II 

109TH CONGRESS 

2D SESSION S. 3701 

To determine successful methods to provide protection from catastrophic 

health expenses for individuals who have exceeded health insurance lifetime limits, to provide catastrophic health insurance coverage for uninsured individuals, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 20, 2006 

Mr. SMITH (for himself and Mr. WYDEN) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To determine successful methods to provide protection from 

catastrophic health expenses for individuals who have 

exceeded health insurance lifetime limits, to provide catastrophic health insurance coverage for uninsured individuals, 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. 

4 This Act may be cited as the ‘‘Catastrophic Health 

5 Coverage Promotion Act’’. 


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1 SEC. 2. DEMONSTRATION PROJECTS. 

2 (a) IN GENERAL.—Not later than 6 months after the 

3 date of enactment of this Act, the Secretary of Health and 

4 Human Services (referred to in this Act as the ‘‘Sec5 retary’’) shall establish not more than 6 demonstration 

6 projects in accordance with the provisions of this section 

7 to provide— 

8 (1) in conjunction with the program under title 

9 XVIII of the Social Security Act (42 U.S.C. 1395 et 

10 seq.), health insurance coverage for individuals 

11 who— 

12 (A) are not eligible for benefits under 

13 Medicare or Medicaid program and who have 

14 exceeded $10,500 in out-of-pocket health care 

15 costs in a year, or an adjusted amount based on 

16 the average out-of-pocket costs of individuals 

17 with catastrophic illnesses in a State for the 

18 year, but in no case less than $8,000 and not 

19 more than $15,000 in out-of-pocket health care 

20 costs during such year; or 

21 (B) were receiving benefits under Medicare 

22 or Medicaid but who have exhausted their eligi23 bility for such benefits and any additional pri24 vate health insurance coverage; and 

25 (2) in conjunction with the program under title 

26 XIX of the Social Security Act (42 U.S.C. 1396 et 


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1 seq.), health insurance coverage for catastrophic 

2 health care expenses, including prevention benefits, 

3 to individuals who do not have health insurance cov4 erage. 

5 (b) DESIGN OF DEMONSTRATION PROJECTS.—The 

6 Secretary shall ensure that the demonstration projects 

7 carried out under this section are conducted in a manner 

8 that will, to the greatest extent practicable, allow for com9 parisons of the information resulting from the evaluations 

10 of such programs under subsection (e). 

11 (c) NUMBER AND REQUIREMENTS FOR DEMONSTRA12 TION PROJECTS.— 

13 (1) NUMBER.—The Secretary shall establish, in 

14 accordance with this subsection— 

15 (A) not less than 2 demonstration projects 

16 to provide health insurance coverage under sub17 section (a)(1); 

18 (B) not less than 2 demonstration projects 

19 to provide catastrophic coverage under sub20 section (a)(2); and 

21 (C) if funds remain available after com22 plying with subparagraphs (A) and (B), addi23 tional demonstration projects under subsection 

24 (a). 


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1 (2) REQUIREMENTS FOR PROJECTS UNDER

2 SUBSECTION (A)(1).—In designing the demonstration 

3 projects under subsection (a)(1), the Secretary 

4 shall— 

5 (A) use State risk pools; 

6 (B) use reinsurance mechanisms for small 

7 businesses; 

8 (C) use public or private arrangements for 

9 the provision of affordable health insurance cov10 erage to cover catastrophic health care ex11 penses; and 

12 (D) use any combination of such arrange13 ments. 

14 (3) REQUIREMENTS FOR PROJECTS UNDER

15 SUBSECTION (A)(2).— 

16 (A) IN GENERAL.—In designing the dem17 onstration projects under subsection (a)(2) the 

18 Secretary shall— 

19 (i) use a catastrophic health insurance 

20 product administered by private health 

21 plans that shall— 

22 (I) be sold in both the individual 

23 and small group insurance markets; 

24 (II) offer a deductible of not less 

25 than $5,000 for an individual and 


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1 $7,500 for a family, a deductible that 

2 is indexed to the individual’s or fam3 ily’s income level, or an adjusted de4 ductible amount based on the average 

5 out-of-pocket costs of individuals or 

6 families, but in no case lower than 

7 $2,500 for an individual and $5,000 

8 for a family; 

9 (III) include preventive health 

10 services based on recommendations 

11 made by the United States Preventive 

12 Task Force, including not less than 1 

13 primary care provider’s office visit; 

14 and 

15 (IV) require reasonable co-insur16 ance as determined by the State ad17 ministering the demonstration project, 

18 in consultation with the Secretary; 

19 (ii) subsidize such catastrophic cov20 erage to provide an affordable product and 

21 may provide subsidies on sliding scale, to 

22 offer a more affordable product for individ23 uals in the individual and group market 

24 earning below 200 percent of the Federal 

25 poverty level; and 


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1 (iii) consider subsidizing the cost of 

2 such catastrophic coverage for small busi3 nesses that do not offer employer-spon4 sored insurance by using reinsurance 

5 mechanisms or other public and private 

6 partnerships. 

