I
103D CONGRESS
2D SESSION
H. R. 4840
To provide for reform of health insurance, including tax benefits relating
to health insurance and medical malpractice and antitrust reform.
IN THE HOUSE OF REPRESENTATIVES
JULY 27, 1994
Mr. SAM JOHNSON of Texas (for himself, Mr. DOOLITTLE, and Mr. HUTCHIN-
SON) introduced the following bill; which was referred jointly to the Com-
mittees on Energy and Commerce, Education and Labor, Ways and
Means, and the Judiciary
A BILL
To provide for reform of health insurance, including tax
benefits relating to health insurance and medical mal-
practice and antitrust reform.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) SHORT TITLE.—This Act may be cited as ‘‘The
Prescription for Health Act of 1994’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title.
TITLE I—INSURANCE REFORMS
Subtitle A—Reform of Insured Market for Employers and Individuals
PART 1—GENERAL REFORMS
Sec. 101. Assurance of renewability of coverage.
Sec. 102. Limitation on annual premium increases.
Sec. 103. Assurance of continuity of coverage.
Sec. 104. Limitation on continuation premiums.
Sec. 105. Basis for variations in premiums.
Sec. 106. Disclosure of rating practices.
Sec. 107. Enforcement.
Sec. 108. Definitions.
Sec. 109. Effective date.
PART 2—STATE PREEMPTIONS
Sec. 111. Prohibition of State benefit mandate.
Sec. 112. Elimination of restrictions on group purchase of insurance.
Subtitle B—ERISA and Internal Revenue Code Requirements
Sec. 131. Clarification of ERISA preemption.
Sec. 132. Solvency requirements for single-employer plans.
Sec. 133. Clarification of VEBA contributions.
TITLE II—TAX FAIRNESS
Sec. 201. Individuals allowed deduction from gross income for cost of health in-
surance and contributions to medical savings accounts.
TITLE III—MEDICAL SAVINGS ACCOUNTS
Sec. 301. Medical savings accounts.
TITLE IV—MEDICAL MALPRACTICE
Sec. 401. Applicability and preemption.
Sec. 402. Statute of limitations.
Sec. 403. Scope of liability.
Sec. 404. Limitation on noneconomic damages.
Sec. 405. Treatment of payments for future economic losses.
Sec. 406. Treatment of costs and attorney’s fees.
Sec. 407. Collateral sources.
Sec. 408. Damages relating to medical product liability claims.
Sec. 409. Definitions.
Sec. 410. Effective date.
TITLE V—ANTITRUST REFORM
Sec. 501. Publication of antitrust guidelines on activities of health plans.
Sec. 502. Issuance of health care certificates of public advantage.
TITLE VI—CONSUMER INFORMATION
Sec. 601. Requirement for disclosure of prices for health care services.
TITLE I—INSURANCE REFORMS
Subtitle A—Reform of Insured Mar-
ket for Employers and Individ-
uals
PART 1—GENERAL REFORMS
SEC. 101. ASSURANCE OF RENEWABILITY OF COVERAGE.
(a) IN GENERAL.—An insurer may not cancel cov-
erage or deny renewal of coverage of health insurance with
respect to an employer or an individual other than—
(1) for nonpayment of premiums,
(2) for fraud or other misrepresentations,
(3) for noncompliance with plan provisions, or
(4) because the insurer is ceasing to provide
any health insurance in the State, or, in the case of
a health maintenance organization, in a geographic
area with respect to employer or individuals, respec-
tively.
(b) LIMITATION ON MARKET REENTRY.—If an in-
surer terminates the offering of health insurance plans in
an area with respect to the market for employers or indi-
viduals, the insurer may not offer such a health insurance
plan to any employer or individual, respectively, in the
area until 5 years after the date of the termination.
SEC. 102. LIMITATION ON ANNUAL PREMIUM INCREASES.
An insurer may not provide for an increase in the
premium charged an employer or an individual for health
insurance in a percentage that exceeds the percentage
change in the premium charged any other employer or in-
dividual with the same characteristics, for similar benefits,
and for the same area.
SEC. 103. ASSURANCE OF CONTINUITY OF COVERAGE.
(a) IN GENERAL.—No insurer shall deny health in-
surance coverage to any employer or individual, and no
sponsor of a group health plan shall deny coverage to an
eligible individual, on the basis of health status or pre-
existing condition, if the employer or individual was cov-
ered by health insurance or a group health plan for the
same condition by another insurer or group health plan
for a period of not less than 12 months within the 15-
month period ending with the month in which the applica-
tion for coverage is made.
(b) PREEXISTING CONDITIONS.—An insurer or spon-
sor of a group health plan shall waive any period applica-
ble to a preexisting condition under health insurance or
a group health plan if the employer or individual was cov-
ered by health insurance or a group health plan for the
same condition by another insurer or sponsor of a group
health plan for a period of not less than 12 months within
the 15-month period ending with the month in which the
application for coverage is made.
(c) APPLICATION OF CAPACITY LIMITS.—Subsection
(a) shall not apply if the insurer has reached its capacity
to provide additional health insurance coverage and has
stopped providing any new health insurance coverage in
the State involved.
SEC. 104. LIMITATION ON CONTINUATION PREMIUMS.
The premium charged by an insurer with respect to
an employer or an individual covered under health insur-
ance by another insurer for a period of not less than 12
consecutive months may not exceed the greater of the
amount charged during the previous rating period or the
premium charged to any other employer or individual with
the same characteristics, for similar benefits, and for the
same area.
SEC. 105. BASIS FOR VARIATIONS IN PREMIUMS.
Nothing in sections 102 and 104 shall be construed
as prohibiting variations in health insurance premiums
among employers or individuals based on differences in
covered services, age, gender, family composition, geo-
graphic area, or group size.
SEC. 106. DISCLOSURE OF RATING PRACTICES.
An insurer shall upon request fully disclose all actu-
arial assumptions and methods used in establishing its
premiums for health insurance at the time it offers, or
renews coverage to any employer or individual.
SEC. 107. ENFORCEMENT.
Any insurer or sponsor of a group health plan which
fails to comply with the provisions of this part shall be
subject to a civil money penalty of $250,000 for each indi-
vidual for each violation. The provisions of section 1128A
of the Social Security Act (other than subsections (a) and
(b)) shall apply to civil money penalties under this section
in the same manner as they apply to a penalty or proceed-
ing under section 1128A(a) of such Act.
SEC. 108. DEFINITIONS.
For purposes of this title:
(1)(A) The term ‘‘health insurance’’ means any
contract of health insurance, including any hospital
or medical service policy or certificate, hospital or
medical service plan contract, or health maintenance
organization group contract, that is provided by an
insurer, other than health insurance described in
subparagraph (B).
(B) The term ‘‘health insurance’’ does not in-
clude any of the following (or any combination there-
of):
(i) Coverage only for accident, dental,
vision, disability income, or long-term care
insurance, or any combination thereof.
(ii) Medicare supplemental health in-
surance.
(iii) Coverage issued as a supplement
to liability insurance.
(iv) Worker’s compensation or similar
insurance.
(v) Automobile medical-payment in-
surance.
(vi) Coverage for a specified disease
or illness.
