I

105TH CONGRESS

2D SESSION H. R. 4739

To amend the Internal Revenue Code of 1986 and title XVIII of the Social

Security Act to provide for comprehensive financing for graduate medical

education.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 8, 1998

Mr. CARDIN (for himself, Mr. STARK, and Mr. JEFFERSON) introduced the

following bill; which was referred to the Committee on Ways and Means,

and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such

provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 and title

XVIII of the Social Security Act to provide for comprehensive financing for graduate medical education.

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 ‘‘All-Payer Graduate Medical Education Act’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.
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TITLE I—HEALTH CARE WORKFORCE TRUST FUND; PAYMENTS

TO TEACHING HOSPITALS

Subtitle A—Establishment and Financing of Fund

Sec. 101. Establishment.

Sec. 102. Financing for fund; fees on insured and self-insured health plans.

Subtitle B—Additional Payments to Teaching Hospitals

Sec. 111. Formula payments regarding private-sector share of costs of graduate

medical education.

Sec. 112. Application for payments.

Sec. 113. Annual amount of payments.

Sec. 114. Definitions.

Sec. 115. Study.

Subtitle C—Conforming Changes in Medicare Payment for Direct Costs of

Graduate Medical Education

Sec. 121. Changes in medicare formula for payment of direct GME costs.

Sec. 122. Rural exception from limitation on number of residents.

TITLE II—HEALTH WORKFORCE PRIORITIES

Sec. 201. Plan to reduce residency training positions.

TITLE III—MODIFICATION IN MEDICARE PAYMENT FOR IME AND

DSH

Sec. 301. Modification regarding payments for indirect costs of graduate medical education.

Sec. 302. Modification of DSH.

TITLE IV—ADDITIONAL PAYMENTS FOR GRADUATE EDUCATION

FOR NON-PHYSICIAN HEALTH PROFESSIONALS

Sec. 401. Payments for graduate education for non-physician health professionals.
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1 TITLE I—HEALTH CARE WORK2 FORCE TRUST FUND; PAY3 MENTS TO TEACHING HOS4 PITALS

5 Subtitle A—Establishment and

6 Financing of Fund

7 SEC. 101. ESTABLISHMENT.

8 (a) IN GENERAL.—Subchapter A of chapter 98 of the

9 Internal Revenue Code of 1986 (relating to trust fund

10 code) is amended by adding at the end the following new

11 section:

12 ‘‘SEC. 9511. HEALTH CARE WORKFORCE TRUST FUND.

13 ‘‘(a) CREATION OF TRUST FUND.—There is estab14 lished in the Treasury of the United States a trust fund

15 to be known as the ‘Health Care Workforce Trust Fund’,

16 consisting of such amounts as may be appropriated or

17 credited to such Trust Fund as provided in this section

18 and section 9602(b).

19 ‘‘(b) TRANSFERS TO FUND.—

20 (1) IN GENERAL.—There are hereby appro21 priated to the Health Care Workforce Trust Fund—

22 ‘‘(A) amounts equivalent to the net reve23 nues received in the Treasury from the fees im24 posed under subchapter B of chapter 34 (relat-
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1 ing to fees on health insurance and health-relat2 ed administrative services);

3 ‘‘(B) subject to paragraph (2), from the

4 Federal Hospital Insurance Trust Fund (estab5 lished under section 1817 of the Social Security

6 Act) amounts determined by the Secretary of

7 Health and Human Services to be equivalent to

8 the reductions in payments made from such

9 Trust Fund by virtue of the amendments made

10 by the All-Payer Graduate Medical Education

11 Act; and

12 ‘‘(C) subject to paragraph (2), from the

13 Federal Supplementary Medical Insurance

14 Trust Fund (established under section 1841 of

15 the Social Security Act) amounts determined by

16 the Secretary of Health and Human Services to

17 be equivalent to the reductions in payments

18 made from such Trust Fund by virtue of the

19 amendments made by the All-Payer Graduate

20 Medical Education Act.

21 ‘‘(2) LIMITATION ON TRANSFERS FROM MEDI22 CARE TRUST FUNDS.—If the sum of the amounts

23 otherwise transferred (but for this paragraph) under

24 subparagraph (B) and (C) of paragraph (1) for a

25 fiscal year would exceed $300,000,000, the amounts
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1 so transferred under each respective subparagraph

2 shall be reduced in a pro-rated manner so that the

3 total so transferred is equal to $300,000,000.

4 ‘‘(c) EXPENDITURES FROM FUND.—Amounts in the

5 Health Care Workforce Trust Fund are available to the

6 Secretary of Health and Human Services for making pay7 ments under sections 111 and 401 of the All-Payer Grad8 uate Medical Education Act.

9 ‘‘(d) NET REVENUES.—For purposes of this section,

10 the term ‘net revenues’ means the amount estimated by

11 the Secretary based on the excess of—

12 ‘‘(1) the fees received in the Treasury under

13 subchapter B of chapter 34, over

14 ‘‘(2) the decrease in the tax imposed by chapter

15 1 resulting from the fees imposed by such sub16 chapter.’’.

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

18 for such subchapter A is amended by adding at the end

19 thereof the following new item:

‘‘Sec. 9511. Health Care Workforce Trust Fund.’’.

20 SEC. 102. FINANCING FOR FUND; FEES ON INSURED AND

21 SELF-INSURED HEALTH PLANS.

22 (a) GENERAL RULE.—Chapter 34 of the Internal

23 Revenue Code of 1986 is amended by adding at the end

24 the following new subchapter:
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1 ‘‘Subchapter B—Insured and Self-Insured

2 Health Plans

‘‘Sec. 4375. Health insurance and health-related administrative

services.

‘‘Sec. 4376. Self-insured health plans.

‘‘Sec. 4377. Definitions and special rules.

