I
105TH CONGRESS
1ST SESSION
H. R. 881
To establish a medical education trust fund, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 27, 1997
Mrs. LOWEY (for herself and Ms. SLAUGHTER) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Commerce, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To establish a medical education trust fund, and for other
purposes.
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
‘‘Medical Education Trust Fund Act of 1997’’.
(b) TABLE OF CONTENTS.—The table of contents of
this title is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Medical Education Trust Fund.
Sec. 3. Amendments to medicare program.
Sec. 4. Amendments to medicaid program.
Sec. 5. Assessments on insured and self-insured health plans.
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Sec. 6. Medical Education Advisory Commission.
Sec. 7. Demonstration projects.
SEC. 2. MEDICAL EDUCATION TRUST FUND.
The Social Security Act (42 U.S.C. 300 et seq.) is
amended by adding after title XX the following new title:
‘‘TITLE XXI—MEDICAL EDUCATION TRUST
FUND
‘‘TABLE OF CONTENTS OF TITLE
‘‘Sec. 2101. Establishment of Trust Fund.
‘‘Sec. 2102. Payments to medical schools.
‘‘Sec. 2103. Payments to teaching hospitals.
‘‘SEC. 2101. ESTABLISHMENT OF TRUST FUND.
‘‘(a) IN GENERAL.—There is established in the
Treasury of the United States a fund to be known as the
Medical Education Trust Fund (in this title referred to
as the ‘Trust Fund’), consisting of the following accounts:
‘‘(1) The Medical School Account.
‘‘(2) The Medicare Teaching Hospital Indirect
Account.
‘‘(3) The Medicare Teaching Hospital Direct
Account.
‘‘(4) The Non-Medicare Teaching Hospital In-
direct Account.
‘‘(5) The Non-Medicare Teaching Hospital Di-
rect Account.
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Each such account shall consist of such amounts as are
allocated and transferred to such account under this sec-
tion, sections 1876(a)(7), 1886(j) and 1931, and section
4503 of the Internal Revenue Code of 1986. Amounts in
the accounts of the Trust Fund shall remain available
until expended.
‘‘(b) 
EXPENDITURES
FROM
TRUST
FUND.—
Amounts in the accounts of the Trust Fund are available
to the Secretary for making payments under sections 2102
and 2103.
‘‘(c) INVESTMENT.—
‘‘(1) IN
GENERAL.—The Secretary of the
Treasury shall invest amounts in the accounts of the
Trust Fund which the Secretary determines are not
required to meet current withdrawals from the Trust
Fund. Such investments may be made only in inter-
est-bearing obligations of the United States. For
such purpose, such obligations may be acquired on
original issue at the issue price, or by purchase of
outstanding obligations at the market price.
‘‘(2) SALE OF OBLIGATIONS.—The Secretary of
the Treasury may sell at market price any obligation
acquired under paragraph (1).
‘‘(3) AVAILABILITY OF INCOME.—Any interest
derived from obligations held in each such account,
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and proceeds from any sale or redemption of such
obligations, are hereby appropriated to such account.
‘‘(d) MONETARY GIFTS TO TRUST FUND.—There are
appropriated to the Trust Fund such amounts as may be
unconditionally donated to the Federal Government as
gifts to the Trust Fund. Such amounts shall be allocated
and transferred to the accounts described in subsection
(a) in the same proportion as the amounts in each of the
accounts bears to the total amount in all the accounts of
the Trust Fund.
‘‘SEC. 2102. PAYMENTS TO MEDICAL SCHOOLS.
‘‘(a) FEDERAL PAYMENTS TO MEDICAL SCHOOLS
FOR CERTAIN COSTS.—
‘‘(1) IN GENERAL.—In the case of a medical
school that in accordance with paragraph (2) sub-
mits to the Secretary an application for fiscal year
1998 or any subsequent fiscal year, the Secretary
shall make payments for such year to the medical
school for the purpose specified in paragraph (3).
The Secretary shall make such payments from the
Medical School Account in an amount determined in
accordance with subsection (b), and may administer
the payments as a contract, grant, or cooperative
agreement.
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‘‘(2) APPLICATION FOR PAYMENTS.—For pur-
poses of paragraph (1), an application for payments
under such paragraph for a fiscal year is in accord-
ance with this paragraph if—
‘‘(A) the medical school involved submits
the application not later than the date specified
by the Secretary; and
‘‘(B) the application is in such form, is
made in such manner, and contains such agree-
ments, assurances, and information as the Sec-
retary determines to be necessary to carry out
this section.
