (A)(i)(I) to the extent that there is only a 

9 remote likelihood that such amounts will 

10 be required to be paid.’’. 

11 (2) APPLICATION OF SPECIAL RULES FOR MAR12 RIED INDIVIDUALS.—Paragraph (5) of section 

13 223(b) of such Code (relating to limitations) is 

14 amended to read as follows: 

15 ‘‘(5) SPECIAL RULES FOR MARRIED INDIVID16 UALS.— 

17 ‘‘(A) IN GENERAL.—In the case of individ18 uals who are married to each other and who are 

19 both eligible individuals, the limitation under 

20 paragraph (1) for each spouse shall be equal to 

21 the spouse’s applicable share of the combined 

22 marital limit. 

23 ‘‘(B) COMBINED MARITAL LIMIT.—For 

24 purposes of subparagraph (A), the combined 

25 marital limit is the excess (if any) of— 


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1 ‘‘(i) the lesser of— 

2 ‘‘(I) subject to subparagraph (C), 

3 the sum of the limitations computed 

4 separately under paragraph (1) for 

5 each spouse (including any additional 

6 contribution amount under paragraph 

7 (3)), or 

8 ‘‘(II) the dollar amount in effect 

9 under subsection (c)(2)(A)(ii)(II), 

10 over 

11 ‘‘(ii) the aggregate amount paid to 

12 Archer MSAs of such spouses for the tax13 able year. 

14 ‘‘(C) SPECIAL RULE WHERE BOTH

15 SPOUSES HAVE FAMILY COVERAGE.—For pur16 poses of subparagraph (B)(i)(I), if either spouse 

17 has family coverage which covers both spouses, 

18 both spouses shall be treated as having only 

19 such coverage (and if both spouses each have 

20 such coverage under different plans, shall be 

21 treated as having only family coverage with the 

22 plan with respect to which the lowest amount is 

23 determined under paragraph (2)(A)(i)(I)). 

24 ‘‘(D) APPLICABLE SHARE.—For purposes 

25 of subparagraph (A), a spouse’s applicable 


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•S 1019 IS

share is 1 1 ⁄2 of the combined marital limit unless 

2 both spouses agree on a different division. 

3 ‘‘(E) COUPLES NOT MARRIED ENTIRE

4 YEAR.—The Secretary shall prescribe rules for 

5 the application of this paragraph in the case of 

6 any taxable year for which the individuals were 

7 not married to each other during all months in8 cluded in the taxable year, including rules 

9 which allow individuals in appropriate cases to 

10 take into account coverage prior to marriage in 

11 computing the combined marital limit for pur12 poses of this paragraph.’’. 

13 (3) SELF-ONLY COVERAGE.—Paragraph (4) of 

14 section 223(c) of such Code (relating to definitions 

15 and special rules) is amended to read as follows: 

16 ‘‘(4) COVERAGE.— 

17 ‘‘(A) FAMILY COVERAGE.—The term ‘fam18 ily coverage’ means any coverage other than 

19 self-only coverage. 

20 ‘‘(B) SELF-ONLY COVERAGE.—If more 

21 than 1 individual is covered by a high deduct22 ible health plan but only 1 of the individuals is 

23 an eligible individual, the coverage shall be 

24 treated as self-only coverage.’’. 

25 (4) CONFORMING AMENDMENTS.— 


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•S 1019 IS

1 (A) Section 223(b)(3)(A) of such Code is 

2 amended by striking ‘‘subparagraphs (A) and 

3 (B) of’’. 

4 (B) Section 223(d)(1)(A)(ii)(I) of such 

5 Code is amended by striking ‘‘subsection 

6 (b)(2)(B)(ii)’’ and inserting ‘‘subsection 

7 (c)(2)(A)(ii)(II)’’. 

8 (C) Clause (ii) of section 223(c)(2)(D) of 

9 such Code is amended to read as follows: 

10 ‘‘(ii) CERTAIN ITEMS DISREGARDED

11 IN COMPUTING MONTHLY LIMITATION.— 

12 Such plan’s annual deductible, and such 

13 plan’s annual out-of-pocket limitation, for 

14 services provided outside of such network 

15 shall not be taken into account for pur16 poses of subsection (b)(2).’’ 

17 (D) Subsection (g) of section 223 of such 

18 Code is amended to read as follows: 

19 ‘‘(g) COST-OF-LIVING ADJUSTMENT.— 

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

21 year beginning in a calendar year after 2008, each 

22 dollar amount contained in subsections (b)(2)(A) 

23 and (c)(2)(A) shall be increased by an amount equal 

24 to— 

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


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•S 1019 IS

1 ‘‘(B) the cost-of-living adjustment deter2 mined under paragraph (2) for the calendar 

3 year in which such taxable year begins. 

4 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur5 poses of paragraph (1), the cost-of-living adjustment 

6 for any calendar year is the percentage (if any) by 

7 which— 

8 ‘‘(A) the GDP for the preceding calendar 

9 year, exceeds 

10 ‘‘(B) the GDP— 

11 ‘‘(i) for calendar year 1997, in the 

12 case of each dollar amount in subsection 

13 (b)(2)(A)(i), 

14 ‘‘(ii) for calendar year 2007, in the 

15 case of the dollar amount in subsection 

16 (b)(2)(A)(ii), and 

17 ‘‘(iii) for calendar year 2003 in the 

18 case of each dollar amount in subsection 

19 (c)(2)(A). 

20 ‘‘(3) GDP FOR ANY CALENDAR YEAR.—For 

21 purposes of paragraph (2), the GDP for any cal22 endar year is the average of the chain-weighted price 

23 index for the gross domestic product as of the close 

24 of the 12-month period ending on March 31 of such 

25 calendar year. 


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1 ‘‘(4) CHAIN-WEIGHTED PRICE INDEX FOR THE

2 GROSS DOMESTIC PRODUCT.—For purposes of para3 graph (3), the term ‘chain-weighted price index for 

4 the gross domestic product’ means the last chain5 weighted price index for the gross domestic product 

6 published by the Department of Commerce. 

7 ‘‘(5) ROUNDING.—Any increase determined 

8 under paragraph (1) shall be rounded to the nearest 

9 multiple of $50.’’. 

10 (b) USE OF ACCOUNT FOR INDIVIDUAL HIGH DE11 DUCTIBLE HEALTH PLAN PREMIUMS.—Section 

12 223(d)(2)(C) of the Internal Revenue Code of 1986 (relat13 ing to exceptions) is amended by striking ‘‘or’’ at the end 

14 of clause (iii), by striking the period at the end of clause 

15 (iv) and inserting ‘‘, or’’, and by adding at the end the 

16 following new clause: 

17 ‘‘(v) a high deductible health plan, but 

18 only if— 

19 ‘‘(I) the plan is not a group 

20 health plan (as defined in section 

21 5000(b)(1) without regard to section 

22 5000(d)), and 

23 ‘‘(II) the expenses are for cov24 erage for a month with respect to 

25 which the account beneficiary is an elVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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•S 1019 IS

1 igible individual by reason of the cov2 erage under the plan. 

3 For purposes of clause (v), an arrangement 

4 which constitutes individual health insurance 

5 shall not be treated as a group health plan, not6 withstanding that an employer or employee or7 ganization negotiates the cost of benefits of 

8 such arrangement.’’. 

9 (c) SAFE HARBOR FOR ABSENCE OF MAINTENANCE

10 OF CHRONIC DISEASE.—Section 223(c)(2)(C) of the In11 ternal Revenue Code of 1986 (safe harbor for absence of 

12 preventive care deductible) is amended— 

13 (1) by inserting ‘‘or maintenance of chronic dis14 ease, or both’’ after ‘‘the Secretary)’’, and 

15 (2) by inserting ‘‘OR MAINTENANCE OF CHRON16 IC DISEASE’’ in the heading after ‘‘PREVENTIVE

17 CARE’’. 

18 (d) CLARIFICATION OF TREATMENT OF CAPITATED

19 PRIMARY CARE PAYMENTS AS AMOUNTS PAID FOR MED20 ICAL CARE.—Section 213(d) of the Internal Revenue Code 

21 of 1986 (relating to definitions) is amended by adding at 

22 the end the following new paragraph: 

23 ‘‘(12) TREATMENT OF CAPITATED PRIMARY

24 CARE PAYMENTS.—Capitated primary care payments 

25 shall be treated as amounts paid for medical care.’’. 


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1 (e) SPECIAL RULE FOR INDIVIDUALS ELIGIBLE FOR

2 VETERANS OR INDIAN HEALTH BENEFITS.—Section 

3 223(c)(1) of the Internal Revenue Code of 1986 (defining 

4 eligible individual) is amended by adding at the end the 

5 following new subparagraph: 

6 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI7 GIBLE FOR VETERANS OR INDIAN HEALTH BEN8 EFITS.—For purposes of subparagraph (A)(ii), 

9 an individual shall not be treated as covered 

10 under a health plan described in such subpara11 graph merely because the individual receives 

12 periodic hospital care or medical services under 

13 any law administered by the Secretary of Vet14 erans Affairs or the Bureau of Indian Affairs.’’. 

15 (f) EFFECTIVE DATES.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the amendments made by this section 

18 shall apply to taxable years beginning after Decem19 ber 31, 2007. 

20 (2) CAPITATED PRIMARY CARE PAYMENTS.— 

21 The amendment made by subsection (d) shall apply 

22 to amounts paid before, on, or after the date of the 

23 enactment of this Act. 


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1 SEC. 202. EXCEPTION TO REQUIREMENT FOR EMPLOYERS 

2 TO MAKE COMPARABLE HEALTH SAVINGS AC3 COUNT CONTRIBUTIONS. 

4 (a) GREATER EMPLOYER-PROVIDED CONTRIBU5 TIONS TO HSAS FOR CHRONICALLY ILL EMPLOYEES

6 TREATED AS MEETING COMPARABILITY REQUIRE7 MENTS.—Subsection (b) of section 4980G of the Internal 

8 Revenue Code of 1986 (relating to failure of employer to 

9 make comparable health savings account contributions) is 

10 amended to read as follows: 

11 ‘‘(b) RULES AND REQUIREMENTS.— 

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), rules and requirements similar to the 

14 rules and requirements of section 4980E shall apply 

15 for purposes of this section. 

16 ‘‘(2) TREATMENT OF EMPLOYER-PROVIDED

17 CONTRIBUTIONS TO HSAS FOR CHRONICALLY ILL

18 EMPLOYEES.—For purposes of this section— 

19 ‘‘(A) IN GENERAL.—Any contribution by 

20 an employer to a health savings account of an 

21 employee who is (or the spouse or any depend22 ent of the employee who is) a chronically ill in23 dividual in an amount which is greater than a 

24 contribution to a health savings account of a 

25 comparable participating employee who is not a 


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•S 1019 IS

1 chronically ill individual shall not fail to be con2 sidered a comparable contribution. 

3 ‘‘(B) NONDISCRIMINATION REQUIRE4 MENT.—Subparagraph (A) shall not apply un5 less the excess employer contributions described 

6 in subparagraph (A) are the same for all chron7 ically ill individuals who are similarly situated. 

8 ‘‘(C) CHRONICALLY ILL INDIVIDUAL.—For 

9 purposes of this paragraph, the term ‘chron10 ically ill individual’ means any individual whose 

11 qualified medical expenses for any taxable year 

12 are more than 50 percent greater than the av13 erage qualified medical expenses of all employ14 ees of the employer for such year.’’. 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2007. 

18 Subtitle B—MediChoice Tax 

19 Rebates 

20 SEC. 211. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

21 COVERAGE. 

22 (a) IN GENERAL.—Subpart C of part IV of sub23 chapter A of chapter 1 of the Internal Revenue Code of 

24 1986 (relating to refundable credits) is amended by redesVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00032 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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•S 1019 IS

1 ignating section 36 as section 37 and by inserting after 

2 section 35 the following new section: 

3 ‘‘SEC. 36. MEDICHOICE TAX REBATES. 

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

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

6 by this subtitle an amount equal to the amount paid dur7 ing the taxable year for qualified health insurance for the 

8 taxpayer and the taxpayer’s spouse or dependent. 

9 ‘‘(b) LIMITATIONS.— 

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

11 credit under subsection (a) to the taxpayer for the 

12 taxable year shall not exceed the sum of the monthly 

13 limitations for coverage months during such taxable 

14 year for the individual referred to in subsection (a) 

15 for whom the taxpayer paid during the taxable year 

16 any amount for coverage under qualified health in17 surance. 

18 ‘‘(2) MONTHLY LIMITATION.— 

19 ‘‘(A) IN GENERAL.—The monthly limita20 tion for an individual for each coverage month 

21 of such individual during the taxable year is the 

amount equal to 1 22 ⁄12 of the qualified health in23 surance amount. 


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•S 1019 IS

1 ‘‘(B) QUALIFIED HEALTH INSURANCE

2 AMOUNT.—For purposes of this paragraph, the 

3 qualified health insurance amount is— 

4 ‘‘(i) $2,000 if such individual is the 

5 taxpayer, 

6 ‘‘(ii) $2,000 if such individual is the 

7 spouse of the taxpayer, the taxpayer and 

8 such spouse are married as of the first day 

9 of such month, and the taxpayer files a 

10 joint return for the taxable year, or 

11 ‘‘(iii) $500 if such individual is an in12 dividual for whom a deduction under sec13 tion 151(c) is allowable to the taxpayer for 

14 such taxable year. 

15 ‘‘(C) LIMITATION ON DEPENDENTS.—Not 

16 more than 2 individuals may be taken into ac17 count by the taxpayer under subparagraph 

18 (B)(iii). 

19 ‘‘(3) COVERAGE MONTH.—For purposes of this 

20 subsection— 

21 ‘‘(A) IN GENERAL.—The term ‘coverage 

22 month’ means, with respect to an individual, 

23 any month if— 


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•S 1019 IS

1 ‘‘(i) as of the first day of such month 

2 such individual is covered by qualified 

3 health insurance, and 

4 ‘‘(ii) the premium for coverage under 

5 such insurance for such month is paid by 

6 the taxpayer. 

7 ‘‘(B) MEDICARE.—Such term shall not in8 clude any month with respect to an individual 

9 if, as of the first day of such month, such indi10 vidual has not made an election to establish and 

11 maintain a Medical Retirement Account under 

12 section 252(a)(2) of the Social Security Act and 

13 is entitled to benefits under title XVIII of the 

14 Social Security Act. 

15 ‘‘(C) CERTAIN OTHER COVERAGE.—Such 

16 term shall not include any month during a tax17 able year with respect to an individual if, at any 

18 time during such year, any benefit is provided 

19 to such individual under— 

20 ‘‘(i) chapter 55 of title 10, United 

21 States Code, 

22 ‘‘(ii) chapter 17 of title 38, United 

23 States Code, or 

24 ‘‘(iii) any medical care program under 

25 the Indian Health Care Improvement Act. 


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•S 1019 IS

1 ‘‘(D) PRISONERS.—Such term shall not in2 clude any month with respect to an individual 

3 if, as of the first day of such month, such indi4 vidual is imprisoned under Federal, State, or 

5 local authority. 

6 ‘‘(E) INSUFFICIENT PRESENCE IN UNITED

7 STATES.—Such term shall not include any 

8 month during a taxable year with respect to an 

9 individual if such individual is present in the 

10 United States on fewer than 183 days during 

11 such year (determined in accordance with sec12 tion 7701(b)(7)). 

13 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur14 poses of this section— 

15 ‘‘(1) IN GENERAL.—The term ‘qualified health 

16 insurance’ means any health plan (within the mean17 ing of section 223(c)(2)) determined without regard 

18 to any annual deductible requirement. 

19 ‘‘(2) ANNUAL WELLNESS EXAM.—Such term 

20 shall include an annual wellness exam fee not to ex21 ceed $150 ($100 in the case of an annual child 

22 wellness exam) if such exam is not covered by the 

23 insurance. 

24 ‘‘(d) ARCHER MSA AND HEALTH SAVINGS ACCOUNT

25 CONTRIBUTIONS.— 


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•S 1019 IS

1 ‘‘(1) IN GENERAL.—If a deduction would (but 

2 for paragraph (2)) be allowed under section 220 or 

3 223 to the taxpayer for a payment for the taxable 

4 year to the Archer MSA or health savings account 

5 of an individual, subsection (a) shall be applied by 

6 treating such payment as a payment for qualified 

7 health insurance for such individual. 

8 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc9 tion shall be allowed under section 220 or 223 for 

10 that portion of the payments otherwise allowable as 

11 a deduction under section 220 or 223 for the taxable 

12 year which is equal to the amount of credit allowed 

13 for such taxable year by reason of this subsection. 

14 ‘‘(e) SPECIAL RULES.—For purposes of this sec15 tion— 

16 ‘‘(1) MARRIED COUPLES MUST FILE JOINT RE17 TURN.—If the taxpayer is married at the close of 

18 the taxable year, the credit shall be allowed under 

19 subsection (a) only if the taxpayer and the tax20 payer’s spouse file a joint return for the taxable 

21 year. 

22 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 

23 credit shall be allowed under this section to any indi24 vidual with respect to whom a deduction under sec25 tion 151 is allowable to another taxpayer for a taxVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00037 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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•S 1019 IS

1 able year beginning in the calendar year in which 

2 such individual’s taxable year begins. 

3 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—No credit 

4 shall be allowed under subsection (a) if the credit 

5 under section 35 is allowed and no credit shall be al6 lowed under 35 if a credit is allowed under this sec7 tion. 

8 ‘‘(4) COORDINATION WITH DEDUCTION FOR

9 HEALTH INSURANCE COSTS.—In the case of a tax10 payer who is eligible to deduct any amount under 

11 section 162(l) or 213 for the taxable year, this sec12 tion shall apply only if the taxpayer elects not to 

13 claim any amount as a deduction under such section 

14 for such year. 

15 ‘‘(5) ELECTION NOT TO CLAIM CREDIT.—This 

16 section shall not apply to a taxpayer for any taxable 

17 year if such taxpayer elects to have this section not 

18 apply for such taxable year. 

19 ‘‘(6) INFLATION ADJUSTMENT.— 

20 ‘‘(A) IN GENERAL.—In the case of any 

21 taxable year beginning in a calendar year after 

22 2008, each dollar amount contained in sub23 section (b)(2)(B) shall be increased by an 

24 amount equal to— 

25 ‘‘(i) such dollar amount, multiplied by 


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•S 1019 IS

1 ‘‘(ii) the cost-of-living adjustment de2 termined under subparagraph (B) for the 

3 calendar year in which such taxable year 

4 begins. 

5 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—For 

6 purposes of subparagraph (A), the cost-of-living 

7 adjustment for any calendar year is the per8 centage (if any) by which— 

9 ‘‘(i) the GDP for the preceding cal10 endar year, exceeds 

11 ‘‘(ii) the GDP for calendar year 2007. 

12 ‘‘(C) GDP FOR ANY CALENDAR YEAR.— 

13 For purposes of subparagraph (B), the GDP 

14 for any calendar year is the average of the 

15 chain-weighted price index for the gross domes16 tic product as of the close of the 12-month pe17 riod ending on March 31 of such calendar year. 

18 ‘‘(D) CHAIN-WEIGHTED PRICE INDEX FOR

19 THE GROSS DOMESTIC PRODUCT.—For pur20 poses of subparagraph (C), the term ‘chain21 weighted price index for the gross domestic 

22 product’ means the last chain-weighted price 

23 index for the gross domestic product published 

24 by the Department of Commerce. 


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•S 1019 IS

1 ‘‘(E) ROUNDING.—Any increase deter2 mined under subparagraph (A) shall be rounded 

3 to the nearest multiple of $50.’’. 

4 (b) INFORMATION REPORTING.— 

5 (1) IN GENERAL.—Subpart B of part III of 

6 subchapter A of chapter 61 of the Internal Revenue 

7 Code of 1986 (relating to information concerning 

8 transactions with other persons) is amended by in9 serting after section 6050V the following new sec10 tion: 

11 ‘‘SEC. 6050W. RETURNS RELATING TO PAYMENTS FOR 

12 QUALIFIED HEALTH INSURANCE. 

13 ‘‘(a) IN GENERAL.—Any person who, in connection 

14 with a trade or business conducted by such person, re15 ceives payments during any calendar year from any indi16 vidual for coverage of such individual or any other indi17 vidual under creditable health insurance, shall make the 

18 return described in subsection (b) (at such time as the 

19 Secretary may by regulations prescribe) with respect to 

20 each individual from whom such payments were received. 