3 ‘‘SEC. 4375. HEALTH INSURANCE AND HEALTH-RELATED

4 ADMINISTRATIVE SERVICES.

5 ‘‘(a) IMPOSITION OF FEE.—There is hereby im6 posed—

7 ‘‘(1) on each specified health insurance policy,

8 a fee equal to 1 percent of the premiums received

9 under such policy, and

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

11 administrative services, a fee equal to 1 percent of

12 the amount so received.

13 ‘‘(b) LIABILITY FOR FEE.—

14 ‘‘(1) HEALTH INSURANCE.—The fee imposed by

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

16 policy.

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

19 paid by the person providing the health-related ad20 ministrative services.

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

22 purposes of this section—
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1 ‘‘(1) IN GENERAL.—Except as otherwise pro2 vided in this section, the term ‘specified health in3 surance policy’ means any accident or health insur4 ance policy issued with respect to individuals resid5 ing in the United States.

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

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

9 coverage provided under such policy relates to—

10 ‘‘(A) liabilities incurred under workers’

11 compensation laws,

12 ‘‘(B) tort liabilities,

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

14 of property,

15 ‘‘(D) credit insurance, or

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

17 Secretary may specify by regulations.

18 ‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES

19 OTHER COVERAGE.—In the case of any specified

20 health insurance policy under which amounts are

21 payable other than for accident and health coverage,

22 in determining the amount of the fee imposed by

23 subsection (a)(1) on any premium received under

24 such policy, there shall be excluded the amount of
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1 the charge for the non-accident and health coverage

2 if—

3 ‘‘(A) the charge for such non-accident and

4 health coverage is either separately stated in

5 the policy, or furnished to the policyholder in a

6 separate statement, and

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

8 to the total charges under the policy.

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

10 received under such a policy shall be subject to the

11 fees under subsection (a)(1).

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

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

16 ‘‘(i) such arrangement shall be treated

17 as a specified health insurance policy,

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

20 treated as premiums received for a speci21 fied health insurance policy, and

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

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

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

4 ‘‘(i) fixed payments or premiums are

5 received as consideration for any person’s

6 agreement to provide or arrange for the

7 provision of accident or health coverage to

8 residents of the United States, regardless

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

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

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

14 such services.

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

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

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

22 included in the premiums under such policy, and

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

24 of accident or health coverage, or performing other

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

2 4376(c)) established or maintained by another per3 son.

4 ‘‘SEC. 4376. SELF-INSURED HEALTH PLANS.

5 ‘‘(a) IMPOSITION OF FEE.—In the case of any appli6 cable self-insured health plan, there is hereby imposed a

7 fee for each month equal to 1 percent of the sum of—

8 ‘‘(1) the accident and health coverage expendi9 tures for such month under such plan, and

10 ‘‘(2) the direct administrative expenditures for

11 such month under such plan.

12 ‘‘(b) LIABILITY FOR FEE.—

13 ‘‘(1) IN GENERAL.—The fee imposed by sub14 section (a) shall be paid by the plan sponsor.

15 ‘‘(2) PLAN SPONSOR.—For purposes of para16 graph (1) the term ‘plan sponsor’ means—

17 ‘‘(A) the employer in the case of a plan es18 tablished or maintained by a single employer,

19 ‘‘(B) the employee organization in the case

20 of a plan established or maintained by an em21 ployee organization,

22 ‘‘(C) in the case of—

23 ‘‘(i) a plan established or maintained

24 by 2 or more employers or jointly by 1 or
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1 more employers and 1 or more employee

2 organizations,

3 ‘‘(ii) a multiple employer welfare ar4 rangement, or

5 ‘‘(iii) a voluntary employees’ bene6 ficiary association described in section

7 501(c)(9),

8 the association, committee, joint board of trust9 ees, or other similar group of representatives of

10 the parties who establish or maintain the plan,

11 or

12 ‘‘(D) the cooperative or association de13 scribed in subsection (c)(2)(F) in the case of a

14 plan established or maintained by such a coop15 erative or association.

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

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

19 or health coverage if—

20 ‘‘(1) any portion of such coverage is provided

21 other than through an insurance policy, and

22 ‘‘(2) such plan is established or maintained—

23 ‘‘(A) by one or more employers for the

24 benefit of their employees or former employees,
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1 ‘‘(B) by one or more employee organiza2 tions for the benefit of their members or former

3 members,

4 ‘‘(C) jointly by 1 or more employers and 1

5 or more employee organizations for the benefit

6 of employees or former employees,

7 ‘‘(D) by a voluntary employees’ beneficiary

8 association described in section 501(c)(9),

9 ‘‘(E) by any organization described in sec10 tion 501(c)(6), or

11 ‘‘(F) in the case of a plan not described in

12 the preceding subparagraphs, by a multiple em13 ployer welfare arrangement (as defined in sec14 tion 3(40) of Employee Retirement Income Se15 curity Act of 1974), a rural electric cooperative

16 (as defined in section 3(40)(B)(iv) of such Act),

17 or a rural telephone cooperative association (as

18 defined in section 3(40)(B)(v) of such Act).

19 ‘‘(d) ACCIDENT AND HEALTH COVERAGE EXPENDI20 TURES.—For purposes of this section—

21 ‘‘(1) IN GENERAL.—The accident and health

22 coverage expenditures of any applicable self-insured

23 health plan for any month is the aggregate expendi24 tures for such month for accident and health cov25 erage provided under such plan to the extent such
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1 expenditures are not subject to the fees under sec2 tion 4375.

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

4 determining accident and health coverage expendi5 tures during any month of any applicable self-in6 sured health plan, reimbursements (by insurance or

7 otherwise) received during such month for accident

8 and health coverage expenditures shall be taken into

9 account as a reduction in accident and health cov10 erage expenditures.