‘‘(3) PURPOSE OF PAYMENTS.—The purpose of
payments under paragraph (1) is to assist medical
schools in maintaining and developing quality edu-
cational programs in an increasingly competitive
health care system.
‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;
ANNUAL AMOUNT OF PAYMENTS.—
‘‘(1) AVAILABILITY OF TRUST FUND FOR PAY-
MENTS.—The following amounts shall be available
for a fiscal year for making payments under sub-
section (a) from the amount allocated and trans-
ferred to the Medical School Account under sections
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1876(a)(7), 1886(j), 1931, 2101 (c)(3) and (d), and
section 4503 of the Internal Revenue Code of 1986:
‘‘(A) In the case of fiscal year 1998,
$200,000,000.
‘‘(B) In the case of fiscal year 1999,
$300,000,000.
‘‘(C) In the case of fiscal year 2000,
$400,000,000.
‘‘(D) In the case of fiscal year 2001,
$500,000,000.
‘‘(E) In the case of fiscal year 2002,
$600,000,000.
‘‘(F) In the case of each subsequent fiscal
year, the amount specified in this paragraph in
the previous fiscal year updated through the
midpoint of the year by the estimated percent-
age change in the general health care inflation
factor (as defined in subsection (d)) during the
12-month period ending at that midpoint, with
appropriate adjustments to reflect previous
underestimations or overestimations under this
subparagraph in the projected health care infla-
tion factor.
‘‘(2) AMOUNT
OF
PAYMENTS
FOR
MEDICAL
SCHOOLS.—
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‘‘(A) IN GENERAL.—Subject to the annual
amount available under paragraph (1) for a fis-
cal year, the amount of payments required
under subsection (a) to be made to a medical
school that submits to the Secretary an applica-
tion for such year in accordance with subsection
(a)(2) is an amount equal to an amount deter-
mined by the Secretary in accordance with sub-
paragraph (B).
‘‘(B) DEVELOPMENT OF FORMULA.—The
Secretary shall develop a formula for allocation
of funds to medical schools under this section
consistent with the purpose described in sub-
section (a)(3).
‘‘(c) MEDICAL SCHOOL DEFINED.—For purposes of
this section, the term ‘medical school’ means a school of
medicine (as defined in section 799 of the Public Health
Service Act) or a school of osteopathic medicine (as de-
fined in such section).
‘‘(d) GENERAL HEALTH CARE INFLATION FAC-
TOR.—The term ‘general health care inflation factor’
means the consumer price index for medical services as
determined by the Bureau of Labor Statistics.
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‘‘SEC. 2103. PAYMENTS TO TEACHING HOSPITALS.
‘‘(a) FORMULA
PAYMENTS
TO
ELIGIBLE
ENTI-
TIES.—
‘‘(1) IN GENERAL.—In the case of any fiscal
year beginning after September 30, 1997, the Sec-
retary shall make payments to each eligible entity
that, in accordance with paragraph (2), submits to
the Secretary an application for such fiscal year.
Such payments shall be made from the Trust Fund,
and the total of the payments to the eligible entity
for the fiscal year shall equal the sum of the
amounts determined under subsections (b), (c), (d),
and (e).
‘‘(2) APPLICATION.—For purposes of para-
graph (1), an application shall contain such informa-
tion as may be necessary for the Secretary to make
payments under such paragraph to an eligible entity
during a fiscal year. An application shall be treated
as submitted in accordance with this paragraph if it
is submitted not later than the date specified by the
Secretary, and is made in such form and manner as
the Secretary may require.
‘‘(3) PERIODIC
PAYMENTS.—Payments under
paragraph (1) to an eligible entity for a fiscal year
shall be made periodically, at such intervals and in
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such amounts as the Secretary determines to be ap-
propriate (subject to applicable Federal law regard-
ing Federal payments).
‘‘(4) ADMINISTRATOR OF PROGRAMS.—The Sec-
retary shall carry out responsibility under this title
by acting through the Administrator of the Health
Care Financing Administration.