21 ‘‘(b) FORM AND MANNER OF RETURNS.—A return 

22 is described in this subsection if such return— 

23 ‘‘(1) is in such form as the Secretary may pre24 scribe, and 

25 ‘‘(2) contains— 


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•S 1019 IS

1 ‘‘(A) the name, address, and TIN of the 

2 individual from whom payments described in 

3 subsection (a) were received, 

4 ‘‘(B) the name, address, and TIN of each 

5 individual who was provided by such person 

6 with coverage under creditable health insurance 

7 by reason of such payments and the period of 

8 such coverage, and 

9 ‘‘(C) such other information as the Sec10 retary may reasonably prescribe. 

11 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur12 poses of this section, the term ‘creditable health insurance’ 

13 means qualified health insurance (as defined in section 

14 36(c)) other than, to the extent provided in regulations 

15 prescribed by the Secretary, any insurance covering an in16 dividual if no credit is allowable under section 36 with re17 spect to such coverage. 

18 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID19 UALS WITH RESPECT TO WHOM INFORMATION IS RE20 QUIRED.—Every person required to make a return under 

21 subsection (a) shall furnish to each individual whose name 

22 is required under subsection (b)(2)(A) to be set forth in 

23 such return a written statement showing— 


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•S 1019 IS

1 ‘‘(1) the name and address of the person re2 quired to make such return and the phone number 

3 of the information contact for such person, 

4 ‘‘(2) the aggregate amount of payments de5 scribed in subsection (a) received by the person re6 quired to make such return from the individual to 

7 whom the statement is required to be furnished, and 

8 ‘‘(3) the information required under subsection 

9 (b)(2)(B) with respect to such payments. 

10 The written statement required under the preceding sen11 tence shall be furnished on or before January 31 of the 

12 year following the calendar year for which the return 

13 under subsection (a) is required to be made. 

14 ‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE

15 MADE BY 2 OR MORE PERSONS.—Except to the extent 

16 provided in regulations prescribed by the Secretary, in the 

17 case of any amount received by any person on behalf of 

18 another person, only the person first receiving such 

19 amount shall be required to make the return under sub20 section (a).’’. 

21 (2) ASSESSABLE PENALTIES.— 

22 (A) Subparagraph (B) of section 

23 6724(d)(1) of such Code (relating to defini24 tions) is amended by redesignating clauses (xv) 

25 through (xx) as clauses (xvi) through (xxi), reVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00042 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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•S 1019 IS

1 spectively, and by inserting after clause (xi) the 

2 following new clause: 

3 ‘‘(xv) section 6050W (relating to re4 turns relating to payments for qualified 

5 health insurance),’’. 

6 (B) Paragraph (2) of section 6724(d) of 

7 such Code is amended by striking the period at 

8 the end of subparagraph (CC) and inserting ‘‘, 

9 or’’ and by adding at the end the following new 

10 subparagraph: 

11 ‘‘(DD) section 6050W(d) (relating to re12 turns relating to payments for qualified health 

13 insurance).’’. 

14 (3) CLERICAL AMENDMENT.—The table of sec15 tions for subpart B of part III of subchapter A of 

16 chapter 61 of such Code is amended by inserting 

17 after the item relating to section 6050V the fol18 lowing new item: 

‘‘Sec. 6050W. Returns relating to payments for qualified health insurance.’’. 

19 (c) CONFORMING AMENDMENTS.— 

20 (1) Paragraph (2) of section 1324(b) of title 

21 31, United States Code, is amended by inserting be22 fore the period ‘‘, or from section 36 of such Code’’. 

23 (2) The table of sections for subpart C of part 

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•S 1019 IS

1 enue Code of 1986 is amended by striking the last 

2 item and inserting the following new items: 

‘‘Sec. 36. MediChoice tax rebates. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2007. 

6 SEC. 212. ADVANCE PAYMENT OF CREDIT FOR PUR7 CHASERS OF QUALIFIED HEALTH INSUR8 ANCE. 

9 (a) IN GENERAL.—Chapter 77 of the Internal Rev10 enue Code of 1986 (relating to miscellaneous provisions) 

11 is amended by adding at the end the following new section: 

12 ‘‘SEC. 7529. ADVANCE PAYMENT OF MEDICHOICE TAX RE13 BATES. 

14 ‘‘(a) GENERAL RULE.—In the case of an eligible indi15 vidual, the Secretary shall make payments to the provider 

16 of such individual’s qualified health insurance equal to 

17 such individual’s qualified health insurance credit advance 

18 amount with respect to such provider. 

19 ‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this 

20 section, the term ‘eligible individual’ means any indi21 vidual— 

22 ‘‘(1) who purchases qualified health insurance 

23 (as defined in section 36(c)), and 


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•S 1019 IS

1 ‘‘(2) for whom a qualified health insurance 

2 credit eligibility certificate is in effect. 

3 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI4 BILITY CERTIFICATE.—For purposes of this section, a 

5 qualified health insurance credit eligibility certificate is a 

6 statement furnished by an individual to the Secretary 

7 which— 

8 ‘‘(1) certifies that the individual will be eligible 

9 to receive the credit provided by section 36 for the 

10 taxable year, 

11 ‘‘(2) estimates the amount of such credit for 

12 such taxable year, and 

13 ‘‘(3) provides such other information as the 

14 Secretary may require for purposes of this section. 

15 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD16 VANCE AMOUNT.—For purposes of this section, the term 

17 ‘qualified health insurance credit advance amount’ means, 

18 with respect to any provider of qualified health insurance, 

19 the Secretary’s estimate of the amount of credit allowable 

20 under section 36 to the individual for the taxable year 

21 which is attributable to the insurance provided to the indi22 vidual by such provider. 

23 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

24 such regulations as may be necessary to carry out the pur25 poses of this section.’’. 


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•S 1019 IS

1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for chapter 77 of the Internal Revenue Code of 1986 is 

3 amended by adding at the end the following new item: 

‘‘Sec. 7529. Advance payment of MediChoice tax rebates.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2007. 

7 SEC. 213. TERMINATION OF EMPLOYER-PROVIDED HEALTH 

8 CARE COVERAGE EXCLUSION. 

9 (a) IN GENERAL.—Section 106 of the Internal Rev10 enue Code of 1986 (relating to contributions by employer 

11 to accident and health plans) is amended by adding at the 

12 end the following new subsection: 

13 ‘‘(e) TERMINATION OF EMPLOYER-PROVIDED

14 HEALTH CARE COVERAGE EXCLUSION.— 

15 ‘‘(1) IN GENERAL.—The amount of any exclu16 sion under subsection (a) for any taxable year begin17 ning after December 31, 2007, with respect to— 

18 ‘‘(A) any employer-provided coverage 

19 under an accident or health plan which con20 stitutes medical care, and 

21 ‘‘(B) any employer contribution to an Ar22 cher MSA or a health savings account which is 

23 treated by subsection (b) or (d) as employer24 provided coverage for medical expenses under 

25 an accident or health plan, 


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•S 1019 IS

1 shall be zero. 

2 ‘‘(2) MEDICAL CARE DEFINED.—For purposes 

3 of paragraph (1), the term ‘medical care’ has the 

4 meaning given to such term in section 213(d) deter5 mined without regard to— 

6 ‘‘(A) paragraph (1)(C) thereof, and 

7 ‘‘(B) so much of paragraph (1)(D) thereof 

8 as relates to qualified long-term care insur9 ance.’’. 

10 (b) TERMINATION OF HEALTH CARE EXPENSE RE11 IMBURSEMENT UNDER CAFETERIA PLANS.—Section 125 

12 of the Internal Revenue Code of 1986 (relating to cafe13 teria plans) is amended by redesignating subsection (h) 

14 as subsection (i) and by inserting after subsection (g) the 

15 following new subsection: 

16 ‘‘(h) TERMINATION.—This section shall not apply to 

17 health benefits coverage in any taxable year beginning 

18 after December 31, 2007.’’. 

19 (c) TERMINATION OF DEDUCTION FOR HEALTH IN20 SURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.— 

21 The table contained in section 162(l)(1)(B) of the Internal 

22 Revenue Code of 1986 (relating to applicable percentage) 

23 is amended by striking ‘‘and thereafter’’ and inserting 

24 ‘‘through 2007’’. 

25 (d) PAYROLL TAXES.— 


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1 (1) IN GENERAL.—Section 3121(a) of the In2 ternal Revenue Code of 1986 (defining wages) is 

3 amended by adding at the end the following new 

4 sentence: ‘‘In the case of any calendar year begin5 ning after December 31, 2007, paragraphs (2) and 

6 (4) shall not apply to payments on account of sick7 ness.’’. 

8 (2) RAILROAD RETIREMENT.—Section 

9 3231(e)(1) of such Code (defining wages) is amend10 ed by adding at the end the following new sentence: 

11 ‘‘In the case of any calendar year beginning after 

12 December 31, 2007, this paragraph shall not apply 

13 to payments on account of sickness.’’. 

14 (3) UNEMPLOYMENT.—Section 3306(b) of such 

15 Code (defining wages) is amended by adding at the 

16 end the following new sentence: ‘‘In the case of any 

17 calendar year beginning after December 31, 2007, 

18 paragraphs (2) and (4) shall not apply to payments 

19 on account of sickness.’’. 

20 (e) EFFECTIVE DATES.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the amendments made by this section 

23 shall apply to taxable years beginning after Decem24 ber 31, 2007. 


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1 (2) PAYROLL TAXES.—The amendments made 

2 by subsection (d) shall apply to calendar years be3 ginning after December 31, 2007. 

4 TITLE III—HEALTH INSURANCE 

5 MODERNIZATION 

6 Subtitle A—Employee Choice 

7 SEC. 301. CLARIFICATION OF DEFINITION OF GROUP 

8 HEALTH PLAN UNDER HIPAA. 

9 (a) ERISA.—Section 733(a)(1) of the Employee Re10 tirement Income Security Act of 1974 (29 U.S.C. 

11 1191b(a)(1)) is amended by adding at the end the fol12 lowing: ‘‘Such term does not include an arrangement 

13 maintained by an employer the sole effect of which is to 

14 provide reimbursement to employees for the purchase by 

15 such employees of health insurance coverage offered in the 

16 individual market (as defined in section 2791(e)(1)) of the 

17 Public Health Service Act), notwithstanding that the em18 ployer or an employee organization negotiates the cost or 

19 benefits of the arrangement.’’. 

20 (b) PHSA.—Section 2791(a)(1) of the Public Health 

21 Service Act (42 U.S.C. 300gg–91(a)(1)) is amended by 

22 adding at the end the following: ‘‘Such term does not in23 clude an arrangement maintained by an employer the sole 

24 effect of which is to provide reimbursement to employees 

25 for the purchase by such employees of health insurance 


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1 coverage offered in the individual market, notwithstanding 

2 that the employer or an employee organization negotiates 

3 the cost or benefits of the arrangement.’’. 

4 (c) IRC.—Section 9832(a) of the Internal Revenue 

5 Code of 1986 (relating to definitions) is amended by in6 serting before the period the following: ‘‘, except that such 

7 term does not include an arrangement maintained by an 

8 employer the sole effect of which is to provide reimburse9 ment to employees for the purchase by such employees of 

10 health insurance coverage offered in the individual market 

11 (as defined in section 2791(e)(1)) of the Public Health 

12 Service Act), notwithstanding that the employer or an em13 ployee organization negotiates the cost or benefits of the 

14 arrangement.’’. 

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

16 this section shall apply to plan years beginning after De17 cember 31, 2007. 

18 Subtitle B—Access to Health Care 

19 SEC. 311. STATE HIGH RISK POOLS. 

20 (a) IN GENERAL.—Not later than 1 year after the 

21 date of enactment of this Act, each State shall have estab22 lished, and be operating, a qualified high risk pool (as de23 fined for purposes of section 2745 of the Public Health 

24 Service Act (42 U.S.C. 300gg–45)) or a State-designated 


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1 alternative that ensures access to private health insurance 

2 for medically uninsurable individuals. 

3 (b) BONUS FOR COMPLIANCE.— 

4 (1) ONE-TIME PAYMENT.—If the Secretary of 

5 Health and Human Services determines that a State 

6 has satisfied the requirement of subsection (a) with 

7 respect to a fiscal year, the Secretary shall increase 

8 the total amount of Federal payments made to the 

9 State under section 1903(a) of the Social Security 

10 Act (42 U.S.C. 1396b(a)) for the succeeding fiscal 

11 year by an amount equal to 1 percent of such pay12 ments (or, if such succeeding fiscal year is fiscal 

13 year 2010 or any fiscal year thereafter, by an 

14 amount equal to 1 percent of the State Medicaid as15 sistance allotment determined for the State for such 

16 succeeding fiscal year under section 1939(b) of such 

17 Act). The additional amount paid to a State for a 

18 fiscal year pursuant to this paragraph shall be used 

19 for maintenance and operational costs of a qualified 

20 high risk pool (as so defined) or a State-designated 

21 alternative that ensures access to private health in22 surance for medically uninsurable individuals. 

23 (2) AUTHORIZATION OF APPROPRIATIONS.— 

24 There are authorized to be appropriated for any fisVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 cal year such sums as may be necessary to carry out 

2 this subsection. 

3 SEC. 312. FEDERALLY QUALIFIED HEALTH CENTERS. 

4 (a) EVALUATION.—Not later than 5 years after the 

5 date of enactment of this Act, and every 5 years there6 after, the Secretary of Health and Human Services shall 

7 evaluate the effect of federally qualified health centers on 

8 proximate rural hospitals. 

9 (b) LIMITATION ON GRANTS.—Notwithstanding any 

10 other provision of law, if the Secretary of Health and 

11 Human Services determines, based on an evaluation con12 ducted under subsection (a), that a federally qualified 

13 health center is having a detrimental effect on a private 

14 hospital facility, the Secretary may revoke a grant award15 ed by the Secretary to such health center or limit the scope 

16 of services of the health center under such a grant. 

17 Subtitle C—Interstate Market for 

18 Health Insurance 

19 SEC. 321. SHORT TITLE. 

20 This subtitle may be cited as ‘‘Health Care Choice 

21 Act of 2007’’. 


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1 SEC. 322. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

2 FOR ENACTMENT OF LAW. 

3 This subtitle is enacted pursuant to the power grant4 ed Congress under article I, section 8, clause 3, of the 

5 United States Constitution. 

6 SEC. 323. FINDINGS. 

7 Congress finds the following: 

8 (1) The application of numerous and significant 

9 variations in State law impacts the ability of insur10 ers to offer, and individuals to obtain, affordable in11 dividual health insurance coverage, thereby impeding 

12 commerce in individual health insurance coverage. 

13 (2) Individual health insurance coverage is in14 creasingly offered through the Internet, other elec15 tronic means, and by mail, all of which are inher16 ently part of interstate commerce. 

17 (3) In response to these issues, it is appropriate 

18 to encourage increased efficiency in the offering of 

19 individual health insurance coverage through a col20 laborative approach by the States in regulating this 

21 coverage. 

22 (4) The establishment of risk-retention groups 

23 has provided a successful model for the sale of insur24 ance across State lines, as the acts establishing 

25 those groups allow insurance to be sold in multiple 

26 States but regulated by a single State. 


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1 SEC. 324. COOPERATIVE GOVERNING OF INDIVIDUAL 

2 HEALTH INSURANCE COVERAGE. 

3 (a) IN GENERAL.—Title XXVII of the Public Health 

4 Service Act (42 U.S.C. 300gg et seq.) is amended by add5 ing at the end the following new part: 

6 ‘‘PART D—COOPERATIVE GOVERNING OF 

7 INDIVIDUAL HEALTH INSURANCE COVERAGE 

8 ‘‘SEC. 2795. DEFINITIONS. 

9 ‘‘In this part: 

10 ‘‘(1) PRIMARY STATE.—The term ‘primary 

11 State’ means, with respect to individual health insur12 ance coverage offered by a health insurance issuer, 

13 the State designated by the issuer as the State 

14 whose covered laws shall govern the health insurance 

15 issuer in the sale of such coverage under this part. 

16 An issuer, with respect to a particular policy, may 

17 only designate 1 such State as its primary State 

18 with respect to all such coverage it offers. Such an 

19 issuer may not change the designated primary State 

20 with respect to individual health insurance coverage 

21 once the policy is issued, except that such a change 

22 may be made upon renewal of the policy. With re23 spect to such designated State, the issuer is deemed 

24 to be doing business in that State. 

25 ‘‘(2) SECONDARY STATE.—The term ‘secondary 

26 State’ means, with respect to individual health insurVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00054 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 ance coverage offered by a health insurance issuer, 

2 any State that is not the primary State. In the case 

3 of a health insurance issuer that is selling a policy 

4 in, or to a resident of, a secondary State, the issuer 

5 is deemed to be doing business in that secondary 

6 State. 

7 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

8 ‘health insurance issuer’ has the meaning given such 

9 term in section 2791(b)(2), except that such an 

10 issuer must be licensed in the primary State and be 

11 qualified to sell individual health insurance coverage 

12 in that State. 

13 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV14 ERAGE.—The term ‘individual health insurance cov15 erage’ means health insurance coverage offered in 

16 the individual market, as defined in section 

17 2791(e)(1). 

18 ‘‘(5) APPLICABLE STATE AUTHORITY.—The 

19 term ‘applicable State authority’ means, with respect 

20 to a health insurance issuer in a State, the State in21 surance commissioner or official or officials des22 ignated by the State to enforce the requirements of 

23 this title for the State with respect to the issuer. 

24 ‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 

25 term ‘hazardous financial condition’ means that, 


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1 based on its present or reasonably anticipated finan2 cial condition, a health insurance issuer is unlikely 

3 to be able— 

4 ‘‘(A) to meet obligations to policyholders 

5 with respect to known claims and reasonably 

6 anticipated claims; or 

7 ‘‘(B) to pay other obligations in the normal 

8 course of business. 

9 ‘‘(7) COVERED LAWS.—The term ‘covered laws’ 

10 means the laws, rules, regulations, agreements, and 

11 orders governing the insurance business pertaining 

12 to— 

13 ‘‘(A) individual health insurance coverage 

14 issued by a health insurance issuer; 

15 ‘‘(B) the offer, sale, and issuance of indi16 vidual health insurance coverage to an indi17 vidual; and 

18 ‘‘(C) the provision to an individual in rela19 tion to individual health insurance coverage 

20 of— 

21 ‘‘(i) health care and insurance related 

22 services; 

23 ‘‘(ii) management, operations, and in24 vestment activities of a health insurance 

25 issuer; and 


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1 ‘‘(iii) loss control and claims adminis2 tration for a health insurance issuer with 

3 respect to liability for which the issuer pro4 vides insurance. 

5 ‘‘(8) STATE.—The term ‘State’ means only the 

6 50 States and the District of Columbia. 

7 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC8 TICES.—The term ‘unfair claims settlement prac9 tices’ means only the following practices: 

10 ‘‘(A) Knowingly misrepresenting to claim11 ants and insured individuals relevant facts or 

12 policy provisions relating to coverage at issue. 

13 ‘‘(B) Failing to acknowledge with reason14 able promptness pertinent communications with 

15 respect to claims arising under policies. 

16 ‘‘(C) Failing to adopt and implement rea17 sonable standards for the prompt investigation 

18 and settlement of claims arising under policies. 

19 ‘‘(D) Failing to effectuate prompt, fair, 

20 and equitable settlement of claims submitted in 

21 which liability has become reasonably clear. 

22 ‘‘(E) Refusing to pay claims without con23 ducting a reasonable investigation. 

24 ‘‘(F) Failing to affirm or deny coverage of 

25 claims within a reasonable period of time after 


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1 having completed an investigation related to 

2 those claims. 

3 ‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 

4 and abuse’ means an act or omission committed by 

5 a person who, knowingly and with intent to defraud, 

6 commits, or conceals any material information con7 cerning, 1 or more of the following: 

8 ‘‘(A) Presenting, causing to be presented 

9 or preparing with knowledge or belief that it 

10 will be presented to or by an insurer, a rein11 surer, broker or its agent, false information as 

12 part of, in support of or concerning a fact ma13 terial to 1 or more of the following: 

14 ‘‘(i) An application for the issuance or 

15 renewal of an insurance policy or reinsur16 ance contract. 

17 ‘‘(ii) The rating of an insurance policy 

18 or reinsurance contract. 

19 ‘‘(iii) A claim for payment or benefit 

20 pursuant to an insurance policy or reinsur21 ance contract. 

22 ‘‘(iv) Premiums paid on an insurance 

23 policy or reinsurance contract. 