(vii) A hospital or fixed indemnity pol-
icy (unless the Secretary determines that
such a policy provides sufficiently com-
prehensive coverage of a benefit so that it
should be treated as a health benefit plan).
(viii) Credit insurance.
(2) The term ‘‘insurer’’ means a licensed insur-
ance company, a prepaid hospital or medical service
plan, a health maintenance organization, or multiple
employer health plan (as defined in section 3(40) of
the Employee Retirement Income Security Act of
1974) regulated under State or Federal law for sol-
vency.
(3) The term ‘‘employer’’ has the meaning
given such term under section 3(5) of the Employee
Retirement Income Security Act of 1974.
(4) The term ‘‘group health plan’’ has the
meaning given such term in section 5000(b)(1) of
the Internal Revenue Code of 1986.
SEC. 109. EFFECTIVE DATE.
This part shall first apply to plan years beginning
after the date of the enactment of this Act.
PART 2—STATE PREEMPTIONS
SEC. 111. PROHIBITION OF STATE BENEFIT MANDATE.
No provision of State or local law shall apply to any
insurer that requires the coverage under health insurance
of any specific benefits, services, or categories of health
care, or services of any class or type of provider of health
care.
SEC. 112. ELIMINATION OF RESTRICTIONS ON GROUP PUR-
CHASE OF INSURANCE.
No provision of State or local law shall apply that
prohibits 2 or more employers or groups from obtaining
coverage under a multiple health insurance plan.
SEC. 113. EFFECTIVE DATE.
This part shall take effect on the date of the enact-
ment of this Act.
Subtitle B—ERISA and Internal
Revenue Code Requirements
SEC. 131. CLARIFICATION OF ERISA PREEMPTION.
(a) IN GENERAL.—Section 514(b)(6)(A) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1144(b)(6)(A)) is amended—
(1) in clause (i), by striking ‘‘in the case’’ and
inserting ‘‘In the case’’, and by striking in subclause
(ii) ‘‘, and’’ and inserting a period; and
(2) in clause (ii), by striking ‘‘in the case’’ and
inserting ‘‘In the case’’, and by adding at the end
the following new sentence: ‘‘For purposes of this
clause, a State law which regulates insurance shall
not be treated as inconsistent with the preceding
sections of this title solely because such law provides
standards described in clause (i)(I) and provisions
described in clause (i)(II).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (b) shall apply to plan years beginning after
the date of the enactment of this Act.
SEC. 132. SOLVENCY REQUIREMENTS FOR SINGLE-EM-
PLOYER PLANS.
(a) IN GENERAL.—Section 609 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1168)
is amended—
(1) by redesignating subsection (e) as sub-
section (f); and
(2) by inserting after subsection (d) the follow-
ing new subsection:
‘‘(e) SOLVENCY REQUIREMENTS
FOR SINGLE-EM-
PLOYER PLANS.—
‘‘(1) IN
GENERAL.—The Secretary shall pre-
scribe by regulation—
‘‘(A) solvency standards for group health
plans that are single-employer plans which will
ensure that benefits under such plans will be
provided in full when due, and
‘‘(B) rules for monitoring and enforcing
compliance with such standards.
‘‘(2) TREATMENT
OF
EXCESS
OR
STOP-LOSS
COVERAGE.—In prescribing solvency standards pur-
suant to paragraph (1), the Secretary shall take into
consideration the extent to which a plan’s potential
liabilities are covered by excess or stop-loss coverage.
‘‘(3) ASSETS HELD IN TRUST.—For purposes of
complying with regulations prescribing solvency
standards pursuant to paragraph (1), the plan spon-
sor of each group health plan shall, in accordance
with such regulations, take such steps as are nec-
essary to ensure that plan assets held for the pur-
pose of complying with such solvency standards are
held in trust under the plan and are available solely
for such purpose.’’.
(b) DEADLINE FOR ISSUANCE OF REGULATIONS.—
Not later than one year after the date of the enactment
of this Act, the Secretary of Labor (in consultation with
the Secretary of Health and Human Services) shall issue
final regulations carrying out the requirements of the
amendments made by subsection (a).
SEC. 133. CLARIFICATION OF VEBA CONTRIBUTIONS.
Paragraph (1) of section 419A(c) of the Internal Rev-
enue Code of 1986 (relating to qualified asset account;
limitation on additions to account) is amended by striking
‘‘and’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting ‘‘,
and’’, and by adding at the end the following new subpara-
graph:
‘‘(C) in the case of an account providing
medical benefits, compliance with Federal or
State solvency requirements.’’
TITLE II—TAX FAIRNESS
SEC. 
201. 
INDIVIDUALS 
ALLOWED 
DEDUCTION 
FROM
GROSS INCOME FOR COST OF HEALTH INSUR-
ANCE AND CONTRIBUTIONS TO MEDICAL
SAVINGS ACCOUNTS.
(a) IN GENERAL.—Subsection (a) of section 62 of the
Internal Revenue Code of 1986 is amended by inserting
after paragraph (15) the following new paragraph:
‘‘(16) MEDICAL EXPENSES ATTRIBUTABLE TO
HEALTH PLAN COVERAGE.—
‘‘(A) IN GENERAL.—The deduction allowed
by section 213 for—
‘‘(i) amounts paid for coverage under
any health plan, and
‘‘(ii) contributions to any medical sav-
ings account (as defined in section 7524).
‘‘(B) EXCEPTION.—Subparagraph (A)(i)
shall not apply to coverage of an individual who
has 
coverage 
described 
in 
section
213(f)(3)(B).’’.
(b) REVISION OF MEDICAL EXPENSE DEDUCTION.—
Subsection (a) of section 213 of such Code is amended
to read as follows:
‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be
allowed as a deduction the amount equal to the sum of—
‘‘(1) the amounts paid during the taxable year
for coverage of the taxpayer, his spouse, and de-
pendents (as defined in section 152) under any
health plan,
‘‘(2) in the case of a taxpayer who is an eligible
individual (as defined in subsection (f)), the amounts
paid in cash during the taxable year by or on behalf
of such taxpayer to a medical savings account for
the benefit of the taxpayer, his spouse, and depend-
ents (as so defined) if such spouse and dependents
are eligible individuals, and
‘‘(3) the expenses (other than expenses de-
scribed in paragraph (1)) paid during the taxable
year, not compensated by insurance or otherwise, for
medical care of the taxpayer, his spouse, and de-
pendents (as so defined) to the extent such expenses
exceed 7.5 percent of the adjusted gross income of
the taxpayer.
Paragraph (1) shall not apply if the taxpayer, or the
spouse of the taxpayer, is eligible to participate in any
health plan maintained by any employer of such taxpayer
or spouse.’’
(c) DEFINITIONS AND SPECIAL RULES RELATING TO
MEDICAL SAVINGS ACCOUNTS.—Section 213 of such Code
is amended by adding at the end the following new sub-
section:
‘‘(f) DEFINITIONS AND SPECIAL RULES RELATING
TO MEDICAL SAVINGS ACCOUNTS.—
‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as
provided in regulations prescribed by this Secretary,
no deduction shall be allowed under subsection
(a)(2) for amounts paid to any medical savings ac-
count for the benefit of an individual, such individ-
ual’s spouse, or any dependent of such individual or
spouse if such individual, spouse, or dependent is a
beneficiary of any other medical savings account.