‘‘(5) ELIGIBLE ENTITY.—For purposes of this
title, the term ‘eligible entity’, with respect to any
fiscal year, means—
‘‘(A) for payment under subsections (b)
and (c), an entity which would be eligible to re-
ceive payments for such fiscal year under—
‘‘(i) section 1886(d)(5)(B), if such
payments had not been terminated for dis-
charges occurring after September 30,
1997;
‘‘(ii) section 1886(h), if such pay-
ments had not been terminated for cost re-
porting periods beginning after September
30, 1997; or
‘‘(iii) both sections; or
‘‘(B) for payment under subsections (d)
and (e)—
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‘‘(i) an entity which meets the re-
quirement of subparagraph (A); or
‘‘(ii) an entity which the Secretary de-
termines should be considered an eligible
entity.
‘‘(b) DETERMINATION OF AMOUNT FROM MEDICARE
TEACHING HOSPITAL INDIRECT ACCOUNT.—
‘‘(1) IN GENERAL.—The amount determined for
an eligible entity for a fiscal year under this sub-
section is the amount equal to the applicable per-
centage of the total amount allocated and trans-
ferred to the Medicare Teaching Hospital Indirect
Account under sections 1876(a)(7) and 1886(j)(1),
and subsections (c)(3) and (d) of section 2101 for
such fiscal year.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage for any
fiscal year is equal to the percentage of the total
payments which would have been made to the eligi-
ble entity in such fiscal year under section
1886(d)(5)(B) if—
‘‘(A) such payments had not been termi-
nated for discharges occurring after September
30, 1997; and
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‘‘(B) such payments included payments for
individuals enrolled in a plan under section
1876, except that for fiscal years 1998, 1999,
and 2000, only the applicable percentage (as
defined in section 1876(a)(7)(B)) of such pay-
ments shall be taken into account.
‘‘(c) DETERMINATION OF AMOUNT FROM MEDICARE
TEACHING HOSPITAL DIRECT ACCOUNT.—
‘‘(1) IN GENERAL.—The amount determined for
an eligible entity for a fiscal year under this sub-
section is the amount equal to the applicable per-
centage of the total amount allocated and trans-
ferred to the Medicare Teaching Hospital Direct Ac-
count under sections 1876(a)(7) and 1886(j)(2), and
subsections (c)(3) and (d) of section 2101 for such
fiscal year.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage for any
fiscal year is equal to the percentage of the total
payments which would have been made to the eligi-
ble entity in such fiscal year under section 1886(h)
if—
‘‘(A) such payments had not been termi-
nated for cost reporting periods beginning after
September 30, 1997; and
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‘‘(B) such payments included payments for
individuals enrolled in a plan under section
1876, except that for fiscal years 1998, 1999,
and 2000, only the applicable percentage (as
defined in section 1876(a)(7)(B)) of such pay-
ments shall be taken into account.
‘‘(d) DETERMINATION OF AMOUNT FROM NON-MED-
ICARE TEACHING HOSPITAL INDIRECT ACCOUNT.—
‘‘(1) IN GENERAL.—The amount determined for
an eligible entity for a fiscal year under this sub-
section is the amount equal to the applicable per-
centage of the total amount allocated and trans-
ferred to the Non-Medicare Teaching Hospital Indi-
rect Account for such fiscal year under section 1931,
subsections (c)(3) and (d) of section 2101, and sec-
tion 4503 of the Internal Revenue Code of 1986.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage for any
fiscal year for an eligible entity is equal to the per-
centage of the total payments which, as determined
by the Secretary, would have been made in such fis-
cal year under section 1886(d)(5)(B) if—
‘‘(A) such payments had not been termi-
nated for discharges occurring after September
30, 1997; and
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‘‘(B) non-medicare patients were taken
into account in lieu of medicare patients.
‘‘(e) DETERMINATION OF AMOUNT FROM NON-MED-
ICARE TEACHING HOSPITAL DIRECT ACCOUNT.—
‘‘(1) IN GENERAL.—The amount determined for
an eligible entity for a fiscal year under this sub-
section is the amount equal to the applicable per-
centage of the total amount allocated and trans-
ferred to the Non-Medicare Teaching Hospital Di-
rect Account for such fiscal year under section 1931,
subsections (c)(3) and (d) of section 2101, and sec-
tion 4503 of the Internal Revenue Code of 1986.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage for any
fiscal year for an eligible entity is equal to the per-
centage of the total payments which, as determined
by the Secretary, would have been made in such fis-
cal year under section 1886(h) if—
‘‘(A) such payments had not been termi-
nated for cost reporting periods beginning after
September 30, 1997; and
‘‘(B) non-medicare patients were taken
into account in lieu of medicare patients.’’.
