103 
(B) comply with the requirements of this 
Act; 
(3) ensure that health insurance issuers offer-
ing a HAPI plan in such State comply with the re-
quirements described in section 621; 
(4) ensure that HAPI plans offer premium dis-
counts and incentives for participation in wellness 
programs; 
(5) implement mechanisms to collect premium 
payments not otherwise collected under chapter 24A 
of the Internal Revenue Code of 1986 (as added by 
this Act); 
(6) continue to apply State law with respect 
to— 
(A) solvency and financial standards for 
health insurance issuers; 
(B) fair marketing practices for health in-
surance issuers; 
(C) grievances and appeals for covered in-
dividuals; and 
(D) patient protection; 
(7) ensure that providers receiving payment 
from the State HHA, when appropriate, provide in-
formation to patients seeking treatment on the dif-
ferent treatment options, the costs of these treat-
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ment options, and any comparative effectiveness in-
formation available through the research on com-
parative effectiveness conducted under the amend-
ments made by title VIII; and 
(8) comply with subsections (b) and (c). 
(b) ENSURING
MAXIMUM
ENROLLMENT.—Each 
State shall— 
(1) collect and exchange data with Federal and 
other public agencies as necessary to maintain a 
database containing information on the health insur-
ance enrollment status of all State residents; 
(2) implement methods to check enrollment sta-
tus and enroll individuals in HAPI plans, such as 
through the Department of Motor Vehicles of the 
State, the enrollment of children in elementary and 
secondary schools, the voter registration authority of 
the State, and other checkpoints determined appro-
priate by the State; 
(3) implement mechanisms, which may not in-
clude revocation or ineligibility for coverage under a 
HAPI plan, to enforce the responsibility of each 
adult individual to purchase HAPI plan coverage for 
such individual and any dependent children of such 
individual; and 
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(4) implement a mechanism to automatically 
enroll individuals in a HAPI plan who present in 
emergency departments without health insurance. 
(c) MAINTENANCE OF EFFORT.—Each State shall 
submit an annual report to the Secretary that dem-
onstrates that, for each State fiscal year that begins on 
or after January 1 of the first calendar year in which 
HAPI coverage begins under this Act, State expenditures 
for health services (as defined by the Secretary) are not 
less than the amount equal to— 
(1) in the case of the first State fiscal year for 
which such a report is submitted, 100 percent of the 
total amount of the State share of expenditures for 
such services under all public health programs oper-
ated in the State that are funded in whole or in part 
with State expenditures (including the Medicaid pro-
gram) for the most recent State fiscal year ending 
before January 1 of the first calendar year in which 
HAPI coverage begins under this Act; and 
(2) in the case of any subsequent State fiscal 
year for which such a report is submitted, the 
amount applicable under this subsection for the pre-
ceding State fiscal year increased by the percentage 
change, if any, in the consumer price index for all 
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106 
urban consumers over the previous Federal fiscal 
year. 
SEC. 632. EMPOWERING STATES TO INNOVATE THROUGH 
WAIVERS. 
(a) IN GENERAL.—A State that meets the require-
ments of subsection (b) shall be eligible for a waiver of 
applicable Federal health-related program requirements. 
(b) ELIGIBILITY REQUIREMENTS.—A State shall be 
eligible to receive a waiver under this section if— 
(1) the legislature of such State enacts legisla-
tion, or the State through a publically approved bal-
lot measure approves a plan, to provide health care 
coverage to it’s residents that is at least as com-
prehensive as the coverage required under a HAPI 
plan; and 
(2) the State submits to the Secretary an appli-
cation at such time, in such manner, and containing 
such information as the Secretary may require, in-
cluding a comprehensive description of the State leg-
islation or plan for implementing the State-based 
health plan. 
(c) DETERMINATIONS BY SECRETARY.— 
(1) IN
GENERAL.—Not later than 180 days 
after the receipt of an application from a State 
under subsection (b)(2), the Secretary shall make a 
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107 
determination with respect to the granting of a waiv-
er under this section to such State. 
(2) GRANTING OF WAIVER.—If the Secretary 
determines that a waiver should be granted under 
this section, the Secretary shall notify the State in-
volved of such determination and the terms and ef-
fectiveness of such waiver. 
(3) REFUSAL TO GRANT WAIVER.—If the Sec-
retary refuses to grant a waiver under this section, 
the Secretary shall— 
(A) notify the State involved of such deter-
mination, and the reasons therefore; and 
(B) notify the appropriate committees of 
Congress of such determination and the reasons 
therefore. 
(d) SCOPE OF WAIVERS.—The Secretary shall deter-
mine the scope of a waiver granted to a State under this 
section, including which Federal laws and requirements 
will not apply to the State under the waiver. 