11 ‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—

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

13 the acquisition or improvement of land or for the ac14 quisition or improvement of any property to be used

15 in connection with the provision of accident and

16 health coverage which is subject to the allowance

17 under section 167, except that, for purposes of para18 graph (1), allowances under section 167 shall be

19 considered as expenditures.

20 ‘‘(e) DIRECT ADMINISTRATIVE EXPENDITURES.—

21 For purposes of this section, the term ‘direct administra22 tive expenditures’ means the administrative expenditures

23 under the plan to the extent such expenditures are not

24 subject to the fees under section 4375. In determining the
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1 amount of such expenditures, rules similar to the rules of

2 subsection (d)(3) shall apply.

3 ‘‘SEC. 4377. DEFINITIONS AND SPECIAL RULES.

4 ‘‘(a) DEFINITIONS.—For purposes of this sub5 chapter—

6 ‘‘(1) ACCIDENT AND HEALTH COVERAGE.—The

7 term ‘accident and health coverage’ means any cov8 erage which, if provided by an insurance policy,

9 would cause such policy to be a specified health in10 surance policy (as defined in section 4375(c)).

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

12 policy’ means any policy or other instrument where13 by a contract of insurance is issued, renewed, or ex14 tended.

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

16 the gross amount of premiums and other consider17 ation (including advance premiums, deposits, fees,

18 and assessments) arising from policies issued by a

19 person acting as the primary insurer, adjusted for

20 any return or additional premiums paid as a result

21 of endorsements, cancellations, audits, or retrospec22 tive rating.

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

24 States’ includes any possession of the United States.

25 ‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—
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1 ‘‘(1) IN GENERAL.—For purposes of this sub2 chapter—

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

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

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

8 except as provided in paragraph (2).

9 ‘‘(2) TREATMENT OF EXEMPT GOVERNMENTAL

10 PROGRAMS.—In the case of an exempt governmental

11 program—

12 ‘‘(A) no fee shall be imposed under section

13 4375 on any premium received pursuant to

14 such program or on any amount received for

15 health-related administrative services pursuant

16 to such program, and

17 ‘‘(B) no fee shall be imposed under section

18 4376 on any expenditures pursuant to such

19 program.

20 ‘‘(3) EXEMPT GOVERNMENTAL PROGRAM DE21 FINED.—For purposes of this subchapter, the term

22 ‘exempt governmental program’ means—

23 ‘‘(A) the insurance programs established

24 by parts A, B, and C of title XVIII of the So25 cial Security Act,
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1 ‘‘(B) the medical assistance program es2 tablished by title XIX or XXI of the Social Se3 curity Act,

4 ‘‘(C) any program established by Federal

5 law for providing medical care (other than

6 through insurance policies) to individuals (or

7 the spouses and dependents thereof) by reason

8 of such individuals being—

9 ‘‘(i) members of the Armed Forces of

10 the United States, or

11 ‘‘(ii) veterans, and

12 ‘‘(D) any program established by Federal

13 law for providing medical care (other than

14 through insurance policies) to members of In15 dian tribes (as defined in section 4(d) of the In16 dian Health Care Improvement Act).

17 ‘‘(c) TREATMENT AS TAX.—For purposes of subtitle

18 F, the fees imposed by this subchapter shall be treated

19 as if they were taxes.

20 ‘‘(d) NO COVER OVER TO POSSESSIONS.—Notwith21 standing any other provision of law, no amount collected

22 under this subchapter shall be covered over to any posses23 sion of the United States.’’
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1 (b) CLERICAL AMENDMENT.—Chapter 34 of such

2 Code is amended by striking the chapter heading and in3 serting the following:

4 ‘‘CHAPTER 34—TAXES ON CERTAIN

5 INSURANCE POLICIES

‘‘Subchapter A. Policies issued by foreign insurers.

‘‘Subchapter B. Insured and self-insured health plans.

6 ‘‘Subchapter A—Policies Issued By Foreign

7 Insurers’’.

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

9 this section shall apply with respect to premiums received

10 and expenses incurred after December 31, 1999.

11 Subtitle B—Additional Payments to

12 Teaching Hospitals

13 SEC. 111. FORMULA PAYMENTS REGARDING PRIVATE-SEC14 TOR SHARE OF COSTS OF GRADUATE MEDI15 CAL EDUCATION.

16 (a) IN GENERAL.—In the case of each teaching hos17 pital that in accordance with section 112 submits to the

18 Secretary an application for calendar year 2002 or any

19 subsequent calendar year (referred to in this title as an

20 ‘‘eligible hospital’’ for the year involved), the Secretary

21 shall in accordance with section 113 make payments for

22 such year to the hospital.
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1 (b) DEFINITIONS.—For purposes of this subtitle, the

2 term ‘‘teaching hospital’’ means any hospital that receives

3 payments under subsection (d)(5)(B) or (h) of section

4 1886 of the Social Security Act (relating to graduate med5 ical education), or that would be eligible to receive such

6 payments but for the fact that it is located in a State for

7 which a demonstration program under section 1814(b)(3)

8 of such Act is in effect.

9 SEC. 112. APPLICATION FOR PAYMENTS.

10 For purposes of section 111(a), an application for

11 payments under such section for a calendar year is in ac12 cordance with this section if—

13 (1) the application is submitted not later than

14 the date specified by the Secretary;

15 (2) the application contains the agreements re16 quired in this subtitle; and

17 (3) the application is in such form, is made in

18 such manner, and contains such agreements, assur19 ances, and information as the Secretary determines

20 to be necessary to carry out this subtitle.

21 SEC. 113. ANNUAL AMOUNT OF PAYMENTS.

22 (a) IN GENERAL.—From amounts in the Health Care

23 Workforce Trust Fund under section 9511 of the Internal

24 Revenue Code of 1986, the Secretary shall make payments
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1 under section 111 to an eligible hospital for a calendar

2 year as follows:

3 (1) Payments, made on a periodic basis, whose

4 sum is equal to the amount determined under sub5 section (c) for the hospital for the year (which

6 amount relates to the direct costs for graduate medi7 cal education attributable to certain individuals).