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SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.
(a) IN GENERAL.—Section 1886 of the Social Secu-
rity Act (42 U.S.C. 1395ww) is amended—
(1) in subsection (d)(5)(B), in the matter pre-
ceding clause (i), by striking ‘‘The Secretary shall
provide’’ and inserting the following: ‘‘For dis-
charges occurring before October 1, 1997, the Sec-
retary shall provide’’;
(2) in subsection (h)—
(A) in paragraph (1), in the first sentence,
by striking ‘‘the Secretary shall provide’’ and
inserting ‘‘the Secretary shall, subject to para-
graph (6), provide’’; and
(B) by adding at the end the following new
paragraph:
‘‘(6) LIMITATION.—
‘‘(A) IN
GENERAL.—The authority to
make payments under this subsection shall not
apply with respect to—
‘‘(i) cost reporting periods beginning
after September 30, 1997; and
‘‘(ii) any portion of a cost reporting
period beginning on or before such date
which occurs after such date.
‘‘(B) 
RULE
OF
CONSTRUCTION.—This
paragraph may not be construed as authorizing
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any payment under section 1861(v) with re-
spect to graduate medical education.’’; and
(3) by adding at the end the following new sub-
section:
‘‘(j) TRANSFERS TO MEDICAL EDUCATION TRUST
FUND.—
‘‘(1) INDIRECT
COSTS
OF
MEDICAL
EDU-
CATION.—
‘‘(A) TRANSFER.—
‘‘(i) IN GENERAL.—From the Federal
Hospital Insurance Trust Fund, the Sec-
retary shall, for fiscal year 1998 and each
subsequent fiscal year, transfer to the
Medical Education Trust Fund an amount
equal to the amount estimated by the Sec-
retary under subparagraph (B).
‘‘(ii) ALLOCATION.—Of the amount
transferred under clause (i)—
‘‘(I) there shall be allocated and
transferred to the Medical School Ac-
count an amount which bears the
same ratio to the total amount avail-
able under section 2102(b)(1) for the
fiscal year (reduced by the balance in
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such account at the end of the preced-
ing fiscal year) as the amount trans-
ferred under clause (i) bears to the
total amounts transferred to the Med-
ical Education Trust Fund under title
XXI (excluding amounts transferred
under subsections (c)(3) and (d) of
section 2101) for such fiscal year; and
‘‘(II) the remainder shall be allo-
cated and transferred to the Medicare
Teaching Hospital Indirect Account.
‘‘(B) DETERMINATION OF AMOUNTS.—The
Secretary shall make an estimate for each fiscal
year involved of the nationwide total of the
amounts that would have been paid under sub-
section (d)(5)(B) to hospitals during the fiscal
year if such payments had not been terminated
for discharges occurring after September 30,
1997.
‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—
‘‘(A) TRANSFER.—
‘‘(i) IN GENERAL.—From the Federal
Hospital Insurance Trust Fund and the
Federal Supplementary Medical Insurance
Trust Fund, the Secretary shall, for fiscal
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year 1998 and each subsequent fiscal year,
transfer to the Medical Education Trust
Fund an amount equal to the amount esti-
mated by the Secretary under subpara-
graph (B).
‘‘(ii) ALLOCATION.—Of the amount
transferred under clause (i)—
‘‘(I) there shall be allocated and
transferred to the Medical School Ac-
count an amount which bears the
same ratio to the total amount avail-
able under section 2102(b)(1) for the
fiscal year (reduced by the balance in
such account at the end of the preced-
ing fiscal year) as the amount trans-
ferred under clause (i) bears to the
total amounts transferred to the Med-
ical Education Trust Fund under title
XXI (excluding amounts transferred
under subsections (c)(3) and (d) of
section 2101) for such fiscal year; and
‘‘(II) the remainder shall be allo-
cated and transferred to the Medicare
Teaching Hospital Direct Account.
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‘‘(B) DETERMINATION OF AMOUNTS.—For
each hospital, the Secretary shall make an esti-
mate for the fiscal year involved of the amount
that would have been paid under subsection (h)
to the hospital during the fiscal year if such
payments had not been terminated for cost re-
porting periods beginning after September 30,
1997.
