294
‘‘(1) COVERAGE UNDER CERTAIN SUBSIDIZED
EMPLOYER PLANS.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to any taxpayer for any calendar
month for which the taxpayer participates in
any health plan maintained by any employer of
the taxpayer or of the spouse of the taxpayer if
50 percent or more of the cost of coverage
under such plan (determined under section
4980B and without regard to payments made
with respect to any coverage described in sub-
section (e)) is paid or incurred by the employer.
‘‘(B) EMPLOYER CONTRIBUTIONS TO CAF-
ETERIA PLANS, FLEXIBLE SPENDING ARRANGE-
MENTS, AND
MEDICAL
SAVINGS
ACCOUNTS.—
Employer contributions to a cafeteria plan, a
flexible spending or similar arrangement, or a
medical savings account which are excluded
from gross income under section 106 shall be
treated for purposes of subparagraph (A) as
paid by the employer.
‘‘(C) AGGREGATION
OF
PLANS
OF
EM-
PLOYER.—A health plan which is not otherwise
described in subparagraph (A) shall be treated
as described in such subparagraph if such plan
295
would be so described if all health plans of per-
sons treated as a single employer under sub-
section (b), (c), (m), or (o) of section 414 were
treated as one health plan.
‘‘(D) SEPARATE APPLICATION TO HEALTH
INSURANCE
AND
LONG-TERM
CARE
INSUR-
ANCE.—Subparagraphs (A) and (C) shall be
applied separately with respect to—
‘‘(i) plans which include primarily cov-
erage for qualified long-term care services
or are qualified long-term care insurance
contracts, and
‘‘(ii) plans which do not include such
coverage and are not such contracts.
‘‘(2) COVERAGE
UNDER
CERTAIN
FEDERAL
PROGRAMS.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to any amount paid for any coverage
for an individual for any calendar month if, as
of the first day of such month, the individual is
covered under any medical care program de-
scribed in—
‘‘(i) title XVIII, XIX, or XXI of the
Social Security Act,
296
‘‘(ii) chapter 55 of title 10, United
States Code,
‘‘(iii) chapter 17 of title 38, United
States Code,
‘‘(iv) chapter 89 of title 5, United
States Code, or
‘‘(v) the Indian Health Care Improve-
ment Act.
‘‘(B) EXCEPTIONS.—
‘‘(i) QUALIFIED LONG-TERM CARE.—
Subparagraph (A) shall not apply to
amounts paid for coverage under a quali-
fied long-term care insurance contract.
‘‘(ii) CONTINUATION
COVERAGE
OF
FEHBP.—Subparagraph (A)(iv) shall not
apply to coverage which is comparable to
continuation 
coverage 
under 
section
4980B.
‘‘(d) LONG-TERM CARE DEDUCTION LIMITED
TO
QUALIFIED
LONG-TERM
CARE
INSURANCE
CON-
TRACTS.—In the case of a qualified long-term care insur-
ance contract, only eligible long-term care premiums (as
defined in section 213(d)(10)) may be taken into account
under subsection (a).
297
‘‘(e) DEDUCTION NOT AVAILABLE FOR PAYMENT OF
ANCILLARY COVERAGE PREMIUMS.—Any amount paid as
a premium for insurance which provides for—
‘‘(1) coverage for accidents, disability, dental
care, vision care, or a specified illness, or
‘‘(2) making payments of a fixed amount per
day (or other period) by reason of being hospitalized.
shall not be taken into account under subsection (a).
‘‘(f ) SPECIAL RULES.—
‘‘(1) COORDINATION
WITH
DEDUCTION
FOR
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—The amount taken into account by the
taxpayer in computing the deduction under section
162(l) shall not be taken into account under this
section.
‘‘(2) COORDINATION WITH MEDICAL EXPENSE
DEDUCTION.—The amount taken into account by
the taxpayer in computing the deduction under this
section shall not be taken into account under section
213.
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out this
section, including regulations requiring employers to re-
port to their employees and the Secretary such informa-
tion as the Secretary determines to be appropriate.’’.
298
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)
of section 62 of such Code is amended by inserting after
paragraph (17) the following new item:
‘‘(18) HEALTH AND LONG-TERM CARE INSUR-
ANCE
COSTS.—The deduction allowed by section
222.’’.
(c) CLERICAL AMENDMENT.—The table of sections
for part VII of subchapter B of chapter 1 of such Code
is amended by striking the last item and inserting the fol-
lowing new items:
‘‘Sec. 222. Health and long-term care insurance costs.
‘‘Sec. 223. Cross reference.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 322. REFUNDABLE CREDIT FOR HEALTH INSURANCE
COVERAGE.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by redes-
ignating section 35 as section 36 and by inserting after
section 34 the following new section:
‘‘SEC. 35. HEALTH INSURANCE COSTS.