8 (2) Payments (in addition to payments under

9 paragraph (1)), made on a periodic basis, whose sum

10 is equal to the amount determined under subsection

11 (d) for the hospital for the year (which amount re12 lates to the per-discharge indirect costs of the hos13 pital for graduate medical education attributable to

14 certain individuals).

15 (b) EFFECTIVE DATES FOR PAYMENTS.—Payments

16 under paragraph (1) of subsection (a) are effective for por17 tions of cost reporting periods occurring on or after Janu18 ary 1, 2001. Payments under paragraph (2) of such sub19 section are effective for patient discharges occurring on

20 or after such date.

21 (c) AMOUNT OF PAYMENTS; DIRECT COSTS.—

22 (1) IN GENERAL.—For purposes of paragraph

23 (1) of subsection (a), the amount determined under

24 this subsection for an eligible hospital for a calendar

25 year is the product of—
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1 (A) the aggregate nonmedicare training

2 amount for the hospital, as defined in para3 graph (2); and

4 (B) the direct-cost Fund payout percent5 age, as defined in paragraph (4).

6 (2) AGGREGATE NONMEDICARE TRAINING

7 AMOUNT.—For purposes of this subtitle, the term

8 ‘‘aggregate nonmedicare training amount’’, with re9 spect to the eligible hospital involved, means (subject

10 to paragraph (3)(D)) an amount equal to the prod11 uct of subparagraphs (A) and (B), as follows:

12 (A) The number of full-time-equivalent

13 training participants in the approved physician

14 training programs of the hospital for the aca15 demic year in which the calendar year begins,

16 not to exceed the maximum total number per17 mitted under section 1886(h)(4)(F) of the So18 cial Security Act.

19 (B) An amount equal to the product of—

20 (i) the national average FTE wage-re21 lated compensation, as defined in para22 graph (3); and

23 (ii) a percentage equal to the fraction

24 of the total inpatient hospital and out25 patient hospital revenues (as established by
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1 the Secretary) during the cost reporting

2 period which are attributable to patients

3 with respect to whom payment may be

4 made under health insurance coverage

5 (whether through a group health plan or

6 otherwise) or under a group health plan.

7 For purposes of clause (ii), payment made

8 under the medicare or medicaid programs

9 (under titles XVIII or XIX of the Social Secu10 rity Act) shall not be treated as payment under

11 health insurance coverage.

12 (3) NATIONAL AVERAGE FTE WAGE-RELATED

13 COMPENSATION.—

14 (A) IN GENERAL.—For purposes of this

15 subtitle, the term ‘‘national average FTE wage16 related compensation’’ means the national aver17 age of the costs of resident salaries and related

18 fringe benefits per training participant for all

19 approved physician training programs and all

20 medical specialities, as adjusted under subpara21 graphs (B) and (C). Such national average shall

22 be based upon a national resident wage survey

23 for salaries and related fringe benefits as of

24 July 1, 1998, as determined by the Secretary
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1 and shall not include costs of overhead or su2 pervision.

3 (B) ANNUAL ADJUSTMENTS PER CON4 SUMER PRICE INDEX.—The national average

5 applicable under subparagraph (A) for a cal6 endar year for such programs is, subject to sub7 paragraph (C), the amount determined under

8 subparagraph (A) increased by the estimated

9 percentage change in the consumer price index

10 from the January 1999 through the midpoint of

11 the year involved, with appropriate adjustments

12 to reflect previous under-or over-estimations

13 under this subparagraph in the projected per14 centage change in the consumer price index.

15 (C) INDIVIDUAL ADJUSTMENTS PER AREA

16 WAGE INDEX.—The national average deter17 mined under subparagraph (A) and adjusted

18 under subparagraph (B) for a calendar year

19 shall, in the case of the approved physician

20 training programs of the eligible hospital in21 volved, be adjusted by a factor to reflect re22 gional differences in wage and wage-related

23 costs, as determined in accordance with the

24 area wage index applicable (as of the beginning

25 of such year) to hospitals in the labor-market
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1 area involved, as determined under section

2 1886(d)(3)(E) of the Social Security Act.

3 (D) ALTERNATIVE RULE FOR CERTAIN

4 HOSPITALS.—

5 (i) ELECTION FOR APPLICABILITY OF

6 RULE.—In the case of an eligible hospital

7 for which the election under section

8 1861(b)(7) of the Social Security Act was

9 in effect on July 1, 1998, and has re10 mained in effect continuously from such

11 date, the following applies:

12 (I) The hospital may, with re13 spect to the determination under

14 paragraph (2) of the aggregate non15 medicare training amount for the hos16 pital, elect to have the alternative rule

17 described in clause (ii) applied to the

18 hospital.

19 (II) If the election under such

20 section 1861(b)(7) ceases to be in ef21 fect, any election made by the hospital

22 under subclause (I) is terminated.

23 (III) If the hospital has made the

24 election under subclause (I) and sub25 sequently requests that the election be
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1 terminated, the Secretary shall ap2 prove the request. Upon the approval

3 of the request, the hospital may not

4 subsequently elect to have the alter5 native rule applied to the hospital.