Subtitle E—Federal Fallback 
Guarantee Responsibility 
SEC. 641. FEDERAL GUARANTEE OF ACCESS TO COVERAGE. 
(a) FEDERAL GUARANTEE.— 
(1) IN GENERAL.—If a State does not establish 
an HHA in compliance with title V by the date that 
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108 
is 4 years after the date of enactment of this Act, 
the Secretary shall ensure that each individual has 
available, consistent with paragraph (2), a choice of 
enrollment in at least 2 HAPI plans in the coverage 
area in which the individual resides. In any such 
case in which such plans are not available, the indi-
vidual shall be given the opportunity to enroll in a 
fallback HAPI plan. 
(2) REQUIREMENT
FOR
DIFFERENT
PLAN 
SPONSORS.—The requirement in paragraph (1) is 
not satisfied with respect to a coverage area if only 
1 entity offers all the HAPI plans in the area. 
(b) CONTRACTS.— 
(1) IN
GENERAL.—The Secretary shall enter 
into contracts under this subsection with entities for 
the offering of fallback HAPI plans in coverage 
areas in which the guarantee under subsection (a) is 
not met. 
(2) COMPETITIVE
PROCEDURES.—Competitive 
procedures (as defined in section 4(5) of the Office 
of Federal Procurement Policy Act (41 U.S.C. 
403(5))) shall be used to enter into a contract under 
this subsection. 
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(c) FALLBACK HAPI PLAN.—For purposes of this 
section, the term ‘‘fallback HAPI plan’’ means a HAPI 
plan that— 
(1) meets the requirements described in section 
111(b) and does not provide actuarially equivalent 
coverage described in section 111(c); and 
(2) meets such other requirements as the Sec-
retary may specify. 
Subtitle F—Federal Financing 
Responsibilities 
SEC. 651. APPROPRIATION FOR SUBSIDY PAYMENTS. 
There is authorized to be appropriated and there is 
appropriated for each fiscal year such sums as may be 
necessary to fund the insurance premium subsidies under 
section 121. 
SEC. 652. RECAPTURE OF MEDICARE AND 90 PERCENT OF 
MEDICAID 
FEDERAL 
DSH 
FUNDS 
TO 
STRENGTHEN MEDICARE AND ENSURE CON-
TINUED SUPPORT FOR PUBLIC HEALTH PRO-
GRAMS. 
(a) RECAPTURE OF MEDICARE DSH FUNDS.— 
(1) IN GENERAL.—Section 1886(d)(5)(F)(i) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395ww(d)(5)(F)(i)) is amended by inserting ‘‘and 
before January 1 of the first calendar year in which 
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110 
coverage under a HAPI plan begins under the 
Healthy Americans Act,’’ after ‘‘May 1, 1986,’’. 
(2) SAVINGS TO PART A TRUST FUND.—The 
savings to the Federal Hospital Insurance Trust 
Fund by reason of the amendment made by para-
graph (1) shall be used to strengthen the financial 
solvency of such Trust Fund. 
(b) RECAPTURE OF 90 PERCENT OF MEDICAID DSH 
FUNDS.— 
(1) HEALTHY
AMERICANS
PUBLIC
HEALTH 
TRUST FUND.—Subchapter A of chapter 98 of the 
Internal Revenue Code of 1986 (relating to trust 
fund code) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 9511. HEALTHY AMERICANS PUBLIC HEALTH TRUST 
FUND. 
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund 
to be known as the ‘Healthy Americans Public Health 
Trust Fund’, consisting of any amount appropriated or 
credited to the Trust Fund as provided in this section or 
section 9602(b). 
‘‘(b) TRANSFER TO TRUST FUND OF 90 PERCENT 
OF MEDICAID DSH FUNDS.—There are hereby appro-
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111 
priated to the Healthy Americans Public Health Trust 
Fund the following amounts: 
‘‘(1) In the case of the second, third, and 
fourth quarters of the first fiscal year in which cov-
erage under a HAPI plan begins under the Healthy 
Americans Act, an amount equal to 90 percent of 
the amount that would otherwise have been appro-
priated for the purpose of making payments to 
States under section 1903(a) of the Social Security 
Act for the Federal share of disproportionate share 
hospital payments made under section 1923 of such 
Act for such quarters of that fiscal year but for sub-
sections (c)(2) and (d)(2)(D) of section 1941 of the 
such Act, as determined by the Secretary of Health 
and Human Services. 
‘‘(2) In the case of each succeeding fiscal year, 
an amount equal to 90 percent of the amount that 
would otherwise have been appropriated for the pur-
pose of making payments to States under section 
1903(a) of the Social Security Act for the Federal 
share of disproportionate share hospital payments 
made under section 1923 of such Act for that fiscal 
year but for subsections (c)(1) and (d)(2)(D) of sec-
tion 1941 of such Act, as determined by the Sec-
retary of Health and Human Services, taking into 
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112 
account the percentage change, if any, in the con-
sumer price index for all urban consumers (U.S. city 
average) for the preceding fiscal year. 