‘‘(a) IN GENERAL.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
299
by this subtitle an amount equal to the amount paid dur-
ing the taxable year for qualified health insurance for the
taxpayer, his spouse, and dependents.
‘‘(b) LIMITATIONS.—
‘‘(1) IN GENERAL.—The amount allowed as a
credit under subsection (a) to the taxpayer for the
taxable year shall not exceed the sum of the monthly
limitations for coverage months during such taxable
year for each individual referred to in subsection (a)
for whom the taxpayer paid during the taxable year
any amount for coverage under qualified health in-
surance.
‘‘(2) MONTHLY LIMITATION.—
‘‘(A) IN GENERAL.—The monthly limita-
tion for an individual for each coverage month
of such individual during the taxable year is the
amount equal to 1/12 of—
‘‘(i) $1,000 if such individual is the
taxpayer,
‘‘(ii) $1,000 if—
‘‘(I) such individual is the spouse
of the taxpayer,
‘‘(II) the taxpayer and such
spouse are married as of the first day
of such month, and
301
‘‘(A) IN
GENERAL.—The term ‘coverage
month’ means, with respect to an individual,
any month if—
‘‘(i) as of the first day of such month
such individual is covered by qualified
health insurance, and
‘‘(ii) the premium for coverage under
such insurance for such month is paid by
the taxpayer.
‘‘(B) 
EMPLOYER-SUBSIDIZED
COV-
ERAGE.—Such term shall not include any
month for which such individual participates in
any subsidized health plan (within the meaning
of section 162(l)(2)) maintained by any em-
ployer of the taxpayer or of the spouse of the
taxpayer.
‘‘(C) CAFETERIA
PLAN
AND
FLEXIBLE
SPENDING
ACCOUNT
BENEFICIARIES.—Such
term shall not include any month during a tax-
able year if any amount is not includible in the
gross income of the taxpayer for such year
under section 106 with respect to—
‘‘(i) a benefit chosen under a cafeteria
plan (as defined in section 125(d)), or
302
‘‘(ii) a benefit provided under a flexi-
ble spending or similar arrangement.
‘‘(D) MEDICARE
AND
MEDICAID.—Such
term shall not include any month with respect
to an individual if, as of the first day of such
month, such individual—
‘‘(i) is entitled to any benefits under
title XVIII of the Social Security Act, or
‘‘(ii) is a participant in the program
under title XIX of such Act.
‘‘(E) CERTAIN
OTHER
COVERAGE.—Such
term shall not include any month during a tax-
able year with respect to an individual if, at any
time during such year, any benefit is provided
to such individual under—
‘‘(i) chapter 17 of title 38, United
States Code, or
‘‘(ii) any medical care program under
the Indian Health Care Improvement Act.
‘‘(F) PRISONERS.—Such term shall not in-
clude any month with respect to an individual
if, as of the first day of such month, such indi-
vidual is imprisoned under Federal, State, or
local authority.
303
‘‘(G) INSUFFICIENT PRESENCE IN UNITED
STATES.—Such term shall not include any
month during a taxable year with respect to an
individual if such individual is present in the
United States on fewer than 183 days during
such year (determined in accordance with sec-
tion 7701(b)(7)).
‘‘(4) COORDINATION
WITH
DEDUCTION
FOR
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—In the case of a taxpayer who is eligi-
ble to deduct any amount under section 162(l) for
the taxable year, this section shall apply only if the
taxpayer elects not to claim any amount as a deduc-
tion under such section for such year.
‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified health
insurance’ means insurance which constitutes med-
ical care as defined in section 213(d) without regard
to—
‘‘(A) paragraph (1)(C) thereof, and
‘‘(B) so much of paragraph (1)(D) thereof
as relates to qualified long-term care insurance
contracts.
304
‘‘(2) EXCLUSION
OF
CERTAIN
OTHER
CON-
TRACTS.—Such term shall not include insurance if a
substantial portion of its benefits are excepted bene-
fits (as defined in section 9832(c)).
‘‘(d) 
MEDICAL
SAVINGS
ACCOUNT
CONTRIBU-
TIONS.—
‘‘(1) IN GENERAL.—If a deduction would (but
for paragraph (2)) be allowed under section 220 to
the taxpayer for a payment for the taxable year to
the medical savings account of an individual, sub-
section (a) shall be applied by treating such payment
as a payment for qualified health insurance for such
individual.
‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc-
tion shall be allowed under section 220 for that por-
tion of the payments otherwise allowable as a deduc-
tion under section 220 for the taxable year which is
equal to the amount of credit allowed for such tax-
able year by reason of this subsection.