6 (ii) DESCRIPTION OF ALTERNATIVE

7 RULE.—With respect to a determination

8 under paragraph (2) of the aggregate non9 medicare training amount for an eligible

10 hospital that has made the election under

11 clause (i), the alternative rule described in

12 this clause is as follows:

13 (I) In lieu of the applicability of

14 the national FTE training amount

15 (for purposes of paragraph (2)(B)(i)),

16 the Secretary shall apply an amount

17 equal to the approved FTE resident

18 amount in effect for the hospital

19 under section 1886(h)(2) of the Social

20 Security Act.

21 (II) Subject to the modification

22 applied under subclause (I), the Sec23 retary shall determine an amount

24 under paragraph (2).
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1 (III) The Secretary shall deter2 mine an amount equal to the product

3 of the fraction determined under

4 paragraph (2)(B)(ii) and the amount

5 of the physician costs of services rec6 ognized under section 1861(v)(1) of

7 the Social Security Act pursuant to

8 the election of the hospital under sec9 tion 1861(b)(7) of such Act.

10 (IV) In lieu of the applicability of

11 the aggregate nonmedicare training

12 amount (for purposes of paragraph

13 (1)(A)), the Secretary shall apply an

14 amount equal to the sum of the

15 amount determined under subclause

16 (II) and the amount determined under

17 subclause (III).

18 (4) DIRECT-COST FUND PAYOUT PERCENT19 AGE.—For purposes of this subtitle, the term ‘‘di20 rect-cost Fund payout percentage’’, with respect to

21 the calendar year involved, means a percentage equal

22 to the ratio of—

23 (A) the amount available in the Health

24 Care Workforce Trust Fund for such year (as

25 estimated by the Secretary); to
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1 (B) an amount equal to the total amount

2 of payments under subsection (a)(1) that would

3 be made to eligible hospitals for such year if

4 each hospital received, pursuant to paragraph

5 (1), 100 percent of the aggregate nonmedicare

6 training amount determined for the hospital.

7 (d) AMOUNT OF PAYMENTS; INDIRECT COSTS.—

8 (1) IN GENERAL.—For purposes of paragraph

9 (2) of subsection (a), the amount determined under

10 this subsection for an eligible hospital for a calendar

11 year is the product of—

12 (A) an amount equal to the sum of the

13 nonmedicare per-discharge supplemental pay14 ments, as defined in paragraph (2); and

15 (B) the indirect-cost Fund payout percent16 age, as defined in paragraph (3).

17 (2) NONMEDICARE PER-DISCHARGE SUPPLE18 MENTAL PAYMENT.—

19 (A) IN GENERAL.—For purposes of this

20 subtitle, the term ‘‘nonmedicare per-discharge

21 supplemental payment’’, with respect to a cal22 endar year, means a payment made to an eligi23 ble hospital for a discharge during the year of

24 a patient described in subparagraph (B), the
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1 amount of which payment is determined in ac2 cordance with subparagraph (C).

3 (B) RELEVANT PATIENTS.—For purposes

4 of subparagraph (A), a patient described in this

5 subparagraph is a patient who is not—

6 (i) entitled to benefits under part A of

7 title XVIII of the Social Security Act; or

8 (ii) eligible for medical assistance

9 under title XIX of such Act.

10 (C) AMOUNT OF PER-DISCHARGE PAY11 MENT.—For purposes of subparagraph (A), the

12 amount of the payment under such subpara13 graph for the discharge of a patient described

14 in subparagraph (B) is the product of—

15 (i) the amount which would be deter16 mined with respect to the discharge under

17 section 1886(d)(1)(A)(iii) of the Social Se18 curity Act if the patient were entitled to

19 benefits under part A of title XVIII of

20 such Act, adjusted by the Secretary to take

21 into account differences in health status,

22 utilization of services, and other demo23 graphic characteristics among individuals

24 entitled to benefits under part A of title
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1 XVIII of such Act and individuals who are

2 not so entitled; and

3 (ii) the percentage applicable to the

4 hospital under section 1886(d)(5)(B)(ii) of

5 such Act.

6 (D) SPECIAL RULE FOR CERTAIN HOS7 PITALS.—In the case of a hospital that is lo8 cated in a State for which a demonstration pro9 gram under section 1814(b)(3) of the Social Se10 curity Act is in effect, the Secretary shall, for

11 purposes of applying subparagraph (C) to dis12 charges from the hospital, make determinations

13 under such subparagraph as if paragraphs

14 (1)(A)(iii) and (5)(B)(ii) of section 1886(d) of

15 such Act applied to the hospital.

16 (3) INDIRECT-COST FUND PAYOUT PERCENT17 AGE.—For purposes of this subtitle, the term ‘‘indi18 rect-cost Fund payout percentage’’, with respect to

19 the calendar year involved, means a percentage equal

20 to the ratio of—

21 (A) the amount available in the Health

22 Care Workforce Trust Fund for such year re23 maining after payments for the year have been

24 made under subsection (a)(1) (as such amount

25 is estimated by the Secretary); to
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1 (B) the total amount of payments under

2 subsection (a)(2) that would be made to eligible

3 hospitals for such year if each hospital received,

4 pursuant to paragraph (1), 100 percent of an

5 amount equal to the sum of the nonmedicare

6 per-discharge supplemental payments deter7 mined for the hospital.

8 (e) DEFINITIONS.—For purposes of this subtitle, the

9 term ‘‘full-time-equivalent training participant’’ means a

10 full-time equivalent resident of the hospital as determined

11 under section 1886(h)(4) of the Social Security Act for

12 the cost reporting period involved.

13 SEC. 114. DEFINITIONS.

14 For purposes of this subtitle:

15 (1) The term ‘‘aggregate nonmedicare training

16 amount’’ has the meaning given such term in section

17 113(c)(2).

18 (2) The term ‘‘direct-cost Fund payout percent19 age’’ has the meaning given such term in section

20 113(c)(4).

21 (3) The term ‘‘full-time-equivalent training par22 ticipant’’ has the meaning given such term in section

23 113(e).
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1 (4) The term ‘‘indirect-cost Fund payout per2 centage’’ has the meaning given such term in section

3 113(d)(3).

4 (5) The term ‘‘national average FTE wage-re5 lated compensation’’ has the meaning given such

6 term in section 113(c)(3).