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1 ‘‘(v) Payments made in accordance 

2 with the terms of an insurance policy or 

3 reinsurance contract. 

4 ‘‘(vi) A document filed with the com5 missioner or the chief insurance regulatory 

6 official of another jurisdiction. 

7 ‘‘(vii) The financial condition of an in8 surer or reinsurer. 

9 ‘‘(viii) The formation, acquisition, 

10 merger, reconsolidation, dissolution or 

11 withdrawal from 1 or more lines of insur12 ance or reinsurance in all or part of a 

13 State by an insurer or reinsurer. 

14 ‘‘(ix) The issuance of written evidence 

15 of insurance. 

16 ‘‘(x) The reinstatement of an insur17 ance policy. 

18 ‘‘(B) Solicitation or acceptance of new or 

19 renewal insurance risks on behalf of an insurer 

20 reinsurer or other person engaged in the busi21 ness of insurance by a person who knows or 

22 should know that the insurer or other person 

23 responsible for the risk is insolvent at the time 

24 of the transaction. 


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1 ‘‘(C) Transaction of the business of insur2 ance in violation of laws requiring a license, cer3 tificate of authority, or other legal authority for 

4 the transaction of the business of insurance. 

5 ‘‘(D) Attempt to commit, aiding or abet6 ting in the commission of, or conspiracy to com7 mit the acts or omissions specified in this para8 graph. 

9 ‘‘SEC. 2796. APPLICATION OF LAW. 

10 ‘‘(a) IN GENERAL.—The covered laws of the primary 

11 State shall apply to individual health insurance coverage 

12 offered by a health insurance issuer in the primary State 

13 and in any secondary State, but only if the coverage and 

14 issuer comply with the conditions of this section with re15 spect to the offering of coverage in any secondary State. 

16 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC17 ONDARY STATE.—Except as provided in this section, a 

18 health insurance issuer with respect to its offer, sale, re19 newal, and issuance of individual health insurance cov20 erage in any secondary State is exempt from any covered 

21 laws of the secondary State (and any rules, regulations, 

22 agreements, or orders sought or issued by such State 

23 under or related to such covered laws) to the extent that 

24 such laws would— 


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1 ‘‘(1) make unlawful, or regulate, directly or in2 directly, the operation of the health insurance issuer 

3 operating in the secondary State, except that any 

4 secondary State may require such an issuer— 

5 ‘‘(A) to pay, on a nondiscriminatory basis, 

6 applicable premium and other taxes (including 

7 high risk pool assessments) which are levied on 

8 insurers and surplus lines insurers, brokers, or 

9 policyholders under the laws of the State; 

10 ‘‘(B) to register with and designate the 

11 State insurance commissioner as its agent solely 

12 for the purpose of receiving service of legal doc13 uments or process; 

14 ‘‘(C) to submit to an examination of its fi15 nancial condition by the State insurance com16 missioner in any State in which the issuer is 

17 doing business to determine the issuer’s finan18 cial condition, if— 

19 ‘‘(i) the State insurance commissioner 

20 of the primary State has not done an ex21 amination within the period recommended 

22 by the National Association of Insurance 

23 Commissioners; and 

24 ‘‘(ii) any such examination is con25 ducted in accordance with the examiners’ 


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1 handbook of the National Association of 

2 Insurance Commissioners and is coordi3 nated to avoid unjustified duplication and 

4 unjustified repetition; 

5 ‘‘(D) to comply with a lawful order 

6 issued— 

7 ‘‘(i) in a delinquency proceeding com8 menced by the State insurance commis9 sioner if there has been a finding of finan10 cial impairment under subparagraph (C); 

11 or 

12 ‘‘(ii) in a voluntary dissolution pro13 ceeding; 

14 ‘‘(E) to comply with an injunction issued 

15 by a court of competent jurisdiction, upon a pe16 tition by the State insurance commissioner al17 leging that the issuer is in hazardous financial 

18 condition; 

19 ‘‘(F) to participate, on a nondiscriminatory 

20 basis, in any insurance insolvency guaranty as21 sociation or similar association to which a 

22 health insurance issuer in the State is required 

23 to belong; 

24 ‘‘(G) to comply with any State law regard25 ing fraud and abuse (as defined in section 


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1 2795(10)), except that if the State seeks an in2 junction regarding the conduct described in this 

3 subparagraph, such injunction must be obtained 

4 from a court of competent jurisdiction; or 

5 ‘‘(H) to comply with any State law regard6 ing unfair claims settlement practices (as de7 fined in section 2795(9)); 

8 ‘‘(2) require any individual health insurance 

9 coverage issued by the issuer to be countersigned by 

10 an insurance agent or broker residing in that Sec11 ondary State; or 

12 ‘‘(3) otherwise discriminate against the issuer 

13 issuing insurance in both the primary State and in 

14 any secondary State. 

15 ‘‘(c) CLEAR AND CONSPICUOUS DISCLOSURE.—A 

16 health insurance issuer shall provide the following notice, 

17 in 12-point bold type, in any insurance coverage offered 

18 in a secondary State under this part by such a health in19 surance issuer and at renewal of the policy, with the 5 

20 blank spaces therein being appropriately filled with the 

21 name of the health insurance issuer, the name of the pri22 mary State, and the name of the secondary State, respec23 tively, for the coverage concerned: 

24 ‘This policy is issued by lllll and is governed by 

25 the laws and regulations of the State of lllll, and 


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1 it has met all the laws of that State as determined by 

2 that State’s Department of Insurance. This policy may be 

3 less expensive than others because it is not subject to all 

4 of the insurance laws and regulations of the State of 

5 lllll, including coverage of some services or bene6 fits mandated by the law of the State of lllll. Ad7 ditionally, this policy is not subject to all of the consumer 

8 protection laws or restrictions on rate changes of the State 

9 of lllll. As with all insurance products, before pur10 chasing this policy, you should carefully review the policy 

11 and determine what health care services the policy covers 

12 and what benefits it provides, including any exclusions, 

13 limitations, or conditions for such services or benefits.’. 

14 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

15 AND PREMIUM INCREASES.— 

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, a health insurance issuer that provides indi18 vidual health insurance coverage to an individual 

19 under this part in a primary or secondary State may 

20 not upon renewal— 

21 ‘‘(A) move or reclassify the individual in22 sured under the health insurance coverage from 

23 the class such individual is in at the time of 

24 issue of the contract based on the health-status 

25 related factors of the individual; or 


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1 ‘‘(B) increase the premiums assessed the 

2 individual for such coverage based on a health3 status related factor or change of a health-sta4 tus related factor or the past or prospective 

5 claim experience of the insured individual. 

6 ‘‘(2) CONSTRUCTION.—Nothing in paragraph 

7 (1) shall be construed to prohibit a health insurance 

8 issuer— 

9 ‘‘(A) from terminating or discontinuing 

10 coverage or a class of coverage in accordance 

11 with subsections (b) and (c) of section 2742; 

12 ‘‘(B) from raising premium rates for all 

13 policyholders within a class based on claims ex14 perience; 

15 ‘‘(C) from changing premiums or offering 

16 discounted premiums to individuals who engage 

17 in wellness activities at intervals prescribed by 

18 the issuer, if such premium changes or incen19 tives— 

20 ‘‘(i) are disclosed to the consumer in 

21 the insurance contract; 

22 ‘‘(ii) are based on specific wellness ac23 tivities that are not applicable to all indi24 viduals; and 


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1 ‘‘(iii) are not obtainable by all individ2 uals to whom coverage is offered; 

3 ‘‘(D) from reinstating lapsed coverage; or 

4 ‘‘(E) from retroactively adjusting the rates 

5 charged an individual insured individual if the 

6 initial rates were set based on material mis7 representation by the individual at the time of 

8 issue. 

9 ‘‘(e) PRIOR OFFERING OF POLICY IN PRIMARY

10 STATE.—A health insurance issuer may not offer for sale 

11 individual health insurance coverage in a secondary State 

12 unless that coverage is currently offered for sale in the 

13 primary State. 

14 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR

15 HEALTH INSURANCE ISSUERS.—Any State may require 

16 that a person acting, or offering to act, as an agent or 

17 broker for a health insurance issuer with respect to the 

18 offering of individual health insurance coverage obtain a 

19 license from that State, except that a State may not im20 pose any qualification or requirement which discriminates 

21 against a nonresident agent or broker. 

22 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN23 SURANCE COMMISSIONER.—Each health insurance issuer 

24 issuing individual health insurance coverage in both pri25 mary and secondary States shall submit— 


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•S 1019 IS

1 ‘‘(1) to the insurance commissioner of each 

2 State in which it intends to offer such coverage, be3 fore it may offer individual health insurance cov4 erage in such State— 

5 ‘‘(A) a copy of the plan of operation or fea6 sibility study or any similar statement of the 

7 policy being offered and its coverage (which 

8 shall include the name of its primary State and 

9 its principal place of business); 

10 ‘‘(B) written notice of any change in its 

11 designation of its primary State; and 

12 ‘‘(C) written notice from the issuer of the 

13 issuer’s compliance with all the laws of the pri14 mary State; and 

15 ‘‘(2) to the insurance commissioner of each sec16 ondary State in which it offers individual health in17 surance coverage, a copy of the issuer’s quarterly fi18 nancial statement submitted to the primary State, 

19 which statement shall be certified by an independent 

20 public accountant and contain a statement of opin21 ion on loss and loss adjustment expense reserves 

22 made by— 

23 ‘‘(A) a member of the American Academy 

24 of Actuaries; or 

25 ‘‘(B) a qualified loss reserve specialist. 


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1 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 

2 Nothing in this section shall be construed to affect the 

3 authority of any Federal or State court to enjoin— 

4 ‘‘(1) the solicitation or sale of individual health 

5 insurance coverage by a health insurance issuer to 

6 any person or group who is not eligible for such in7 surance; or 

8 ‘‘(2) the solicitation or sale of individual health 

9 insurance coverage by, or operation of, a health in10 surance issuer that is in hazardous financial condi11 tion. 

12 ‘‘(i) STATE POWERS TO ENFORCE STATE LAWS.— 

13 ‘‘(1) IN GENERAL.—Subject to the provisions of 

14 subsection (b)(1)(G) (relating to injunctions) and 

15 paragraph (2), nothing in this section shall be con16 strued to affect the authority of any State to make 

17 use of any of its powers to enforce the laws of such 

18 State with respect to which a health insurance issuer 

19 is not exempt under subsection (b). 

20 ‘‘(2) COURTS OF COMPETENT JURISDICTION.— 

21 If a State seeks an injunction regarding the conduct 

22 described in paragraphs (1) and (2) of subsection 

23 (h), such injunction must be obtained from a Fed24 eral or State court of competent jurisdiction. 


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1 ‘‘(j) STATES’ AUTHORITY TO SUE.—Nothing in this 

2 section shall affect the authority of any State to bring ac3 tion in any Federal or State court. 

4 ‘‘(k) GENERALLY APPLICABLE LAWS.—Nothing in 

5 this section shall be construed to affect the applicability 

6 of State laws generally applicable to persons or corpora7 tions. 

8 ‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 

9 BEFORE ISSUER MAY SELL INTO SECONDARY 

10 STATES. 

11 ‘‘A health insurance issuer may not offer, sell, or 

12 issue individual health insurance coverage in a secondary 

13 State if the primary State does not meet the following re14 quirements: 

15 ‘‘(1) The State insurance commissioner must 

16 use a risk-based capital formula for the determina17 tion of capital and surplus requirements for all 

18 health insurance issuers. 

19 ‘‘(2) The State must have legislation or regula20 tions in place establishing an independent review 

21 process for individuals who are covered by individual 

22 health insurance coverage unless the issuer provides 

23 an independent review mechanism functionally equiv24 alent (as determined by the primary State insurance 

25 commissioner or official) to that prescribed in the 


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1 ‘Health Carrier External Review Model Act’ of the 

2 National Association of Insurance Commissioners for 

3 all individuals who purchase insurance coverage 

4 under the terms of this part. 

5 ‘‘SEC. 2798. ENFORCEMENT. 

6 ‘‘(a) IN GENERAL.—Subject to subsection (b), with 

7 respect to specific individual health insurance coverage the 

8 primary State for such coverage has sole jurisdiction to 

9 enforce the primary State’s covered laws in the primary 

10 State and any secondary State. 

11 ‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 

12 subsection (a) shall be construed to affect the authority 

13 of a secondary State to enforce its laws as set forth in 

14 the exception specified in section 2796(b)(1). 

15 ‘‘(c) COURT INTERPRETATION.—In reviewing action 

16 initiated by the applicable secondary State authority, the 

17 court of competent jurisdiction shall apply the covered 

18 laws of the primary State. 

19 ‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 

20 of individual health insurance coverage offered in a sec21 ondary State that fails to comply with the covered laws 

22 of the primary State, the applicable State authority of the 

23 secondary State may notify the applicable State authority 

24 of the primary State.’’. 


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

2 subsection (a) shall apply to individual health insurance 

3 coverage offered, issued, or sold after the date of the en4 actment of this Act. 

5 SEC. 325. SEVERABILITY. 

6 If any provision of this subtitle or the application of 

7 such provision to any person or circumstance is held to 

8 be unconstitutional, the remainder of this subtitle and the 

9 application of the provisions of such to any other person 

10 or circumstance shall not be affected. 

11 TITLE IV—IMPROVEMENTS TO 

12 THE MEDICARE PROGRAM 

13 Subtitle A—MediChoice for Seniors 

14 SEC. 401. SETTING THE BENCHMARK EQUAL TO THE NA15 TIONAL AVERAGE BID. 

16 (a) SETTING BENCHMARK.— 

17 (1) LOCAL PLANS.—Section 1853 of the Social 

18 Security Act (42 U.S.C. 1395w–23) is amended— 

19 (A) in subsection (j)(1)(A)— 

20 (i) by striking ‘‘beginning with 2007’’ 

21 and inserting ‘‘for 2007 and 2008’’; and 

22 (ii) by inserting ‘‘(or, beginning with 

23 2009, an amount equal to the national av24 erage MA statutory non-drug monthly bid 


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1 amount computed under subsection (l))’’ 

2 after ‘‘for the area’’; and 

3 (iii) by inserting ‘‘and adjusted as ap4 propriate (for years beginning with 2009) 

5 using the geographic adjustment method6 ology established under subsection (m)’’ 

7 before ‘‘; or’’; and 

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

9 subsections: 

10 ‘‘(l) COMPUTATION OF NATIONAL AVERAGE MA 

11 STATUTORY NON-DRUG MONTHLY BID AMOUNT.— 

12 ‘‘(1) IN GENERAL.—For each year (beginning 

13 with 2009) the Secretary shall compute a national 

14 average MA statutory non-drug monthly bid amount 

15 equal to the average of the unadjusted MA statutory 

16 non-drug monthly bid amount (as defined in section 

17 1854(b)(2)(E)) for each MA plan, including an MA 

18 regional plan. 

19 ‘‘(2) WEIGHTED AVERAGE.—The national aver20 age MA statutory non-drug monthly bid amount 

21 computed under subparagraph (A) shall be a weight22 ed average, with the weight for each plan being 

23 equal to the average number of beneficiaries enrolled 

24 under such plan in the previous year. 


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1 ‘‘(m) METHODOLOGY FOR GEOGRAPHICALLY AD2 JUSTING THE NATIONAL AVERAGE MA STATUTORY NON3 DRUG MONTHLY BID AMOUNT.— 

4 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

5 the Secretary shall establish an appropriate method6 ology for adjusting the amount of the national aver7 age MA statutory non-drug monthly bid amount in 

8 a year to take into account, in a budget neutral 

9 manner, variations in input costs based on the provi10 sion of items and services in different geographic 

11 areas. 

12 ‘‘(2) MAXIMIZE PLAN PARTICIPATION.—The 

13 Secretary shall establish the methodology under 

14 paragraph (1) in a manner that maximizes partici15 pation of plans in the program under this part.’’. 

16 (2) REGIONAL PLANS.—Section 1858(f)(1) of 

17 the Social Security Act (42 U.S.C. 1395w– 

18 27a(f)(1)) is amended to read as follows: 

19 ‘‘(1) COMPUTATION FOR REGIONS.—For pur20 poses of section 1853(j)(2) and this section, subject 

21 to subsection (e), the term ‘MA region-specific non22 drug monthly benchmark amount’ means, with re23 spect to an MA region for a month in a year— 


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1 ‘‘(A) for 2006, 2007, and 2008, the sum 

2 of the 2 components described in paragraph (2) 

3 for the region and year; and 

4 ‘‘(B) for 2009 and each subsequent year, 

5 the national average MA statutory non-drug 

6 monthly bid amount computed under section 

7 1853(l) as adjusted as appropriate using the 

8 geographic adjustment methodology established 

9 under section 1853(m). 

10 The Secretary shall compute such benchmark 

11 amount for each MA region before the beginning of 

12 each annual, coordinated election period under sec13 tion 1851(e)(3)(B) for each year (beginning with 

14 2006)’’. 

15 (3) CONFORMING AMENDMENTS.— 

16 1853(b)(1)(B) of the Social Security Act (42 U.S.C. 

17 1395w–23(b)(1)(B)) is amended— 

18 (A) in clause (i)(I), by inserting ‘‘and the 

19 MA area-specific non-drug monthly benchmark 

20 amount under subsection (j), including the geo21 graphic adjusters under subsection (l) to be 

22 used in computing such amount, for each MA 

23 payment area for the year’’ before the period at 

24 the end; and 


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1 (B) in clause (ii), by inserting ‘‘, including 

2 the geographic adjusters under section 1853(l) 

3 to be used in computing such amount’’ before 

4 the period at the end. 

5 (b) STUDY AND REPORT TO CONGRESS.— 

6 (1) REVIEW.—Not less frequently that once 

7 every five years, the Secretary of Health and Human 

8 Services shall conduct a review that compares— 

9 (A) the national average MA statutory 

10 non-drug monthly bid amount (as determined 

11 under subsection (l) of section 1853 of the So12 cial Security Act (42 U.S.C. 1395w–23), as 

13 added by subsection (a)); and 

14 (B) the average per capita cost for the 

15 United States, as estimated by the Secretary 

16 under section 1876(a)(4) of such Act (42 

17 U.S.C. 1395mm(a)(4)). 

18 (2) REPORT TO CONGRESS.—The Secretary of 

19 Health and Human Services shall submit a report to 

20 Congress on each review conducted under paragraph 

21 (1). 

22 SEC. 402. ENHANCEMENT OF BENEFICIARY REBATES. 

23 Section 1854(b)(1)(C)(i) of the Social Security Act 

24 (42 U.S.C. 1395w–24(b)(1)(C)(i)) is amended by insertVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00075 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 ing ‘‘(or 100 percent in the case of plan years beginning 

2 on or after January 1, 2009)’’ after ‘‘75 percent’’. 

3 SEC. 403. ALTERNATIVE BENEFIT DESIGN TO ORIGINAL 

4 MEDICARE FEE-FOR-SERVICE BENEFITS. 

5 Part C of title XVIII of the Social Security Act is 

6 amended by adding at the end the following new section: 

7 ‘‘ALTERNATIVE BENEFIT DESIGN TO ORIGINAL MEDICARE

8 FEE-FOR-SERVICE BENEFITS

9 ‘‘SEC. 1860C–2. (a) BENEFITS.— 

10 ‘‘(1) IN GENERAL.—Notwithstanding the provi11 sions of this part and subject to paragraph (2), be12 ginning with 2009, under procedures established by 

13 the Secretary, a Medicare Advantage plan offered by 

14 a Medicare Advantage organization may provide dif15 ferent benefits than those required under section 

16 1852(a) so long as the Secretary finds that the ben17 efit design meets requirements under the Employee 

18 Retirement Income Security Act of 1974 or that the 

19 benefit design may be offered in any State under ap20 plicable State law. 

21 ‘‘(2) REQUIREMENT.—A Medicare Advantage 

22 organization may not offer an alternative benefit de23 sign plan described in paragraph (1) for a year un24 less the organization also offers a Medicare Advan25 tage plan that is not an alternative benefit design 

26 plan described in paragraph (1) for the year. Such 


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1 plan is not required to be offered in the same area 

2 as the alternative benefit design plan described in 

3 paragraph (1). 