‘‘(c) EXPENDITURES FROM TRUST FUND.—With re-
spect to each fiscal year for which transfers are made 
under subsection (b), amounts in the Healthy Americans 
Public Health Trust Fund shall be available for that fiscal 
year for the following purposes: 
‘‘(1) PROVIDING PREMIUM AND PERSONAL RE-
SPONSIBILITY
CONTRIBUTION
SUBSIDIES.—For 
making appropriations authorized under section 651 
of the Healthy Americans Act for providing pre-
mium and personal responsibility contribution sub-
sidies in accordance with section 122 of such Act. 
‘‘(2) REDUCING THE FEDERAL BUDGET DEF-
ICIT.—The Secretary shall transfer any amounts in 
the Trust Fund that are not expended as of Sep-
tember 30 of a fiscal year for a purpose described 
in paragraph (1) to the general revenues account of 
the Treasury.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for such subchapter is amended by adding at 
the end the following new item: 
‘‘Sec. 9511. Healthy Americans Public Health Trust Fund.’’. 
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113 
Subtitle 
G—Tax 
Treatment 
of 
Health Care Coverage Under 
Healthy 
Americans 
Program; 
Termination of Coverage Under 
Other Governmental Programs 
and Transition Rules for Med-
icaid and SCHIP 
PART 1—TAX TREATMENT OF HEALTH CARE COV-
ERAGE UNDER HEALTHY AMERICANS PRO-
GRAM 
SEC. 661. LIMITED EMPLOYEE INCOME AND PAYROLL TAX 
EXCLUSION FOR EMPLOYER SHARED RE-
SPONSIBILITY 
PAYMENTS, 
HISTORIC 
RE-
TIREE HEALTH CONTRIBUTIONS, AND TRAN-
SITIONAL COVERAGE CONTRIBUTIONS. 
(a) INCOME TAX EXCLUSION.— 
(1) IN
GENERAL.—Subsection (a) of section 
106 of the Internal Revenue Code of 1986 (relating 
to contributions by employer to accident and health 
plans) is amended to read as follows: 
‘‘(a) GENERAL RULE.—Gross income of an individual 
does not include— 
‘‘(1) if such individual is an employee, shared 
responsibility payments made by an employer under 
section 3411, 
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‘‘(2) if such individual is a former employee be-
fore the first calendar year beginning 4 years after 
the date of the enactment of the Healthy Americans 
Act, employer-provided coverage under an accident 
or health plan, 
‘‘(3) if such individual is a qualified collective 
bargaining employee under an accident or health 
plan in effect on January 1 of the first calendar year 
beginning 4 years after the date of the enactment of 
the Healthy Americans Act, employer-provided cov-
erage under such plan during any transition period 
described in section 3432, and 
‘‘(4) employer-provided coverage for qualified 
long-term care services (as defined in section 
7702B(c)).’’. 
(2) CONFORMING AMENDMENTS.—Section 106 
of such Code is amended— 
(A) by adding at the end of subsection (b) 
the following new paragraph: 
‘‘(8) TERMINATION.—This subsection shall not 
apply to contributions made in any calendar year be-
ginning at least 4 years after the date of the enact-
ment of the Healthy Americans Act.’’, 
(B) by inserting ‘‘and before the first cal-
endar year beginning 4 years after the date of 
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115 
the enactment of the Healthy Americans Act,’’ 
after ‘‘January 1, 1997,’’ in subsection (c)(1), 
and 
(C) by striking ‘‘shall be treated as em-
ployer-provided coverage for medical expenses 
under an accident or health plan’’ in subsection 
(d)(1) and inserting ‘‘shall not be included in 
such employee’s gross income’’. 
(b) PAYROLL TAXES.— 
(1) IN
GENERAL.—Section 3121(a) (defining 
wages) is amended by adding at the end the fol-
lowing new sentence: ‘‘In the case of any calendar 
year beginning at least 4 years after the date of the 
enactment of the Healthy Americans Act, para-
graphs (2) and (3) shall apply to payments on ac-
count of sickness only if such payments are de-
scribed in section 106(a).’’. 
(2) 
RAILROAD
RETIREMENT.—Section 
3231(e)(1) (defining wages) is amended by adding 
at the end the following new sentence: ‘‘In the case 
of any calendar year beginning at least 4 years after 
the date of the enactment of the Healthy Americans 
Act, this paragraph shall apply to payments on ac-
count of sickness only if such payments are de-
scribed in section 106(a).’’. 
