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SEC. 5. ASSESSMENTS ON INSURED AND SELF-INSURED
HEALTH PLANS.
(a) GENERAL RULE.—Subtitle D of the Internal Rev-
enue Code of 1986 (relating to miscellaneous excise taxes)
is amended by adding after chapter 36 the following new
chapter:
‘‘CHAPTER 37—HEALTH RELATED
ASSESSMENTS
‘‘SUBCHAPTER A. Insured and self-insured health plans.
‘‘Subchapter A—Insured and Self-Insured
Health Plans
‘‘Sec. 4501. Health insurance and health-related administrative
services.
‘‘Sec. 4502. Self-insured health plans.
‘‘Sec. 4503. Transfer to accounts.
‘‘Sec. 4504. Definitions and special rules.
‘‘SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED
ADMINISTRATIVE SERVICES.
‘‘(a) IMPOSITION
OF TAX.—There is hereby im-
posed—
‘‘(1) on each taxable health insurance policy, a
tax equal to 1.5 percent of the premiums received
under such policy, and
‘‘(2) on each amount received for health-related
administrative services, a tax equal to 1.5 percent of
the amount so received.
‘‘(b) LIABILITY FOR TAX.—
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‘‘(1) HEALTH
INSURANCE.—The tax imposed
by subsection (a)(1) shall be paid by the issuer of
the policy.
‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV-
ICES.—The tax imposed by subsection (a)(2) shall
be paid by the person providing the health-related
administrative services.
‘‘(c) TAXABLE HEALTH INSURANCE POLICY.—For
purposes of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, the term ‘taxable health insur-
ance policy’ means any insurance policy providing
accident or health insurance with respect to individ-
uals residing in the United States.
‘‘(2) EXEMPTION OF CERTAIN POLICIES.—The
term ‘taxable health insurance policy’ does not in-
clude any insurance policy if substantially all of the
coverage provided under such policy relates to—
‘‘(A) liabilities incurred under workers’
compensation laws,
‘‘(B) tort liabilities,
‘‘(C) liabilities relating to ownership or use
of property,
‘‘(D) credit insurance, or
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‘‘(E) such other similar liabilities as the
Secretary may specify by regulations.
‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES
OTHER
COVERAGE.—In the case of any taxable
health insurance policy under which amounts are
payable other than for accident or health coverage,
in determining the amount of the tax imposed by
subsection (a)(1) on any premium paid under such
policy, there shall be excluded the amount of the
charge for the nonaccident or nonhealth coverage
if—
‘‘(A) the charge for such nonaccident or
nonhealth coverage is either separately stated in
the policy, or furnished to the policyholder in a
separate statement, and
‘‘(B) such charge is reasonable in relation
to the total charges under the policy.
In any other case, the entire amount of the premium
paid under such policy shall be subject to tax under
subsection (a)(1).
‘‘(4) TREATMENT
OF
PREPAID
HEALTH
COV-
ERAGE ARRANGEMENTS.—
‘‘(A) IN GENERAL.—In the case of any ar-
rangement described in subparagraph (B)—
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‘‘(i) such arrangement shall be treated
as a taxable health insurance policy,
‘‘(ii) the payments or premiums re-
ferred to in subparagraph (B)(i) shall be
treated as premiums received for a taxable
health insurance policy, and
‘‘(iii) the person referred to in sub-
paragraph (B)(i) shall be treated as the is-
suer.
‘‘(B) DESCRIPTION OF ARRANGEMENTS.—
An arrangement is described in this subpara-
graph if under such arrangement—
‘‘(i) fixed payments or premiums are
received as consideration for any person’s
agreement to provide or arrange for the
provision of accident or health coverage to
residents of the United States, regardless
of how such coverage is provided or ar-
ranged to be provided, and
‘‘(ii) substantially all of the risks of
the rates of utilization of services is as-
sumed by such person or the provider of
such services.
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‘‘(d) HEALTH-RELATED
ADMINISTRATIVE
SERV-
ICES.—For purposes of this section, the term ‘health-re-
lated administrative services’ means—
‘‘(1) the processing of claims or performance of
other administrative services in connection with acci-
dent or health coverage under a taxable health in-
surance policy if the charge for such services is not
included in the premiums under such policy, and
‘‘(2) processing claims, arranging for provision
of accident or health coverage, or performing other
administrative services in connection with an appli-
cable self-insured health plan (as defined in section
4502(c)) established or maintained by a person
other than the person performing the services.