4 ‘‘(b) SPECIAL RULES.—The following rules shall 

5 apply to an alternative benefit design plan described in 

6 subsection (a)(1): 

7 ‘‘(1) PAYMENT TO PLANS FOR NON-DRUG BEN8 EFITS.—Payment to an organization for benefits 

9 under the plan (other than prescription drug bene10 fits) shall be determined in the same manner as pay11 ments are determined under clauses (i) and (ii) of 

12 section 1853(a)(1)(B), except that in applying such 

13 clauses the monthly bid amount described in para14 graph (2)(B)(i) of this subsection shall be sub15 stituted for the unadjusted MA statutory non-drug 

16 monthly bid amount. 

17 ‘‘(2) SUBMISSION OF BIDS.—Notwithstanding 

18 paragraph (6) of section 1854(a), the information 

19 required to be submitted under such section is as 

20 follows: 

21 ‘‘(A) The monthly aggregate bid amount 

22 for the provision of all items and services under 

23 the plan, which amount shall be based on aver24 age revenue requirements (as used for purposes 

25 of section 1302(8) of the Public Health Service 


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1 Act) in the payment area for an enrollee with 

2 a national average risk profile for the factors 

3 described in section 1853(a)(1)(C) (as specified 

4 by the Secretary). 

5 ‘‘(B) The proportions of such bid amount 

6 that are attributable to— 

7 ‘‘(i) the provision of items and serv8 ices other than prescription drug coverage; 

9 and 

10 ‘‘(ii) the provision of basic prescrip11 tion drug coverage and supplemental pre12 scription drug coverage. 

13 ‘‘(C) The actuarial basis for determining 

14 the amount under subparagraph (A) and the 

15 proportions described in subparagraph (B) and 

16 such additional information as the Secretary 

17 may require to verify such actuarial bases and 

18 the projected number of enrollees in each MA 

19 local area. 

20 ‘‘(D) A description of deductibles, coinsur21 ance, and copayments applicable under the plan 

22 and the actuarial value of such deductibles, co23 insurance, and copayments, described in section 

24 1854(e)(4)(A). 


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1 ‘‘(E) With respect to qualified prescription 

2 drug coverage, the information required under 

3 section 1860D–4, as incorporated under section 

4 1860D–11(b)(2), with respect to such coverage. 

5 ‘‘(3) PREMIUM.—In determining the monthly 

6 amount (if any) of the premium charged to an indi7 vidual enrolled in the plan— 

8 ‘‘(A) section 1854(b) shall be applied by 

9 substituting the monthly bid amount described 

10 in paragraph (2)(B)(i) of this subsection for the 

11 unadjusted MA statutory non-drug monthly bid 

12 amount; and 

13 ‘‘(B) subparagraphs (C) and (D) of para14 graph (2) of such section shall not apply. 

15 ‘‘(c) APPLICATION.— 

16 ‘‘(1) NO AFFECT ON SPECIAL BENEFIT RULES

17 FOR REGIONAL PLANS.—The provisions of this sec18 tion shall not affect the special benefit rules for MA 

19 regional plans under section 1852(a)(6). 

20 ‘‘(2) NO EFFECT ON PRESCRIPTION DRUG COV21 ERAGE.—The provisions of this section shall not ef22 fect the provision of prescription drug coverage 

23 under this part. 

24 ‘‘(3) BID NOT TAKEN INTO ACCOUNT WHEN DE25 TERMINING THE NATIONAL AVERAGE MA STATUTORY


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1 NON-DRUG MONTHLY BID AMOUNT.—The bid for an 

2 alternative benefit design plan described in sub3 section (a)(1) shall not be taken into account when 

4 computing the national average MA statutory non5 drug monthly bid amount under section 1853(l). 

6 ‘‘(d) WAIVER.—To facilitate the offering of alter7 native benefit design plans described in subsection (a)(1) 

8 under this part, the Secretary may waiver or modify re9 quirements under this part.’’. 

10 SEC. 404. MEDICARE ADVANTAGE HSA PLANS. 

11 (a) PROVIDING MEDICARE ADVANTAGE HSA PLANS

12 AS A TYPE OF PLAN UNDER THE MEDICARE ADVANTAGE

13 PROGRAM.—Section 1851(a)(2) of the Social Security Act 

14 (42 U.S.C. 1395w–21(a)(2)) is amended by adding at the 

15 end the following new subparagraph: 

16 ‘‘(D) COMBINATION OF HSA PLAN AND

17 CONTRIBUTIONS TO HSA.—A Medicare Advan18 tage HSA plan, as defined in section 

19 1859(b)(7), and a contribution into a Medicare 

20 Advantage health savings account (HSA).’’. 

21 (b) DEFINITION OF MEDICARE ADVANTAGE HSA 

22 PLAN.—Section 1859(b) of the Social Security Act (42 

23 U.S.C. 1395w–28(b)) is amended by adding at the end 

24 the following new paragraph: 

25 ‘‘(7) MEDICARE ADVANTAGE HSA PLAN.— 


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1 ‘‘(A) IN GENERAL.—The term ‘Medicare 

2 Advantage HSA plan’ means a Medicare Ad3 vantage plan that— 

4 ‘‘(i) is a high deductible health plan 

5 (as defined in section 223(c)(2) of the In6 ternal Revenue Code of 1986, including the 

7 application of subparagraphs (C) and (D) 

8 of such section); 

9 ‘‘(ii) has a service area of— 

10 ‘‘(I) not less than an entire State 

11 or territory; or 

12 ‘‘(II) in the case of the District 

13 of Columbia, not less than the District 

14 of Columbia and 1 contiguous State; 

15 ‘‘(iii) provides reimbursement for at 

16 least the items and services described in 

17 section 1852(a)(1) in a year but only after 

18 the enrollee incurs countable expenses (as 

19 specified under the plan) equal to the 

20 amount of the annual deductible (as deter21 mined under section 223(c)(2)(A)(i) of the 

22 Internal Revenue Code of 1986); 

23 ‘‘(iv) counts as such expenses (for 

24 purposes of such deductible) at least all 

25 amounts that would have been payable 


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1 under parts A and B, and that would have 

2 been payable by the enrollee as deductibles, 

3 coinsurance, or copayments, if the enrollee 

4 had elected to receive benefits through the 

5 provisions of such parts; and 

6 ‘‘(v) provides, after such deductible is 

7 met for a year and for all subsequent ex8 penses for items and services referred to in 

9 clause (iii) in the year, for a level of reim10 bursement that is not less than— 

11 ‘‘(I) 100 percent of such ex12 penses, or 

13 ‘‘(II) 100 percent of the amounts 

14 that would have been paid (without 

15 regard to any deductibles or coinsur16 ance) under parts A and B with re17 spect to such expenses, 

18 whichever is less.’’. 

19 (c) SPECIAL RULES FOR HSA PLANS.—Part C of 

20 title XVIII of the Social Security Act is amended by in21 serting after section 1858 the following new section: 

22 ‘‘SPECIAL RULES FOR MEDICARE ADVANTAGE HSA PLANS

23 ‘‘SEC. 1858A. (a) IN GENERAL.—Except for the 

24 modifications described in the succeeding provisions of this 

25 section, a Medicare Advantage HSA plan shall be treated 


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1 in the same manner as an MSA plan is treated under this 

2 title. 

3 ‘‘(b) SPECIAL PAYMENT RULES.— 

4 ‘‘(1) IN GENERAL.—Section 1853(e) shall be 

5 applied— 

6 ‘‘(A) in the heading, by substituting ‘HSA’ 

7 for ‘MSA’; 

8 ‘‘(B) in paragraph (1)— 

9 ‘‘(i) by substituting ‘HSA premium 

10 (as defined in section 1858A(b)(2))’ for 

11 ‘MSA premium (as defined in section 

12 1854(b)(2)(C))’; and 

13 ‘‘(ii) by substituting ‘HSA’ for ‘MSA’ 

14 each place it appears; 

15 ‘‘(C) in paragraph (2)— 

16 ‘‘(i) in the heading, by substituting 

17 ‘HEALTH’ for ‘MEDICAL’; 

18 ‘‘(ii) in the matter preceding subpara19 graph (A), by substituting ‘a Medicare Ad20 vantage HSA plan’ for ‘an MSA plan’; 

21 ‘‘(iii) in subparagraph (A), by sub22 stituting ‘HSA (as defined in section 

23 138(b) of the Internal Revenue Code of 

24 1986)’ for ‘MSA (as defined in section 


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1 138(b)(2) of the Internal Revenue Code of 

2 1986)’; and 

3 ‘‘(iv) in subparagraph (B), by sub4 stituting ‘HSA’ for ‘MSA’ each place it ap5 pears; and 

6 ‘‘(D) without regard to paragraph (3) (re7 quiring a lump-sum deposit of a medical sav8 ings account contribution during the first 

9 month election is effective). 

10 ‘‘(2) DEFINITION OF MEDICARE ADVANTAGE

11 MONTHLY HSA PREMIUM.—The term ‘Medicare Ad12 vantage monthly HSA premium’ has the same mean13 ing given the term ‘Medicare Advantage monthly 

14 MSA premium’ under section 1854(b)(2)(D). 

15 ‘‘(c) TREATMENT OF MEDICARE ADVANTAGE HSA 

16 PLANS UNDER PART D.—Rules with respect to prescrip17 tion drug coverage under part D for MSA plans shall not 

18 apply to a Medicare Advantage HSA plan. For purposes 

19 of part D, a Medicare Advantage HSA plan shall be treat20 ed in the same manner as a coordinated care plan (as de21 scribed in section 1851(a)(2)(A)(i)) is treated under such 

22 part.’’. 

23 (d) TAX TREATMENT OF MEDICARE ADVANTAGE

24 HSA PLANS.— 


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1 (1) IN GENERAL.—Part III of subchapter B of 

2 chapter 1 of the Internal Revenue Code of 1986 is 

3 amended by inserting after section 139A the fol4 lowing new section: 

5 ‘‘SEC. 139B. MEDICARE ADVANTAGE HSA. 

6 ‘‘(a) EXCLUSION.—Gross income shall not include— 

7 ‘‘(1) any payment to the Medicare Advantage 

8 HSA of an individual by the Secretary of Health 

9 and Human Services under part C of title XVIII of 

10 the Social Security Act, 

11 ‘‘(2) any amount contributed to such Medicare 

12 Advantage HSA by or on behalf of the individual 

13 under section 223, including the individual’s em14 ployer as described in section 106(d), and 

15 ‘‘(3) an amount equal to any one-time qualified 

16 rollover from any of the individual’s health savings 

17 accounts, health reimbursement accounts, flexible 

18 spending accounts, and medical savings accounts 

19 (including any Medicare Advantage MSA). 

20 ‘‘(b) MEDICARE ADVANTAGE HSA.—For purposes of 

21 this section, the term ‘Medicare Advantage HSA’ means 

22 a health savings account (as defined in section 223(d))— 

23 ‘‘(1) which is designated as a Medicare Advan24 tage HSA, 


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1 ‘‘(2) with respect to which no contribution may 

2 be made other than— 

3 ‘‘(A) a contribution described in subsection 

4 (a), or 

5 ‘‘(B) a trustee-to-trustee transfer described 

6 in subsection (c)(4), 

7 ‘‘(3) the governing instrument of which pro8 vides that trustee-to-trustee transfers described in 

9 subsection (c)(4) may be made to and from such ac10 count, and 

11 ‘‘(4) which is established in connection with an 

12 HSA plan described in section 1859(b)(7) of the So13 cial Security Act. 

14 ‘‘(c) SPECIAL RULES FOR DISTRIBUTIONS.— 

15 ‘‘(1) DISTRIBUTIONS FOR QUALIFIED MEDICAL

16 EXPENSES.—In applying section 223 to a Medicare 

17 Advantage HSA, qualified medical expenses shall not 

18 include amounts paid for medical care for any indi19 vidual other than the account holder. 

20 ‘‘(2) PENALTY FOR DISTRIBUTIONS FROM

21 MEDICARE ADVANTAGE HSA NOT USED FOR QUALI22 FIED MEDICAL EXPENSES IF MINIMUM BALANCE

23 NOT MAINTAINED.— 

24 ‘‘(A) IN GENERAL.—The tax imposed by 

25 this chapter for any taxable year in which there 


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1 is a payment or distribution from a Medicare 

2 Advantage HSA which is not used exclusively to 

3 pay the qualified medical expenses of the ac4 count holder shall be increased by 50 percent of 

5 the excess (if any) of— 

6 ‘‘(i) the amount of such payment or 

7 distribution, over 

8 ‘‘(ii) the excess (if any) of— 

9 ‘‘(I) the fair market value of the 

10 assets in such HSA as of the close of 

11 the calendar year preceding the cal12 endar year in which the taxable year 

13 begins, over 

14 ‘‘(II) an amount equal to 60 per15 cent of the deductible under the Medi16 care Advantage HSA plan covering 

17 the account holder as of January 1 of 

18 the calendar year in which the taxable 

19 year begins. 

20 Section 223(f)(4) shall not apply to any 

21 payment or distribution from a Medicare 

22 Advantage HSA. 

23 ‘‘(B) EXCEPTIONS.—Subparagraph (A) 

24 shall not apply if the payment or distribution is 

25 made on or after the date the account holder— 


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1 ‘‘(i) becomes disabled within the 

2 meaning of section 72(m)(7), or 

3 ‘‘(ii) dies. 

4 ‘‘(C) SPECIAL RULES.—For purposes of 

5 subparagraph (A)— 

6 ‘‘(i) all Medicare Advantage HSAs of 

7 the account holder shall be treated as 1 ac8 count, 

9 ‘‘(ii) all payments and distributions 

10 not used exclusively to pay the qualified 

11 medical expenses of the account holder 

12 during any taxable year shall be treated as 

13 1 distribution, and 

14 ‘‘(iii) any distribution of property 

15 shall be taken into account at its fair mar16 ket value on the date of the distribution. 

17 ‘‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBU18 TIONS.—Section 223(f)(2) and paragraph (2) of this 

19 subsection shall not apply to any payment or dis20 tribution from a Medicare Advantage HSA to the 

21 Secretary of Health and Human Services of an erro22 neous contribution to such HSA and of the net in23 come attributable to such contribution. 

24 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—Sec25 tion 223(f)(2) and paragraph (2) of this subsection 


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1 shall not apply to any trustee-to-trustee transfer 

2 from a Medicare Advantage HSA of an account 

3 holder to another Medicare Advantage HSA of such 

4 account holder. 

5 ‘‘(d) SPECIAL RULES FOR TREATMENT OF ACCOUNT

6 AFTER DEATH OF ACCOUNT HOLDER.—In applying sec7 tion 223(f)(8)(A) to an account which was a Medicare Ad8 vantage HSA of a decedent, the rules of section 223(f) 

9 shall apply in lieu of the rules of subsection (c) of this 

10 section with respect to the spouse as the account holder 

11 of such Medicare Advantage HSA. 

12 ‘‘(e) REPORTS.—In the case of a Medicare Advantage 

13 HSA, the report under section 223(h)— 

14 ‘‘(1) shall include the fair market value of the 

15 assets in such Medicare Advantage HSA as of the 

16 close of each calendar year, and 

17 ‘‘(2) shall be furnished to the account holder— 

18 ‘‘(A) not later than January 31 of the cal19 endar year following the calendar year to which 

20 such reports relate, and 

21 ‘‘(B) in such manner as the Secretary pre22 scribes in such regulations.’’. 

23 (2) CLERICAL AMENDMENT.—The table of sec24 tions for part III of subchapter B of chapter 1 of 


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1 such Code is amended by inserting after the item re2 lating to section 139A the following new item: 

‘‘Sec. 139B. Medicare Advantage HSA.’’. 

3 (e) EFFECTIVE DATE.—The amendments made by 

4 this section shall take effect on January 1, 2009. 

5 SEC. 405. REVIEW OF ADJUSTMENT MECHANISM USED 

6 UNDER THE MEDICARE ADVANTAGE PRO7 GRAM. 

8 (a) REVIEW.—Not later than 1 year after the date 

9 of enactment of this Act, the Secretary of Health and 

10 Human Services shall conduct a review of the adjustment 

11 mechanism used to adjust payments to Medicare Advan12 tage organizations under section 1853(a)(1)(C) of the So13 cial Security Act (42 U.S.C. 1395w–23(a)(1)(C)). The 

14 Secretary shall take into account the results of such review 

15 in making payments to Medicare Advantage organizations 

16 for plan years beginning on or after January 1, 2009. 

17 (b) CONSULTATION.—In conducting the review under 

18 subsection (a), the Secretary of Health and Human Serv19 ices shall consult with industry representatives and other 

20 individuals and organizations that the Secretary deter21 mines appropriate. 


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1 Subtitle B—Enhancements to the 

2 Medicare Fee-For-Service Program 

3 SEC. 411. ELIMINATION OF ANNUAL INDEXING OF INCOME 

4 THRESHOLDS FOR REDUCED PART B PRE5 MIUM SUBSIDIES. 

6 Paragraph (5) of section 1839(i) of the Social Secu7 rity Act (42 U.S.C. 1395r(i)) is repealed. 

8 SEC. 412. AUTHORITY TO ADJUST AMOUNT OF MEDICARE 

9 PART B PREMIUM TO REWARD POSITIVE 

10 HEALTH BEHAVIOR. 

11 Section 1839 of the Social Security Act (42 U.S.C. 

12 1395r) is amended— 

13 (1) in subsection (a)(2), by striking ‘‘and (i)’’ 

14 and inserting ‘‘(i), and (j)’’; and 

15 (2) by adding at the end the following new sub16 section: 

17 ‘‘(j)(1) With respect to the monthly premium amount 

18 for months after December 2008, the Secretary may ad19 just (under procedures established by the Secretary) the 

20 amount of such premium for an individual based on 

21 whether or not the individual participates in certain 

22 healthy behaviors, such as weight management, exercise, 

23 nutrition counseling, refraining from tobacco use, desig24 nating a health home, and other behaviors determined ap25 propriate by the Secretary. 


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1 ‘‘(2) In making the adjustments under paragraph (1) 

2 for a month, the Secretary shall ensure that the total 

3 amount of premiums to be paid under this part for the 

4 month is equal to the total amount of premiums that 

5 would have been paid under this part for the month if 

6 no such adjustments had been made, as estimated by the 

7 Secretary.’’. 

8 SEC. 413. RECAPTURE OF MEDICARE DSH FUNDS. 

9 (a) IN GENERAL.—Section 1886(d)(5)(F)(i) of the 

10 Social Security Act (42 U.S.C. 1395ww(d)(5)(F)(i)) is 

11 amended by inserting ‘‘and before January 1, 2010,’’ after 

12 ‘‘May 1, 1986,’’. 

13 (b) SAVINGS TO PART A TRUST FUND.—The savings 

14 to the Federal Hospital Insurance Trust Fund under sec15 tion 1817 of the Social Security Act (42 U.S.C. 1395i) 

16 by reason of the amendment made by paragraph (1) shall 

17 be used to strengthen the financial solvency of such Trust 

18 Fund. 

19 SEC. 414. PRICE TRANSPARENCY REQUIREMENTS FOR 

20 MEDICARE PROVIDERS. 

21 (a) TRANSPARENCY.—Title XVIII of the Social Secu22 rity Act is amended by adding at the end the following 

23 new section: 

24 ‘‘PRICE TRANSPARENCY REQUIREMENTS

25 ‘‘SEC. 1898. (a) PRE-TREATMENT DISCLOSURE.—A 

26 provider of services (as defined in section 1861(u)) and 


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1 a supplier (as defined in section 1861(d)) shall provide 

2 to each individual (regardless of whether or not the indi3 vidual is a beneficiary under this title) who is scheduled 

4 to receive a treatment (or to begin a course of treatment) 

5 that is not for an emergency medical condition the esti6 mated price that the provider of services or supplier will 

7 charge for the treatment (or course of treatment). Such 

8 price shall be determined at the time of scheduling. 

9 ‘‘(b) POST-TREATMENT DISCLOSURE.—A provider of 

10 services (as so defined) and a supplier (as so defined) shall 

11 include with any bill that includes the charges for a treat12 ment with respect to an individual (regardless of whether 

13 or not the individual is a beneficiary under this title), an 

14 itemized list of component charges for such treatment, in15 cluding charges for drugs and medical equipment involved, 

16 as determined at the time of billing. With respect to each 

17 item included on such list, the provider of services or sup18 plier shall include the price charged for the item.’’. 

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

20 subsection (a) shall apply to providers of services and sup21 pliers on and after January 1, 2009. 


