I
107TH CONGRESS
1ST SESSION
H. R. 1033
To amend the Social Security Act to provide grants and flexibility through
demonstration projects for States to provide universal, comprehensive,
cost-effective 
systems 
of 
health 
care 
coverage, 
with 
simplified
administration.
IN THE HOUSE OF REPRESENTATIVES
MARCH 14, 2001
Mr. TIERNEY (for himself, Mr. BONIOR, Mr. CAPUANO, Ms. CARSON of Indi-
ana, Mr. CONYERS, Mr. DEFAZIO, Mr. HILLIARD, Mr. MCDERMOTT, Mr.
NADLER, Ms. NORTON, Mr. OLVER, Ms. RIVERS, Mr. SANDERS, Mr.
WEINER, Mr. STARK, Mr. FATTAH, Mr. MCGOVERN, Ms. LEE, Ms.
SCHAKOWSKY, Ms. WATERS, Mr. BALDACCI, Mr. KUCINICH, Mr. GUTIER-
REZ, Mrs. MEEK of Florida, Mr. KILDEE, Ms. MILLENDER-MCDONALD,
Mr. GEORGE MILLER of California, Mrs. CHRISTENSEN, Mr. HINCHEY,
Mr. LANTOS, Mrs. JONES of Ohio, Mr. FILNER, Mr. LEWIS of Georgia,
Mr. EVANS, Mr. HASTINGS of Florida, Ms. JACKSON-LEE of Texas, Mr.
BRADY of Pennsylvania, Mr. PAYNE, Ms. BALDWIN, Mr. MARKEY, Mr.
THOMPSON of Mississippi, Mr. OWENS, and Mr. DAVIS of Illinois) intro-
duced the following bill; which was referred to the Committee on Energy
and Commerce
A BILL
To amend the Social Security Act to provide grants and
flexibility through demonstration projects for States to
provide universal, comprehensive, cost-effective systems
of health care coverage, with simplified administration.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘States’ Right To Innovate in Health Care Act of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Amendment to Social Security Act.
‘‘TITLE XXII—STATE COMPREHENSIVE HEALTH CARE AND COST
CONTAINMENT DEMONSTRATION PROJECTS
‘‘Sec. 2201. Planning grants.
‘‘Sec. 2202. Demonstration grants.
‘‘Sec. 2203. State plan requirements.
‘‘Sec. 2204. Interstate arrangements.
‘‘Sec. 2205. Definitions.’’.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—Congress finds the following:
(1) In 1998, annual health care expenditures in
the United States totaled $1.15 trillion, or $4,094
per person.
(2) In 1998, health care expenditures rep-
resented 13.5 percent of the gross domestic product
(GDP) in the United States and grew at the rate of
5.6 percent while the gross domestic product grew
only at the rate of 4.9 percent.
(3) Businesses, and consumers, would save ap-
proximately $562.8 billion over 7 years if health care
expenditures were increasing at the same rate as
GDP growth.
(4) Because many individuals do not have
health insurance coverage, they may incur health
care costs which they do not fully reimburse, result-
ing in cost-shifting to others.
(5) As a consequence of the piecemeal health
care system in the United States, administrative
overhead costs approximately $1,000 per person an-
nually while other Western industrialized nations
with universal health care systems spend approxi-
mately $200 per person annually for administrative
overhead.
(b) PURPOSE.—It is the purpose of this Act to en-
courage States—
(1) to develop plans for universal, comprehen-
sive, cost-effective systems of health care with sim-
plified administration to individuals residing in such
States; and
(2) to implement such plans by offering transi-
tional grants and by removing Federal statutory and
administrative barriers that may inhibit or discour-
age efforts by States to provide such health care
while maintaining Federal payments for health care
under Federal health care programs.
SEC. 3. AMENDMENT TO SOCIAL SECURITY ACT.
The Social Security Act (42 U.S.C. 301 et seq.) is
amended by adding at the end the following new title:
‘‘TITLE 
XXII—STATE 
COMPREHENSIVE
HEALTH CARE AND COST CONTAINMENT
DEMONSTRATION PROJECTS
‘‘SEC. 2201. PLANNING GRANTS.
‘‘(a) APPLICATION.—A State may apply to the Sec-
retary for a State planning grant under this section to
develop a State plan to offer universal comprehensive
health care, with simplified administration, and to improve
the cost-effectiveness of the health care delivery system.