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(3) UNEMPLOYMENT.—Section 3306(b) (defin-
ing wages) is amended by adding at the end the fol-
lowing new sentence: ‘‘In the case of any calendar 
year beginning at least 4 years after the date of the 
enactment of the Healthy Americans Act, para-
graphs (2) and (4) shall apply to payments on ac-
count of sickness only if such payments are de-
scribed in section 106(a).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning at 
least 4 years after the date of the enactment of the 
Healthy Americans Act. 
SEC. 662. EXCLUSION FOR LIMITED EMPLOYER-PROVIDED 
HEALTH CARE FRINGE BENEFITS. 
(a) IN GENERAL.—Section 132(a) of the Internal 
Revenue Code of 1986 (relating to certain fringe benefits) 
is amended by striking ‘‘or’’ at the end of paragraph (7), 
by striking the period at the end of paragraph (8) and 
inserting ‘‘, or’’, and by adding at the end the following 
new paragraph: 
‘‘(9) qualified health care fringe.’’. 
(b) QUALIFIED HEALTH CARE FRINGE.— 
(1) IN GENERAL.—Section 132 of the Internal 
Revenue Code of 1986 is amended by redesignating 
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subsection (o) as subsection (p) and by inserting 
after subsection (n) the following new subsection: 
‘‘(o) QUALIFIED HEALTH CARE FRINGE.—For pur-
poses of this section, the term ‘qualified health care fringe’ 
means— 
‘‘(1) any wellness program described in section 
131 of the Healthy Americans Act, and 
‘‘(2) any on-site first aid coverage for employ-
ees.’’. 
(2) NONDISCRIMINATORY
TREATMENT.—Sec-
tion 132(j)(1) of such Code (relating to exclusions 
under subsection (a)(1) and (2) apply to highly com-
pensated employees only if no discrimination) is 
amended— 
(A) by striking ‘‘Paragraphs (1) and (2) of 
subsection (a)’’ and inserting ‘‘Paragraphs (1), 
(2), and (9) of subsection (a)’’, and 
(B) by striking ‘‘SUBSECTION (a)(1) AND’’ 
in the heading and inserting ‘‘SUBSECTIONS 
(a)(1), (2), AND’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning at 
least 4 years after the date of the enactment of the 
Healthy Americans Act. 
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SEC. 663. LIMITED EMPLOYER DEDUCTION FOR EMPLOYER 
SHARED RESPONSIBILITY PAYMENTS, HIS-
TORIC RETIREE HEALTH CONTRIBUTIONS, 
AND OTHER HEALTH CARE EXPENSES. 
(a) IN GENERAL.—Subsection (l) of section 162 of 
the Internal Revenue Code of 1986 (relating to trade or 
business expenses) is amended to read as follows: 
‘‘(l) 
LIMITATION
ON
DEDUCTIBLE
EMPLOYER 
HEALTH CARE EXPENDITURES.—No deduction shall be 
allowed under this chapter for any employer contribution 
to an accident or health plan other than— 
‘‘(1) any shared responsibility payment made 
under section 3411, 
‘‘(2) any accident or health plan coverage for 
individuals who are former employees before the first 
calendar year beginning 4 years after the date of the 
enactment of the Healthy Americans Act, 
‘‘(3) any accident or health plan in effect on 
January 1 of the first calendar year beginning 4 
years after the date of the enactment of the Healthy 
Americans Act with respect to coverage for qualified 
collective bargaining employees during a transition 
period described in section 3432, 
‘‘(4) any accident or health plan which qualifies 
as a wellness program described in section 131 of 
such Act, 
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‘‘(5) any accident or health plan which con-
stitutes on-site first aid coverage for employees, and 
‘‘(6) any accident or health plan which is a 
qualified long-term care insurance contract.’’. 
(b) CONFORMING AMENDMENT.—Section 162 of the 
Internal Revenue Code of 1986 is amended by striking 
subsection (n). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning at 
least 4 years after the date of the enactment of the 
Healthy Americans Act. 
SEC. 664. REFUNDABLE CREDIT FOR INDIVIDUAL SHARED 
RESPONSIBILITY PAYMENTS. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by redesignating section 36 as section 
37 and by inserting after section 35 the following new sec-
tion: 
‘‘SEC. 36. REFUNDABLE CREDIT FOR INDIVIDUAL SHARED 
RESPONSIBILITY PAYMENTS. 
‘‘(a) IN GENERAL.—In the case of an individual, if 
the taxpayer has gross income for the taxable year exceed-
ing 100 percent of the poverty line (adjusted for the size 
of the family involved) for the calendar year in which such 
taxable year begins and is enrolled in a HAPI plan under 
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120 
the Healthy Americans Act, there shall be allowed as a 
credit against the tax imposed by this chapter an amount 
equal to the applicable fraction times, in the case of— 
‘‘(1) coverage of an individual, $1,810, 
‘‘(2) coverage of a married couple or domestic 
partnership (as determined by a State) without de-
pendent children, $3,615, 
‘‘(3) coverage of an unmarried individual with 
1 or more dependent children, $2,585, plus $600 for 
each dependent child, and 
‘‘(4) coverage of a married couple or domestic 
partnership (as determined by a State) with 1 or 
more dependent children, $4,565, plus $600 for each 
dependent child. 