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1 Subtitle C—Value-Based 

2 Purchasing 

3 SEC. 421. REPEAL OF PHYSICIAN OWNERSHIP REFERRAL 

4 PROHIBITIONS BASED ON COMPENSATION 

5 ARRANGEMENTS. 

6 (a) IN GENERAL.—Section 1877(a)(2) of the Social 

7 Security Act (42 U.S.C. 1395nn(a)(2)) is amended by 

8 striking ‘‘is—’’ and all that follows through ‘‘equity,’’ and 

9 inserting the following: ‘‘is (except as provided in sub10 section (c)) an ownership or investment interest in the en11 tity through equity,’’. 

12 (b) CONFORMING AMENDMENTS.—Section 1877 of 

13 the Social Security Act (42 U.S.C. 1395nn) is amended 

14 as follows: 

15 (1) In subsection (b)— 

16 (A) in the heading, by striking ‘‘TO BOTH

17 OWNERSHIP AND COMPENSATION ARRANGE18 MENT PROHIBITIONS’’ and inserting ‘‘WHERE

19 FINANCIAL RELATIONSHIP EXISTS’’; and 

20 (B) by redesignating paragraphs (4) and 

21 (5) as paragraphs (7) and (8). 

22 (2) In subsection (c)— 

23 (A) by amending the heading to read as 

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1 VESTMENT INTEREST IN PUBLICLY TRADED

2 SECURITIES AND MUTUAL FUNDS’’; and 

3 (B) in the matter preceding paragraph (1), 

4 by striking ‘‘subsection (a)(2)(A)’’ and inserting 

5 ‘‘subsection (a)(2)’’. 

6 (3) In subsection (d)— 

7 (A) by striking the heading and the matter 

8 preceding paragraph (1); 

9 (B) in paragraph (3), by striking ‘‘para10 graph (1)’’ and inserting ‘‘paragraph (4)’’; and 

11 (C) by redesignating paragraphs (1), (2), 

12 and (3) as paragraphs (4), (5), and (6), and by 

13 transferring and inserting such paragraphs 

14 after paragraph (3) of subsection (b). 

15 (4) By striking subsection (e). 

16 (5) In subsection (f)— 

17 (A) in the matter preceding paragraph (1), 

18 by striking ‘‘ownership, investment, and com19 pensation’’ and inserting ‘‘ownership and in20 vestment’’; and 

21 (B) in paragraph (2)— 

22 (i) by striking ‘‘subsection (a)(2)(A)’’ 

23 and all that follows through ‘‘subsection 

24 (a)(2)(B)),’’ and inserting ‘‘subsection 

25 (a)(2)),’’; and 


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1 (ii) in paragraph (2), by striking ‘‘or 

2 who have such a compensation relationship 

3 with the entity’’. 

4 (6) In subsection (h)— 

5 (A) by striking paragraphs (1), (2), and 

6 (3); 

7 (B) in paragraph (4)(A)— 

8 (i) by striking clauses (iv) and (vi); 

9 (ii) in clause (iii), by adding ‘‘and’’ at 

10 the end; 

11 (iii) by redesignating clause (v) as 

12 clause (iv); and 

13 (iv) in clause (iv), as redesignated by 

14 clause (iii), by striking ‘‘, and’’ and insert15 ing a period; 

16 (C) in paragraph (4)(B), by striking 

17 ‘‘RULES.—’’ and all that follows through ‘‘(ii) 

18 FACULTY’’ and inserting ‘‘RULES FOR FAC19 ULTY’’; and 

20 (D) by adding at the end of paragraph (4) 

21 the following new subparagraph: 

22 ‘‘(C) MEMBER OF A GROUP.—A physician 

23 is a ‘member’ of a group if the physician is an 

24 owner or a bona fide employee, or both, of the 

25 group.’’. 


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1 SEC. 422. REVISION OF DESIGNATED HEALTH SERVICES 

2 SUBJECT TO OWNERSHIP REFERRAL PROHI3 BITION. 

4 (a) IN GENERAL.—Section 1877(h)(6) of the Social 

5 Security Act (42 U.S.C. 1395nn(h)(6)) is amended by 

6 striking subparagraphs (B) through (K) and inserting the 

7 following: 

8 ‘‘(B) Parenteral and enteral nutrients, 

9 equipment, and supplies. 

10 ‘‘(C) Radiology services, including mag11 netic resonance imaging, computerized tomog12 raphy, and ultrasound services. 

13 ‘‘(D) Outpatient physical or occupational 

14 therapy services.’’. 

15 (b) CONFORMING AMENDMENTS.— 

16 (1) Section 1877(b)(2) of the Social Security 

17 Act (42 U.S.C. 1395nn(b)(2)), in the matter pre18 ceding subparagraph (A), is amended by striking 

19 ‘‘services’’ and all that follows through ‘‘supplies)— 

20 ’’ and inserting ‘‘services—’’. 

21 (2) Section 1877(h)(5)(C) of the Social Secu22 rity Act (42 U.S.C. 1395nn(h)(5)(C)) is amended— 

23 (A) by striking ‘‘, a request by a radiolo24 gist for diagnostic radiology services, and a re25 quest by a radiation oncologist for radiation 

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1 diologist for magnetic resonance imaging or for 

2 computerized tomography’’; and 

3 (B) by striking ‘‘radiologist, or radiation 

4 oncologist’’ and inserting ‘‘or radiologist’’. 

5 SEC. 423. EXCEPTIONS TO OWNERSHIP REFERRAL PROHI6 BITIONS. 

7 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN8 CILLARY SERVICES.— 

9 (1) REPEAL OF SITE-OF-SERVICE REQUIRE10 MENT.—Section 1877 of the Social Security Act (42 

11 U.S.C. 1395nn) is amended— 

12 (A) in subsection (b)(2), by striking sub13 paragraph (A) and inserting the following new 

14 subparagraph: 

15 ‘‘(A) that are furnished personally by the 

16 referring physician, personally by a physician 

17 who is a member of the same group practice as 

18 the referring physician, or personally by individ19 uals who are under the general supervision of 

20 the physician or of another physician in the 

21 group practice; and’’, and 

22 (B) in subsection (h), by adding at the end 

23 following new paragraph: 

24 ‘‘(8) GENERAL SUPERVISION.—An individual is 

25 considered to be under the ‘general supervision’ of a 


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1 physician if the physician (or group practice of 

2 which the physician is a member) is legally respon3 sible for the services performed by the individual and 

4 for ensuring that the individual meets licensure and 

5 certification requirements, if any, applicable under 

6 other provisions of law, regardless of whether or not 

7 the physician is physically present when the indi8 vidual furnishes an item or service.’’. 

9 (2) CLARIFICATION OF TREATMENT OF PHYSI10 CIAN OWNERS OF GROUP PRACTICE.—Section 

11 1877(b)(2)(B) of the Social Security Act (42 U.S.C. 

12 1395nn(b)(2)(B)) is amended by striking ‘‘physician 

13 or such group practice’’ and inserting ‘‘physician, 

14 such group practice, or the physician owners of such 

15 group practice’’. 

16 (3) CONFORMING AMENDMENT.—The heading 

17 of section 1877(b)(2) of the Social Security Act (42 

18 U.S.C. 1395nn(b)(2)) is amended by striking ‘‘IN19 OFFICE ANCILLARY SERVICES’’ and inserting ‘‘AN20 CILLARY SERVICES FURNISHED PERSONALLY OR

21 THROUGH GROUP PRACTICE’’. 

22 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

23 FURNISHED IN A RURAL AREA.—Paragraph (5)(A) of 

24 section 1877(b) of the Social Security Act (42 U.S.C. 

25 1395nn(b)), as transferred by section 421(b)(3)(C), is 


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1 amended by striking ‘‘substantially all’’ and inserting ‘‘not 

2 less than 75 percent’’. 

3 (c) REVISION OF EXCEPTION FOR CERTAIN MAN4 AGED CARE ARRANGEMENTS.—Section 1877(b)(3) of the 

5 Social Security Act (42 U.S.C. 1395nn(b)(3)) is amend6 ed— 

7 (1) in the heading by inserting ‘‘; MANAGED

8 CARE ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’; 

9 (2) in the matter preceding subparagraph (A), 

10 by striking ‘‘organization—’’ and inserting ‘‘organi11 zation, directly or through contractual arrangements 

12 with other entities, to individuals enrolled with the 

13 organization—’’; 

14 (3) in subparagraph (A), by inserting ‘‘or part 

15 C’’ after ‘‘section 1876’’; 

16 (4) in subparagraph (D), by striking ‘‘or’’ at 

17 the end; 

18 (5) in subparagraph (E), by striking the period 

19 at the end and inserting ‘‘or which provides or ar20 ranges for the provision of health care items or serv21 ices pursuant to a written agreement between the or22 ganization and an individual or entity if the written 

23 agreement places the individual or entity at substan24 tial financial risk for the cost or utilization of the 

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1 ligated to provide, whether through a withhold, capi2 tation, incentive pool, per diem payment, or any 

3 other similar risk arrangement which places the in4 dividual or entity at substantial financial risk, or’’; 

5 and 

6 (6) by adding at the end the following new sub7 paragraph: 

8 ‘‘(E) with a contract with a State to pro9 vide services under the State plan under title 

10 XIX (in accordance with section 1903(m)).’’. 

11 (d) NEW EXCEPTION FOR SHARED FACILITY SERV12 ICES.— 

13 (1) IN GENERAL.—Section 1877(b) of the So14 cial Security Act (42 U.S.C. 1395nn(b)), as amend15 ed by paragraphs (1)(B) and (3)(C) of section 

16 421(b), is amended— 

17 (A) by redesignating paragraphs (4) 

18 through (8) as paragraphs (5) through (9); and 

19 (B) by inserting after paragraph (3) the 

20 following new paragraph: 

21 ‘‘(4) SHARED FACILITY SERVICES.—In the case 

22 of a designated health service consisting of a shared 

23 facility service of a shared facility— 

24 ‘‘(A) that is furnished— 


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1 ‘‘(i) personally by the referring physi2 cian who is a shared facility physician or 

3 personally by an individual directly em4 ployed by or under the general supervision 

5 of such a physician; 

6 ‘‘(ii) by a shared facility in a building 

7 in which the referring physician furnishes 

8 substantially all of the services of the phy9 sician that are unrelated to the furnishing 

10 of shared facility services; and 

11 ‘‘(iii) to a patient of a shared facility 

12 physician; and 

13 ‘‘(B) that is billed by the referring physi14 cian or a group practice of which the physician 

15 is a member.’’. 

16 (2) DEFINITIONS.—Section 1877(h) of the So17 cial Security Act (42 U.S.C. 1395nn(h)), as amend18 ed by section 421(b)(6), is amended by inserting be19 fore paragraph (4) the following new paragraph: 

20 ‘‘(1) SHARED FACILITY RELATED DEFINI21 TIONS.— 

22 ‘‘(A) SHARED FACILITY SERVICE.—The 

23 term ‘shared facility service’ means, with re24 spect to a shared facility, a designated health 


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1 service furnished by the facility to patients of 

2 shared facility physicians. 

3 ‘‘(B) SHARED FACILITY.—The term 

4 ‘shared facility’ means an entity that furnishes 

5 shared facility services under a shared facility 

6 arrangement. 

7 ‘‘(C) SHARED FACILITY PHYSICIAN.—The 

8 term ‘shared facility physician’ means, with re9 spect to a shared facility, a physician (or a 

10 group practice of which the physician is a mem11 ber) who has a financial relationship under a 

12 shared facility arrangement with the facility. 

13 ‘‘(D) SHARED FACILITY ARRANGEMENT.— 

14 The term ‘shared facility arrangement’ means, 

15 with respect to the provision of shared facility 

16 services in a building, a financial arrange17 ment— 

18 ‘‘(i) which is only between physicians 

19 who are providing services (unrelated to 

20 shared facility services) in the same build21 ing; 

22 ‘‘(ii) in which the overhead expenses 

23 of the facility are shared, in accordance 

24 with methods previously determined by the 


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1 physicians in the arrangement, among the 

2 physicians in the arrangement; and 

3 ‘‘(iii) which, in the case of a corpora4 tion, is wholly owned and controlled by 

5 shared facility physicians.’’. 

6 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

7 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.— 

8 Section 1877(b) of the Social Security Act (42 U.S.C. 

9 1395nn(b)), as amended by paragraphs (1)(B) and (3)(C) 

10 of section 421(b) and subsection (d)(1), is amended— 

11 (1) by redesignating paragraphs (5) through 

12 (9) as paragraphs (6) through (10); and 

13 (2) by inserting after paragraph (4) the fol14 lowing new paragraph: 

15 ‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.— 

16 In the case of a designated health service furnished 

17 in any area with respect to which the Secretary de18 termines that individuals residing in the area do not 

19 have reasonable access to such a designated health 

20 service for which subsection (a)(1) does not apply.’’. 

21 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

22 AMBULATORY SURGICAL CENTERS.—Section 1877(b) of 

23 the Social Security Act (42 U.S.C. 1395nn(b)), as amend24 ed by paragraphs (1)(B) and (3)(C) of section 421(b), 

25 subsection (d)(1), and subsection (e)(1), is amended— 


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1 (1) by redesignating paragraphs (6) through 

2 (10) as paragraphs (7) through (11); and 

3 (2) by inserting after paragraph (5) the fol4 lowing new paragraph: 

5 ‘‘(6) SERVICES FURNISHED IN AMBULATORY

6 SURGICAL CENTERS.—In the case of a designated 

7 health service furnished in an ambulatory surgical 

8 center described in section 1832(a)(2)(F)(i).’’. 

9 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

10 RENAL DIALYSIS FACILITIES.—Section 1877(b) of the 

11 Social Security Act (42 U.S.C. 1395nn(b)), as amended 

12 by paragraphs (1)(B) and (3)(C) of section 421(b), sub13 section (d)(1), subsection (e)(1), and subsection (f), is 

14 amended— 

15 (1) by redesignating paragraphs (7) through 

16 (11) as paragraphs (8) through (12); and 

17 (2) by inserting after paragraph (6) the fol18 lowing new paragraph: 

19 ‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS

20 FACILITIES.—In the case of a designated health 

21 service furnished in a renal dialysis facility under 

22 section 1881.’’. 

23 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN

24 A HOSPICE.—Section 1877(b) of the Social Security Act 

25 (42 U.S.C. 1395nn(b)), as amended by paragraphs (1)(B) 


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1 and (3)(C) of section 421(b), subsection (d)(1), subsection 

2 (e)(1), subsection (f), and subsection (g), is amended— 

3 (1) by redesignating paragraphs (8) through 

4 (12) as paragraphs (9) through (13); and 

5 (2) by inserting after paragraph (7) the fol6 lowing new paragraph: 

7 ‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO8 GRAM.—In the case of a designated health service 

9 furnished by a hospice program (as defined in sec10 tion 1861(dd)(2)).’’. 

11 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN

12 A COMPREHENSIVE OUTPATIENT REHABILITATION FA13 CILITY.—Section 1877(b) of the Social Security Act (42 

14 U.S.C. 1395nn(b)), as amended by paragraphs (1)(B) and 

15 (3)(C) of section 421(b), subsection (d)(1), subsection 

16 (e)(1), subsection (f), subsection (g), and subsection (h), 

17 is amended— 

18 (1) by redesignating paragraphs (9) through 

19 (13) as paragraphs (10) through (14); and 

20 (2) by inserting after paragraph (8) the fol21 lowing new paragraph: 

22 ‘‘(9) SERVICES FURNISHED IN A COMPREHEN23 SIVE OUTPATIENT REHABILITATION FACILITY.—In 

24 the case of a designated health service furnished in 


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1 a comprehensive outpatient rehabilitation facility (as 

2 defined in section 1861(cc)(2)).’’. 

3 (j) DEFINITION OF REFERRAL.—Section 

4 1877(h)(5)(A) of the Social Security Act (42 U.S.C. 

5 1395nn(h)(5)(A)) is amended— 

6 (1) by striking ‘‘an item or service’’ and insert7 ing ‘‘a designated health service’’; and 

8 (2) by striking ‘‘the item or service’’ and insert9 ing ‘‘the designated health service’’. 

10 (k) CONFORMING AMENDMENT.—Section 

11 1877(g)(6)(B) of the Social Security Act (42 U.S.C. 

12 1395nn(g)(6)(B)) is amended by striking ‘‘subsection 

13 (b)(4)’’ and inserting ‘‘subsection (b)(13)’’. 

14 (l) TRANSPARENCY.—The Secretary of Health and 

15 Human Services shall establish procedures for requiring 

16 a physician making a referral to an entity that would have 

17 been prohibited under section 1877 of the Social Security 

18 Act (42 U.S.C. 1395nn) if the amendments made by this 

19 section had not been made to disclose to the individual 

20 being referred the financial relationship that the physician 

21 has with the entity. 

22 SEC. 424. EFFECTIVE DATE. 

23 The amendments made by this subtitle shall apply to 

24 referrals made on or after the date of the enactment of 


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1 this Act, regardless of whether or not regulations are pro2 mulgated to carry out such amendments. 

3 Subtitle D—Securing Medicare’s 

4 Future for Tomorrow’s Seniors 

5 SEC. 431. MEDICAL RETIREMENT ACCOUNTS. 

6 (a) IN GENERAL.—Title II of the Social Security Act 

7 (42 U.S.C. 401 et seq.) is amended— 

8 (1) by inserting before section 201 the fol9 lowing: 

10 ‘‘PART A—INSURANCE BENEFITS’’; 

11 and 

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

13 ‘‘PART B—MEDICAL RETIREMENT ACCOUNTS 

14 ‘‘SEC. 251. MEDICAL RETIREMENT ACCOUNT FUND. 

15 ‘‘(a) ESTABLISHMENT.— 

16 ‘‘(1) IN GENERAL.—There shall be established 

17 and maintained in the Treasury of the United States 

18 a Medical Retirement Account Fund in the same 

19 manner as the Thrift Savings Fund under section 

20 8437 of title 5, United States Code (excluding para21 graphs (4) and (5) of subsection (c) thereof). 

22 ‘‘(2) CONTENTS OF FUND.—There is hereby ap23 propriated to the Medical Retirement Account Fund 

24 amounts equivalent to— 


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1 ‘‘(A) the contributions received in the 

2 Treasury under sections 3101(b), 3111(b), and 

3 1401(b) of the Internal Revenue Code of 1986 

4 with respect to each eligible individual on and 

5 after the date of an election under section 

6 252(a)(2), and 

7 ‘‘(B) the aggregate of the contributions de8 scribed in subparagraphs (B)(, (C), and (D) of 

9 section 252(c)(1) with respect to such eligible 

10 individuals. 

11 ‘‘(b) INVESTMENT OF MEDICAL RETIREMENT AC12 COUNT FUND.—Amounts in the Medical Retirement Ac13 count Fund shall be invested in the same manner as 

14 amounts in the Thrift Savings Fund are invested under 

15 section 8438 of title 5, United States Code. 

16 ‘‘(c) ACCOUNTING AND INFORMATION.—The Execu17 tive Director of the Medical Retirement Account Board 

18 shall maintain accounts and provide information in the 

19 same manner as the Executive Director of the Thrift Sav20 ings Fund is required to maintain accounts and provide 

21 information with respect to the Thrift Savings Fund under 

22 section 8439 of title 5, United States Code. 

23 ‘‘SEC. 252. MEDICAL RETIREMENT ACCOUNTS. 

24 ‘‘(a) ESTABLISHMENT.— 


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1 ‘‘(1) IN GENERAL.—Within 30 days after re2 ceiving the first contribution under subsection (c) 

3 with respect to an eligible individual, the Medical 

4 Retirement Account Board shall establish a Medical 

5 Retirement Account for such individual in the Med6 ical Retirement Account Fund. Each account shall 

7 be identified to the account holder by means of the 

8 account holder’s social security account number. 

9 ‘‘(2) ELIGIBLE INDIVIDUAL.—For purposes of 

10 this part, the term ‘eligible individual’ means any in11 dividual who, under regulations prescribed by the 

12 Secretary of Health and Human Services, makes an 

13 irrevocable election on or after the effective date of 

14 this part to renounce eligibility under the Medicare 

15 Program under title XVIII and establish a Medical 

16 Retirement Account. 

17 ‘‘(b) TREATMENT OF ACCOUNT.—Except as provided 

18 in this section, a Medical Retirement Account shall be 

19 treated for purposes of the Internal Revenue Code of 1986 

20 in the same manner as a health savings account under 

21 section 223 of such Code (determined without regard to 

22 subsections (d)(1)(A)((ii) and (d)(2)(B) thereof). 