For purposes of paragraph (1), rules similar to the rules
of subsection (c)(3) shall apply.
‘‘SEC. 4502. SELF-INSURED HEALTH PLANS.
‘‘(a) IMPOSITION OF TAX.—In the case of any appli-
cable self-insured health plan, there is hereby imposed a
tax for each month equal to 1.5 percent of the sum of—
‘‘(1) the accident or health coverage expendi-
tures for such month under such plan, and
‘‘(2) the administrative expenditures for such
month under such plan to the extent such expendi-
tures are not subject to tax under section 4501.
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In determining the amount of expenditures under para-
graph (2), rules similar to the rules of subsection (d)(3)
apply.
‘‘(b) LIABILITY FOR TAX.—
‘‘(1) IN GENERAL.—The tax imposed by sub-
section (a) shall be paid by the plan sponsor.
‘‘(2) PLAN SPONSOR.—For purposes of para-
graph (1), the term ‘plan sponsor’ means—
‘‘(A) the employer in the case of a plan es-
tablished or maintained by a single employer,
‘‘(B) the employee organization in the case
of a plan established or maintained by an em-
ployee organization, or
‘‘(C) in the case of—
‘‘(i) a plan established or maintained
by 2 or more employers or jointly by 1 or
more employers and 1 or more employee
organizations,
‘‘(ii) a voluntary employees’ bene-
ficiary association under section 501(c)(9),
or
‘‘(iii) any other association plan,
the association, committee, joint board of trust-
ees, or other similar group of representatives of
the parties who establish or maintain the plan.
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‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—
For purposes of this section, the term ‘applicable self-in-
sured health plan’ means any plan for providing accident
or health coverage if any portion of such coverage is pro-
vided other than through an insurance policy.
‘‘(d) ACCIDENT OR HEALTH COVERAGE EXPENDI-
TURES.—For purposes of this section—
‘‘(1) IN GENERAL.—The accident or health cov-
erage expenditures of any applicable self-insured
health plan for any month are the aggregate expend-
itures paid in such month for accident or health cov-
erage provided under such plan to the extent such
expenditures are not subject to tax under section
4501.
‘‘(2) TREATMENT
OF
REIMBURSEMENTS.—In
determining accident or health coverage expenditures
during any month of any applicable self-insured
health plan, reimbursements (by insurance or other-
wise) received during such month shall be taken into
account as a reduction in accident or health coverage
expenditures.
‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—
Paragraph (1) shall not apply to any expenditure for
the acquisition or improvement of land or for the ac-
quisition or improvement of any property to be used
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in connection with the provision of accident or
health coverage which is subject to the allowance
under section 167, except that, for purposes of para-
graph (1), allowances under section 167 shall be
considered as expenditures.
‘‘SEC. 4503. TRANSFER TO ACCOUNTS.
‘‘For fiscal year 1998 and each subsequent fiscal
year, there are hereby appropriated and transferred to the
Medical Education Trust Fund amounts equivalent to
taxes received in the Treasury under sections 4501 and
4502, of which—
‘‘(1) there shall be allocated and transferred to
the Medical School Account an amount which bears
the same ratio to the total amount available under
section 2102(b)(1) for the fiscal year (reduced by
the balance in such account at the end of the pre-
ceding fiscal year) as the amount transferred to the
Medical Education Trust Fund under title XXI of
the Social Security Act under this section bears to
the total amounts transferred to such Trust Fund
(excluding amounts transferred under subsections
(c)(3) and (d) of section 2101 of such Act) for such
fiscal year; and
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‘‘(2) the remainder shall be allocated and trans-
ferred to the Non-Medicare Teaching Hospital Indi-
rect Account and the Non-Medicare Teaching Hos-
pital Direct Account, in the same proportion as the
amounts transferred to such account under section
1886(j) relate to the total amounts transferred
under such section for such fiscal year.
Such amounts shall be transferred in the same manner
as under section 9601.
‘‘SEC. 4504. DEFINITIONS AND SPECIAL RULES.
‘‘(a) DEFINITIONS.—For purposes of this sub-
chapter—
‘‘(1) ACCIDENT OR HEALTH COVERAGE.—The
term ‘accident or health coverage’ means any cov-
erage which, if provided by an insurance policy,
would cause such policy to be a taxable health insur-
ance policy (as defined in section 4501(c)).