‘‘(b) CONTENTS.—The Secretary may not approve
such a State planning grant for a State unless the applica-
tion for the grant includes or provides for the following:
‘‘(1) BUDGET.—A budget and a budget jus-
tification.
‘‘(2) PLANNING
PROCESS.—A description of
how under the grant the State shall—
‘‘(A) identify options to provide a uni-
versal, comprehensive, and cost-effective system
of health care, with simplified administration,
that is affordable and accessible to all eligible
beneficiaries in the State; and
‘‘(B) conduct an analysis that compares
projected overall health expenditures over a 7-
year period under the proposed system with the
projected overall health expenditures that would
otherwise occur during such period.
‘‘(3) OPPORTUNITY
FOR
PUBLIC
PARTICIPA-
TION.—Assurances that the State will include a
process for public contribution and participation in
the planning process.
‘‘(c) NUMBER OF STATES; PERIOD OF GRANT.—The
Secretary may not award State planning grants under this
section to more than 10 States. A State planning grant
under this section shall be effective for a period of up to
30 months. In awarding State planning grants under this
section the Secretary shall give preference to States from
a variety of geographic areas in the United States.
‘‘(d) AMOUNT.—The amount of a State planning
grant under this section to a State may not exceed
$3,750,000.
‘‘(e) TECHNICAL ASSISTANCE.—The Secretary shall
provide States with technical assistance in applying for
and implementing State planning grants under this sec-
tion. At the request of the Secretary, other Departments
and Offices of the Federal Government shall provide
States with such technical assistance.
‘‘SEC. 2202. DEMONSTRATION GRANTS.
‘‘(a) APPLICATION.—A State that has developed a
State plan may apply to the Secretary for approval of a
demonstration grant under this section to achieve a cost-
effective delivery system of universal, comprehensive
health care with simplified administration. The Secretary
shall notify the chief executive officer of all States of the
availability of demonstration grants under this section.
‘‘(b) APPROVAL.—The Secretary shall approve the
applications of not more than 5 States under this section.
In approving grants under this section the Secretary shall
give preference to States from a variety of geographic
areas in the United States. If the Secretary determines
that a State no longer meets the conditions for approval
of the grant, the Secretary shall notify the State of such
determination and provide the State with an opportunity
to correct deficiencies in a timely manner. If the Secretary
further determines that a State has not corrected such de-
ficiencies in a timely manner, the Secretary shall termi-
nate the grant (including waivers authorized under the
grant).
‘‘(c) PERIOD.—A demonstration grant approved
under this section shall be effective for 7 years from the
date of final approval of the demonstration grant applica-
tion under subsection (b).
‘‘(d) STATE PLAN REQUIRED.—The Secretary may
not approve a demonstration grant under this section un-
less the State has a State plan to carry out the grant con-
sistent with the requirements of section 2203.
‘‘(e) FUNDING.—
‘‘(1) TRANSITIONAL
GRANT
AMOUNT.—The
amount awarded under this section to a State with
a demonstration grant approved under this section
may 
not 
exceed 
an 
aggregate 
amount 
of
$10,000,000 plus $3 multiplied by the number of el-
igible State residents of the State, to assist the
State in the transition of the health care delivery
and financing infrastructure. Such amount shall be
made available to a State during the period of tran-
sition, as provided in the State plan. The number of
eligible State residents of a State shall be deter-
mined based on the best available Census Bureau
data as of the July 1 before the date the grant
under this section is approved.
‘‘(2) 
MAINTENANCE
OF
FEDERAL
FUNDS
UNDER WAIVERS.—Pursuant to the waivers under
subsection (f), the Federal Government shall pay to
a State amounts for health care under Federal
health care programs that would otherwise have
been payable by the Federal Government but for the
State’s universal, comprehensive health care system
under this section.
‘‘(f) WAIVER OF ERISA PREEMPTION AND WAIVERS
TO POOL FUNDS.—As part of a demonstration grant
under this section and subject to the benefit maintenance
requirements applicable under section 2203(b), a State
may request (and the Secretary may grant) the following
waivers of requirements and provisions to the extent nec-
essary to carry out the State plan under section 2203:
‘‘(1) ERISA.—Waiving application of section
514 of the Employee Retirement Income Security
Act of 1974.