23 ‘‘(c) CONTRIBUTIONS.— 


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1 ‘‘(1) IN GENERAL.—The Medical Retirement 

2 Account Board shall credit to the Medical Retire3 ment Account of an eligible individual— 

4 ‘‘(A) except as provided in paragraph (2), 

5 an amount equal to the sum of any amounts 

6 transferred to the Medical Retirement Account 

7 Fund under section 251(a)(2)(A) which are at8 tributable to the contributions paid by or on be9 half of such individual under sections 3101(b), 

10 3111(b), and 1401(b) of the Internal Revenue 

11 Code of 1986, plus 

12 ‘‘(B) at the time of such individual’s retire13 ment date determined under subsection (d)(1), 

14 an amount equal to the sum of any amounts 

15 transferred to the Federal Hospital Insurance 

16 Trust Fund under section 1817 which is attrib17 utable to such contributions paid on average by 

18 or on behalf of individuals in the same age co19 hort as such eligible individual under sections 

20 3101(b), 3111(b), and 1401(b) of the Internal 

21 Revenue Code of 1986 (including any Trust 

22 Fund earnings on such amount), plus 

23 ‘‘(C) any amount contributed to such Med24 ical Retirement Account by the eligible indi25 vidual or the eligible individual’s employer, inVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00111 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 cluding, in the case of an eligible individual who 

2 is a State government employee, any contribu3 tion under an applicable State law, to the ex4 tent the aggregate amount of contributions 

5 under this subparagraph for any calendar year 

6 does not exceed $10,000, adjusted for inflation 

7 in the same manner as the applicable dollar 

8 amount under section 402(g)(1)(B) of the In9 ternal Revenue Code of 1986, and reduced in 

10 the same manner as under section 408A(c)(3) 

11 of such Code, plus 

12 ‘‘(D) an amount equal to any one-time 

13 qualified rollover at the time of such individ14 ual’s retirement from any of the eligible individ15 ual’s health savings accounts, health reimburse16 ment accounts, flexible spending accounts, and 

17 medical savings accounts. 

18 ‘‘(2) REDISTRIBUTION.—Not later than 90 days 

19 after the end of each taxable year, the Secretary 

20 shall transfer such portion of the contributions paid 

21 under section 3111(b) or 1401(b) of the Internal 

22 Revenue Code of 1986 by or on behalf of eligible in23 dividuals whose wages or net earnings from self-em24 ployment exceed the contribution and benefit base 

25 under section 230 for such taxable year to Medical 


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1 Retirement Accounts of eligible individuals whose 

2 wages and net earnings from self-employment do not 

3 exceed such base for such taxable year in an amount 

4 per each Medical Retirement Account so as not to 

5 exceed 2.9 percent of the national average salary for 

6 each such Account. 

7 ‘‘(d) DISTRIBUTIONS.— 

8 ‘‘(1) IN GENERAL.—Except as provided in para9 graph (2), distributions may only be made from a 

10 Medical Retirement Account of an eligible individual 

11 on and after the date the eligible individual at12 tains— 

13 ‘‘(A) retirement age (as determined under 

14 section 216), or 

15 ‘‘(B) if elected by such individual, early re16 tirement age, but only if such individual pre17 sents proof of the purchase of a lifetime cata18 strophic health insurance policy upon such elec19 tion. 

20 ‘‘(2) DISTRIBUTION IN THE EVENT OF DEATH

21 BEFORE THE DATE OF INITIAL DISTRIBUTION.—If 

22 the eligible individual dies before the date deter23 mined under paragraph (1), the balance in such in24 dividual’s Medical Retirement Account shall be disVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00113 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 tributed in a lump sum, under rules established by 

2 the Medical Retirement Account Board— 

3 ‘‘(A) to the Medical Retirement Account of 

4 a surviving spouse of such individual, and 

5 ‘‘(B) in the case there is no surviving 

6 spouse or such spouse waives the right to such 

7 funds, to the Medical Retirement Accounts of 

8 the eligible individual’s heirs. 

9 ‘‘(3) DIVORCE.—The Medical Retirement Ac10 count Board shall issue regulations which provide 

11 that, in the case of an eligible individual with a Med12 ical Retirement Account who becomes divorced after 

13 at least 10 years of marriage to the same spouse, 

14 contributions to the Account during the marriage 

15 and earnings on the Account during the marriage 

16 shall be divided evenly between the Account of such 

17 individual and a Medical Retirement Account of 

18 such individual’s former spouse. 

19 ‘‘SEC. 253. MEDICAL RETIREMENT ACCOUNT BOARD. 

20 ‘‘(a) IN GENERAL.—There shall be established and 

21 maintained in the Social Security Administration a Med22 ical Retirement Account Board in the same manner as the 

23 Federal Retirement Thrift Investment Board under sub24 chapter VII of chapter 84 of title 5, United States Code. 


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1 ‘‘(b) EXECUTIVE DIRECTOR.—The Medical Retire2 ment Account Board shall appoint an Executive Director 

3 in the same manner and with the same functions as the 

4 Executive Director of the Thrift Savings Board under sec5 tion 8474 of title 5, United States Code.’’. 

6 (b) TAX TREATMENT OF CERTAIN CONTRIBUTIONS

7 TO MEDICAL RETIREMENT ACCOUNTS.— 

8 (1) IN GENERAL.—Part III of subchapter B of 

9 chapter 1 of the Internal Revenue Code of 1986, as 

10 amended by this Act, is amended by inserting after 

11 section 139B the following new section: 

12 ‘‘SEC. 139C. MEDICAL RETIREMENT ACCOUNT CONTRIBU13 TIONS. 

14 ‘‘Gross income shall not include any contribution to 

15 a Medical Retirement Account specified under section 

16 252(c) of the Social Security Act or any earnings on such 

17 contributions.’’. 

18 (2) CLERICAL AMENDMENT.—The table of sec19 tion for part III of subchapter B of chapter 1 of 

20 such Code, as amended by this Act, is amended by 

21 inserting after the item relating to section 139B the 

22 following new item: 

‘‘Sec. 139C. Medical Retirement Account contributions.’’. 

23 (c) CONFORMING AMENDMENTS TO THE MEDICARE

24 PROGRAM.— 


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1 (1) PART A ENTITLEMENT.—Section 1811 of 

2 the Social Security Act (42 U.S.C. 1395d) is amend3 ed by adding at the end the following new sentence: 

4 ‘‘On and after the effective date of part B of title 

5 II, the entitlement under the preceding sentence 

6 shall only apply to an individual who is not an eligi7 ble individual (as defined in section 252(a)(2)).’’. 

8 (2) PART A TRUST FUND.—The third sentence 

9 of section 1817 of the Social Security Act (42 

10 U.S.C. 1395i) is amended in each of paragraphs (1) 

11 and (2) by inserting ‘‘subject to section 

12 251(a)(2)(A),’’ before ‘‘the taxes imposed’’. 

13 (3) PART B ELIGIBILITY.—Section 1836 of the 

14 Social Security Act (42 U.S.C. 1395o) is amended 

15 by adding at the end the following new sentence: 

16 ‘‘On and after the effective date of part B of title 

17 II, the eligibility under the preceding sentence shall 

18 only apply to an individual who is not an eligible in19 dividual (as defined in section 252(a)(2)).’’. 

20 (d) EFFECTIVE DATES.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the amendments made by this section 

23 shall take effect on January 1, 2009. 


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1 (2) INTERNAL REVENUE CODE.—The amend2 ments made by subsection (b) shall apply to taxable 

3 years beginning after December 31, 2008. 

4 TITLE V—KEEPING MEDICAID 

5 ON MISSION 

6 SEC. 501. RESTRUCTURING OF MEDICAID FUNDING. 

7 Title XIX of the Social Security Act (42 U.S.C. 1396 

8 et seq.) is amended— 

9 (1) by redesignating section 1939 as section 

10 1940; and 

11 (2) by inserting after section 1938, the fol12 lowing: 

13 ‘‘MEDICAID MODERNIZED AND ON MISSION

14 ‘‘SEC. 1939. (a) STATE MEDICAID ASSISTANCE AL15 LOTMENTS.—Notwithstanding any other provision of this 

16 title, beginning with fiscal year 2010, and for each fiscal 

17 year thereafter— 

18 ‘‘(1) no State shall receive a payment under 

19 section 1903(a); and 

20 ‘‘(2) only in the case of a State with a State 

21 plan under this title that satisfies the conditions de22 scribed in subsection (c), the Secretary shall pay 

23 such State the State Medicaid assistance allotment 

24 for the State determined under subsection (b). 

25 ‘‘(b) DETERMINATION OF AMOUNT OF ALLOT26 MENTS.— 


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1 ‘‘(1) IN GENERAL.—Subject to paragraphs (4) 

2 and (5), the State Medicaid assistance allotment 

3 payable to a State (other than a State referred to 

4 in subparagraph (B)(ii)) for a fiscal year shall be 

5 the amount that bears the same ratio to the amount 

6 appropriated under subsection (f) for the fiscal year 

7 (reduced by the amount of the allotments made 

8 under paragraph (2)), as the ratio of— 

9 ‘‘(A) the sum of— 

10 ‘‘(i) the population of the State; 

11 ‘‘(ii) the number of individuals resid12 ing in the State whose family income does 

13 not exceed the poverty line (as defined in 

14 section 2110(c)(5) applicable to a family of 

15 the size involved); 

16 ‘‘(iii) the number of individuals resid17 ing in the State who are full-benefit dual 

18 eligible individuals (as defined in section 

19 1935(c)(6)); and 

20 ‘‘(iv) the number of disabled individ21 uals residing in the State; to 

22 ‘‘(B) the sum of the amounts determined 

23 under subparagraph (A). 

24 ‘‘(2) ALLOTMENTS TO TERRITORIES.— 


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1 ‘‘(A) IN GENERAL.—Subject to paragraphs 

2 (4) and (5), the State Medicaid assistance allot3 ment payable to a commonwealth or territory 

4 referred to in subparagraph (B) for a fiscal 

5 year shall be the amount that bears the same 

6 ratio to 0.25 percent of the amount appro7 priated under subsection (f) for the fiscal year, 

8 as the percentage specified in subparagraph 

9 (B)) for the commonwealth or territory bears to 

10 the sum of such percentages for all such com11 monwealths and territories so described. 

12 ‘‘(B) PERCENTAGE.—The percentage spec13 ified in this subparagraph for— 

14 ‘‘(i) Puerto Rico is 91.6 percent, 

15 ‘‘(ii) Guam is 3.5 percent, 

16 ‘‘(iii) the Virgin Islands is 2.6 per17 cent, 

18 ‘‘(iv) American Samoa is 1.2 percent, 

19 and 

20 ‘‘(v) the Northern Mariana Islands is 

21 1.1 percent. 

22 ‘‘(3) DETERMINATION OF POPULATION AND

23 NUMBER OF INDIVIDUALS.—The Secretary shall de24 termine the State populations and numbers of indi25 viduals described in paragraph (1) on the basis of 


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1 the most recent American Community Survey of the 

2 Bureau of the Census (or, until such data is avail3 able, on the basis of the 3 most recent Annual Social 

4 and Economic Supplements of the Current Popu5 lation Survey of the Bureau of the Census) and such 

6 other data as the Secretary determines is necessary. 

7 ‘‘(4) PHASE-IN; TRANSITION ASSISTANCE.— 

8 ‘‘(A) PHASED-IN CHANGE IN FUNDING

9 AMOUNTS.—Notwithstanding paragraph (1) and 

10 (2), subject to subparagraph (B), the State 

11 Medicaid assistance allotment determined for a 

12 State for each of fiscal years 2010 through 

13 2013 shall be the amount equal to the fol14 lowing: 

15 ‘‘(i) FISCAL YEAR 2010.—In the case 

16 of fiscal year 2010, the amount equal to 

17 the sum of— 

18 ‘‘(I) 80 percent of the amount 

19 paid to the State under section 

20 1903(a) for fiscal year 2006; and 

21 ‘‘(II) 20 percent of the amount of 

22 the State Medicaid assistance allot23 ment that would be paid to the State 

24 under paragraph (1) or (2) (as appliVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00120 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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•S 1019 IS

1 cable) without regard to this para2 graph. 

3 ‘‘(ii) FISCAL YEAR 2011.—In the case 

4 of fiscal year 2011, the amount equal to 

5 the sum of— 

6 ‘‘(I) 60 percent of the amount 

7 paid to the State under section 

8 1903(a) for fiscal year 2006; and 

9 ‘‘(II) 40 percent of the amount of 

10 the State Medicaid assistance allot11 ment that would be paid to the State 

12 under paragraph (1) or (2) (as appli13 cable) without regard to this para14 graph. 

15 ‘‘(iii) FISCAL YEAR 2012.—In the case 

16 of fiscal year 2012, the amount equal to 

17 the sum of— 

18 ‘‘(I) 40 percent of the amount 

19 paid to the State under section 

20 1903(a) for fiscal year 2006; and 

21 ‘‘(II) 60 percent of the amount of 

22 the State Medicaid assistance allot23 ment that would be paid to the State 

24 under paragraph (1) or (2) (as appliVerDate Aug 31 2005 03:19 Mar 31, 2007 Jkt 059200 PO 00000 Frm 00121 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019

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1 cable) without regard to this para2 graph. 

3 ‘‘(iv) FISCAL YEAR 2013.—In the case 

4 of fiscal year 2013, the amount equal to 

5 the sum of— 

6 ‘‘(I) 20 percent of the amount 

7 paid to the State under section 

8 1903(a) for fiscal year 2006; and 

9 ‘‘(II) 80 percent of the amount of 

10 the State Medicaid assistance allot11 ment that would be paid to the State 

12 under paragraph (1) or (2) (as appli13 cable) without regard to this para14 graph. 

15 ‘‘(B) TRANSITION ASSISTANCE.—The 

16 State Medicaid assistance allotment paid to a 

17 State for any of fiscal years 2010 through 2014 

18 shall not be less than the approximate total 

19 amount paid to the State under section 1903(a) 

20 for fiscal year 2006. 

21 ‘‘(c) CONDITIONS DESCRIBED.—For purposes of sub22 section (a), the conditions described in this subsection are 

23 the following: 

24 ‘‘(1) POPULATIONS COVERED.— 


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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the State uses its State Medicaid as3 sistance allotment to provide medical assistance 

4 (subject, notwithstanding section 1916 or 

5 1916A, to payment of premiums or other cost6 sharing charges (set on a sliding scale based on 

7 income) that the State may determine) only for 

8 populations of individuals— 

9 ‘‘(i) who are eligible for medical as10 sistance under the State plan on January 

11 1, 2008; or 

12 ‘‘(ii) whose family income does not ex13 ceed 133 percent of the poverty line (as de14 fined in section 2110(c)(5)). 

15 ‘‘(B) PRIORITY FOR MANDATORY POPU16 LATIONS.—In determining the populations eligi17 ble for medical assistance under the State plan 

18 in accordance with subparagraph (A), the State 

19 shall give priority to making populations de20 scribed in section 1902(a)(10)(A)(i) eligible for 

21 such assistance. 

22 ‘‘(C) OPTION TO RISK-ADJUST PRE23 MIUMS.—With respect to populations covered in 

24 accordance with this paragraph, a State may 


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1 impose risk-adjusted premiums based on chron2 ic disease conditions. 

3 ‘‘(2) BENEFITS.— 

4 ‘‘(A) IN GENERAL.—The State does not 

5 provide medical assistance for purposes of any 

6 item or service that is not described in section 

7 1905(a) as in effect on January 1, 2008 or au8 thorized to be provided by any State under a 

9 waiver approved under section 1115, 1915, or 

10 otherwise, as in effect on January 1, 2008. 

11 ‘‘(B) HEALTH PROMOTION AND DISEASE

12 PREVENTION.—At State option, the State im13 plements initiatives designed to educate the 

14 population of the State with respect to health 

15 promotion and disease prevention of the top 3 

16 lethal diseases for the State. 

17 ‘‘(3) MATCHING REQUIREMENT.—The State 

18 provides non-Federal matching funds of not less 

19 than $1 for every $3 of Federal funds received 

20 under this section. 

21 ‘‘(4) LIMITATION ON ADMINISTRATIVE EXPEND22 ITURES.—The total amount of reasonable costs in23 curred by the State to administer the State plan for 

24 a fiscal year shall not exceed the amount equal to 

25 3 percent of the State Medicaid assistance allotment 


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1 paid to the State under this section for such fiscal 

2 year. 

3 ‘‘(5) APPLICATION OF RESTRICTIONS ON USE

4 OF FUNDS.—The restrictions on the use of Federal 

5 funds appropriated to carry out this title contained 

6 in title V of division F of the Consolidated Appro7 priations Act, 2005, shall apply to the State Med8 icaid assistance allotments paid to States under this 

9 section for fiscal year 2010 and each fiscal year 

10 thereafter in the same manner as such restrictions 

11 apply to amounts appropriated under division F of 

12 such Act. 

13 ‘‘(6) PROMOTION OF PRICE AND QUALITY

14 TRANSPARENCY IN THE PRIVATE MARKET.—The 

15 State provides an assurance that the State has im16 plemented initiatives— 

17 ‘‘(A) to promote price and quality trans18 parency with respect to each type of health in19 surance offered by health insurance issuers in 

20 the State; and 

21 ‘‘(B) to ensure that any provider of a 

22 health care item or service that is paid for (in 

23 whole or in part) with Federal or State funds 

24 publishes price information with respect to such 


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1 item or service and makes the information read2 ily available to consumers. 

3 ‘‘(7) ANNUAL REPORT ON HEALTH COV4 ERAGE.—The State submits annual reports to the 

5 Secretary that— 

6 ‘‘(A) describe the State’s expenditure of 

7 the State Medicaid assistance allotment; 

8 ‘‘(B) include— 

9 ‘‘(i) the number of individuals pro10 vided medical assistance through such al11 lotment; 

12 ‘‘(ii) the average per beneficiary 

13 spending of the allotment with respect to— 

14 ‘‘(I) acute care; and 

15 ‘‘(II) long-term care; and 

16 ‘‘(C) the number of individuals in the 

17 State who are enrolled in private health cov18 erage. 

19 ‘‘(d) OPTION TO SUBSIDIZE PURCHASE OF PRIVATE

20 MARKET COVERAGE.— 

21 ‘‘(1) IN GENERAL.—Subject to paragraph (4), a 

22 State may elect to permit individuals eligible for 

23 medical assistance in accordance with subsection 

24 (c)(1) to opt-out of enrollment under the State plan 

25 (on a risk-adjusted basis) in return for payment on 


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1 the individual’s behalf of the individual health insur2 ance purchase subsidy amount determined under 

3 paragraph (2) to an issuer of health insurance cov4 erage within the private market. 

5 ‘‘(2) INDIVIDUAL HEALTH INSURANCE PUR6 CHASE SUBSIDY.—For purposes of paragraph (1), 

7 the individual health insurance purchase subsidy 

8 amount determined under this paragraph is equal to 

9 the actuarial average cost of providing coverage 

10 under the State plan under this title to all enrollees 

11 in such plan. 

12 ‘‘(3) AUTHORITY TO COMBINE SUBSIDY WITH

13 REFUNDABLE CREDIT FOR HEALTH INSURANCE COV14 ERAGE.—Payment of an individual health insurance 

15 purchase subsidy on behalf of an individual under 

16 this subsection shall not be taken into account for 

17 purposes of determining the amount the individual is 

18 allowed as a credit under section 36 of the Internal 

19 Revenue Code of 1986 for qualified health insur20 ance. 

21 ‘‘(4) ENROLLMENT INFORMATION AND ASSIST22 ANCE.—A State may only make the election de23 scribed in paragraph (1) if the State— 

24 ‘‘(A) makes available to the individuals de25 scribed in paragraph (1) benefit enrollment 


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1 counselors to assist the individuals with select2 ing coverage within the individual market; and 

3 ‘‘(B) has implemented procedures to en4 sure that accurate and complete plan informa5 tion is provided to such individuals prior to 

6 their enrollment in a plan within such market. 

7 ‘‘(5) FACILITATION OF USE OF FEDERAL TAX

8 CREDIT TO ELECT CATASTROPHIC OR OTHER PRI9 VATE MARKET COVERAGE.—A State may establish 

10 mechanisms to facilitate the enrollment of individ11 uals who elect to opt-out of the State plan in private 

12 health insurance or in qualified health insurance for 

13 purposes of such individuals being allowed a credit 

14 under section 36 of the Internal Revenue Code of 

15 1986. 

16 ‘‘(e) AVAILABILITY.—Amounts paid to a State under 

17 this section shall remain available for expenditure without 

18 fiscal year limitation. 