‘‘(e) SPECIAL RULES.—
‘‘(1) COORDINATION WITH MEDICAL EXPENSE
DEDUCTION.—The amount which would (but for this
paragraph) be taken into account by the taxpayer
under section 213 for the taxable year shall be re-
305
duced by the credit (if any) allowed by this section
to the taxpayer for such year.
‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which
such individual’s taxable year begins.
‘‘(3) INFLATION ADJUSTMENT.—In the case of
any taxable year beginning in a calendar year after
2000, each dollar amount contained in subsection
(b)(2)(A) shall be increased by an amount equal
to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 1999’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of $50
($25 in the case of the dollar amount in subsection
(b)(2)(A)(iii)).’’.
(b) INFORMATION REPORTING.—
306
(1) IN GENERAL.—Subpart B of part III of
subchapter A of chapter 61 of such Code (relating
to information concerning transactions with other
persons) is amended by inserting after section
6050S the following new section:
‘‘SEC. 6050T. RETURNS RELATING TO PAYMENTS FOR
QUALIFIED HEALTH INSURANCE.
‘‘(a) IN GENERAL.—Any person who, in connection
with a trade or business conducted by such person, re-
ceives payments during any calendar year from any indi-
vidual for coverage of such individual or any other indi-
vidual under creditable health insurance, shall make the
return described in subsection (b) (at such time as the
Secretary may by regulations prescribe) with respect to
each individual from whom such payments were received.
‘‘(b) FORM AND MANNER OF RETURNS.—A return
is described in this subsection if such return—
‘‘(1) is in such form as the Secretary may pre-
scribe, and
‘‘(2) contains—
‘‘(A) the name, address, and TIN of the
individual from whom payments described in
subsection (a) were received,
‘‘(B) the name, address, and TIN of each
individual who was provided by such person
307
with coverage under creditable health insurance
by reason of such payments and the period of
such coverage, and
‘‘(C) such other information as the Sec-
retary may reasonably prescribe.
‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur-
poses of this section, the term ‘creditable health insurance’
means qualified health insurance (as defined in section
35(c)) other than—
‘‘(1) insurance under a subsidized group health
plan maintained by an employer, or
‘‘(2) to the extent provided in regulations pre-
scribed by the Secretary, any other insurance cov-
ering an individual if no credit is allowable under
section 35 with respect to such coverage.
‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return under
subsection (a) shall furnish to each individual whose name
is required under subsection (b)(2)(A) to be set forth in
such return a written statement showing—
‘‘(1) the name and address of the person re-
quired to make such return and the phone number
of the information contact for such person,
308
‘‘(2) the aggregate amount of payments de-
scribed in subsection (a) received by the person re-
quired to make such return from the individual to
whom the statement is required to be furnished, and
‘‘(3) the information required under subsection
(b)(2)(B) with respect to such payments.
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the
year following the calendar year for which the return
under subsection (a) is required to be made.
‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE
MADE BY 2 OR MORE PERSONS.—Except to the extent
provided in regulations prescribed by the Secretary, in the
case of any amount received by any person on behalf of
another person, only the person first receiving such
amount shall be required to make the return under sub-
section (a).’’.
(2) ASSESSABLE PENALTIES.—
(A) 
Subparagraph 
(B) 
of 
section
6724(d)(1) of such Code (relating to defini-
tions) is amended by redesignating clauses (xi)
through (xvii) as clauses (xii) through (xviii),
respectively, and by inserting after clause (x)
the following new clause:
309
‘‘(xi) section 6050T (relating to re-
turns relating to payments for qualified
health insurance),’’.
(B) Paragraph (2) of section 6724(d) of
such Code is amended by striking ‘‘or’’ at the
end of the next to last subparagraph, by strik-
ing the period at the end of the last subpara-
graph and inserting ‘‘, or’’, and by adding at
the end the following new subparagraph:
‘‘(BB) section 6050T(d) (relating to re-
turns relating to payments for qualified health
insurance).’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of
chapter 61 of such Code is amended by inserting
after the item relating to section 6050S the fol-
lowing new item:
‘‘Sec. 6050T. Returns relating to payments for qualified health
insurance.’’.
(c) ADVANCE PAYMENT
OF CREDIT FOR PUR-
CHASERS OF QUALIFIED HEALTH INSURANCE.—Chapter
77 of the Internal Revenue Code of 1986 (relating to mis-
cellaneous provisions) is amended by adding at the end
the following new section:
310
‘‘SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE
CREDIT FOR PURCHASERS OF QUALIFIED
HEALTH INSURANCE.
‘‘(a) GENERAL RULE.—In the case of an eligible indi-
vidual, the Secretary shall make payments to the provider
of such individual’s qualified health insurance equal to
such individual’s qualified health insurance credit advance
amount with respect to such provider.
‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this
section, the term ‘eligible individual’ means any
individual—
‘‘(1) who purchases qualified health insurance
(as defined in section 35(c)), and
‘‘(2) for whom a qualified health insurance
credit eligibility certificate is in effect.
‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI-
BILITY CERTIFICATE.—For purposes of this section, a
qualified health insurance credit eligibility certificate is a
statement furnished by an individual to the Secretary
which—
‘‘(1) certifies that the individual will be eligible
to receive the credit provided by section 35 for the
taxable year,
‘‘(2) estimates the amount of such credit for
such taxable year, and
311
‘‘(3) provides such other information as the
Secretary may require for purposes of this section.
‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD-
VANCE AMOUNT.—For purposes of this section, the term
‘qualified health insurance credit advance amount’ means,
with respect to any provider of qualified health insurance,
the Secretary’s estimate of the amount of credit allowable
under section 35 to the individual for the taxable year
which is attributable to the insurance provided to the indi-
vidual by such provider.
‘‘(e) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section.’’.
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 35 of such Code’’.
(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 of such Code is
amended by striking the last item and inserting the
following new items:
‘‘Sec. 35. Health insurance costs.
‘‘Sec. 36. Overpayments of tax.’’.
(3) The table of sections for chapter 77 of such
Code is amended by adding at the end the following
new item:
312
‘‘Sec. 7527. Advance payment of health insurance credit for pur-
chasers of qualified health insurance.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1999.
(2) ADVANCE PAYMENT OF CREDIT FOR PUR-
CHASERS OF QUALIFIED HEALTH INSURANCE.—The
amendments made by subsections (c) and (d)(3)
shall take effect on January 1, 2000.
SEC. 323. STUDY OF STATE SAFETY-NET HEALTH INSUR-
ANCE PROGRAMS FOR THE MEDICALLY UNIN-
SURABLE.
(a) STUDY.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall provide for a study on the
current state of all existing State safety-net health
insurance programs (as defined in subsection (c)).
The study shall determine which forms of such pro-
grams are the most successful in making health in-
surance available to all willing payers regardless of
their health status.
(2) CONSULTATION.—In conducting the study
the Secretary shall consult with representatives of
the National Governors Association, the National
313
Association of Insurance Commissioners, national
associations representing health insurers, insurance
companies that administer and participate in State
safety-net health insurance programs, and individ-
uals who receive their health insurance through such
programs.
(b) REPORT.—The Secretary shall submit to Con-
gress, by not later than October 1, 2000, a detailed report
on the study conducted under subsection (a). The report
shall include recommendations on how Congress can best
strengthen State safety-net health insurance programs
where they currently exist and can encourage their estab-
lishment in States where they do not exist.
(c) STATE SAFETY-NET HEALTH INSURANCE PRO-
GRAM DEFINED.—For purposes of this section, the term
‘‘State safety-net health insurance program’’ means a high
risk pool or similar arrangement provided under State law
for providing access of medically uninsurable individuals
to health insurance coverage. Such term may include such
other arrangements as the Secretary finds appropriate for
assuring the provision of health insurance coverage to
such individuals.
314
SEC. 
324. 
CARRYOVER 
OF 
UNUSED 
BENEFITS 
FROM
CAFETERIA PLANS AND FLEXIBLE SPENDING
ARRANGEMENTS.
(a) IN GENERAL.—Section 125 of the Internal Rev-
enue Code of 1986 (relating to cafeteria plans) is amended
by redesignating subsections (h) and (i) as subsections (i)
and (j), respectively, and by inserting after subsection (g)
the following new subsection:
‘‘(h) ALLOWANCE OF CARRYOVERS OF UNUSED BEN-
EFITS TO LATER TAXABLE YEARS.—
‘‘(1) IN GENERAL.—For purposes of this title—
‘‘(A) a plan or other arrangement shall not
fail to be treated as a cafeteria plan or flexible
spending or similar arrangement, and
‘‘(B) no amount shall be required to be in-
cluded in gross income by reason of this section
or any other provision of this chapter,
solely because under such plan or other arrangement
any nontaxable benefit which is unused as of the
close of a taxable year may be carried forward to 1
or more succeeding taxable years.
‘‘(2) LIMITATION.—Paragraph (1) shall not
apply to amounts carried from a plan to the extent
such amounts exceed $500 (applied on an annual
basis). For purposes of this paragraph, all plans and
315
arrangements maintained by an employer or any re-
lated person shall be treated as 1 plan.