7 (6) The term ‘‘nonmedicare per-discharge sup8 plemental payment’’ has the meaning given such

9 term in section 113(d)(2).

10 (7) The term ‘‘Secretary’’ means the Secretary

11 of Health and Human Services, unless the context of

12 usage indicates otherwise.

13 (8) The term ‘‘teaching hospital’’ has the mean14 ing given such term in section 111(b).

15 SEC. 115. STUDY.

16 (a) STUDY.—The Secretary of Health and Human

17 Services shall conduct a study of the impact of this sub18 title.

19 (b) REPORT.—Not later than 5 years after the date

20 that payments are first made under this subtitle, the Sec21 retary shall submit to Congress a report on such study

22 and shall include such recommendations on the continu23 ation of payments under this subtitle, and such changes

24 in such payments, as the Secretary deems appropriate.
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1 Subtitle C—Conforming Changes in

2 Medicare Payment for Direct

3 Costs of Graduate Medical Edu4 cation

5 SEC. 121. CHANGES IN MEDICARE FORMULA FOR PAYMENT

6 OF DIRECT GME COSTS.

7 (a) USE OF NATIONAL AVERAGE FTE WAGE-RELAT8 ED COMPENSATION AS BASIS FOR PAYMENT.—Section

9 1886(h)(3)(B)(i) of the Social Security Act (42 U.S.C.

10 1395ww(h)(3)(B)(i)) is amended by inserting ‘‘(or, for

11 portions of cost reporting periods occurring on or after

12 January 1, 2001, in the case of a hospital that does not

13 have in effect the election described in section

14 113(c)(3)(D)(i) of the All-Payer Graduate Medical Edu15 cation Act, the applicable national average FTE wage-re16 lated compensation, as determined under section

17 113(c)(3) of such Act)’’ after ‘‘for that period’’.

18 (b) ALLOCATION BASED ON MEDICARE REVE19 NUES.—Section 1886(h)(3) of such Act (42 U.S.C.

20 1395ww(h)(3)) is amended—

21 (1) in subparagraph (C), by inserting before the

22 period at the end the following: ‘‘, or, for portions

23 of a cost reporting period occurring on or after Jan24 uary 1, 2001, in the case of a hospital that does not

25 have in effect the election described in section
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1 113(c)(3)(D)(i) of the All-Payer Graduate Medical

2 Education Act, the fraction of the total inpatient

3 hospital and outpatient hospital revenues (as estab4 lished by the Secretary) during the reporting period

5 which is attributable to patients with respect to

6 whom payment may be made under this title’’; and

7 (2) in subparagraph (D)(i)(II), by inserting be8 fore the period at the end the following: ‘‘or, for por9 tions of a cost reporting period occurring on or after

10 January 1, 2001, in the case of a hospital that does

11 not have in effect the election described in section

12 113(c)(3)(D)(i) of the All-Payer Graduate Medical

13 Education Act, the fraction of the total inpatient

14 hospital and outpatient hospital revenues (as estab15 lished by the Secretary) during the reporting period

16 which is attributable to such enrolled individuals’’.

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

18 this section apply to portions of cost reporting periods oc19 curring on or after January 1, 2001.

20 SEC. 122. RURAL EXCEPTION FROM LIMITATION ON NUM21 BER OF RESIDENTS.

22 (a) IN GENERAL.—Section 1886 of the Social Secu23 rity Act (42 U.S.C. 1395ww) is amended—

24 (1) in subsection (d)(5)(B), by adding at the

25 end the following: ‘‘The Secretary shall provide for
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1 reasonable exemptions and exceptions from the pre2 vious sentence in the case of a hospital that has resi3 dents who are assigned to serve a rural area.’’; and

4 (2) in subsection (h)(4)(F), by adding at the

5 end the following: ‘‘The Secretary shall provide for

6 reasonable exemptions and exceptions from the pre7 vious sentence in the case of a hospital that has resi8 dents who are assigned to serve a rural area.’’.

9 (b) EFFECTIVE DATES.—The amendments made

10 by—

11 (1) subsection (a)(1) apply to discharges occur12 ring on or after January 1, 2000; or

13 (2) subsection (a)(2) apply to cost reporting pe14 riods beginning on or after January 1, 2000.

15 TITLE II—HEALTH WORKFORCE

16 PRIORITIES

17 SEC. 201. PLAN TO REDUCE RESIDENCY TRAINING POSI18 TIONS.

19 (a) IN GENERAL.—The Secretary of Health and

20 Human Services shall develop and implement a plan to

21 reduce beginning with the residency year that begins July

22 1, 2005, the number of first year training positions in

23 medical residency training programs in the United States

24 to 110 percent of the annual number of students graduat25 ing from a medical school in the United States.
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1 (b) MONITORING DISTRIBUTION.—In implementing

2 the plan under this section, the Secretary shall monitor

3 the distribution of resident specialties in order to assure

4 that there is an adequate proportion of primary care phy5 sicians to fulfill the country’s needs and to ensure access

6 to health care for underserved populations.

7 (c) CONSULTATION.—The plan under this section

8 shall be developed in conjunction with the Institute of

9 Medicine, the Council on Graduate Medical Education, the

10 Association of American Medical Colleges, the American

11 Hospital Association, the American Medical Association,

12 the American Osteopathic Association, and other organi13 zations deemed appropriate by the Secretary.

14 (d) REPORT TO CONGRESS.—Not later than 1 year

15 after the date of the enactment of this Act, the Secretary

16 shall submit to the Committee on Ways and Means in the

17 House of Representatives, and to the Committee on Fi18 nance in the Senate, a report on providing plan developed

19 under this section.