19 ‘‘(f) APPROPRIATIONS.— 

20 ‘‘(1) IN GENERAL.—Out of any money in the 

21 Treasury of the United States not otherwise appro22 priated, there are appropriated for making State 

23 Medicaid assistance allotments to States under this 

24 section— 


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1 ‘‘(A) for fiscal year 2010, 

2 $212,000,000,000; and 

3 ‘‘(B) for each of fiscal years 2011 through 

4 2017, the amount appropriated under this sub5 section for the preceding fiscal year, increased 

6 by the percentage increase (if any) in the chain7 weighted consumer price index for all urban 

8 consumers (all items; United States city aver9 age) for the previous fiscal year. 

10 ‘‘(2) ADDITIONAL APPROPRIATION FOR TRANSI11 TION YEARS; HOLD HARMLESS.—Out of any money 

12 in the Treasury of the United States not otherwise 

13 appropriated, there are appropriated for the period 

14 of fiscal years 2010 through 2014, $20,000,000,000, 

15 for purposes of carrying out subsection (b)(4)(B).’’. 

16 SEC. 502. MEDICAID ADVANTAGE PROGRAM. 

17 Title XIX of the Social Security Act (42 U.S.C. 1396 

18 et seq.), as amended by section 501, is amended by— 

19 (1) redesignating section 1940 as section 1941; 

20 and 

21 (2) inserting after section 1939 the following 

22 new section: 

23 ‘‘MEDICAID ADVANTAGE PROGRAM

24 ‘‘SEC. 1940. (a) DEFINITIONS.—In this section: 


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1 ‘‘(1) MEDICAID ADVANTAGE ELIGIBLE INDI2 VIDUAL.—The term ‘Medicaid Advantage eligible in3 dividual’ means an individual who— 

4 ‘‘(A) is a full-benefit dual eligible indi5 vidual (as defined in section 1935(c)(6)); and 

6 ‘‘(B) resides in a participating State. 

7 ‘‘(2) PARTICIPATING STATE.—The term ‘par8 ticipating State’ means a State that elects to offer 

9 a State Medicaid Advantage program under this sec10 tion. 

11 ‘‘(3) PROGRAM.—The term ‘program’ means a 

12 State Medicaid Advantage program. 

13 ‘‘(4) STATE MEDICAID ADVANTAGE PROGRAM.— 

14 The term ‘State Medicaid Advantage program’ 

15 means a program offered by a State that provides 

16 individuals enrolled in the program a medical home 

17 where they receive a seamless continuum of medical 

18 care and care management that meets the following 

19 requirements: 

20 ‘‘(A) OPERATION.—The primary manager 

21 of the program is the State. 

22 ‘‘(B) INTEGRATED COVERAGE.—The pro23 gram provides integrated health care benefits to 

24 Medicaid Advantage eligible individuals. 

25 ‘‘(b) ESTABLISHMENT.— 


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1 ‘‘(1) IN GENERAL.—Beginning with fiscal year 

2 2010, a State may elect to provide benefits to Med3 icaid Advantage eligible individuals who elect to en4 roll in a program established under this section. 

5 Such benefits shall be provided instead of benefits 

6 under title XVIII or under a State plan under this 

7 title. 

8 ‘‘(2) ENROLLMENT.— 

9 ‘‘(A) IN GENERAL.—A participating State 

10 shall establish procedures to enroll Medicaid 

11 Advantage eligible individuals in the program. 

12 Such procedures shall ensure that a Medicaid 

13 Advantage eligible individual may elect to not 

14 enroll and to disenroll upon request from the 

15 program. 

16 ‘‘(B) PRESERVATION OF ORIGINAL MEDI17 CARE AND MEDICAID BENEFITS.—Nothing in 

18 this section shall be construed to limit the right 

19 of a Medicaid Advantage eligible individual who 

20 is entitled to benefits under title XVIII or 

21 under a State plan under this title to receive 

22 such benefits if the individual elects to not en23 roll or to disenroll from the program. 

24 ‘‘(3) PAYMENTS.— 


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1 ‘‘(A) IN GENERAL.—The Secretary shall 

2 develop a system for making risk-adjusted pay3 ments on a capitated basis to participating 

4 States for the cost of providing items and serv5 ices to each individual enrolled in the program 

6 that would, but for the application of this sec7 tion, be covered under— 

8 ‘‘(i) title XVIII, including the cost of 

9 providing qualified prescription drug cov10 erage under part D of such title; or 

11 ‘‘(ii) a State plan under this title. 

12 ‘‘(B) DETERMINATION OF PAYMENT

13 AMOUNT.—The Secretary shall use actuarial 

14 data and payment history in determining the 

15 payment amount under such system with re16 spect to each individual enrolled in the pro17 gram, and shall adjust the payment amount to 

18 take into account the comparative frailty of 

19 such individuals and such other factors as the 

20 Secretary determines to be appropriate. 

21 ‘‘(C) UPDATE OF PAYMENT SYSTEM.—The 

22 Secretary shall update the payment system de23 veloped under this paragraph as appropriate. 

24 ‘‘(D) STATE PROCEDURES.—A partici25 pating State shall establish such procedures for 


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•S 1019 IS

1 the submission of claims and the transmission 

2 of data as the Secretary determines appropriate 

3 in order to carry out the payment system devel4 oped under this paragraph. 

5 ‘‘(4) SCOPE OF BENEFITS.—A participating 

6 State shall provide individuals enrolled in the pro7 gram, regardless of the source of payment and di8 rectly or under contracts with other entities, at a 

9 minimum— 

10 ‘‘(A) all items and services covered under 

11 title XVIII and all items and services covered 

12 under this title, except that States shall have 

13 authority and flexibility to design benefit pack14 ages that meet the specific needs of Medicaid 

15 Advantage eligible individuals, including the 

16 needs of such individuals with mental illness; 

17 ‘‘(B) qualified prescription drug coverage 

18 (as defined in section 1860D–2(a)(1)); and 

19 ‘‘(C) such other items and services as the 

20 State determines appropriate. 

21 ‘‘(c) RESPONSIBILITIES OF PARTICIPATING

22 STATES.— 

23 ‘‘(1) BIDDING PROCESS FOR HEALTH PLANS.— 

24 ‘‘(A) IN GENERAL.—A participating State 

25 shall establish procedures for health plans to 


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1 participate in a bidding process to enter into a 

2 contract under paragraph (2) to provide serv3 ices to Medicaid Advantage eligible individuals 

4 under the program. 

5 ‘‘(B) BID SUBMISSION.—Each health plan 

6 participating in the bidding process established 

7 under paragraph (1) shall submit a bid rep8 resenting the estimated cost to such plans of 

9 providing Medicaid Advantage eligible individ10 uals the benefits described in subsection (b)(4). 

11 ‘‘(2) CONTRACTS WITH HEALTH PLANS.— 

12 ‘‘(A) IN GENERAL.—A participating State 

13 shall enter into contracts with health plans, in14 cluding managed care health plans, in order to 

15 provide integrated health care benefits to Med16 icaid Advantage eligible individuals enrolled in 

17 the program. 

18 ‘‘(B) RESPONSIBILITY FOR PROVIDING

19 CARE.—Each contract entered into under this 

20 paragraph shall provide that the health plan is 

21 responsible for— 

22 ‘‘(i) providing the benefits described 

23 in subsection (b)(4) to individuals enrolled 

24 in the program; 


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1 ‘‘(ii) collecting performance data on 

2 treatments and outcomes for each such in3 dividual; and 

4 ‘‘(iii) providing such data to the State 

5 for use in monitoring the program under 

6 this section. 

7 ‘‘(C) ENSURING QUALITY AND VALUE.— 

8 ‘‘(i) PROMOTING COMPETITION.—A 

9 participating State shall provide incentives 

10 for health plans to compete with respect to 

11 the quality and value of the services pro12 vided to Medicaid Advantage eligible indi13 viduals who are enrolled in the program. 

14 ‘‘(ii) REWARDING EFFICIENCY.—A 

15 participating State may reward health 

16 plans that provide higher quality care at a 

17 reduced price under the program. 

18 ‘‘(3) CHOICE OF PLANS.—A participating State 

19 shall establish procedures to allow Medicaid Advan20 tage eligible individuals to choose from among the 

21 competing plans that the State enters into a con22 tract with under paragraph (2). 

23 ‘‘(4) PAYMENT PROCEDURES.—A participating 

24 State shall establish procedures with respect to pay25 ments in accordance with subsection (b)(3)(D). 


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1 ‘‘(5) MONITORING AND ENFORCEMENT.—A 

2 participating State shall share responsibility with the 

3 Secretary for— 

4 ‘‘(A) carefully monitoring health plans that 

5 the State enters into a contract with under 

6 paragraph (2); and 

7 ‘‘(B) bringing action against those health 

8 plans that do not meet their obligations under 

9 such contracts. 

10 ‘‘(d) FEDERAL RESPONSIBILITIES.— 

11 ‘‘(1) PAYMENTS TO PARTICIPATING STATES.— 

12 The Secretary shall provide for payments to partici13 pating States in accordance with subsection (b)(3). 

14 ‘‘(2) MONITORING AND ENFORCEMENT.— 

15 ‘‘(A) GOALS.—The Secretary shall set and 

16 monitor goals for programs. 

17 ‘‘(B) MONITORING AND ENFORCEMENT.— 

18 The Secretary shall share responsibility with a 

19 participating State for— 

20 ‘‘(i) carefully monitoring health plans 

21 that the State enters into a contract with 

22 under subsection (c)(2); and 

23 ‘‘(ii) bringing appropriate action 

24 against those health plans that do not 


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1 meet their obligations under such con2 tracts. 

3 ‘‘(3) ACCESS TO PRESCRIPTION DRUG DATA.— 

4 ‘‘(A) IN GENERAL.—Notwithstanding any 

5 provision of law, the Secretary shall ensure that 

6 States have access to prescription drug data 

7 submitted by prescription drug plans and MA– 

8 PD plans under part D of title XVIII for the 

9 purpose of carrying out the program under this 

10 section. 

11 ‘‘(B) SAFEGUARDS.—The Secretary shall 

12 ensure that States have in place appropriate 

13 safeguards to protect against the unauthorized 

14 disclosure of data provided under subparagraph 

15 (A). 

16 ‘‘(e) WAIVERS OF REQUIREMENTS .—With respect to 

17 carrying out a State Medicaid Advantage program under 

18 this section, the following requirements of this title (and 

19 regulations relating to such requirements) shall not apply: 

20 ‘‘(1) Section 1902(a)(1), relating to any re21 quirement that a program or benefits under such a 

22 program be provided in all areas of a State. 

23 ‘‘(2) Section 1902(a)(10), insofar as such sec24 tion relates to comparability of services among dif25 ferent population groups. 


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1 ‘‘(3) Sections 1902(a)(23) and 1915(b)(4), re2 lating to freedom of choice of providers under a pro3 gram. 

4 ‘‘(4) Section 1903(m)(2)(A), insofar as it re5 stricts a program from receiving prepaid capitation 

6 payments. 

7 ‘‘(5) Such other provisions of this title that the 

8 Secretary determines are inapplicable to carrying out 

9 a program under this section.’’. 

10 SEC. 503. HIGH PERFORMANCE BONUSES. 

11 Section 1939 of the Social Security Act, as added by 

12 section 501, is amended by adding at the end the fol13 lowing: 

14 ‘‘(g) BONUS TO REWARD HIGH PERFORMANCE

15 STATES.— 

16 ‘‘(1) IN GENERAL.—In addition to the State 

17 Medicaid assistance allotments paid to States in ac18 cordance with the preceding provisions of this sec19 tion, the Secretary shall make a payment pursuant 

20 to this subsection to each State for each bonus year 

21 for which the State is a high performing State. 

22 ‘‘(2) AMOUNT OF PAYMENT.— 

23 ‘‘(A) IN GENERAL.—Subject to subpara24 graph (B), the Secretary shall determine the 


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1 amount of the payment under this subsection to 

2 a high performing State for a bonus year. 

3 ‘‘(B) LIMITATION.—The amount payable 

4 to a State under this subsection for a bonus 

5 year shall not exceed 5 percent of the State 

6 Medicaid assistance allotment paid to the State 

7 under subsection (a). 

8 ‘‘(3) USE OF FUNDS.—Amounts paid to a State 

9 under this subsection shall be used to facilitate the 

10 enrollment of uninsured individuals who reside in 

11 the State in private health insurance or to maintain 

12 the enrollment of individuals in such health insur13 ance. 

14 ‘‘(4) DEFINITIONS.—As used in this paragraph: 

15 ‘‘(A) BONUS YEAR.—The term ‘bonus 

16 year’ means each of fiscal years 2010 through 

17 2017. 

18 ‘‘(B) HIGH PERFORMING STATE.—The 

19 term ‘high performing State’ means, with re20 spect to a bonus year, a State that— 

21 ‘‘(i) with respect to, each of bonus 

22 years 2010 and 2011, the Secretary deter23 mines that at least 90 percent of the total 

24 population of the State is enrolled in pri25 vate health insurance coverage; and 


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1 ‘‘(ii) with respect to each of bonus 

2 years 2012 through 2017, the Secretary 

3 determines that— 

4 ‘‘(I) at least 95 percent of the 

5 total population of the State is en6 rolled in private health insurance cov7 erage; and 

8 ‘‘(II) the State has satisfies the 

9 conditions in subsection (c). 

10 ‘‘(5) APPROPRIATION.—Out of any money in 

11 the Treasury of the United States not otherwise ap12 propriated, there are appropriated for the period of 

13 fiscal years 2010 through 2017, $5,000,000,000 for 

14 making payments under this subsection.’’. 

15 TITLE VI—ADMINISTRATIVE 

16 HEALTH CARE TRIBUNALS 

17 SEC. 601. STATE GRANTS TO CREATE ADMINISTRATIVE 

18 HEALTH CARE TRIBUNALS. 

19 Part P of title III of the Public Health Service Act 

20 (42 U.S.C. 280g et seq.) is amended by adding at the end 

21 the following: 

22 ‘‘SEC. 399R. STATE GRANTS TO CREATE ADMINISTRATIVE 

23 HEALTH CARE TRIBUNALS. 

24 ‘‘(a) IN GENERAL.—The Secretary may award grants 

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1 uation of administrative health care tribunals that comply 

2 with this section, for the resolution of disputes concerning 

3 injuries allegedly caused by health care providers. 

4 ‘‘(b) CONDITIONS FOR DEMONSTRATION GRANTS.— 

5 To be eligible to receive a grant under this section, a State 

6 shall submit to the Secretary an application at such time, 

7 in such manner, and containing such information as may 

8 be required by the Secretary. A grant shall be awarded 

9 under this section on such terms and conditions as the 

10 Secretary determines appropriate. 

11 ‘‘(c) REPRESENTATION BY COUNSEL.—A State that 

12 receives a grant under this section may not preclude any 

13 party to a dispute before an administrative health care tri14 bunal operated under such grant from obtaining legal rep15 resentation during any review by the expert panel under 

16 subsection (d), the administrative health care tribunal 

17 under subsection (e), or a State court under subsection 

18 (f). 

19 ‘‘(d) EXPERT PANEL REVIEW AND EARLY OFFER

20 GUIDELINES.— 

21 ‘‘(1) IN GENERAL.—Prior to the submission of 

22 any dispute concerning injuries allegedly caused by 

23 health care providers to an administrative health 

24 care tribunal under this section, such allegations 

25 shall first be reviewed by an expert panel. 


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1 ‘‘(2) COMPOSITION.— 

2 ‘‘(A) IN GENERAL.—An expert panel under 

3 this subsection shall be composed of 3 medical 

4 experts (either physicians or health care profes5 sionals) and 3 attorneys to be appointed by the 

6 head of the State agency responsible for health. 

7 ‘‘(B) LICENSURE AND EXPERTISE.—Each 

8 physician or health care professional appointed 

9 to an expert panel under subparagraph (A) 

10 shall— 

11 ‘‘(i) be appropriately credentialed or 

12 licensed in 1 or more States to deliver 

13 health care services; and 

14 ‘‘(ii) typically treat the condition, 

15 make the diagnosis, or provide the type of 

16 treatment that is under review. 

17 ‘‘(C) INDEPENDENCE.— 

18 ‘‘(i) IN GENERAL.—Subject to clause 

19 (ii), each individual appointed to an expert 

20 panel under this paragraph shall— 

21 ‘‘(I) not have a material familial, 

22 financial, or professional relationship 

23 with a party involved in the dispute 

24 reviewed by the panel; and 


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1 ‘‘(II) not otherwise have a con2 flict of interest with such a party. 

3 ‘‘(ii) EXCEPTION.—Nothing in clause 

4 (i) shall be construed to prohibit an indi5 vidual who has staff privileges at an insti6 tution where the treatment involved in the 

7 dispute was provided from serving as a 

8 member of an expert panel merely on the 

9 basis of such affiliation, if the affiliation is 

10 disclosed to the parties and neither party 

11 objects. 

12 ‘‘(D) PRACTICING HEALTH CARE PROFES13 SIONAL IN SAME FIELD.— 

14 ‘‘(i) IN GENERAL.—In a dispute be15 fore an expert panel that involves treat16 ment, or the provision of items or serv17 ices— 

18 ‘‘(I) by a physician, the medical 

19 experts on the expert panel shall be 

20 practicing physicians (allopathic or os21 teopathic) of the same or similar spe22 cialty as a physician who typically 

23 treats the condition, makes the diag24 nosis, or provides the type of treat25 ment under review; or 


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1 ‘‘(II) by a health care profes2 sional other than a physician, at least 

3 two medical experts on the expert 

4 panel shall be practicing physicians 

5 (allopathic or osteopathic) of the same 

6 or similar specialty as the health care 

7 professional who typically treats the 

8 condition, makes the diagnosis, or 

9 provides the type of treatment under 

10 review, and, if determined appropriate 

11 by the State agency, the third medical 

12 expert shall be a practicing health 

13 care professional (other than such a 

14 physician) of such a same or similar 

15 specialty. 

16 ‘‘(ii) PRACTICING DEFINED.—In this 

17 paragraph, the term ‘practicing’ means, 

18 with respect to an individual who is a phy19 sician or other health care professional, 

20 that the individual provides health care 

21 services to individual patients on average 

22 at least 2 days a week. 

23 ‘‘(E) PEDIATRIC EXPERTISE.—In the case 

24 of dispute relating to a child, at least 1 medical 


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1 expert on the expert panel shall have expertise 

2 described in subparagraph (D)(i) in pediatrics. 

3 ‘‘(3) DETERMINATION.—After a review under 

4 paragraph (1), an expert panel shall make a deter5 mination as to the liability of the parties involved 

6 and compensation. 

7 ‘‘(4) ACCEPTANCE.—If the parties to a dispute 

8 before an expert panel under this subsection accept 

9 the determination of the expert panel concerning li10 ability and compensation, such compensation shall 

11 be paid to the claimant and the claimant shall agree 

12 to forgo any further action against the health care 

13 providers involved. 

14 ‘‘(5) FAILURE TO ACCEPT.—If any party de15 cides not to accept the expert panel’s determination, 

16 the matter shall be referred to an administrative 

17 health care tribunal created pursuant to this section. 

18 ‘‘(e) ADMINISTRATIVE HEALTH CARE TRIBUNALS.— 

19 ‘‘(1) IN GENERAL.—Upon the failure of any 

20 party to accept the determination of an expert panel 

21 under subsection (d), the parties shall have the right 

22 to request a hearing concerning the liability or com23 pensation involved by an administrative health care 

24 tribunal established by the State involved. 


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1 ‘‘(2) REQUIREMENTS.—In establishing an ad2 ministrative health care tribunal under this section, 

3 a State shall— 

4 ‘‘(A) ensure that such tribunals are pre5 sided over by special judges with health care ex6 pertise; 

7 ‘‘(B) provide authority to such judges to 

8 make binding rulings, rendered in written deci9 sions, on standards of care, causation, com10 pensation, and related issues with reliance on 

11 independent expert witnesses commissioned by 

12 the tribunal; 

13 ‘‘(C) establish negligence as the legal 

14 standard for the tribunal; 

15 ‘‘(D) allow the admission into evidence of 

16 the recommendation made by the expert panel 

17 under subsection (d); and 

18 ‘‘(E) provide for an appeals process to 

19 allow for review of decisions by State courts. 