‘‘(3) ALLOWANCE OF ROLLOVER.—
‘‘(A) IN GENERAL.—Each flexible spending
or similar arrangement which permits a carry-
over under paragraph (1) of an amount of un-
used benefit shall provide that each participant
may elect, in lieu of a carryover of such
amount, to have such amount distributed to the
participant.
‘‘(B) AMOUNTS
NOT
INCLUDED
IN
IN-
COME.—Any distribution under subparagraph
(A) shall not be included in gross income to the
extent that such amount is transferred in a
trustee-to-trustee transfer, or is contributed
within 60 days of the date of the distribution,
to—
‘‘(i) an individual retirement plan,
‘‘(ii) a qualified cash or deferred ar-
rangement described in section 401(k),
‘‘(iii) a plan under which amounts are
contributed by an individual’s employer for
an annuity contract described in section
403(b),
316
‘‘(iv) an eligible deferred compensa-
tion plan described in section 457,
‘‘(v) a medical savings account (within
the meaning of section 220), or
‘‘(vi) an education individual retire-
ment account (within the meaning of sec-
tion 530(b)).
Any amount rolled over under this subpara-
graph shall be treated as a rollover contribution
for the taxable year from which the unused
amount would otherwise be carried.
‘‘(C) TREATMENT
OF
ROLLOVER.—Any
amount rolled over under subparagraph (B)
shall be treated as an eligible rollover under
section 219, 220, 401(k), 403(b), 457, or 530,
whichever is applicable, and shall not be taken
into account in applying any limitation (or par-
ticipation requirement) on contributions under
such section or any other provision of this chap-
ter for the taxable year of the rollover.
‘‘(4) COST-OF-LIVING
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 1999, the $500 amount under paragraph
(2) shall be adjusted at the same time and in the
same manner as under section 415(d)(2), except
317
that the base period taken into account shall be the
calendar quarter beginning October 1, 1998, and
any increase which is not a multiple of $50 shall be
rounded to the next lowest multiple of $50.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
TITLE IV—HEALTH CARE
LAWSUIT REFORM
Subtitle A—General Provisions
SEC. 401. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This title shall apply with re-
spect to any health care liability action brought in any
State or Federal court, except that this title shall not
apply to—
(1) an action for damages arising from a vac-
cine-related injury or death to the extent that title
XXI of the Public Health Service Act applies to the
action; or
(2) an action under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1001 et
seq.).
(b) PREEMPTION.—This title shall preempt any State
law to the extent such law is inconsistent with the limita-
318
tions contained in this title. This title shall not preempt
any State law that provides for defenses or places limita-
tions on a person’s liability in addition to those contained
in this title or otherwise imposes greater restrictions than
those provided in this title.
(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (b) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a cit-
izen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
(d) AMOUNT
IN CONTROVERSY.—In an action to
which this title applies and which is brought under section
319
1332 of title 28, United States Code, the amount of non-
economic damages or punitive damages, and attorneys’
fees or costs, shall not be included in determining whether
the matter in controversy exceeds the sum or value of
$50,000.
(e) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this title shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of section 1331 or 1337 of
title 28, United States Code.
SEC. 402. DEFINITIONS.
As used in this title:
(1) ACTUAL DAMAGES.—The term ‘‘actual dam-
ages’’ means damages awarded to pay for economic
loss.
(2) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means a system established
under Federal or State law that provides for the res-
olution of health care liability claims in a manner
other than through health care liability actions.
(3) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and any person on whose behalf such an action is
320
brought. If such action is brought through or on be-
half of an estate, the term includes the claimant’s
decedent. If such action is brought through or on be-
half of a minor or incompetent, the term includes
the claimant’s legal guardian.
(4) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established.
Such measure or degree of proof is more than that
required under preponderance of the evidence but
less than that required for proof beyond a reason-
able doubt.
(5) COLLATERAL
SOURCE
PAYMENTS.—The
term ‘‘collateral source payments’’ means any
amount paid or reasonably likely to be paid in the
future to or on behalf of a claimant, or any service,
product, or other benefit provided or reasonably like-
ly to be provided in the future to or on behalf of a
claimant, as a result of an injury or wrongful death,
pursuant to—
(A) any State or Federal health, sickness,
income-disability, accident or workers’ com-
pensation Act;
321
(B) any health, sickness, income-disability,
or accident insurance that provides health bene-
fits or income-disability coverage;
(C) any contract or agreement of any
group, organization, partnership, or corporation
to provide, pay for, or reimburse the cost of
medical, hospital, dental, or income disability
benefits; and
(D) any other publicly or privately funded
program.
(6) DRUG.—The term ‘‘drug’’ has the meaning
given such term in section 201(g)(1) of the Federal
Food, 
Drug, 
and 
Cosmetic 
Act 
(21 
U.S.C.
321(g)(1)).