‘‘(2) INSURANCE POLICY.—The term ‘insurance
policy’ means any policy or other instrument where-
by a contract of insurance is issued, renewed, or ex-
tended.
‘‘(3) PREMIUM.—The term ‘premium’ means
the gross amount of premiums and other consider-
ation (including advance premiums, deposits, fees,
and assessments) arising from policies issued by a
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person acting as the primary insurer, adjusted for
any return or additional premiums paid as a result
of endorsements, cancellations, audits, or retrospec-
tive rating. Amounts returned where the amount is
not fixed in the contract but depends on the experi-
ence of the insurer or the discretion of management
shall not be included in return premiums.
‘‘(4) UNITED
STATES.—The term ‘United
States’ includes any possession of the United States.
‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—
‘‘(1) IN GENERAL.—For purposes of this sub-
chapter—
‘‘(A) the term ‘person’ includes any gov-
ernmental entity, and
‘‘(B) notwithstanding any other law or rule
of law, governmental entities shall not be ex-
empt from the taxes imposed by this subchapter
except as provided in paragraph (2).
‘‘(2) EXEMPT GOVERNMENTAL PROGRAMS.—In
the case of an exempt governmental program—
‘‘(A) no tax shall be imposed under section
4501 on any premium received pursuant to
such program or on any amount received for
health-related administrative services pursuant
to such program, and
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‘‘(B) no tax shall be imposed under section
4502 on any expenditures pursuant to such
program.
‘‘(3) EXEMPT GOVERNMENTAL PROGRAM.—For
purposes of this subchapter, the term ‘exempt gov-
ernmental program’ means—
‘‘(A) the insurance programs established
by parts A and B of title XVIII of the Social
Security Act,
‘‘(B) the medical assistance program es-
tablished by title XIX of the Social Security
Act,
‘‘(C) any program established by Federal
law for providing medical care (other than
through insurance policies) to individuals (or
the spouses and dependents thereof) by reason
of such individuals being—
‘‘(i) members of the Armed Forces of
the United States, or
‘‘(ii) veterans, and
‘‘(D) any program established by Federal
law for providing medical care (other than
through insurance policies) to members of In-
dian tribes (as defined in section 4(d) of the In-
dian Health Care Improvement Act).
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‘‘(c) NO COVER OVER TO POSSESSIONS.—Notwith-
standing any other provision of law, no amount collected
under this subchapter shall be covered over to any posses-
sion of the United States.’’.
(b) CLERICAL AMENDMENT.—The table of chapters
for subtitle D of the Internal Revenue Code of 1986 is
amended by inserting after the item relating to chapter
36 the following new item:
‘‘CHAPTER 37. Health related assessments.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to premiums received,
and expenses incurred, with respect to coverage for peri-
ods after September 30, 1997.
SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.
(a) ESTABLISHMENT.—There is hereby established
an advisory commission to be known as the Medical Edu-
cation Advisory Commission (in this section referred to as
the ‘‘Advisory Commission’’).
(b) DUTIES.—
(1) IN
GENERAL.—The Advisory Commission
shall—
(A) conduct a thorough study of all mat-
ters relating to—
(i) the operation of the Medical Edu-
cation Trust Fund established under sec-
tion 2;
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(ii) alternative and additional sources
of graduate medical education funding;
(iii) 
alternative 
methodologies 
for
compensating teaching hospitals for grad-
uate medical education;
(iv) policies designed to maintain su-
perior research and educational capacities
in an increasing competitive health system;
(v) the role of medical schools in grad-
uate medical education; and
(vi) policies designed to expand eligi-
bility for graduate medical education pay-
ments to institutions other than teaching
hospitals;
(B) develop recommendations, including
the use of demonstration projects, on the mat-
ters studied under subparagraph (A) in con-
sultation with the Secretary of Health and
Human Services and the entities described in
paragraph (2);
(C) not later than January 1999, submit
an interim report to the Committee on Finance
of the Senate, the Committee on Ways and
Means of the House of Representatives, and the
Secretary of Health and Human Services; and
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(D) not later than January 2001, submit
a final report to the Committee on Finance of
the Senate, the Committee on Ways and Means
of the House of Representatives, and the Sec-
retary of Health and Human Services.