‘‘(2) DOLLAR LIMITATION.—The amount allow-
able as a deduction under subsection (a)(2) for the
taxable year shall not exceed the lesser of—
‘‘(A) the lowest deductible under any cata-
strophic health plan providing coverage to any
beneficiary of the medical savings account, or
‘‘(B)(i) $2,500, or
‘‘(ii) $5,000 if the catastrophic health plan
covering the taxpayer provides coverage for
more than 1 individual.
A beneficiary of such account who has attained age
65 before the close of the taxable year shall not be
taken into account in determining the limitation
under the preceding sentence.
‘‘(3) ELIGIBLE INDIVIDUAL.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means any individual who is covered
under a catastrophic health plan throughout the
calendar year in which or with which the tax-
able year ends.
‘‘(B) LIMITATION.—Such term does not in-
clude an individual who is 65 years of age or
older, unless the individual is covered under a
catastrophic health plan that is a primary plan
(within the meaning of section 1862(b)(2)(A) of
the Social Security Act).
‘‘(4) CATASTROPHIC HEALTH PLAN.—For pur-
poses of this subsection—
‘‘(A) IN
GENERAL.—The term ‘cata-
strophic health plan’ means a health plan cover-
ing specified expenses incurred by an individual
for medical care for such individual and the
spouse and dependents (as defined in section
152) of such individual only to the extent such
expenses covered by the plan for any calendar
year exceed $1,800 ($3,600 if the catastrophic
health plan covering the taxpayer provides cov-
erage for more than 1 individual) or such high-
er amounts as may be specified by the plan.
‘‘(B) COST-OF-LIVING
ADJUSTMENT.—In
the case of any calendar year after 1994, each
dollar amount in subparagraph (A) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year.
If any increase under the preceding sentence is
not a multiple of $50, such increase shall be
rounded to the nearest multiple of $50.
‘‘(5) NO DEDUCTION FOR MEDICAL EXPENSES
PAID FROM ACCOUNT.—The amount otherwise taken
into account under subsection (a) as expenses paid
for medical care shall be reduced by the amount (if
any) of the distributions from any medical savings
account of the taxpayer during the taxable year
which is not includible in gross income by reason of
being used for medical care.’’
(d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO
MEDICAL
SAVINGS
ACCOUNTS
FROM
EMPLOYMENT
TAXES.—
(1) SOCIAL SECURITY TAXES.—
(A) Subsection (a) of section 3121 of such
Code is amended by striking ‘‘or’’ at the end of
paragraph (20), by striking the period at the
end of paragraph (21) and inserting ‘‘; or’’, and
by inserting after paragraph (21) the following
new paragraph:
‘‘(22) remuneration paid to or on behalf of
an employee if (and to the extent that) at the
time of payment of such remuneration it is rea-
sonable to believe that a corresponding deduc-
tion is allowable under section 213(a)(2).’’
(B) Subsection (a) of section 209 of the
Social Security Act is amended by striking ‘‘or’’
at the end of paragraph (17), by striking the
period at the end of paragraph (18) and insert-
ing ‘‘; or’’, and by inserting after paragraph
(18) the following new paragraph:
‘‘(19) remuneration paid to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 213(a)(2) of the Internal Revenue
Code of 1986.’’
(2) RAILROAD RETIREMENT TAX.—Subsection
(e) of section 3231 of such Code is amended by add-
ing at the end thereof the following new paragraph:
‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL
SAVINGS ACCOUNTS.—The term ‘compensation’ shall
not include any payment made to or on behalf of an
employee if (and to the extent that) at the time of
payment of such remuneration it is reasonable to be-
lieve that a corresponding deduction is allowable
under section 213(a)(2).’’
(3) UNEMPLOYMENT TAX.—Subsection (b) of
section 3306 of such Code is amended by striking
‘‘or’’ at the end of paragraph (15), by striking the
period at the end of paragraph (16) and inserting ‘‘;
or’’, and by inserting after paragraph (16) the fol-
lowing new paragraph:
‘‘(17) remuneration paid to or on behalf of
an employee if (and to the extent that) at the
time of payment of such remuneration it is rea-
sonable to believe that a corresponding deduc-
tion is allowable under section 213(a)(2).’’
(4) WITHHOLDING TAX.—Subsection (a) of sec-
tion 3401 of such Code is amended by striking ‘‘or’’
at the end of paragraph (19), by striking the period
at the end of paragraph (20) and inserting ‘‘; or’’,
and by inserting after paragraph (20) the following
new paragraph:
‘‘(21) remuneration paid to or on behalf of
an employee if (and to the extent that) at the
time of payment of such remuneration it is rea-
sonable to believe that a corresponding deduc-
tion is allowable under section 213(a)(2).’’
(e) REFUNDABLE INCOME TAX CREDIT EQUIVALENT
TO
EXEMPTION
FROM
FICA 
TAXES
FOR
NONEMPLOYMENT-RELATED
PURCHASES
OF
HEALTH
PLAN COVERAGE AND CONTRIBUTIONS TO MEDICAL SAV-
INGS ACCOUNTS.—
(1) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of such Code (relating to re-
fundable credits) is amended by redesignating sec-
tion 35 as section 36 and by inserting after section
34 the following new section:
‘‘SEC. 35. FICA TAXES ON AMOUNTS USED TO PAY FOR PUR-
CHASE OF HEALTH PLAN COVERAGE AND TO
MAKE CONTRIBUTIONS TO MEDICAL SAVINGS
ACCOUNTS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount
equal to the allocable FICA tax for such year.
‘‘(b) ALLOCABLE FICA TAX.—For purposes of this
section, the term ‘allocable FICA tax’ means, for any tax-
able year, the sum of—
‘‘(1) 2.9 percent of the amounts described in
subsection (c) for the calendar year ending with or
within such taxable year, and
‘‘(2) the sum of the amounts by which the taxes
imposed by sections 3101(a) and 3111(a) would
have been reduced for such calendar year if the con-
tribution and benefit base (as determined under sec-
tion 230 of the Social Security Act) for such cal-
endar year were reduced by the aggregate of the
amounts described in subsection (c).
‘‘(c) AMOUNTS DESCRIBED.—
‘‘(1) IN GENERAL.—The amounts described in
this subsection are—
‘‘(A) the amounts paid for coverage of the
taxpayer, his spouse, and dependents (as de-
fined in section 152) under any health plan,
and
‘‘(B) in the case of a taxpayer who is an
eligible individual (as defined in section 213(f)),
the amounts paid in cash by or on behalf of
such taxpayer to a medical savings account for
the benefit of the taxpayer, his spouse, and de-
pendents (as so defined) if such spouse and de-
pendents are eligible individuals.
Subparagraph (A) shall not apply if the taxpayer, or
the spouse of the taxpayer, is eligible to participate
in any health plan maintained by any employer of
such taxpayer or spouse.
‘‘(2) LIMITATIONS.—
‘‘(A) IN GENERAL.—An amount shall be
treated as not described in this subsection if the
taxpayer’s wages (as defined in section 3121)
were reduced by reason of such amount.