20 (e) ENFORCEMENT.—

21 (1) IN GENERAL.—Notwithstanding any other

22 provision of law, but subject to paragraph (2), for

23 purposes of computing the amount of payment to be

24 made under subsection (d)(5)(B) or (h) of section

25 1886 of the Social Security Act (42 U.S.C. 1395ww)
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1 for any hospital that the Secretary determines has

2 a medical residency training program in which the

3 number of first year residents exceeds the maximum

4 number permitted for such program under the plan

5 implemented under subsection (a), the number of

6 residents counted shall be reduced by 5 multiplied by

7 the number of such excess.

8 (2) EXCEPTION FOR HOSPITALS ELECTIVE AL9 TERNATIVE TREATMENT.—Paragraph (1) does not

10 apply to a hospital for which the election under sec11 tion 1861(b)(7) of the Social Security Act was in ef12 fect on July 1, 1998.

13 TITLE III—MODIFICATION IN

14 MEDICARE PAYMENT FOR

15 IME AND DSH

16 SEC. 301. MODIFICATION REGARDING PAYMENTS FOR INDI17 RECT COSTS OF GRADUATE MEDICAL EDU18 CATION.

19 (a) MODIFICATION FROM 5.5% TO 4.8%.—Section

20 1886(d)(5)(B)(ii) of the Social Security Act (42 U.S.C.

21 1395ww(d)(5)(B)(ii)) is amended—

22 (1) by striking ‘‘and’’ at the end of subclause

23 (IV),

24 (2) by amending subclause (V) to read as fol25 lows:
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1 ‘‘(V) during fiscal year 2001, ‘c’ is

2 equal to 1.35; and’’; and

3 (3) by adding at the end the following:

4 ‘‘(VI) on or after October 1, 2001, ‘c’

5 is equal to 1.18.’’.

6 (b) REPORTING OF IME PAYMENTS.—The Secretary

7 of Health and Human Services, in collaboration with the

8 Institute of Medicine, the Council on Graduate Medical

9 Education, the Association of American Medical Colleges,

10 the American Hospital Association, and other organiza11 tions deemed appropriate by the Secretary, shall develop

12 and implement a plan for hospitals that receive additional

13 payments under section 1886(d)(5)(B) of the Social Secu14 rity Act to report annually to the Secretary information

15 on how such hospitals contributed to education, improve16 ments in clinical services and research infrastructure, and

17 community services operated by or in such hospitals. The

18 first such report shall be submitted for cost reporting peri19 ods beginning during fiscal year 2002.

20 SEC. 302. MODIFICATION OF DSH.

21 (a) COLLECTION OF CHARGE DATA.—Section

22 1886(d)(5)(F) of the Social Security Act (42 U.S.C.

23 1395ww(d)(5)(F)) is amended by adding at the end the

24 following new clause:
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1 ‘‘(x) The Secretary shall collect from all subsection

2 (d) hospitals annual data on inpatient and outpatient

3 charges, including all such charges—

4 ‘‘(I) for all patients;

5 ‘‘(II) for patients who are eligible for benefits

6 (excluding any State supplementation) under the

7 supplemental security income program under title

8 XVI and entitled to benefits under part A;

9 ‘‘(III) for patients who are entitled to (or, if

10 they applied, would be eligible for) medical assist11 ance under title XIX;

12 ‘‘(IV) for patients who are beneficiaries of indi13 gent care programs sponsored by State or local gov14 ernments; and

15 ‘‘(V) to the extent that payment is not made

16 because of an inability of the patient to pay (or have

17 payment made on the patient’s behalf for) such

18 charges.’’.

19 (b) REVISION OF FORMULA FOR DISPROPORTIONATE

20 PATIENT PERCENTAGE.—Clause (vi) of such section is

21 amended to read as follows:

22 ‘‘(vi) In this subparagraph, the term ‘disproportion23 ate patient percentage’ means, with respect to a cost re24 porting period of a hospital—
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1 ‘‘(I) the charges described in subclauses (II)

2 through (V) of clause (x) for such period; divided by

3 (II) the charges described in clause (x)(I) for such

4 period.’’.

5 (c) ESTABLISHING GENERAL QUALIFYING DIS6 PROPORTIONATE PATIENT PERCENTAGE THRESHOLD TO

7 COVER HALF OF PPS HOSPITALS.—Clause (v) of such

8 section is amended by striking ‘‘equals, or exceeds—’’ and

9 all that follows and inserting ‘‘equals or exceeds a thresh10 old percentage, which is established by the Secretary in

11 a manner so that, if the amendments made by section 302

12 of the All-Payer Graduate Medical Education Act had

13 been in effect for cost reporting periods ending in fiscal

14 year 2000, 50 percent of subsection (d) hospitals would

15 have been eligible for an additional payment under this

16 subparagraph for such periods. The Secretary shall estab17 lish such threshold percentage based upon data collected

18 by the Secretary under clause (x) for such cost reporting

19 periods.’’.

20 (d) ESTABLISHING UNIFORM GENERAL PAYMENT

21 FORMULA.—Such section is further amended—

22 (1) in clause (iv), by striking ‘‘and that—’’ and

23 all that follows and inserting ‘‘is equal to (P–

24 T)(CF), where—
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1 ‘‘(I) ‘P’ is the hospital’s disproportionate pa2 tient percentage (as defined in clause (vi));

3 ‘‘(II) ‘T’ is equal to the threshold percentage

4 established by the Secretary under clause (v); and

5 ‘‘(III) ‘CF’ is equal to such conversion factor as

6 the Secretary may establish so that, applying such

7 conversion factor as if the amendments made by sec8 tion 302 of the All-Payer Graduate Medical Edu9 cation Act had been in effect for cost reporting peri10 ods ending in fiscal year 2000, the total of the addi11 tional payments that would have been made under

12 this subparagraph is equal to the total of the pay13 ments actually made under this subparagraph (not

14 taking into account such amendments).