‘‘(2) MEDICARE.—Waiving provisions necessary
to permit the State—
‘‘(A) to use funds otherwise paid under
title XVIII for beneficiaries residing in the
State; and
‘‘(B) to permit the State to enter into an
arrangement with the Secretary under which el-
igible State residents who are not otherwise en-
rolled for benefits under parts A and B of such
title are enrolled for such benefits under such
title and the State provides for such actuarially
appropriate reimbursement to the Secretary
with respect to coverage of such benefits for
such residents as is necessary to assure that the
Trust Funds under such title are not adversely
affected by virtue of such waiver, such reim-
bursement subject to—
‘‘(i) an independent audit, to be re-
viewed by the Comptroller General of the
United States, assuring that such reim-
bursement does not adversely affect in any
way the Trust Funds for medicare eligible
beneficiaries, and
‘‘(ii) in the case that the audit deter-
mines that additional reimbursement to the
Secretary is required, such additional reim-
bursement, with appropriate adjustments
for interest attributable to the late reim-
bursement.
‘‘(3) MEDICAID.—Waiving provisions necessary
to permit the State to use funds otherwise paid to
the State under title XIX.
‘‘(4) SCHIP.—Waiving provisions necessary to
permit the State to use funds otherwise paid to the
State under title XXI.
‘‘(5) FEHBP.—Waiving provisions necessary to
permit the State to use funds otherwise paid under
chapter 89 of title 5, United States Code, or allow-
ing the Office of Personnel Management to purchase
health care coverage for Federal employees and re-
tirees in the State under the State plan.
‘‘(6) USE OF OTHER FUNDS.—Waiving provi-
sions necessary to permit the State to use funds oth-
erwise provided under other Federal programs for
the provision of health care coverage or services,
identified by the State.
‘‘(7) OTHER
LAWS.—Waiving of other provi-
sions of Federal law identified by the State under
section 2203(e)(3) only if the Secretary determines
such a waiver to be appropriate after consultation
with the head of the Federal agency or department
concerned.
The Secretary may grant a waiver under this subsection
only if the State provides the Secretary with satisfactory
assurances that necessary safeguards have been taken to
protect the health and welfare of individuals provided serv-
ices under the waiver and that financial accountability is
maintained for any funds expended under the waiver. The
Secretary may grant a waiver under paragraph (1) only
with the concurrence of the Secretary of Labor.
‘‘(g) REENROLLMENT
OF ELIGIBLE STATE RESI-
DENTS WHO MOVE FROM A PARTICIPATING STATE.—In
the case of an eligible State resident who is covered under
a State plan under section 2203, who (but for such cov-
erage) is eligible to be enrolled in a program described in
subsection (f) (including the medicare and medicaid pro-
grams), and who is not enrolled in such a program because
of such coverage, if the resident leaves the State to reside
in a State that does not have such a State plan in effect,
the resident shall be permitted, notwithstanding any other
provision of law, to enroll immediately in such a program
if the resident is still otherwise eligible to be so enrolled.
In the case of such enrollment in the medicare program,
the resident shall be treated for purposes of section
1882(s)(2) (relating to availability of medigap policies
without underwriting) as if the resident had turned 65
years of age on the date the resident enrolls in the medi-
care program.
‘‘(h) DUTIES OF THE SECRETARY.—
‘‘(1) GUIDANCE AND INFORMATION.—The Sec-
retary shall—
‘‘(A) provide guidance to State health care
authorities regarding applications for grants
under this title and exchange information with,
and otherwise assist, such authorities upon the
request of the authorities;
‘‘(B) set application procedures;
‘‘(C) review and approve applications for
demonstration grants under this section, includ-
ing providing for appropriate waivers described
in subsection (f);
‘‘(D) provide appropriate levels of funding
for such approved applications consistent with
such section;
‘‘(E) conduct such evaluation, monitoring,
compliance, and other review functions as may
be appropriate;
‘‘(F) develop guidelines, standards, and
formats for States to follow in evaluating, re-
porting, and collecting data in order to enable
the Commission to monitor State plan adminis-
tration and compliance, and to evaluate and
compare the effectiveness of State plans; and
‘‘(G) implement any other requirements or
activities necessary and appropriate under this
title.
‘‘(2) ANNUAL
REPORT.—The Secretary shall
submit to the President and the Congress an annual
report. Such report shall be submitted not later than
March 30 of each year and shall include information
concerning States that receive grants under this title
and the effectiveness of any health care programs
assisted by such grants during the previous year.
‘‘(3) APPROVAL
PROCESS.—The provisions of
section 2106(c) shall apply to State plans and the
Secretary under this title in the same manner as
they apply to State plans and the Secretary under
such section.
‘‘SEC. 2203. STATE PLAN REQUIREMENTS.