20 ‘‘(f) REVIEW BY STATE COURT AFTER EXHAUSTION

21 OF ADMINISTRATIVE REMEDIES.— 

22 ‘‘(1) RIGHT TO FILE.—If any party to a dispute 

23 before a health care tribunal under subsection (e) is 

24 not satisfied with the determinations of the tribunal, 


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1 the party shall have the right to file their claim in 

2 a State court of competent jurisdiction. 

3 ‘‘(2) FORFEIT OF AWARDS.—Any party filing 

4 an action in a State court in accordance with para5 graph (1) shall forfeit any compensation award 

6 made under subsection (e). 

7 ‘‘(3) ADMISSIBILITY.—The determinations of 

8 the expert panel and the administrative health care 

9 tribunal pursuant to subsections (d) and (e) with re10 spect to a State court proceeding under paragraph 

11 (1) shall be admissible into evidence in any such 

12 State court proceeding. 

13 ‘‘(g) DEFINITION.—In this section, the term ‘health 

14 care provider’ has the meaning given such term for pur15 poses of part A of title VII. 

16 ‘‘(h) FUNDING.— 

17 ‘‘(1) ONE-TIME INCREASE IN MEDICAID PAY18 MENT.—In the case of a State awarded a grant to 

19 carry out this section, the total amount of Federal 

20 payments made to the State under section 1903(a) 

21 of the Social Security Act or section 1939(b)of such 

22 Act (in the case of fiscal year 2010 or any fiscal 

23 year thereafter) for the first fiscal year for which 

24 such grant is awarded shall be increased by an 

25 amount equal to 1 percent of of the total amount of 


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1 such payments made to the State for the preceding 

2 fiscal year under such 1903(a) or 1939(b) (as appli3 cable) for purposes of carrying out this section. 

4 Amounts paid to a State pursuant to this subsection 

5 shall remain available until expended. 

6 ‘‘(2) AUTHORIZATION OF APPROPRIATIONS.— 

7 There are authorized to be appropriated for any fis8 cal year such sums as may be necessary for purposes 

9 of making payments to States pursuant to para10 graph (1).’’. 

11 TITLE VII—HEALTH 

12 INFORMATION TECHNOLOGY 

13 Subtitle A—Assisting the Develop14 ment of Health Information 

15 Technology 

16 SEC. 701. PURPOSE. 

17 It is the purpose of this subtitle to promote the utili18 zation of health record banking by improving the coordina19 tion of health information through an infrastructure for 

20 the secure and authorized exchange and use of healthcare 

21 information. 

22 SEC. 702. HEALTH RECORD BANKING. 

23 (a) ESTABLISHMENT.—Not later than 1 year after 

24 the date of enactment of this Act, the Secretary of Health 

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1 vide for the certification and auditing of the banking of 

2 electronic medical records. 

3 (b) GENERAL RIGHTS.—An individual who has a 

4 health record contained in a health record bank shall 

5 maintain ownership over the health record and shall have 

6 the right to review the contents of the record. 

7 SEC. 703. APPLICATION OF FEDERAL AND STATE SECURITY 

8 AND CONFIDENTIALITY STANDARDS. 

9 (a) IN GENERAL.—Current Federal security and con10 fidentiality standards and State security and confiden11 tiality laws shall apply to this subtitle until such time as 

12 Congress acts to amend such standards. 

13 (b) DEFINITIONS.—In this section: 

14 (1) CURRENT FEDERAL SECURITY AND CON15 FIDENTIALITY STANDARDS.—The term ‘‘current 

16 Federal security and confidentiality standards’’ 

17 means the Federal privacy standards established 

18 pursuant to section 264(c) of the Health Insurance 

19 Portability and Accountability Act of 1996 (42 

20 U.S.C. 1320d–2 note) and security standards estab21 lished under section 1173(d) of the Social Security 

22 Act (42 U.S.C. 1320d–2(d)). 

23 (2) STATE SECURITY AND CONFIDENTIALITY

24 LAWS.—The term ‘‘State security and confidentiality 

25 laws’’ means State laws and regulations relating to 


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1 the privacy and confidentiality of individually identi2 fiable health information or to the security of such 

3 information. 

4 (3) STATE.—The term ‘‘State’’ has the mean5 ing given such term for purposes of title XI of the 

6 Social Security Act, as provided under section 

7 1101(a) of such Act (42 U.S.C. 1301(a)). 

8 Subtitle B—Promoting the Use of 

9 Health Information Technology 

10 to Better Coordinate Health 

11 Care 

12 SEC. 711. SAFE HARBORS TO ANTIKICKBACK CIVIL PEN13 ALTIES AND CRIMINAL PENALTIES FOR PRO14 VISION OF HEALTH INFORMATION TECH15 NOLOGY AND TRAINING SERVICES. 

16 (a) FOR CIVIL PENALTIES.—Section 1128A of the 

17 Social Security Act (42 U.S.C. 1320a–7a) is amended— 

18 (1) in subsection (b), by adding at the end the 

19 following new paragraph: 

20 ‘‘(4) For purposes of this subsection, inducements to 

21 reduce or limit services described in paragraph (1) shall 

22 not include the practical or other advantages resulting 

23 from health information technology or related installation, 

24 maintenance, support, or training services.’’; and 


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1 (2) in subsection (i), by adding at the end the 

2 following new paragraph: 

3 ‘‘(8) The term ‘health information technology’ 

4 means hardware, software, license, right, intellectual 

5 property, equipment, or other information tech6 nology (including new versions, upgrades, and 

7 connectivity) designed or provided primarily for the 

8 electronic creation, maintenance, or exchange of 

9 health information to better coordinate care or im10 prove health care quality, efficiency, or research.’’. 

11 (b) FOR CRIMINAL PENALTIES.—Section 1128B of 

12 such Act (42 U.S.C. 1320a–7b) is amended— 

13 (1) in subsection (b)(3)— 

14 (A) in subparagraph (G), by striking 

15 ‘‘and’’ at the end; 

16 (B) in the subparagraph (H) added by sec17 tion 237(d) of the Medicare Prescription Drug, 

18 Improvement, and Modernization Act of 2003 

19 (Public Law 108–173; 117 Stat. 2213)— 

20 (i) by moving such subparagraph 2 

21 ems to the left; and 

22 (ii) by striking the period at the end 

23 and inserting a semicolon; 

24 (C) in the subparagraph (H) added by sec25 tion 431(a) of such Act (117 Stat. 2287)— 


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1 (i) by redesignating such subpara2 graph as subparagraph (I); 

3 (ii) by moving such subparagraph 2 

4 ems to the left; and 

5 (iii) by striking the period at the end 

6 and inserting ‘‘; and’’; and 

7 (D) by adding at the end the following new 

8 subparagraph: 

9 ‘‘(J) any nonmonetary remuneration (in the 

10 form of health information technology, as defined in 

11 section 1128A(i)(8), or related installation, mainte12 nance, support or training services) made to a per13 son by a specified entity (as defined in subsection 

14 (g)) if— 

15 ‘‘(i) the provision of such remuneration is 

16 without an agreement between the parties or 

17 legal condition that— 

18 ‘‘(I) limits or restricts the use of the 

19 health information technology to services 

20 provided by the physician to individuals re21 ceiving services at the specified entity; 

22 ‘‘(II) limits or restricts the use of the 

23 health information technology in conjunc24 tion with other health information tech25 nology; or 


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1 ‘‘(III) conditions the provision of such 

2 remuneration on the referral of patients or 

3 business to the specified entity; 

4 ‘‘(ii) such remuneration is arranged for in 

5 a written agreement that is signed by the par6 ties involved (or their representatives) and that 

7 specifies the remuneration solicited or received 

8 (or offered or paid) and states that the provi9 sion of such remuneration is made for the pri10 mary purpose of better coordination of care or 

11 improvement of health quality, efficiency, or re12 search; and 

13 ‘‘(iii) the specified entity providing the re14 muneration (or a representative of such entity) 

15 has not taken any action to disable any basic 

16 feature of any hardware or software component 

17 of such remuneration that would permit inter18 operability.’’; and 

19 (2) by adding at the end the following new sub20 section: 

21 ‘‘(g) SPECIFIED ENTITY DEFINED.—For purposes of 

22 subsection (b)(3)(J), the term ‘specified entity’ means an 

23 entity that is a hospital, group practice, prescription drug 

24 plan sponsor, a Medicare Advantage organization, or any 

25 other such entity specified by the Secretary, considering 


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1 the goals and objectives of this section, as well as the goals 

2 to better coordinate the delivery of health care and to pro3 mote the adoption and use of health information tech4 nology.’’. 

5 (c) EFFECTIVE DATE AND EFFECT ON STATE

6 LAWS.— 

7 (1) EFFECTIVE DATE.—The amendments made 

8 by subsections (a) and (b) shall take effect on the 

9 date that is 120 days after the date of the enact10 ment of this Act. 

11 (2) PREEMPTION OF STATE LAWS.—No State 

12 (as defined in section 1101(a) of the Social Security 

13 Act (42 U.S.C. 1301(a)) for purposes of title XI of 

14 such Act) shall have in effect a State law that im15 poses a criminal or civil penalty for a transaction de16 scribed in section 1128A(b)(4) or section 

17 1128B(b)(3)(J) of such Act, as added by subsections 

18 (a)(1) and (b), respectively, if the conditions de19 scribed in the respective provision, with respect to 

20 such transaction, are met. 

21 (d) STUDY AND REPORT TO ASSESS EFFECT OF

22 SAFE HARBORS ON HEALTH SYSTEM.— 

23 (1) IN GENERAL.—The Secretary of Health and 

24 Human Services shall conduct a study to determine 

25 the impact of each of the safe harbors described in 


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1 paragraph (3). In particular, the study shall examine 

2 the following: 

3 (A) The effectiveness of each safe harbor 

4 in increasing the adoption of health information 

5 technology. 

6 (B) The types of health information tech7 nology provided under each safe harbor. 

8 (C) The extent to which the financial or 

9 other business relationships between providers 

10 under each safe harbor have changed as a re11 sult of the safe harbor in a way that adversely 

12 affects or benefits the health care system or 

13 choices available to consumers. 

14 (D) The impact of the adoption of health 

15 information technology on health care quality, 

16 cost, and access under each safe harbor. 

17 (2) REPORT.—Not later than 3 years after the 

18 effective date described in subsection (c)(1), the Sec19 retary of Health and Human Services shall submit 

20 to Congress a report on the study under paragraph 

21 (1). 

22 (3) SAFE HARBORS DESCRIBED.—For purposes 

23 of paragraphs (1) and (2), the safe harbors de24 scribed in this paragraph are— 


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1 (A) the safe harbor under section 

2 1128A(b)(4) of such Act (42 U.S.C. 1320a– 

3 7a(b)(4)), as added by subsection (a)(1); and 

4 (B) the safe harbor under section 

5 1128B(b)(3)(J) of such Act (42 U.S.C. 1320a– 

6 7b(b)(3)(J)), as added by subsection (b). 

7 SEC. 712. EXCEPTION TO LIMITATION ON CERTAIN PHYSI8 CIAN REFERRALS (UNDER STARK) FOR PRO9 VISION OF HEALTH INFORMATION TECH10 NOLOGY AND TRAINING SERVICES TO 

11 HEALTH CARE PROFESSIONALS. 

12 (a) IN GENERAL.—Section 1877(b) of the Social Se13 curity Act (42 U.S.C. 1395nn(b)) is amended by adding 

14 at the end the following new paragraph: 

15 ‘‘(6) INFORMATION TECHNOLOGY AND TRAIN16 ING SERVICES.— 

17 ‘‘(A) IN GENERAL.—Any nonmonetary re18 muneration (in the form of health information 

19 technology or related installation, maintenance, 

20 support or training services) made by a speci21 fied entity to a physician if— 

22 ‘‘(i) the provision of such remunera23 tion is without an agreement between the 

24 parties or legal condition that— 


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1 ‘‘(I) limits or restricts the use of 

2 the health information technology to 

3 services provided by the physician to 

4 individuals receiving services at the 

5 specified entity; 

6 ‘‘(II) limits or restricts the use of 

7 the health information technology in 

8 conjunction with other health informa9 tion technology; or 

10 ‘‘(III) conditions the provision of 

11 such remuneration on the referral of 

12 patients or business to the specified 

13 entity; 

14 ‘‘(ii) such remuneration is arranged 

15 for in a written agreement that is signed 

16 by the parties involved (or their represent17 atives) and that specifies the remuneration 

18 made and states that the provision of such 

19 remuneration is made for the primary pur20 pose of better coordination of care or im21 provement of health quality, efficiency, or 

22 research; and 

23 ‘‘(iii) the specified entity (or a rep24 resentative of such entity) has not taken 

25 any action to disable any basic feature of 


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1 any hardware or software component of 

2 such remuneration that would permit 

3 interoperability. 

4 ‘‘(B) HEALTH INFORMATION TECHNOLOGY

5 DEFINED.—For purposes of this paragraph, the 

6 term ‘health information technology’ means 

7 hardware, software, license, right, intellectual 

8 property, equipment, or other information tech9 nology (including new versions, upgrades, and 

10 connectivity) designed or provided primarily for 

11 the electronic creation, maintenance, or ex12 change of health information to better coordi13 nate care or improve health care quality, effi14 ciency, or research. 

15 ‘‘(C) SPECIFIED ENTITY DEFINED.—For 

16 purposes of this paragraph, the term ‘specified 

17 entity’ means an entity that is a hospital, group 

18 practice, prescription drug plan sponsor, a 

19 Medicare Advantage organization, or any other 

20 such entity specified by the Secretary, consid21 ering the goals and objectives of this section, as 

22 well as the goals to better coordinate the deliv23 ery of health care and to promote the adoption 

24 and use of health information technology.’’. 

25 (b) EFFECTIVE DATE; EFFECT ON STATE LAWS.— 


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1 (1) EFFECTIVE DATE.—The amendment made 

2 by subsection (a) shall take effect on the date that 

3 is 120 days after the date of the enactment of this 

4 Act. 

5 (2) PREEMPTION OF STATE LAWS.—No State 

6 (as defined in section 1101(a) of the Social Security 

7 Act (42 U.S.C. 1301(a)) for purposes of title XI of 

8 such Act) shall have in effect a State law that im9 poses a criminal or civil penalty for a transaction de10 scribed in section 1877(b)(6) of such Act, as added 

11 by subsection (a), if the conditions described in such 

12 section, with respect to such transaction, are met. 

13 (c) STUDY AND REPORT TO ASSESS EFFECT OF EX14 CEPTION ON HEALTH SYSTEM.— 

15 (1) IN GENERAL.—The Secretary of Health and 

16 Human Services shall conduct a study to determine 

17 the impact of the exception under section 1877(b)(6) 

18 of such Act (42 U.S.C. 1395nn(b)(6)), as added by 

19 subsection (a). In particular, the study shall examine 

20 the following: 

21 (A) The effectiveness of the exception in 

22 increasing the adoption of health information 

23 technology. 

24 (B) The types of health information tech25 nology provided under the exception. 


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1 (C) The extent to which the financial or 

2 other business relationships between providers 

3 under the exception have changed as a result of 

4 the exception in a way that adversely affects or 

5 benefits the health care system or choices avail6 able to consumers. 

7 (D) The impact of the adoption of health 

8 information technology on health care quality, 

9 cost, and access under the exception. 

10 (2) REPORT.—Not later than 3 years after the 

11 effective date described in subsection (b)(1), the Sec12 retary of Health and Human Services shall submit 

13 to Congress a report on the study under paragraph 

14 (1). 

15 SEC. 713. RULES OF CONSTRUCTION REGARDING USE OF 

16 CONSORTIA. 

17 (a) APPLICATION TO SAFE HARBOR FROM CRIMINAL

18 PENALTIES.—Section 1128B(b)(3) of the Social Security 

19 Act (42 U.S.C. 1320a–7b(b)(3)) is amended by adding 

20 after and below subparagraph (J), as added by section 

21 711(b)(1), the following: ‘‘For purposes of subparagraph 

22 (J), nothing in such subparagraph shall be construed as 

23 preventing a specified entity, consistent with the specific 

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1 ployers, and other interested entities to collectively pur2 chase and donate health information technology, or from 

3 offering health care providers a choice of health informa4 tion technology products in order to take into account the 

5 varying needs of such providers receiving such products.’’. 

6 (b) APPLICATION TO STARK EXCEPTION.—Para7 graph (6) of section 1877(b) of the Social Security Act 

8 (42 U.S.C. 1395nn(b)), as added by section 712(a), is 

9 amended by adding at the end the following new subpara10 graph: 

11 ‘‘(D) RULE OF CONSTRUCTION.—For pur12 poses of subparagraph (A), nothing in such 

13 subparagraph shall be construed as preventing 

14 a specified entity, consistent with the specific 

15 requirements of such subparagraph, from— 

16 ‘‘(i) forming a consortium composed 

17 of health care providers, payers, employers, 

18 and other interested entities to collectively 

19 purchase and donate health information 

20 technology; or 

21 ‘‘(ii) offering health care providers a 

22 choice of health information technology 

23 products in order to take into account the 

24 varying needs of such providers receiving 

25 such products.’’. 


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1 TITLE VIII—MISCELLANEOUS 

2 SEC. 801. DEDICATION OF MEDICAID AND REVENUE SAV3 INGS TO STRENGTHENING THE FINANCIAL 

4 SOLVENCY OF THE FEDERAL HOSPITAL IN5 SURANCE TRUST FUND. 

6 The third sentence of section 1817(a) of the Social 

7 Security Act (42 U.S.C. 1395(i)) is amended— 

8 (1) in paragraph (1), by striking ‘‘and’’ at the 

9 end; 

10 (2) in paragraph (2), by striking the period at 

11 the end and inserting ‘‘; and’’; and 

12 (3) by adding at the end the following: 

13 ‘‘(3) the revenues made available as a result of 

14 the amendments to title XIX and the Internal Rev15 enue Code of 1986 made by the Universal Health 

16 Care Choice and Access Act (as determined by the 

17 Secretary of the Treasury).’’. 

18 SEC. 802. HEALTH CARE CHOICE FOR VETERANS. 

19 Beginning not later than 2 years after the date of 

20 the enactment of this Act, the Secretary of Veterans Af21 fairs shall— 

22 (1) permit veterans, and survivors and depend23 ents of veterans, who are eligible for health care and 

24 services under the laws administered by the Sec25 retary to receive such care and services through such 


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1 non-Department of Veterans Affairs providers and 

2 facilities as the Secretary shall approve for purposes 

3 of this section; and 

4 (2) pursuant to such procedures as the Sec5 retary of Veteran Affairs shall prescribe for purposes 

6 of this section, make payments to such providers 

7 and facilities for the provision of such care and serv8 ices to veterans, and such survivors and dependents, 

9 at such rates as the Secretary shall specify in such 

10 procedures and in such manner so that the Sec11 retary ensures that the aggregate payments made by 

12 the Secretary to such providers and facilities do not 

13 exceed the aggregate amounts which the Secretary 

14 would have paid for such care and services if this 

15 section had not been enacted. 

16 SEC. 803. HEALTH CARE CHOICE FOR INDIANS. 

17 (a) IN GENERAL.—Beginning not later than 2 years 

18 after the date of enactment of this Act, the Secretary of 

19 Health and Human Services shall— 

20 (1) permit Indians who are eligible for health 

21 care and services under a health care program oper22 ated or financed by the Indian Health Service or by 

23 an Indian Tribe, Tribal Organization, or Urban In24 dian Organization (and any such other individuals 

25 who are so eligible as the Secretary may specify), to 


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1 receive such care and services through such non- In2 dian Health Service, Indian Tribe, Tribal Organiza3 tion, or Urban Indian Organization providers and 

4 facilities as the Secretary shall approve for purposes 

5 of this section; and 

6 (2) pursuant to such procedures as the Sec7 retary of Health and Human Services shall prescribe 

8 for purposes of this section, make payments to such 

9 providers and facilities for the provision of such care 

10 and services to Indians and individuals described in 

11 paragraph (1), at such rates as the Secretary shall 

12 specify in such procedures and in such manner so 

13 that the Secretary ensures that the aggregate pay14 ments made by the Secretary to such providers and 

15 facilities do not exceed the aggregate amounts which 

16 the Secretary would have paid for such care and 

17 services if this section had not been enacted. 

18 (b) DEFINITIONS.—In this section, the terms ‘‘In19 dian’’, ‘‘Indian Health Program’’, ‘‘Indian Tribe’’, ‘‘Tribal 

20 Organization’’, and ‘‘Urban Indian Organization’’ have 

21 the meanings given those terms in section 4 of the Indian 

22 Health Care Improvement Act. 

Æ 


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