‘‘(B) MEDICAL
SAVINGS
ACCOUNTS.—An
amount shall be treated as not described in this
subsection if a deduction is not allowed for such
amount under section 213(a)(2).’’
(2) CONFORMING AMENDMENT.—Paragraph (2)
of section 1324(b) of title 31, United States Code,
is amended by inserting before the period ‘‘or from
section 35 of such Code’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart C of part IV of subchapter A of
chapter 1 of such Code is amended by striking the
item relating to section 35 and inserting the follow-
ing:
‘‘Sec. 35. FICA taxes on amounts used to pay for purchase of
health plan coverage and to make contributions to
medical savings accounts.
‘‘Sec. 36. Overpayments of tax.’’
(f) CONFORMING AMENDMENT.—Section 162 of such
Code is amended by striking subsection (l).
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
TITLE III—MEDICAL SAVINGS
ACCOUNTS
SEC. 301. MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Chapter 77 of the Internal Reve-
nue Code of 1986 is amended by adding at the end the
following new section:
‘‘SEC. 7524. MEDICAL SAVINGS ACCOUNTS.
‘‘(a) MEDICAL SAVINGS ACCOUNTS.—For purposes
of this title—
‘‘(1) MEDICAL SAVINGS ACCOUNT.—
‘‘(A) IN
GENERAL.—The term ‘medical
savings account’ means a trust created or orga-
nized in the United States exclusively for the
purpose of paying the medical expenses of the
beneficiaries of such trust, but only if the writ-
ten governing instrument creating the trust
meets the following requirements:
‘‘(i) Except in the case of a rollover
contribution described in subsection (b)(4),
no contribution will be accepted unless it is
in cash, and contributions will not be ac-
cepted in excess of the amount allowed as
a deduction under section 213(a)(2) for
the taxable year.
‘‘(ii) The trustee is a bank (as defined
in section 408(n)) or another person who
demonstrates to the satisfaction of the
Secretary that the manner in which such
person will administer the trust will be
consistent with the requirements of this
section.
‘‘(iii) No part of the trust assets will
be invested in life insurance contracts.
‘‘(iv) The assets of the trust will not
be commingled with other property except
in a common trust fund or common invest-
ment fund.
‘‘(v) The interest of an individual in
the balance in his account is nonforfeit-
able.
‘‘(vi) Under regulations prescribed by
the Secretary, rules similar to the rules of
section 401(a)(9) shall apply to the dis-
tribution of the entire interest of bene-
ficiaries of such trust.
‘‘(B) TREATMENT
OF
COMPARABLE
AC-
COUNTS
HELD
BY
INSURANCE
COMPANIES.—
For purposes of this section, an account held by
an insurance company in the United States
shall be treated as a medical savings account
(and such company shall be treated as a bank)
if—
‘‘(i) such account is part of a health
insurance plan that includes a catastrophic
health 
plan 
(as 
defined 
in 
section
213(f)(4)),
‘‘(ii) such account is exclusively for
the purpose of paying the medical expenses
of the beneficiaries of such account who
are covered under such catastrophic health
plan, and
‘‘(iii) the written instrument govern-
ing the account meets the requirements of
clauses (i), (v), and (vi) of subparagraph
(A).
‘‘(2) MEDICAL EXPENSES.—The term ‘medical
expenses’ means, with respect to an individual,
amounts paid or incurred by such individual for—
‘‘(A) medical care (as defined in section
213), or
‘‘(B) long-term care (as defined in para-
graph (3)),
for such individual, the spouse of such individual,
and any dependent (as defined in section 152) of
such individual, but only to the extent such amounts
are not compensated for by insurance or otherwise.
‘‘(3) LONG-TERM CARE.—
‘‘(A) IN GENERAL.—The term ‘long-term
care’ means diagnostic, preventive, therapeutic,
rehabilitative, maintenance, or personal care
services which are required by, and provided to,
a chronically ill individual, which have as their
primary purpose the direct provision of needed
assistance with 1 or more activities of daily liv-
ing (or the alleviation of the conditions neces-
sitating such assistance) that the individual is
certified under subparagraph (B) as being un-
able to perform, and which are provided in a
setting other than an acute care unit of a hos-
pital pursuant to a continuing plan of care pre-
scribed by a physician or registered professional
nurse. Such term does not include food or lodg-
ing provided in an institutional or other setting,
or basic living services associated with the
maintenance of a household or participation in
community life, such as case management,
transportation or legal services, or the perform-
ance of home maintenance or household chores.
‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The
term ‘chronically ill individual’ means an indi-
vidual who is certified by a physician or reg-
istered professional nurse as being unable to
perform at least 3 activities of daily living with-
out substantial assistance from another individ-
ual. For purposes of this paragraph, the term
‘activities of daily living’ means bathing, dress-
ing, eating, toileting, transferring, and walking.
‘‘(4) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A contribution shall be deemed to be made
on the last day of the preceding taxable year if the
contribution is made on account of such taxable year
and is made not later than the time prescribed by
law for filing the return for such taxable year (not
including extensions thereof).
‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Any amount paid or dis-
tributed out of a medical savings account shall be in-
cluded in the gross income of the individual for
whose benefit such account was established unless
such amount is used exclusively to pay the medical
expenses of such individual.
‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution of any contribution paid
during a taxable year to a medical savings account
to the extent that such contribution exceeds the
amount allowable as a deduction under section
213(a)(2) if—
‘‘(A) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for filing
such individual’s return for such taxable year,
and
‘‘(B) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (B) shall
be included in the gross income of the individual for
the taxable year in which it is received.
‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED
FOR MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by
chapter 1 for any taxable year in which there
is a payment or distribution from a medical
savings account which is not used to pay the
medical expenses of the individual for whose
benefit the account was established shall be in-
creased by 10 percent of the amount of such
payment or distribution which is includible in
gross income under paragraph (1).
‘‘(B) ACCOUNT
BALANCE
LIMITATION.—
If—
‘‘(i) the tax imposed by this chapter is
required to be increased under subpara-
graph (A) by reason of a distribution, and
‘‘(ii) after such distribution, the ag-
gregate balance of all medical savings ac-
counts established for the benefit of the in-
dividual, is less than the amount of the de-
ductible under the catastrophic health plan
covering such individual,
subparagraph (A) shall be applied by substitut-
ing ‘50 percent’ for ‘10 percent’.
‘‘(4) ROLLOVERS.—Paragraph (1) shall not
apply to any amount paid or distributed out of a
medical savings account to the individual for whose
benefit the account is maintained if the entire
amount received (including money and any other
property) is paid into another medical savings ac-
count for the benefit of such individual not later
than the 60th day after the day on which he received
the payment or distribution.
‘‘(5) PENALTY
FOR
MANDATORY
DISTRIBU-
TIONS NOT MADE FROM ACCOUNT.—
‘‘(A) IN GENERAL.—If during any taxable
year—
‘‘(i) there is a payment of a manda-
tory distribution expense incurred by a
beneficiary of a medical savings account,
and
‘‘(ii) the person making such payment
is not reimbursed for such payment with a
distribution from such account before the
60th day after such payment,
the taxpayer’s tax imposed by this chapter for
such taxable year shall be increased by 100 per-
cent of the excess of the amount of such pay-
ment over the amount of reimbursement made
before such 60th day.