‘‘(a) COVERAGE.—
‘‘(1) IN GENERAL.—A State plan shall provide
a process and a timeline for achieving coverage of all
eligible State residents statewide, without regard to
employment status, income, health status or pre-
existing condition, or location of residency within the
State.
‘‘(2) OUTREACH MECHANISMS.—A State plan
shall describe the outreach mechanisms to be used to
assure coverage of all eligible individuals, including
measures to assure coverage of individuals in hard-
to-reach populations and to assure benefits are pro-
vided to eligible individuals located in underserved
areas.
‘‘(b) BENEFITS.—
‘‘(1) BASIC BENEFITS.—A State plan shall pro-
vide for health benefits that—
‘‘(A) are at least actuarially equivalent to
the standard Blue Cross/Blue Shield preferred
provider option service benefit plan, described
in and offered under section 8903(1) of title 5,
United States Code; and
‘‘(B) include benefits for at least the fol-
lowing items and services:
‘‘(i) Inpatient and outpatient hospital
services, 
including 
emergency 
services
available 24 hours a day.
‘‘(ii) Long term, acute, and chronic
care services, including skilled nursing fa-
cility services, intermediate care facility
services home health services, home and
community-based long-term care services,
hospice care, and services in intermediate
care facilities for individuals diagnosed
with mental retardation.
‘‘(iii) Professional services of health
care practitioners authorized to provide
health care services under State law.
‘‘(iv) 
Community-based 
primary
health care services, including rural health
clinic 
services 
and 
Federally-qualified
health center services.
‘‘(v) Laboratory, x-ray services, and
diagnostic tests.
‘‘(vi) Preventive care, including pre-
natal, well-baby, and well-child care, appro-
priate immunizations, pap smears, screen-
ing 
mammography, 
colorectal 
cancer
screening, physical examinations, and fam-
ily planning.
‘‘(vii) 
Prescription 
drugs 
and
biologicals, including insulin and medical
foods.
‘‘(viii) Mental health services.
‘‘(ix) Substance abuse treatment serv-
ices.
‘‘(x) Vision services, including routine
eye examinations, eyeglasses, and contact
lenses.
‘‘(xi) Hearing services, including hear-
ing aids.
‘‘(xii) Dental services, including rou-
tine check ups.
‘‘(xiii) Durable medical equipment, in-
cluding home dialysis supplies and equip-
ment.
‘‘(xiv) Emergency ambulance services.
‘‘(xv) Prosthetics.
‘‘(xvi) Outpatient therapy, including
physical therapy, occupational therapy, and
speech language pathology services and re-
lated services.
‘‘(2) ASSURANCE THAT BENEFITS ARE NOT RE-
DUCED
FOR
INDIVIDUALS
COVERED
UNDER
FED-
ERAL PROGRAMS.—Insofar as the State under the
plan incorporates funding provided by Federal pro-
grams described in section 2202(f), the State plan
may not provide for a reduction in benefits (includ-
ing coverage, access, availability, duration, and bene-
ficiary rights, and, if applicable, vaccine benefits
under section 1928) otherwise provided for under
such programs or an increase in cost-sharing and
premiums otherwise provided for under such pro-
grams.
‘‘(3) CONTINUATION
OF
BENEFITS
FOR
CER-
TAIN ALIENS.—Nothing in this title shall be con-
strued as affecting the access of aliens described in
section 2204(1)(D) to health care services provided
under law for such aliens as of the date of the enact-
ment of this title.
‘‘(c) QUALITY ASSURANCE.—
‘‘(1) IN GENERAL.—A State plan shall provide,
and describe, mechanisms to be used to assure, mon-
itor, and maintain the quality of items and services
furnished under the plan.
‘‘(2) HEALTH OUTCOMES.—A State plan shall
describe the plan’s projected effect on health out-
comes in the State, including estimates of health
benefits, decreased morbidity and mortality, and im-
proved productivity resulting from reduction in the
number of individuals without health benefits.
‘‘(d) PROGRAMS
FOR
MEDICAL
EDUCATION.—A
State plan shall describe health professions training and
graduate medical education activities applicable under the
plan, and shall provide, under the State plan, for payment
from Federal, State, and local governments for such train-
ing and education activities in the amounts that would
otherwise be payable by such governments but for the
State’s universal, comprehensive health care system under
the State plan.