‘‘(b) APPLICABLE FRACTION.—For purposes of sub-
section (a), the applicable fraction is the fraction (not to 
exceed 1)— 
‘‘(1) the numerator of which is the gross in-
come of the taxpayer for the taxable year expressed 
as a percentage of the poverty line (adjusted for the 
size of the family involved) minus such poverty line 
for the calendar year in which such taxable year be-
gins, and 
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‘‘(2) the denominator of which is 400 percent of 
the poverty line (adjusted for the size of the family 
involved) minus such poverty line. 
‘‘(c) PHASEOUT OF CREDIT AMOUNT.— 
‘‘(1) IN GENERAL.—The amount otherwise de-
termined under subsection (a) for any taxable year 
shall be reduced by the amount determined under 
paragraph (2). 
‘‘(2) AMOUNT
OF
REDUCTION.—The amount 
determined under this paragraph shall be the 
amount which bears the same ratio to the amount 
determined under subsection (a) as— 
‘‘(A) the excess of the taxpayer’s modified 
adjusted gross income for such taxable year, 
over $62,500 (twice such amount in the case of 
a joint return), bears to 
‘‘(B) $62,500 (twice such amount in the 
case of a joint return). 
Any amount determined under this paragraph which 
is not a multiple of $50 shall be rounded to the next 
lowest $50. 
‘‘(d) INFLATION ADJUSTMENT.—In the case of any 
taxable year beginning in a calendar year after 2009, each 
dollar amount contained in subsection (a) and subpara-
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graphs (A) and (B) of subsection (c)(2) shall be increased 
by an amount equal to— 
‘‘(1) such dollar amount, multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, determined by substituting 
‘calendar year 2008’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
Any increase determined under the preceding sentence 
shall be rounded to the nearest multiple of $50. 
‘‘(e) DETERMINATION
OF
MODIFIED
ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘modified adjusted gross income’ 
means adjusted gross income— 
‘‘(A) determined without regard to this 
section and sections 86, 135, 137, 199, 221, 
222, 911, 931, and 933, and 
‘‘(B) increased by— 
‘‘(i) the amount of interest received or 
accrued during the taxable year which is 
exempt from tax under this title, and 
‘‘(ii) the amount of any social security 
benefits (as defined in section 86(d)) re-
ceived or accrued during the taxable year. 
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‘‘(2) POVERTY
LINE.—For purposes of this 
paragraph, the term ‘poverty line’ has the meaning 
given such term in section 673(2) of the Community 
Health Services Block Grant Act (42 U.S.C. 
9902(2)), including any revision required by such 
section.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting ‘‘or 
36’’ after ‘‘section 35’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the last 
item and inserting the following new items: 
‘‘Sec. 36. Refundable credit for individual shared responsibility payments. 
‘‘Sec. 37. Overpayments of tax.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made in calendar 
years beginning at least 4 years after the date of the en-
actment of this Act. 
SEC. 665. MODIFICATION OF OTHER TAX INCENTIVES TO 
COMPLEMENT HEALTHY AMERICANS PRO-
GRAM. 
(a) TERMINATION OF CREDIT FOR HEALTH INSUR-
ANCE COSTS OF ELIGIBLE INDIVIDUALS.—Section 35 of 
the Internal Revenue Code of 1986 (relating to health in-
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124 
surance costs of eligible individuals) is amended by adding 
at the end the following new subsection: 
‘‘(h) TERMINATION.—This section shall not apply to 
payments made in any calendar year beginning at least 
4 years after the date of the enactment of the Healthy 
Americans Act.’’. 
(b) TERMINATION OF HEALTH CARE EXPENSE RE-
IMBURSEMENT UNDER CAFETERIA PLANS.— 
(1) IN GENERAL.—Section 125 of the Internal 
Revenue Code of 1986 (relating to cafeteria plans) 
is amended by redesignating subsection (h) as sub-
section (i) and by inserting after subsection (g) the 
following new subsection: 
‘‘(h) TERMINATION.—This section shall not apply to 
health benefits coverage in any calendar year beginning 
at least 4 years after the date of the enactment of the 
Healthy Americans Act.’’. 
(2) LONG-TERM CARE ALLOWED UNDER CAFE-
TERIA PLANS.— 
(A) IN GENERAL.—Section 125(f) of such 
Code (defining qualified benefits) is amended by 
striking the last sentence. 
(B) EFFECTIVE
DATE.—The amendment 
made by this paragraph shall apply to contracts 
issued with respect to any calendar year begin-
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ning at least 4 years after the date of the en-
actment of this Act. 