‘‘(B) 
MANDATORY
DISTRIBUTION
EX-
PENSE.—For purposes of subparagraph (A),
the term ‘mandatory distribution expense’
means any expense incurred which may be
counted towards a deductible, or for a
copayment or coinsurance, under the cata-
strophic health plan covering such beneficiary.
‘‘(c) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION FROM TAX.—Any medical sav-
ings account is exempt from taxation under this sub-
title unless such account has ceased to be a medical
savings account by reason of paragraph (2) or (3).
Notwithstanding the preceding sentence, any such
account shall be subject to the taxes imposed by sec-
tion 511 (relating to imposition of tax on unrelated
business income of charitable, etc. organizations).
‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN-
GAGES IN PROHIBITED TRANSACTION.—
‘‘(A) IN GENERAL.—If, during any taxable
year of the individual for whose benefit the
medical savings account was established, such
individual engages in any transaction prohibited
by section 4975 with respect to the account, the
account ceases to be a medical savings account
as of the first day of that taxable year.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a medical savings account by
reason of subparagraph (A) on the first day of
any taxable year, paragraph (1) of subsection
(b) shall be applied as if there were a distribu-
tion on such first day in an amount equal to
the fair market value (on such first day) of all
assets in the account (on such first day) and no
portion of such distribution were used to pay
medical expenses.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a medical savings account was estab-
lished uses the account or any portion thereof as se-
curity for a loan, the portion so used is treated as
distributed to that individual and not used to pay
medical expenses.
‘‘(d) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if—
‘‘(1) the assets of such account are held by a
bank (as defined in section 408(n)) or another per-
son who demonstrates to the satisfaction of the Sec-
retary that the manner in which he will administer
the account will be consistent with the requirements
of this section, and
‘‘(2) the custodial account would, except for the
fact that it is not a trust, constitute a medical sav-
ings account described in subsection (a).
For purposes of this title, in the case of a custodial ac-
count treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as
the trustee thereof.
‘‘(e) REPORTS.—The trustee of a medical savings ac-
count shall make such reports regarding such account to
the Secretary and to the individual for whose benefit the
account is maintained with respect to contributions, dis-
tributions, and such other matters as the Secretary may
require under regulations. The reports required by this
subsection shall be filed at such time and in such manner
and furnished to such individuals at such time and in such
manner as may be required by those regulations.’’
(b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973
of such Code (relating to tax on excess contributions to
individual retirement accounts, certain section 403(b) con-
tracts, and certain individual retirement annuities) is
amended—
(1) by inserting ‘‘MEDICAL
SAVINGS
AC-
COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of
such section,
(2) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following:
‘‘(2) a medical savings account (within the
meaning of section 7524(a)),’’,
(3) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a), and
(4) by adding at the end thereof the following
new subsection:
‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS
ACCOUNTS.—For purposes of this section, in the case of
a medical savings account (within the meaning of section
7524(a)), the term ‘excess contributions’ means the
amount by which the amount contributed for the taxable
year to the account exceeds the amount allowable as a de-
duction under section 213(a)(2) for such taxable year. For
purposes of this subsection, any contribution which is dis-
tributed out of the medical savings account in a distribu-
tion to which section 7524(b)(2) applies shall be treated
as an amount not contributed.’’
(c) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC-
COUNTS.—An individual for whose benefit a medical
savings account (within the meaning of section
7524(a)) is established shall be exempt from the tax
imposed by this section with respect to any trans-
action concerning such account (which would other-
wise be taxable under this section) if, with respect
to such transaction, the account ceases to be a medi-
cal savings account by reason of the application of
section 7524(b)(2)(A) to such account.’’, and
(2) by inserting ‘‘or a medical savings account
described in section 7524(a)’’ in subsection (e)(1)
after ‘‘described in section 408(a)’’.
(d) FAILURE TO PROVIDE REPORTS ON MEDICAL
SAVINGS ACCOUNTS.—Section 6693 of such Code (relat-
ing to failure to provide reports on individual retirement
account or annuities) is amended—
(1) by inserting ‘‘OR ON MEDICAL SAVINGS
ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of
such section, and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 7524(e)
to file a report regarding a medical savings account
at the time and in the manner required by such sec-
tion shall pay a penalty of $50 for each failure un-
less it is shown that such failure is due to reasonable
cause.’’
(e) CLERICAL AMENDMENTS.—
(1) The table of sections for chapter 77 of such
Code is amended by adding at the end the following:
‘‘Sec. 7524. Medical savings accounts.’’
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, medical savings accounts, certain 403(b)
contracts, and certain individual retirement annu-
ities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on medical savings accounts’’ after ‘‘annuities’’ in
the item relating to section 6693.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
TITLE IV—MEDICAL
MALPRACTICE
SEC. 401. APPLICABILITY AND PREEMPTION.
(a) APPLICABILITY.—This title shall apply with re-
spect to any medical malpractice liability claim and to any
medical malpractice liability action brought in any State
or Federal court, except that this title shall not apply to
a claim or action for damages arising from a vaccine-relat-
ed injury or death to the extent that title XXI of the Pub-
lic Health Service Act applies to the claim or action.
(b) PREEMPTION.—
(1) IN GENERAL.—The provisions of this title
shall preempt any State or local law to the extent
such law is inconsistent with the limitations con-
tained in such provisions. The provisions of this title
shall not preempt any State law that provides for
defenses or places limitations on a person’s liability
in addition to those contained in this title, places
greater limitations on the amount of attorneys’ fees
and expenses that can be collected, or otherwise im-
poses greater restrictions than those provided in this
title.
(2) NEGOTIATED LIABILITY.—The provisions of
this title shall preempt any Federal, State or local
law to the extent that such law prohibits a health
care provider and a purchaser of health care from
voluntarily entering into a contractual agreement in
which the provider offers reduced fees for medical
services in exchange for a prearranged limit on the
amount of any award in a medical malpractice liabil-
ity action resulting from the provision of such serv-
ices or a limit on the cause of action that may be
maintained with respect to such services.
(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 citi-
zen 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) 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 medical
malpractice liability actions on the basis of section 1331
or 1337 of title 28, United States Code.
SEC. 402. STATUTE OF LIMITATIONS.
(a) IN GENERAL.—Except as provided in subsection
(b), no medical malpractice liability action shall be initi-
ated after the expiration of the 2-year period that begins
on the later of the date that the alleged injury that is the
subject of the claim was discovered, or the date on which
such injury should reasonably have been discovered. In no
event shall any such action be initiated after the expiration
of the 4-year period that begins on the date on which the
alleged injury occurred.
(b) EXCEPTION FOR CERTAIN MINORS.—In the case
of an alleged injury suffered by a minor who has not at-
tained 6 years of age, no medical malpractice liability ac-
tion shall be initiated after the expiration of the 2-year
period that begins on the date on which the alleged injury
was discovered, or the date on which such injury should
reasonably have been discovered. In no event shall any
such action be initiated after the expiration of the 4-year
period that begins on the date on which the alleged injury
occurred, or the date on which the minor attains 8 years
of age, whichever is later.
SEC. 403. SCOPE OF LIABILITY.