‘‘(e) FINANCING.—
‘‘(1) BUDGET.—A State plan shall incorporate
a budget which contains—
‘‘(A) detailed projections of health care ex-
penditures presently and under the proposed
system, including an identification and calcula-
tion of the amount of funding to be provided by
the Federal, State, and local governments under
the plan and an assurance that the amount of
expenditures made by the State and local gov-
ernments will not be reduced as a result of the
implementation of the plan; and
‘‘(B) a description (and an estimate of
costs) of transitional activities to be undertaken
in implementing the proposed system.
‘‘(2) COST CONTAINMENT.—A State plan shall
describe the means to be used to contain costs under
the plan, including when and how the plan will in-
crease efficiencies.
‘‘(3) FEDERAL EXPENDITURE LIMIT.—A State
plan shall contain assurances that aggregate Federal
expenditures on health care (including Federal ex-
penditures under titles 5, 10, and 38 of the United
States Code, and under this Act) under the plan will
not exceed aggregate Federal expenditures that
would have been incurred in the absence of such
plan.
‘‘(f) IMPLEMENTATION.—
‘‘(1) IN GENERAL.—A State plan shall describe
the method (including a timetable and period of
transition) for implementing the plan.
‘‘(2) COORDINATION.—A State plan shall iden-
tify all Federal, State, and local programs that pro-
vide health care services in the State and describe
how such programs would be incorporated in, or co-
ordinated with, the health coverage system under the
plan.
‘‘(3) FEDERAL WAIVERS REQUIRED.—A State
plan shall identify any waivers of Federal law re-
quired to implement the plan, including the use of
any pooled Federal funds and other waivers de-
scribed in section 2202(f).
‘‘(4) APPROVAL
OF
STATE
LEGISLATURE.—A
State plan shall provide that State approvals and
commitments (including approval of the State legis-
lature) necessary for the implementation of the plan
will be obtained by not later than 1 year after the
date of the Secretary’s approval of the plan. Any ap-
proval of a grant is conditioned upon the timely
completion of such approvals and commitments.
‘‘(g) EVALUATION.—A State plan shall provide for a
process for its evaluation, and shall comply with any eval-
uation reporting or data collection requirements imposed
by the Secretary.
‘‘(h) CONSTRUCTION.—Nothing in this title shall be
construed as preempting State laws that provide greater
protections or benefits than the protections or benefits re-
quired under this title.
‘‘SEC. 2204. INTERSTATE ARRANGEMENTS.
‘‘(a) IN GENERAL.—One or more contiguous States
in a geographic region may file a joint application for
planning and demonstration grants under this title.
‘‘(B) CONGRESSIONAL APPROVAL.—Congress hereby
authorizes and approves States entering into Interstate
Compacts in order to conduct joint health care programs
under such a grant.
‘‘(c) REFERENCES TO STATE.—In the case of a joint
application described in subsection (a), any reference in
this title to a State is deemed to refer to all of the States,
and the approval of a grant with respect to such a joint
application shall be counted as 1 State for purposes of
applying sections 2201(c) and 2202(b).
‘‘SEC. 2205. DEFINITIONS.
‘‘As used in this title:
‘‘(1) ELIGIBLE
STATE
RESIDENT.—The term
‘eligible State resident’ means any resident of the
United States who is a citizen or national of the
United States, or lawful resident alien, and who re-
sides in any particular State. Such term may in-
clude, at the option of a State, the following:
‘‘(A) State employees and dependents of
such employees.
‘‘(B) Employees, and dependents of such
employees, working in a work site of a business
located in the State.
‘‘(C) One or more classes of non-
immigrants (as defined in section 101(a)(15) of
the Immigration and Nationality Act) specified
in the State plan.
‘‘(D) Aliens unlawfully present in the
United States.
‘‘(2) LAWFUL
RESIDENT
ALIEN.—The term
‘lawful resident alien’ means an alien lawfully admit-
ted for permanent residence and any other alien law-
fully residing permanently in the United States
under color of law, including an alien granted asy-
lum or with lawful temporary resident status under
section 210, 210A, or 245A of the Immigration and
Nationality Act.
‘‘(3) SECRETARY.—The term ‘Secretary’ means
the Secretary of Health and Human Services.
‘‘(4) STATE.—Subject to section 2204(c), the
term ‘State’ means a State, the District of Colum-
bia, the Commonwealth of Puerto Rico, the United
States Virgin Islands, Guam, American Samoa, and
the Commonwealth of the Northern Mariana Is-
lands.
‘‘(5) STATE
PLAN.—The term ‘State plan’
means a comprehensive health care plan of a State
participating in a State Care demonstration project
under this title that meets the requirements of sec-
tion 2203.’’.
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