(c) TERMINATION
OF ARCHER MSA CONTRIBU-
TIONS.—Section 220 of the Internal Revenue Code of 
1986 (relating to Archer MSAs) is amended— 
(1) by inserting ‘‘and made before the first cal-
endar year beginning 4 years after the date of the 
enactment of the Healthy Americans Act’’ after ‘‘in 
cash’’ in subsection (d)(1)(A)(i), and 
(2) by adding at the end the following new sub-
section: 
‘‘(k) TERMINATION.—This section shall not apply to 
contributions made in any calendar year beginning at least 
4 years after the date of the enactment of the Healthy 
Americans Act.’’. 
(d) HEALTH SAVINGS ACCOUNTS ALLOWED IN CON-
JUNCTION WITH HIGH DEDUCTIBLE HAPI PLANS.— 
(1) IN GENERAL.—Section 223 of the Internal 
Revenue Code of 1986 (relating to health savings ac-
counts) is amended— 
(A) by inserting ‘‘qualified’’ before ‘‘high 
deductible health plan’’ each place it appears in 
the text (other than subsection (c)(2)(A)), 
(B) by striking ‘‘The term ‘high deductible 
health plan’ means a health plan’’ in subsection 
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126 
(c)(2)(A) and inserting ‘‘The term ‘qualified 
high deductible health plan’ means a HAPI 
plan under the Healthy Americans Act’’, 
(C) by striking subparagraphs (B) and (C) 
of subsection (c)(2) and by redesignating sub-
paragraph (D) of subsection (c)(2) as subpara-
graph (B), and 
(D) by striking ‘‘HIGH’’ in the heading for 
paragraph (2) of subsection (c) and inserting 
‘‘QUALIFIED HIGH’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to payments made in 
calendar years beginning at least 4 years after the 
date of the enactment of this Act. 
SEC. 666. TERMINATION OF CERTAIN EMPLOYER INCEN-
TIVES WHEN REPLACED BY LOWER HEALTH 
CARE COSTS. 
(a) IN GENERAL.—Subchapter C of chapter 90 of the 
Internal Revenue Code of 1986 (relating to provisions af-
fecting more than one subtitle) is amended by adding at 
the end the following new section: 
‘‘SEC. 7875. TERMINATION OF CERTAIN PROVISIONS. 
‘‘The following provisions shall not apply to taxable 
years beginning (or transactions in the case of sections 
referred to in paragraph (3)) in any calendar year begin-
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127 
ning at least 4 years after the date of the enactment of 
the Healthy Americans Act: 
‘‘(1) Section 199 (relating to income attrib-
utable to domestic production activities). 
‘‘(2) Section 501(c)(9) (relating to tax-exempt 
status of voluntary employees’ beneficiary associa-
tions). 
‘‘(3) Sections 861(a)(6), 862(a)(6), 863(b)(2), 
863(b)(3), and 865(b) (relating to inventory prop-
erty sales source rule exception).’’. 
(b) DEFERRAL OF ACTIVE INCOME OF CONTROLLED 
FOREIGN CORPORATIONS.—Section 952 of the Internal 
Revenue Code of 1986 (relating to subpart F income de-
fined) is amended by adding at the end the following new 
subsection: 
‘‘(e) SPECIAL APPLICATION OF SUBPART.— 
‘‘(1) IN GENERAL.—For taxable years begin-
ning in any calendar year beginning at least 4 years 
after the date of the enactment of the Healthy 
Americans Act, notwithstanding any other provision 
of this subpart, the term ‘subpart F income’ means, 
in the case of any controlled foreign corporation, the 
income of such corporation derived from any foreign 
country. 
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128 
‘‘(2) APPLICABLE RULES.—Rules similar to the 
rules under the last sentence of subsection (a) and 
subsection (d) shall apply to this subsection.’’. 
(c) CONFORMING AMENDMENT.—The table of sec-
tions for subchapter C of chapter 90 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new item: 
‘‘Sec. 7875. Termination of certain provisions.’’. 
PART 2—TERMINATION OF COVERAGE UNDER 
OTHER GOVERNMENTAL PROGRAMS AND 
TRANSITION RULES FOR MEDICAID AND 
SCHIP 
SEC. 671. GROUP AND INDIVIDUAL HEALTH PLAN REQUIRE-
MENTS NOT APPLICABLE TO HAPI PLANS. 
(a) ERISA.—Section 3(1) of Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(1)) is 
amended by adding at the end the following new sentence: 
‘‘Such terms shall not include the provision of medical, 
surgical, or hospital care or benefits through HAPI plans 
under the Healthy Americans Act.’’. 