7 (B) ELIGIBILITY.—An individual or small 

8 business shall be eligible to participate in a 

9 demonstration project under subsection (a)(2) 

10 only if— 

11 (i) such individual did not have health 

12 insurance coverage within the 1-year pe13 riod immediately prior to applying for cov14 erage under the demonstration project; or 

15 (ii) such small business did not offer 

16 employer-sponsored health insurance cov17 erage within such 1-year period. 

18 (d) DURATION; EVALUATION.— 

19 (1) DURATION.—The Secretary shall complete 

20 the demonstration projects established under this 

section not later than 6 and 1 21 ⁄2 years after the date 

22 of enactment of this Act. 

23 (2) EVALUATION.—During the 18-month period 

24 beginning after the date that is 5 years after the 

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1 lished under this section, the Secretary shall com2 plete an evaluation of such demonstration projects 

3 established to determine— 

4 (A) the ability of individuals and small 

5 businesses to access health insurance coverage; 

6 (B) the length of time individuals partici7 pated in and maintained such coverage; 

8 (C) with respect to each geographic area of 

9 a demonstration project— 

10 (i) the impact on the amount of char11 ity or other uncompensated care provided 

12 by health care providers who participated 

13 in the demonstration projects; 

14 (ii) the impact on insurance rates in 

15 the commercial market; and 

16 (iii) the impact on the number of 

17 medical related bankruptcies; and 

18 (D) if additional information is needed and 

19 whether the projects should be continued or 

20 modified, as the Secretary determines appro21 priate. 

22 (e) APPLICATION; SITE SELECTION.— 

23 (1) APPLICATION.—A State may submit an ap24 plication to the Secretary to participate in any of the 

25 demonstration projects established under this section 


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1 at such time, in such manner, and containing such 

2 information as the Secretary may require. 

3 (2) IN GENERAL.—In selecting States to par4 ticipate in a demonstration project, the Secretary 

5 shall— 

6 (A) consider the current structure of a 

7 State’s programs to assist individuals with cata8 strophic health care costs and individuals that 

9 do not have health insurance coverage; 

10 (B) determine what parameters for the 

11 demonstration project will be least intrusive to 

12 the State’s existing such structures; and 

13 (C) consider the overall health status of 

14 the State, the age demographics of individuals 

15 with high health care costs and of individuals 

16 who do not have health insurance coverage, and 

17 the historical health care costs and efficiency of 

18 the State’s health care system. 

19 (3) SPECIFIC SITE.—The Secretary shall select 

20 as a demonstration project site the State in which 

21 (according to the Hospital Referral Region of Resi22 dence, 1994–1995, as listed in the Dartmouth Atlas 

23 of Health Care 1998) the largest metropolitan areas 

24 of the State had the lowest percentage of Medicare 

25 beneficiary deaths in a hospital when compared to 


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1 the largest metropolitan areas of each other State 

2 and the percentage of enrollees who experienced in3 tensive care during the last 6 months of life was 

4 21.5 percent. 

5 (f) FUNDING.— 

6 (1) IN GENERAL.—Notwithstanding sections 

7 1901, 1903(a)(1) and 1923 of the Social Security 

8 Act (42 U.S.C. 1396, 1396a(a)(13)(A)(iv), 

9 1396b(a)(1), 1396r–4), the Secretary shall expend 

10 not less than $50,000,000 of the total amount of un11 expended State DSH allotments under section 1923 

12 of such Act for each of fiscal years 2007 through 

13 2012 for purposes of carrying out the demonstration 

14 projects authorized under this section. 

15 (2) USE OF OTHER FUNDING SOURCES.—A 

16 State may contribute other public funds (other than 

17 otherwise obligated Federal funds), and an employer 

18 may contribute private funds, to a demonstration 

19 project funded under this section. 

20 (g) REPORTS TO CONGRESS.— 

21 (1) PRELIMINARY REPORT.—Not later than 3 

22 years after the date of enactment of this Act, the 

23 Secretary shall submit to the Committee on Finance 

24 of the Senate and the Committee on Ways and 

25 Means of the House of Representatives a prelimiVerDate Aug 31 2005 04:14 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3701.IS S3701

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1 nary report on the progress made in the demonstra2 tion projects established under this section. 

3 (2) INTERIM REPORT.—Not later than 30 

4 months after the implementation of the demonstra5 tion projects established under this section, the Sec6 retary, in consultation with the participants in such 

7 demonstration projects, shall submit to the Commit8 tees described in paragraph (1), an interim report 

9 on such demonstration projects. 

10 (3) FINAL REPORT.—Not later than the date 

11 on which all demonstration projects established 

12 under this section end, the Secretary shall submit to 

13 the Committees described in paragraph (1) a final 

14 report on such demonstration projects that includes 

15 the results of the evaluation conducted under sub16 section (f) and recommendations for appropriate leg17 islative changes. 

Æ 


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