(a) IN GENERAL.—With respect to economic and
noneconomic damages, the liability of each defendant in
a medical malpractice liability action shall be several only
and may not be joint. Such a defendant shall be liable
only for the amount of economic or noneconomic damages
allocated to the defendant in direct proportion to such de-
fendant’s percentage of fault or responsibility for the in-
jury suffered by the claimant.
(b) DETERMINATION OF PERCENTAGE OF LIABIL-
ITY.—The trier of fact in a medical malpractice liability
action shall determine the extent of each defendant’s fault
or responsibility for the economic or noneconomic damages
suffered by the claimant, and shall assign a percentage
of responsibility for such injury to each such defendant.
SEC. 404. LIMITATION ON NONECONOMIC DAMAGES.
The total amount of noneconomic damages that may
be awarded to a claimant and the members of the claim-
ant’s family for losses resulting from the injury which is
the subject of a medical malpractice liability action may
not exceed $250,000, regardless of the number of parties
against whom the action is brought or the number of ac-
tions brought with respect to such injury.
SEC. 405. TREATMENT OF PAYMENTS FOR FUTURE ECO-
NOMIC LOSSES.
(a) PROHIBITING SINGLE LUMP-SUM PAYMENT.—In
any medical malpractice liability action in which the dam-
ages awarded for any economic losses to be incurred after
the date on which the judgment is entered exceeds
$100,000, a defendant may not be required to pay such
damages in a single, lump-sum payment, but shall be per-
mitted to make such payments periodically based on pro-
jections of the amount of damages expected to be incurred
by the claimant at appropriate intervals, as determined by
the court.
(b) USE OF ANNUITIES OR TRUSTS.—The court may
require that a defendant in a medical malpractice liability
action purchase an annuity or fund a reversionary trust
to make periodic payments under subsection as provided
for in subsection (a) if the court determines that a reason-
able basis exists for concluding that the defendant may
be unable or otherwise fail to make the required periodic
payments.
(c) REQUIREMENT OF PERIODIC PAYMENT AS FINAL
ORDER.—A judgment of a court awarding periodic pay-
ments under this section may not be reopened at any time
to contest, amend, or modify the schedule or amount of
the payments in the absence of fraud or any other basis
under which a party may obtain relief from a final judg-
ment.
SEC. 406. TREATMENT OF COSTS AND ATTORNEY’S FEES.
(a) COURT DISCRETION.—A court in a medical mal-
practice liability action may, as a condition of the initi-
ation of such an action, require an undertaking for the
payment of the costs associated with such action, includ-
ing reasonable attorneys’ fees.
(b) PAYMENT OF COSTS.—If a judgment in a medical
malpractice liability action is rendered against a party to
such action, upon a motion by the prevailing party to such
action, the court shall require the party against whom the
judgment was rendered to pay to such prevailing party
the costs and fees incurred by such prevailing party under
the action, including reasonable attorneys’ fees and other
expenses. The court may waive the application of this
paragraph if the court finds that the position maintained
by the party against whom such judgment was rendered
under such action was substantially justified or that spe-
cial circumstances make such an award unjust.
(c) APPLICATION
FOR RECOVERY
OF COSTS.—A
party to a medical malpractice liability action who is seek-
ing an award of costs and fees as provided for in sub-
section (b) shall, not later than 30 days after the date
on which the final, nonappealable judgment in entered
with respect to such action, submit to the appropriate
court an application for the recovery of costs and fees.
Such application shall contain—
(1) a certification that the submitting party is
a prevailing party and is eligible to receive costs and
fees under subsection (b);
(2) a description of the amount of costs and
fees sought, including an itemized statement from
any attorney or expert witness representing or ap-
pearing on behalf of such party stating the actual
time expended and the rate at which fees and other
expenses were computed; and
(3) a description of the reasons why the posi-
tion of the party against whom the judgment was
rendered was not substantially justified.
In determining whether or not the position of the
nonprevailing party was substantially justified the court
shall consider only the record presented in the action
maintained for the costs and fees.
(d) AMOUNT OF AWARD.—In making a decision on
an application submitted under subsection (c), the court
may—
(1) assess the amount to be awarded under this
section against the party against whom the judg-
ment was rendered or against the attorney (or attor-
neys) of such party; and
(2) reduce the amount to be awarded pursuant
to this section, or deny an award, to the extent that
the prevailing party, during the course of the pro-
ceedings, engaged in conduct which unnecessarily
and unreasonably lengthened the time for, or in-
creased the costs of, the final resolution of the mat-
ter in controversy.
SEC. 407. COLLATERAL SOURCES.
(a) IN GENERAL.—The total amount of damages re-
ceived by a claimant in a medical malpractice liability ac-
tion shall be reduced, in accordance with subsection (b),
by any other payment that has been made, or that will
be made, to such claimant to compensate such claimant
for an injury that was part of such action, including
payments—
(1) under Federal or State disability or sickness
programs;
(2) under Federal, State, or private health in-
surance programs;
(3) under private disability insurance programs;
(4) under employer wage continuation pro-
grams; and
(5) from any other source that are intended to
compensate such claimant for such injury.
(b) AMOUNT OF REDUCTION.—The amount by which
an award of damages to a claimant for an injury shall
be reduced under subsection (a) shall be—
(1) the total amount of any payments (other
than such award) that have been made, or that will
be made, to such claimant to compensate such
claimant for such injury; and
(2) the amount paid by such claimant (or by
the spouse, parent, or legal guardian of such claim-
ant) to secure the payments described in paragraph
(1).
SEC. 408. DAMAGES RELATING TO MEDICAL PRODUCT
LIABILITY CLAIMS.
(a) IN GENERAL.—Noneconomic damages may not
be awarded with respect to any medical product liability
claim alleged against a medical product producer if—
(1) the drug or device that is the subject of
such claim—
(A) was subject to approval under section
505, or premarket approval under section 515,
of the Federal Food, Drug, and Cosmetic Act
by the Food and Drug Administration with re-
spect to—
(i) the safety of the formulation or
performance of the aspect of the drug or
device; or
(ii) the adequacy of the packaging or
labeling of the drug or device, and
(B) was approved by the Food and Drug
Administration; or
(2) the drug or device is generally recognized as
safe and effective pursuant to conditions established
by the Food and Drug Administration and applica-
ble regulations, including packaging and labeling
regulations.
(b) EXCEPTION IN CASE OF WITHHELD INFORMA-
TION, MISREPRESENTATION, OR ILLEGAL PAYMENT.—
The provisions of subsection (a) shall not apply if it is
determined on the basis of clear and convincing evidence
that the medical product producer—
(1) withheld from or misrepresented to the
Food and Drug Administration information concern-
ing such drug or device that is required to be sub-
mitted under the Federal Food, Drug, and Cosmetic
Act or section 352 of the Public Health Service Act
and that is material and relevant to the action in-
volved; or
(2) made an illegal payment to an official of the
Food and Drug Administration for the purpose of
securing approval of the drug or device.
(c) DEFINITION.—As used in this section, the term
‘‘clear and convincing evidence’’ is that measure 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, except that such measure or de-
gree of proof is more than that required under preponder-
ance of the evidence, but less than that required for proof
beyond a reasonable doubt.