(7) ECONOMIC
LOSS.—The term ‘‘economic
loss’’ means any pecuniary loss resulting from injury
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs,
and loss of business or employment opportunities),
to the extent recovery for such loss is allowed under
applicable State law.
(8) HARM.—The term ‘‘harm’’ means any le-
gally cognizable wrong or injury for which punitive
damages may be imposed.
322
(9) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ means—
(A) a hospital or medical expense incurred
policy or certificate;
(B) a hospital or medical service plan con-
tract;
(C) a health maintenance subscriber con-
tract; or
(D) a Medicare+Choice plan (offered
under part C of title XVIII of the Social Secu-
rity Act),
that provides benefits with respect to health care
services.
(10) HEALTH
CARE
LIABILITY
ACTION.—The
term ‘‘health care liability action’’ means a civil ac-
tion brought in a State or Federal court against—
(A) a health care provider;
(B) an entity which is obligated to provide
or pay for health benefits under any health ben-
efit plan (including any person or entity acting
under a contract or arrangement to provide or
administer any health benefit); or
(C) the manufacturer, distributor, supplier,
marketer, promoter, or seller of a medical prod-
uct,
323
in which the claimant alleges a claim (including third
party claims, cross claims, counter claims, or contribution
claims) based upon the provision of (or the failure to pro-
vide or pay for) health care services or the use of a medical
product, regardless of the theory of liability on which the
claim is based or the number of plaintiffs, defendants, or
causes of action.
(11) HEALTH
CARE
LIABILITY
CLAIM.—The
term ‘‘health care liability claim’’ means a claim in
which the claimant alleges that injury was caused by
the provision of (or the failure to provide) health
care services.
(12) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any person that is en-
gaged in the delivery of health care services in a
State and that is required by the laws or regulations
of the State to be licensed or certified by the State
to engage in the delivery of such services in the
State.
(13) 
HEALTH
CARE
SERVICE.—The 
term
‘‘health care service’’ means any service eligible for
payment under a health benefit plan, including serv-
ices related to the delivery or administration of such
service.
324
(14) MEDICAL DEVICE.—The term ‘‘medical de-
vice’’ has the meaning given such term in section
201(h) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(h)).
(15) NON-ECONOMIC
DAMAGES.—The term
‘‘non-economic damages’’ means damages paid to an
individual for pain and suffering, inconvenience,
emotional distress, mental anguish, loss of consor-
tium, injury to reputation, humiliation, and other
nonpecuniary losses.
(16) PERSON.—The term ‘‘person’’ means any
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any
other entity, including any governmental entity.
(17) PRODUCT SELLER.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘‘product seller’’ means a
person who, in the course of a business con-
ducted for that purpose—
(i) sells, distributes, rents, leases, pre-
pares, blends, packages, labels, or is other-
wise involved in placing, a product in the
stream of commerce; or
(ii) installs, repairs, or maintains the
harm-causing aspect of a product.
325
(B) EXCLUSION.—Such term does not
include—
(i) a seller or lessor of real property;
(ii) a provider of professional services
in any case in which the sale or use of a
product is incidental to the transaction and
the essence of the transaction is the fur-
nishing of judgment, skill, or services; or
(iii) any person who—
(I) acts in only a financial capac-
ity with respect to the sale of a prod-
uct; or
(II) leases a product under a
lease arrangement in which the selec-
tion, possession, maintenance, and op-
eration of the product are controlled
by a person other than the lessor.
(18) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means damages awarded against any per-
son not to compensate for actual injury suffered, but
to punish or deter such person or others from en-
gaging in similar behavior in the future.
(19) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, American Samoa,
326
the Northern Mariana Islands, and any other terri-
tory or possession of the United States.
SEC. 403. EFFECTIVE DATE.
This title will apply to—
(1) any health care liability action brought in a
Federal or State court; and
(2) any health care liability claim subject to an
alternative dispute resolution system,
that is initiated on or after the date of enactment of this
title, except that any health care liability claim or action
arising from an injury occurring before the date of enact-
ment of this title shall be governed by the applicable stat-
ute of limitations provisions in effect at the time the injury
occurred.
Subtitle B—Uniform Standards for
Health Care Liability Actions
SEC. 411. STATUTE OF LIMITATIONS.
A health care liability action may not be brought
after the expiration of the 2-year period that begins on
the date on which the alleged injury that is the subject
of the action was discovered or should reasonably have
been discovered, but in no case after the expiration of the
5-year period that begins on the date the alleged injury
occurred.
327
SEC. 412. CALCULATION AND PAYMENT OF DAMAGES.