(b) INTERNAL REVENUE CODE OF 1986.—Section 
5000 of the Internal Revenue Code of 1986 (relating to 
certain group health plans) is amended by adding at the 
end the following new subsection: 
‘‘(e) HAPI PLANS.—For purposes of this section, the 
terms ‘group health plan’ and ‘large group health plan’ 
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129 
shall not include any HAPI plan under the Healthy Amer-
icans Act.’’. 
(c) 
PUBLIC
HEALTH
SERVICE
ACT.—Section 
2791(b)(5) of the Public Health Service Act (42 U.S.C. 
300gg–91(b)(5)) is amended by adding at the end the fol-
lowing new sentence: ‘‘Such term shall not include health 
insurance coverage offered to individuals through a HAPI 
plan under the Healthy Americans Act.’’. 
SEC. 672. FEDERAL EMPLOYEES HEALTH BENEFITS PLAN. 
(a) IN GENERAL.—Chapter 89 of title 5, United 
States Code, is amended by adding at the end the fol-
lowing new section: 
‘‘§ 8915. Termination 
‘‘No contract shall be entered into under this chapter 
or chapters 89A and 89B with respect to any coverage 
period occurring in any calendar year beginning at least 
4 years after the date of the enactment of the Healthy 
Americans Act.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for such chapter 89 is amended by adding at the 
end the following new item: 
‘‘8915. Termination.’’. 
SEC. 673. MEDICAID AND SCHIP. 
(a) IN GENERAL.—Title XIX of the Social Security 
Act, as amended by section 311, is amended by adding 
at the end the following new section: 
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130 
‘‘TRANSITION
TO
COVERAGE
UNDER
HAPI
PLANS; RE-
QUIREMENT
TO
PROVIDE
SUPPLEMENTAL
COV-
ERAGE; TERMINATION OF UNNECESSARY PROVISIONS 
‘‘SEC. 1941. (a) TRANSITION AND SUPPLEMENTAL 
COVERAGE REQUIREMENTS.—The Secretary shall provide 
technical assistance to States and health insurance issuers 
of HAPI plans to ensure that individuals receiving medical 
assistance under State Medicaid plans under this title or 
child health assistance under child health plans under title 
XXI are— 
‘‘(1) informed of— 
‘‘(A) the guarantee of private coverage for 
essential services for all Americans established 
by the Healthy Americans Act; and 
‘‘(B) each individual’s personal responsi-
bility— 
‘‘(i) for health care prevention; 
‘‘(ii) to enroll (or to be enrolled on 
their behalf) in a HAPI plan through the 
applicable State HHA during an open en-
rollment period; and 
‘‘(iii) to submit necessary documenta-
tion to their State HHA so that the HHA 
may determine the individual’s eligibility 
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131 
for premium and personal responsibility 
contribution subsidies; 
‘‘(2) provided with appropriate assistance in 
transitioning from receiving medical assistance 
under State Medicaid plans or child health assist-
ance under child health plans for their primary 
health coverage to obtaining such coverage through 
enrollment in HAPI plans in a manner that ensures 
continuation of coverage for such individuals; and 
‘‘(3) notwithstanding any other provision of this 
title, after December 31 of the last calendar year 
ending before the first calendar year in which cov-
erage under a HAPI plan begins in accordance with 
the Healthy Americans Act, provided with medical 
assistance that consists of supplemental coverage 
that meets the requirements of sections 202 and 301 
of such Act. 
‘‘(b) MAINTENANCE
OF
MEDICARE
COST-SHAR-
ING.—For each month beginning after the last month of 
the last calendar year ending before the first calendar year 
in which coverage under a HAPI plan begins in accord-
ance with the Healthy Americans Act— 
‘‘(1) a State shall continue to provide medical 
assistance for medicare cost-sharing to individuals 
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132 
described in section 1902(a)(10)(E) as if the 
Healthy Americans Act had not been enacted; and 
‘‘(2) the Secretary shall continue to reimburse 
the State for the provision of such medical assist-
ance. 
‘‘(c) CONTINUED SUPPORT
FOR DSH EXPENDI-
TURES.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of this title, with respect to each fiscal year 
that begins after the first calendar year in which 
coverage under a HAPI plan begins in accordance 
with the Healthy Americans Act, the DSH allotment 
for each State otherwise applicable under section 
1923(f) for that fiscal year shall be reduced by 90 
percent and no payment shall be made under section 
1903(a) to a State with respect to any payment ad-
justment made under section 1923 for hospitals in 
the State for quarters in the fiscal year in excess of 
the reduced DSH allotment for the State applicable 
for such year. 