SEC. 409. DEFINITIONS.
(1) CLAIMANT.—The term ‘‘claimant’’ means
any person who alleges a medical malpractice liabil-
ity claim, and any person on whose behalf such a
claim is alleged, including the decedent in the case
of an action brought through or on behalf of an
estate.
(2) COMMERCIAL LOSS.—The term ‘‘commercial
loss’’ means loss, including damage to the product
itself, which is not harm described in subparagraph
(A) or (B) of paragraph (5), and which is of a kind
for which there is a remedy under applicable con-
tract or commercial law.
(3) ECONOMIC DAMAGES.—The term ‘‘economic
damages’’ means damages paid to compensate an in-
dividual for hospital and other medical expenses, lost
wages, lost employment, and other pecuniary losses.
(4) HEALTH CARE PROFESSIONAL.—The term
‘‘health care professional’’ means any individual who
provides health care services in a State and who is
required by the laws or regulations of the State to
be licensed or certified by the State to provide such
services in the State.
(5) HARM.—The term ‘‘harm’’ means—
(A) the personal physical illness, injury, or
death of a claimant;
(B) the mental anguish or emotional harm
of a claimant that is caused by or causing the
claimant personal physical illness or injury; or
(C) the physical damage caused by a medi-
cal product to property other than the medical
product itself.
Such term does not include commercial loss or loss
or damage to a medical product.
(6) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any organization or
institution that is engaged 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 cer-
tified by the State to engage in the delivery of such
services in the State.
(7) INJURY.—The term ‘‘injury’’ means any ill-
ness, disease, or other harm that is the subject of
a medical malpractice liability action or a medical
malpractice liability claim.
(8) MEDICAL
MALPRACTICE
LIABILITY
AC-
TION.—The term ‘‘medical malpractice liability ac-
tion’’ means a civil action brought in a State or Fed-
eral court against a health care provider or health
care professional in which the plaintiff alleges a
medical malpractice liability claim, but does not in-
clude any action in which the plaintiff’s sole allega-
tion is an allegation of an intentional tort.
(9) 
MEDICAL
MALPRACTICE
LIABILITY
CLAIM.—The term ‘‘medical malpractice 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 or the use of
a medical product.
(10) MEDICAL PRODUCT.—
(A) IN
GENERAL.—The term ‘‘medical
product’’ means, with respect to the allegation
of a claimant, a drug (as defined in section
201(g)(1) of the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 321(g)(1)) or a medical
device (as defined in section 201(h) of the Fed-
eral Food, Drug, and Cosmetic Act (21 U.S.C.
321(h)) if—
(i) such drug or device was subject to
premarket approval under section 505,
507, or 515 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355, 357, or
360e) or section 351 of the Public Health
Service Act (42 U.S.C. 262) with respect
to the safety of the formulation or per-
formance of the aspect of such drug or de-
vice which is the subject of the claimant’s
allegation or the adequacy of the packag-
ing or labeling of such drug or device, and
such drug or device is approved by the
Food and Drug Administration; or
(ii) the drug or device is generally rec-
ognized as safe and effective under regula-
tions issued by the Secretary of Health
and Human Services under section 201(p)
of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(p)).
(B) EXCEPTION
IN
CASE
OF
MISREPRE-
SENTATION OR FRAUD.—Notwithstanding sub-
paragraph (A), the term ‘‘medical product’’
shall not include any product described in such
subparagraph if the claimant shows that the
product is approved by the Food and Drug Ad-
ministration for marketing as a result of with-
held information, misrepresentation, or an ille-
gal payment by manufacturer of the product.
(11) 
NONECONOMIC
DAMAGES.—The 
term
‘‘noneconomic damages’’ means damages paid to
compensate an individual for losses for physical and
emotional pain, suffering, inconvenience, physical
impairment, mental anguish, emotional distress, dis-
figurement, loss of enjoyment of life, loss of society
and companionship, loss of consortium, injury to
reputation, humiliation, and other noneconomic in-
jury.
(12) PERSON.—The term ‘‘person’’ means any
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any
other entity, including any governmental entity.
SEC. 410. EFFECTIVE DATE.
This title shall apply to all medical malpractice liabil-
ity actions commenced on or after the date of enactment
of this Act.
TITLE V—ANTITRUST REFORM
SEC. 501. PUBLICATION OF ANTITRUST GUIDELINES ON
ACTIVITIES OF HEALTH PLANS.
(a) IN GENERAL.—The Attorney General shall pro-
vide for the development and publication of explicit guide-
lines on the application of antitrust laws to the activities
of health plans. The guidelines shall be designed to facili-
tate the development and operation of plans, consistent
with the antitrust laws.
(b) REVIEW PROCESS.—The Attorney General shall
establish a review process under which the administrator
or sponsor of a health plan (or organization that proposes
to administer or sponsor a health plan) may submit a re-
quest to Attorney General to obtain a prompt opinion (but
in no event later than 90 days after the Attorney General
receives the request) from the Department of Justice on
the plan’s conformity with the Federal antitrust laws.
(c) DEFINITIONS.—In this section—
(1) the term ‘‘antitrust laws’’—
(A) has the meaning given it in subsection
(a) of the first section of the Clayton Act (15
U.S.C. 12(a)), except that such term includes
section 5 of the Federal Trade Commission Act
(15 U.S.C. 45) to the extent such section ap-
plies to unfair methods of competition, and
(B) includes any State law similar to the
laws referred to in subparagraph (A); and
(2) the term ‘‘health plan’’ means any contract
or arrangement under which an entity bears all or
part of the cost of providing health care items and
services, including a hospital or medical expense in-
curred policy or certificate, hospital or medical serv-
ice plan contract, or health maintenance subscriber
contract, but does not include—
(A) coverage only for accident, dental, vi-
sion, disability, or long term care, medicare
supplemental health insurance, or any combina-
tion thereof,
(B) coverage issued as a supplement to li-
ability insurance,
(C) workers’ compensation or similar in-
surance, or
(D) automobile medical-payment insur-
ance.
SEC. 502. ISSUANCE OF HEALTH CARE CERTIFICATES OF
PUBLIC ADVANTAGE.
(a) ISSUANCE AND EFFECT OF CERTIFICATE.—The
Attorney General, after consultation with the Secretary of
Health and Human Services, shall issue in accordance
with this section a certificate of public advantage to each
eligible health care collaborative activity that complies
with the requirements in effect under this section on or
after the expiration of the 1-year period that begins on
the date of the enactment of this Act (without regard to
whether or not the Attorney General has promulgated reg-
ulations to carry out this section by such date). Such ac-
tivity, and the parties to such activity, shall not be liable
under any of the antitrust laws for conduct described in
such certificate and engaged in by such activity if such
conduct occurs while such certificate is in effect.
(b) REQUIREMENTS APPLICABLE TO ISSUANCE OF
CERTIFICATES.—
(1) STANDARDS
TO
BE
MET.—The Attorney
General shall issue a certificate to an eligible health
care collaborative activity if the Attorney General
finds that—
(A) the benefits that are likely to result
from carrying out the activity outweigh the re-
duction in competition (if any) that is likely to
result from the activity, and
(B) such reduction in competition is rea-
sonably necessary to obtain such benefits.