(a) TREATMENT OF NON-ECONOMIC DAMAGES.—
(1) LIMITATION
ON
NON-ECONOMIC
DAM-
AGES.—The total amount of non-economic damages
that may be awarded to a claimant for losses result-
ing from the injury which is the subject of a health
care liability action may not exceed $250,000, re-
gardless of the number of parties against whom the
action is brought or the number of actions brought
with respect to the injury. The limitation under this
paragraph shall not apply to an action for damages
based solely on intentional denial of medical treat-
ment necessary to preserve a patient’s life that the
patient is otherwise qualified to receive, against the
wishes of a patient, or if the patient is incompetent,
against the wishes of the patient’s guardian, on the
basis of the patient’s present or predicated age, dis-
ability, degree of medical dependency, or quality of
life.
(2) LIMIT.—If, after the date of the enactment
of this Act, a State enacts a law which prescribes
the amount of non-economic damages which may be
awarded in a health care liability action which is dif-
ferent from the amount prescribed by section
412(a)(1), the State amount shall apply in lieu of
the amount prescribed by such section. If, after the
328
date of the enactment of this Act, a State enacts
a law which limits the amount of recovery in a
health care liability action without delineating be-
tween economic and non-economic damages, the
State amount shall apply in lieu of the amount pre-
scribed by such section.
(3) JOINT AND SEVERAL LIABILITY.—In any
health care liability action brought in State or Fed-
eral court, a defendant shall be liable only for the
amount of non-economic damages attributable to
such defendant in direct proportion to such defend-
ant’s share of fault or responsibility for the claim-
ant’s actual damages, as determined by the trier of
fact. In all such cases, the liability of a defendant
for non-economic damages shall be several and not
joint and a separate judgment shall be rendered
against each defendant for the amount allocated to
such defendant.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) GENERAL RULE.—Punitive damages may,
to the extent permitted by applicable State law, be
awarded in any health care liability action for harm
in any Federal or State court against a defendant if
the claimant establishes by clear and convincing evi-
329
dence that the harm suffered was the result of
conduct—
(A) specifically intended to cause harm; or
(B) conduct manifesting a conscious, fla-
grant indifference to the rights or safety of oth-
ers.
(2) 
APPLICABILITY.—This 
subsection 
shall
apply to any health care liability action brought in
any Federal or State court on any theory where pu-
nitive damages are sought. This subsection does not
create a cause of action for punitive damages.
(3) LIMITATION ON PUNITIVE DAMAGES.—The
total amount of punitive damages that may be
awarded to a claimant for losses resulting from the
injury which is the subject of a health care liability
action may not exceed the greater of—
(A) 2 times the amount of economic dam-
ages, or
(B) $250,000,
regardless of the number of parties against whom
the action is brought or the number of actions
brought with respect to the injury. This subsection
does not preempt or supersede any State or Federal
law to the extent that such law would further limit
the award of punitive damages.
330
(4) BIFURCATION.—At the request of any
party, the trier of fact shall consider in a separate
proceeding whether punitive damages are to be
awarded and the amount of such award. If a sepa-
rate proceeding is requested, evidence relevant only
to the claim of punitive damages, as determined by
applicable State law, shall be inadmissible in any
proceeding to determine whether actual damages are
to be awarded.
(5) DRUGS AND DEVICES.—
(A) IN GENERAL.—
(i) 
PUNITIVE
DAMAGES.—Punitive
damages shall not be awarded against a
manufacturer or product seller of a drug
or medical device which caused the claim-
ant’s harm where—
(I) such drug or device was sub-
ject to premarket approval by the
Food and Drug Administration with
respect to the safety of the formula-
tion or performance of the aspect of
such drug or device which caused the
claimant’s harm, or the adequacy of
the packaging or labeling of such drug
or device which caused the harm, and
331
such drug, device, packaging, or label-
ing was approved by the Food and
Drug Administration; or
(II) the drug is generally recog-
nized as safe and effective pursuant to
conditions established by the Food
and Drug Administration and applica-
ble regulations, including packaging
and labeling regulations.
(ii) APPLICATION.—Clause (i) shall
not apply in any case in which the defend-
ant, before or after premarket approval of
a drug or device—
(I) intentionally and wrongfully
withheld from or misrepresented to
the Food and Drug Administration in-
formation concerning such drug or de-
vice required to be submitted under
the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 301 et seq.) or
section 351 of the Public Health Serv-
ice Act (42 U.S.C. 262) that is mate-
rial and relevant to the harm suffered
by the claimant; or
332
(II) made an illegal payment to
an official or employee of the Food
and Drug Administration for the pur-
pose of securing or maintaining ap-
proval of such drug or device.