‘‘(2) SPECIAL RULE FOR LAST 3 QUARTERS OF 
FIRST FISCAL YEAR IN WHICH COVERAGE UNDER A 
HAPI PLAN BEGINS.—With respect to the first fiscal 
year in which coverage under a HAPI plan begins 
in accordance with the Healthy Americans Act, the 
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133 
Secretary shall reduce the DSH allotment for each 
State that is otherwise applicable under section 
1923(f) for that fiscal year so that each such DSH 
allotment reflects a 90 percent reduction in the allot-
ment for the second, third, and fourth quarters of 
that fiscal year. 
‘‘(d) TERMINATION OF ALL FEDERAL PAYMENTS 
UNDER THIS TITLE OTHER THAN FOR MEDICARE COST- 
SHARING OR SUPPLEMENTAL MEDICAL ASSISTANCE.— 
Notwithstanding any other provision of this title: 
‘‘(1) no individual other than an individual to 
which section 202 or 301 of the Healthy Americans 
Act applies is entitled to medical assistance under a 
State plan approved under this title for any item or 
service furnished after December 31 of the last cal-
endar year ending before the first calendar year in 
which coverage under a HAPI plan begins in accord-
ance with such Act; 
‘‘(2) no payment shall be made to a State 
under section 1903(a) for any item or service fur-
nished after that date or for any other sums ex-
pended by a State for which a payment would have 
been made under such section, other than for the 
Federal medical assistance percentage of the total 
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134 
amount expended by a State for each fiscal year 
quarter beginning after that date for providing— 
‘‘(A) medical assistance for the mainte-
nance of medicare cost-sharing in accordance 
with subsection (b); 
‘‘(B) medical assistance for individuals who 
are eligible for supplemental medical assistance 
under this title after such date in accordance 
with section 202 or 301 of the Healthy Ameri-
cans Act; and 
‘‘(C) payment adjustments under section 
1923 for hospitals in the State that do not ex-
ceed the reduced DSH allotment for the State 
determined under subsection (c)’’. 
(b) APPLICATION TO SCHIP.— 
(1) APPLICATION
OF
TRANSITION
REQUIRE-
MENTS.—Section 2107(e)(1) of the Social Security 
Act (42 U.S.C. 1397gg(e)(1)) is amended by adding 
at the end the following: 
‘‘(E) Section 1941(a) (relating to transi-
tion to coverage under HAPI plans and, in the 
case of paragraph (3) of such section, the re-
quirement to provide supplemental medical as-
sistance for targeted low-income children who 
are provided child health assistance as optional 
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135 
targeted 
low-income 
children 
under 
title 
XIX).’’. 
(2) TERMINATION.—Title XXI of the Social Se-
curity Act is amended by adding at the end the fol-
lowing new section: 
‘‘TERMINATION 
‘‘SEC. 2111. Notwithstanding any other provision of 
this title, no payment shall be made to a State under sec-
tion 2105(a) with respect to child health assistance for 
any item or service furnished after December 31 of the 
last calendar year ending before the first calendar year 
in which coverage under a HAPI plan begins in accord-
ance with the Healthy Americans Act.’’. 
TITLE 
VII—PURCHASING 
HEALTH 
SERVICES 
AND 
PRODUCTS THAT ARE MOST 
EFFECTIVE 
SEC. 701. ONE TIME DISALLOWANCE OF DEDUCTION FOR 
ADVERTISING AND PROMOTIONAL EXPENSES 
FOR 
CERTAIN 
PRESCRIPTION 
PHARMA-
CEUTICALS. 
(a) IN GENERAL.—Part IX of subchapter B of chap-
ter 1 of subtitle A of the Internal Revenue Code of 1986 
(relating to items not deductible) is amended by adding 
at the end the following new section: 
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136 
‘‘SEC. 280I. ONE TIME DISALLOWANCE OF DEDUCTION FOR 
CERTAIN PRESCRIPTION PHARMACEUTICALS 
ADVERTISING 
AND 
PROMOTIONAL 
EX-
PENSES. 
‘‘(a) IN GENERAL.—No deduction shall be allowed 
under this chapter for expenses relating to advertising or 
promoting the sale and use of prescription pharma-
ceuticals other than drugs for rare diseases or conditions 
(within the meaning of section 45C) for any taxable year 
which includes any portion of— 
‘‘(1) the 3-year period which begins on the date 
of a new drug application approval with respect to 
such a pharmaceutical, unless the manufacturer of 
such pharmaceutical demonstrates to the satisfaction 
of the Secretary that such pharmaceutical is subject 
to a comparison effectiveness study, including over- 
the-counter medication (if appropriate), or 
‘‘(2) the 1-year period which ends with the 
availability of a generic drug substitute, unless such 
advertising or promotion includes a statement that 
a lower cost alternative may soon be available and 
includes the chemical name of such alternative. 
‘‘(b) ADVERTISING OR PROMOTING.—For purposes of 
this section, the term ‘advertising or promoting’ includes 
direct-to-consumer advertising and any activity designed 
to promote the use of a prescription pharmaceutical di-
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