(2) FACTORS TO BE CONSIDERED.—
(A) WEIGHING OF BENEFITS AGAINST RE-
DUCTION
IN
COMPETITION.—For purposes of
making the finding described in paragraph
(1)(A), the Attorney General shall consider
whether the activity is likely—
(i) to maintain or to increase the
quality of health care,
(ii) to increase access to health care,
(iii) to achieve cost efficiencies that
will be passed on to health care consumers,
such as economies of scale, reduced trans-
action costs, and reduced administrative
costs,
(iv) to preserve the operation of
health care facilities located in underserved
geographical areas,
(v) to improve utilization of health
care resources, and
(vi) to reduce inefficient health care
resource duplication.
(B) NECESSITY OF REDUCTION IN COM-
PETITION.—For purposes of making the finding
described in paragraph (1)(B), the Attorney
General shall consider the availability of equally
efficient, less restrictive alternatives to achieve
the benefits that are intended to be achieved by
carrying out the activity.
(c) ESTABLISHMENT
OF CRITERIA
AND PROCE-
DURES.—Subject to subsections (d) and (e), not later than
1 year after the date of the enactment of this Act, the
Attorney General and the Secretary shall establish jointly
by rule the criteria and procedures applicable to the issu-
ance of certificates under subsection (a). The rules shall
specify the form and content of the application to be sub-
mitted to the Attorney General to request a certificate,
the information required to be submitted in support of
such application, the procedures applicable to denying and
to revoking a certificate, and the procedures applicable to
the administrative appeal (if such appeal is authorized by
rule) of the denial and the revocation of a certificate. Such
information may include the terms of the health care col-
laborative activity (in the case of an activity in existence
as of the time of the application) and implementation plan
for the collaborative activity.
(d) ELIGIBLE HEALTH CARE COLLABORATIVE AC-
TIVITY.—To be an eligible health care collaborative activ-
ity for purposes of this section, a health care collaborative
activity shall submit to the Attorney General an applica-
tion that complies with the rules in effect under subsection
(c) and that includes—
(1) an agreement by the parties to the activity
that the activity will not foreclose competition by en-
tering into contracts that prevent health care provid-
ers from providing health care in competition with
the activity,
(2) an agreement that the activity will submit
to the Attorney General annually a report that de-
scribes the operations of the activity and information
regarding the impact of the activity on health care
and on competition in health care, and
(3) an agreement that the parties to the activity
will notify the Attorney General and the Secretary of
the termination of the activity not later than 30
days after such termination occurs.
(e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—
Not later than 90 days after an eligible health care col-
laborative activity submits to the Attorney General an ap-
plication that complies with the rules in effect under sub-
section (c) and with subsection (d), the Attorney General
shall issue or deny the issuance of such certificate. If, be-
fore the expiration of such 90-day period, the Attorney
General fails to issue or deny the issuance of such certifi-
cate, the Attorney General shall be deemed to have issued
such certificate.
(f) REVOCATION OF CERTIFICATE.—Whenever the
Attorney General finds that a health care collaborative ac-
tivity with respect to which a certificate is in effect does
not meet the standards specified in subsection (b), the At-
torney General shall revoke such certificate.
(g) WRITTEN REASONS; JUDICIAL REVIEW.—
(1) DENIAL
AND
REVOCATION
OF
CERTIFI-
CATES.—If the Attorney General denies an applica-
tion for a certificate or revokes a certificate, the At-
torney General shall include in the notice of denial
or revocation a statement of the reasons relied upon
for the denial or revocation of such certificate.
(2) JUDICIAL REVIEW.—
(A) AFTER
ADMINISTRATIVE
PROCEED-
ING.—(i) If the Attorney General denies an ap-
plication submitted or revokes a certificate is-
sued under this section after an opportunity for
hearing on the record, then any party to the
health care collaborative activity involved may
commence a civil action, not later than 60 days
after receiving notice of the denial or revoca-
tion, in an appropriate district court of the
United States for review of the record of such
denial or revocation.
(ii) As part of the Attorney General’s an-
swer, the Attorney General shall file in such
court a certified copy of the record on which
such denial or revocation is based. The findings
of fact of the Attorney General may be set aside
only if found to be unsupported by substantial
evidence in such record taken as a whole.
(B) DENIAL OR REVOCATION WITHOUT AD-
MINISTRATIVE
PROCEEDING.—If the Attorney
General denies an application submitted or re-
vokes a certificate issued under this section
without an opportunity for hearing on the
record, then any party to the health care col-
laborative activity involved may commence a
civil action, not later than 60 days after receiv-
ing notice of the denial or revocation, in an ap-
propriate district court of the United States for
de novo review of such denial or revocation.
(h) EXEMPTION.—A person shall not be liable under
any of the antitrust laws for conduct necessary—
(1) to prepare, agree to prepare, or attempt to
agree to prepare an application to request a certifi-
cate under this section, or
(2) to attempt to enter into any health care col-
laborative activity with respect to which such a cer-
tificate is in effect.
(i) DEFINITIONS.—In this section:
(1) The term ‘‘antitrust laws’’ has the meaning
given it in section 501(c)(1).
(2) The term ‘‘certificate’’ means a certificate
of public advantage authorized to be issued under
subsection (a).
(3) The term ‘‘health care collaborative activ-
ity’’ means an agreement (whether existing or pro-
posed) between 2 or more providers of health care
services that is entered into solely for the purpose of
sharing in the provision of health care services and
that involves substantial integration or financial
risk-sharing between the parties, but does not in-
clude the exchanging of information, the entering
into of any agreement, or the engagement in any
other conduct that is not reasonably required to
carry out such agreement.
(4) The term ‘‘health care services’’ includes
services related to the delivery or administration of
health care services.
(5) The term ‘‘liable’’ means liable for any civil
or criminal violation of the antitrust laws.
(6) The term ‘‘provider of health care services’’
means any individual or entity that is engaged in the
delivery of health care services in a State and that
is required by State law or regulation to be licensed
or certified by the State to engage in the delivery of
such services in the State.
TITLE VI—CONSUMER
INFORMATION
SEC. 601. REQUIREMENT FOR DISCLOSURE OF PRICES FOR
HEALTH CARE SERVICES.
(a) IN GENERAL.—Except as provided in subsection
(b), each hospital, physician, or other provider of a health
care item or service shall make available to an individual,
before providing any health care item or service to the in-
dividual in the United States, a list of all applicable fees
and charges for the item or service. In the case of provi-
sion of items and services for which the particular services
to be provided are not readily determinable in advance,
the health care provider may use such estimates as the
Secretary of Health and Human Services may permit.
(b) EXCEPTION FOR EMERGENCIES.—Subsection (a)
shall not apply in the case of emergency treatment and
such other extenuating circumstances as the Secretary
may provide by regulation.
(c) ENFORCEMENT.—No individual shall be liable for
payment for a health care item or service for which a dis-
closure is required under subsection (a), if the disclosure
has not been substantially made in accordance with such
subsection.
(d) DEADLINE FOR ISSUANCE OF REGULATIONS.—
Not later than one year after the date of the enactment
of this Act, the Secretary of Health and Human Services
shall issue final regulations carrying out the requirements
of this section.