(B) PACKAGING.—In a health care liability
action for harm which is alleged to relate to the
adequacy of the packaging or labeling of a drug
which is required to have tamper-resistant
packaging under regulations of the Secretary of
Health and Human Services (including labeling
regulations related to such packaging), the
manufacturer or product seller of the drug shall
not be held liable for punitive damages unless
such packaging or labeling is found by the court
by clear and convincing evidence to be substan-
tially out of compliance with such regulations.
(c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—
(1) GENERAL RULE.—In any health care liabil-
ity action in which the damages awarded for future
economic and non-economic loss exceeds $50,000, a
person shall not be required to pay such damages in
a single, lump-sum payment, but shall be permitted
to make such payments periodically based on when
333
the damages are likely to occur, as such payments
are determined by the court.
(2) FINALITY OF JUDGMENT.—The judgment
of the court awarding periodic payments under this
subsection may not, in the absence of fraud, be re-
opened at any time to contest, amend, or modify the
schedule or amount of the payments.
(3) 
LUMP-SUM
SETTLEMENTS.—This 
sub-
section shall not be construed to preclude a settle-
ment providing for a single, lump-sum payment.
(d) TREATMENT
OF COLLATERAL SOURCE PAY-
MENTS.—
(1) INTRODUCTION
INTO
EVIDENCE.—In any
health care liability action, any defendant may intro-
duce evidence of collateral source payments. If any
defendant elects to introduce such evidence, the
claimant may introduce evidence of any amount paid
or contributed or reasonably likely to be paid or con-
tributed in the future by or on behalf of the claim-
ant to secure the right to such collateral source pay-
ments.
(2) NO SUBROGATION.—No provider of collat-
eral source payments shall recover any amount
against the claimant or receive any lien or credit
against the claimant’s recovery or be equitably or le-
334
gally subrogated to the right of the claimant in a
health care liability action.
(3) APPLICATION TO SETTLEMENTS.—This sub-
section shall apply to an action that is settled as well
as an action that is resolved by a fact finder.
SEC. 413. LIMITATIONS ON CONTINGENT FEES.
(a) IN GENERAL.—The total of all contingent fees
for representing all claimants in a health care liability
claim or action shall not exceed the following limits:
(1) 40 percent of the first $500,000 recovered
by the claimant.
(2) 33 1/3 percent of the next $50,000 recov-
ered by the claimant.
(3) 25 percent of the next $50,000 recovered by
the claimant.
(4) 15 percent of any amount by which the re-
covery by the claimant exceeds $600,000.
(b) APPLICABILITY.—The limitations prescribed by
subsection (a) shall apply whether the recovery is by judg-
ment, settlement, mediation, arbitration, or any other
form of ADR. A court acting in a health care liability
claim or action involving a minor or incompetent person
retains the authority to authorize or approve a fee that
is less than the maximum permitted under subsection (a).
(c) DEFINITIONS.—For purposes of this section:
335
(1) CONTINGENT FEE.—The term ‘‘contingent
fee’’ includes all compensation to any person which
is payable only if a recovery is effected on behalf of
one or more claimants.
(2) RECOVERY.—The term ‘‘recovery’’ means
the net sum recovered after deducting any disburse-
ments or costs incurred in connection with prosecu-
tion or settlement of the claim, including all costs
paid or advanced by any person. Costs of health care
incurred by the plaintiff and the attorney’s office
overhead costs or charges for legal services are not
deductible disbursements of costs for such purpose.
SEC. 413. ALTERNATIVE DISPUTE RESOLUTION.
Any ADR used to resolve a health care liability action
or claim shall contain provisions relating to statute of limi-
tations, non-economic damages, joint and several liability,
punitive damages, collateral source rule, and periodic pay-
ments which are consistent with the provisions relating to
such matters in this title.
SEC. 414. REPORTING ON FRAUD AND ABUSE ENFORCE-
MENT ACTIVITIES.
The General Accounting Office shall—
(1) monitor—
(A) the compliance of the Department of
Justice and all United States Attorneys–with
336
the guideline entitled ‘‘Guidance on the Use of
the False Claims Act in Civil Health Care Mat-
ters’’ issued by the Department on June 3,
1998, including any revisions to that guideline;
and
(B) the compliance of the Office of the In-
spector General of the Department of Health
and Human Services with the protocols and
guidelines entitled ‘‘National Project Proto-
cols—Best Practice Guidelines’’ issued by the
Inspector General on June 3, 1998, including
any revisions to such protocols and guidelines;
and
(2) submit a report on such compliance to the
Committee on Commerce, the Committee on the Ju-
diciary, and the Committee on Ways and Means of
the House of Representatives and the Committee on
the Judiciary and the Committee on Finance of the
Senate not later than February 1, 2000, and every
year thereafter for a period of 4 years ending Feb-
ruary 1, 2003.
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