(2) ENTITIES
DESCRIBED.—The entities de-
scribed in this paragraph are—
(A) other advisory groups, including the
Council on Graduate Medical Education, the
Prospective Payment Assessment Commission,
and the Physician Payment Review Commis-
sion;
(B) interested parties, including the Asso-
ciation of American Medical Colleges, the Asso-
ciation of Academic Health Centers, and the
American Medical Association;
(C) health care insurers, including man-
aged care entities; and
(D) other entities as determined by the
Secretary of Health and Human Services.
(c) NUMBER AND APPOINTMENT.—The membership
of the Advisory Commission shall include 9 individuals
who are appointed to the Advisory Commission from
among individuals who are not officers or employees of
the United States. Such individuals shall be appointed by
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the Secretary of Health and Human Services, and shall
include individuals from each of the following categories:
(1) Physicians who are faculty members of
medical schools.
(2) Officers or employees of teaching hospitals.
(3) Officers or employees of health plans.
(4) Deans of medical schools.
(5) Such other individuals as the Secretary de-
termines to be appropriate.
(d) TERMS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), members of the Advisory Commission
shall serve for the lesser of the life of the Advisory
Commission, or 4 years.
(2) SERVICE BEYOND TERM.—A member of the
Advisory Commission may continue to serve after
the expiration of the term of the member until a
successor is appointed.
(e) VACANCIES.—If a member of the Advisory Com-
mission does not serve the full term applicable under sub-
section (d), the individual appointed to fill the resulting
vacancy shall be appointed for the remainder of the term
of the predecessor of the individual.
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(f) CHAIR.—The Secretary of Health and Human
Services shall designate an individual to serve as the Chair
of the Advisory Commission.
(g) MEETINGS.—The Advisory Commission shall
meet not less than once during each 4-month period and
shall otherwise meet at the call of the Secretary of Health
and Human Services or the Chair.
(h) COMPENSATION AND REIMBURSEMENT OF EX-
PENSES.—Members of the Advisory Commission shall re-
ceive compensation for each day (including travel time) en-
gaged in carrying out the duties of the Advisory Commis-
sion. Such compensation may not be in an amount in ex-
cess of the maximum rate of basic pay payable for level
IV of the Executive Schedule under section 5315 of title
5, United States Code.
(i) STAFF.—
(1) STAFF DIRECTOR.—The Advisory Commis-
sion shall, without regard to the provisions of title
5, United States Code, relating to competitive serv-
ice, appoint a Staff Director who shall be paid at a
rate equivalent to a rate established for the Senior
Executive Service under 5382 of title 5, United
States Code.
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(2) ADDITIONAL
STAFF.—The Secretary of
Health and Human Services shall provide to the Ad-
visory Commission such additional staff, informa-
tion, and other assistance as may be necessary to
carry out the duties of the Advisory Commission.
(j) TERMINATION OF THE ADVISORY COMMISSION.—
The Advisory Commission shall terminate 90 days after
the date on which the Advisory Commission submits its
final report under subsection (b)(1)(D).
(k) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated such sums as may be
necessary to carry out the purposes of this section.
SEC. 7. DEMONSTRATION PROJECTS.
(a) ESTABLISHMENT.—The Secretary of Health and
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall establish, by regulation, guidelines for the
establishment and operation of demonstration projects
which the Medical Education Advisory Commission rec-
ommends under subsection (b)(1)(B) of section 6.
(b) FUNDING.—
(1) IN
GENERAL.—For any fiscal year after
1997, amounts in the Medical Education Trust
Fund under title XXI of the Social Security Act
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shall be available for use by the Secretary in the es-
tablishment and operation of demonstration projects
described in subsection (a).
(2) FUNDS AVAILABLE.—
(A) LIMITATION.—Not more than 1⁄10 of 1
percent of the funds in such trust fund shall be
available for the purposes of paragraph (1).
(B) ALLOCATION.—Amounts under para-
graph (1) shall be paid from the accounts es-
tablished under paragraphs (2) through (5) of
section 2101(a) of the Social Security Act, in
the same proportion as the amounts transferred
to such accounts bears to the total of amounts
transferred to all 4 such accounts for such fis-
cal year.
(c) LIMITATION.—Nothing in this section shall be
construed to authorize any change in the payment meth-
odology for teaching hospitals and medical schools estab-
lished by this Act.
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