15 The Secretary shall establish the conversion factor under

16 subclause (III) based upon data collected by the Secretary

17 under clause (x) for cost reporting periods ending in fiscal

18 year 2000.’’; and

19 (2) by striking clauses (vii) and (viii).

20 (e) CARVING OUT DSH PAYMENTS FROM PAYMENTS

21 TO MEDICARE+CHOICE ORGANIZATIONS AND PAYING

22 THE AMOUNTS DIRECTLY TO DSH HOSPITALS TREATING

23 MEDICARE+CHOICE ENROLLEES.—

24 (1) IN GENERAL.—Section 1853(c)(3) of the

25 Social Security Act (42 U.S.C. 1395w–23(c)(3)), as
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1 inserted by section 4001 of the Balanced Budget Act

2 of 1997, is amended—

3 (A) in subparagraph (A), by striking ‘‘sub4 paragraph (B)’’ and inserting ‘‘subparagraphs

5 (B) and (D)’’;

6 (B) by redesignating subparagraph (D) as

7 subparagraph (E); and

8 (C) by inserting after subparagraph (C)

9 the following new subparagraph:

10 ‘‘(D) REMOVAL OF PAYMENTS ATTRIB11 UTABLE TO DISPROPORTIONATE SHARE PAY12 MENTS FROM CALCULATION OF ADJUSTED AV13 ERAGE PER CAPITA COST.—

14 ‘‘(i) IN GENERAL.—In determining

15 the area-specific Medicare+Choice capita16 tion rate under subparagraph (A) for a

17 year (beginning with 2002), the annual per

18 capita rate of payment for 1998 deter19 mined under section 1876(a)(1)(C) shall be

20 adjusted, subject to clause (ii) to exclude

21 from the rate the additional payments that

22 the Secretary estimates were payment dur23 ing 1997 for additional payments described

24 in section 1886(d)(5)(F).
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1 ‘‘(ii) TREATMENT OF PAYMENTS COV2 ERED UNDER STATE HOSPITAL REIM3 BURSEMENT SYSTEM.—To the extent that

4 the Secretary estimates that an annual per

5 capita rate of payment for 1997 described

6 in clause (i) reflects payments to hospitals

7 reimbursed under section 1814(b)(3), the

8 Secretary shall estimate a payment adjust9 ment that is comparable to the payment

10 adjustment that would have been made

11 under clause (i) if the hospitals had not

12 been reimbursed under such section.’’.

13 (2) ADDITIONAL PAYMENTS FOR MANAGED

14 CARE ENROLLEES.—Section 1886(d)(5)(F) of such

15 Act ((42 U.S.C. 1395ww(d)(5)(F)) is amended—

16 (A) in clause (ii), by striking ‘‘clause (ix)’’

17 and inserting ‘‘clauses (ix) and (x)’’, and

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

19 ‘‘(ix)(I) For portions of cost reporting periods occur20 ring on or after January 1, 2002, the Secretary shall pro21 vide for an additional payment amount for each applicable

22 discharge of any subsection (d) hospital that is a dis23 proportionate share hospital (as described in clause (i)).

24 ‘‘(II) For purposes of this clause, the term ‘applicable

25 discharge’ means the discharge of any individual who is
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1 enrolled under a risk-sharing contract with an eligible or2 ganization under section 1876 and who is entitled to bene3 fits under part A or any individual who is enrolled with

4 a Medicare+Choice organization under part C.

5 ‘‘(III) The amount of the payment under this clause

6 with respect to any applicable discharge shall be equal to

7 the estimated average per discharge amount that would

8 otherwise have been paid under this subparagraph if the

9 individuals had not been enrolled as described in subclause

10 (II).

11 ‘‘(IV) The Secretary shall establish rules for an addi12 tional payment amount, for any hospital reimbursed under

13 a reimbursement system authorized under section

14 1814(b)(3) if such hospital would qualify as a dispropor15 tionate share hospital under clause (i) were it not so reim16 bursed. Such payment shall be determined in the same

17 manner as the amount of payment is determined under

18 this clause for disproportionate share hospitals.’’.

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

20 subsections (a) through (d) of this section apply to pay21 ments for discharges occurring on or after January 1,

22 2002.
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1 TITLE IV—ADDITIONAL PAY2 MENTS FOR GRADUATE EDU3 CATION FOR NON-PHYSICIAN

4 HEALTH PROFESSIONALS

5 SEC. 401. PAYMENTS FOR GRADUATE EDUCATION FOR

6 NON-PHYSICIAN HEALTH PROFESSIONALS.

7 (a) DEVELOPMENT OF PLAN.—

8 (1) IN GENERAL.—Not later than 3 years after

9 the date of the enactment of this Act, the Secretary

10 of Health and Human Services shall develop (and

11 submit to Congress a report on) a plan to provide

12 support to institutions that provide graduate health

13 care education for non-physician health profes14 sionals.

15 (2) CONSULTATION.—The Secretary shall de16 velop the plan in consultation with the Council on

17 Graduate Medical Education, the Institute of Medi18 cine, the American Hospital Association, the Asso19 ciation of American Medical Colleges, the American

20 Nurses Association, the American Physical Therapy

21 Association, the American Occupational Therapy As22 sociation, the American Speech-Language-Hearing

23 Association, and other organizations as deemed ap24 propriate by the Secretary.
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1 (b) PAYMENTS.—For each fiscal year, beginning with

2 first fiscal year that begins after the report under sub3 section (a) has been submitted to Congress, the Secretary

4 of Health and Human Services shall provide from the

5 Health Care Workforce Trust Fund (established under

6 section 9511 of the Internal Revenue Code of 1986) for

7 support in the aggregate amount of $300,000,000 for in8 stitutions providing graduate health care education for

9 non-physician health professionals. Such support shall be

10 provided under such terms and conditions as the Secretary

11 establishes in order to carry out the plan developed under

12 subsection (a).

Æ