‘‘(C) ALLOCATION BETWEEN FUNDS.—In
providing for a transfer under subparagraph
(A) for a fiscal year, the Secretary shall provide
for an allocation of the amounts involved be-
tween part A and part B (and the trust funds
established under the respective parts) as rea-
sonably reflects the proportion of direct grad-
uate medical education costs of hospitals associ-
ated with the provision of services under each
respective part.’’.
(b) MEDICARE HMO’S.—Section 1876(a) of the So-
cial Security Act (42 U.S.C. 1395mm(a)) is amended by
inserting after paragraph (6) the following new paragraph:
‘‘(7)(A) In determining the adjusted average per cap-
ita cost under paragraph (4) for fiscal years after 1997,
the Secretary shall not take into account the applicable
percentage of costs under sections 1886(d)(5)(B) (indirect
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costs of medical education) and 1886(h) (direct graduate
medical education costs).
‘‘(B) For purposes of subparagraph (A), the applica-
ble percentage is—
‘‘(i) for fiscal year 1998, 25 percent;
‘‘(ii) for fiscal year 1999, 50 percent;
‘‘(iii) for fiscal year 2000, 75 percent; and
‘‘(iv) for fiscal year 2001 and each subsequent
fiscal year, 100 percent.
‘‘(C)(i) There is appropriated and transferred to the
Medical Education Trust Fund each fiscal year an amount
equal to the aggregate amounts not taken into account
under paragraph (4) by reason of subparagraph (A).
‘‘(ii) Of the amounts transferred under clause (i)—
‘‘(I) 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 under
clause (i) bears to the total amounts transferred to
the Medical Education Trust Fund under section
2101 (excluding amounts transferred under sub-
sections (c)(3) and (d) of such section) for such fis-
cal year; and
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‘‘(II) the remainder shall be allocated and
transferred to the Medicare Teaching Hospital Indi-
rect Account under such section and the Medicare
Teaching Hospital Direct Account under such sec-
tion in the same proportion as the amounts attrib-
utable to the costs under sections 1886(d)(5)(B) and
1886(h) were of the amounts transferred under
clause (i).
‘‘(iii) The Secretary shall make payments under
clause (i) from the Federal Hospital Insurance Trust
Fund and the Federal Supplementary Medical Insurance
Trust Fund, in the same manner as the Secretary deter-
mines under section 1886(j).’’.
SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) is amended—
(1) by redesignating section 1931 as section
1932; and
(2) by inserting after section 1930, the follow-
ing new section:
‘‘TRANSFER OF FUNDS TO ACCOUNTS
‘‘SEC. 1931. (a) TRANSFER OF FUNDS.—
‘‘(1) IN GENERAL.—For fiscal year 1998 and
each subsequent fiscal year, the Secretary shall
transfer to the Medical Education Trust Fund an
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amount equal to the amount determined under sub-
section (b).
‘‘(2) ALLOCATION.—Of the amount transferred
under paragraph (1)—
‘‘(A) there shall be allocated and trans-
ferred 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 preceding fiscal year)
as the amount transferred under paragraph (1)
bears to the total amounts transferred to the
Medical Education Trust Fund under title XXI
(excluding amounts transferred under sub-
sections (c)(3) and (d) of section 2101) for
such fiscal year; and
‘‘(B) the remainder shall be allocated and
transferred to the Non-Medicare Teaching Hos-
pital Indirect Account and the Non-Medicare
Teaching Hospital Direct Account, in the same
proportion as the amounts transferred to each
account under section 1886(j) relate to the total
amounts transferred under such section for
such fiscal year.
‘‘(b) AMOUNT DETERMINED.—
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‘‘(1) OUTLAYS FOR ACUTE MEDICAL SERVICES
DURING PRECEDING FISCAL YEAR.—Beginning with
fiscal year 1998, the Secretary shall determine 5
percent of the total amount of Federal outlays made
under this title for acute medical services, as defined
in paragraph (2), for the preceding fiscal year.
‘‘(2) ACUTE
MEDICAL
SERVICES
DEFINED.—
The term ‘acute medical services’ means items and
services described in section 1905(a) other than the
following:
‘‘(A) Nursing facility services (as defined
in section 1905(f)).
‘‘(B) Intermediate care facility for the
mentally retarded services (as defined in section
1905(d)).
‘‘(C) Personal care services (as described
in section 1905(a)(24)).
‘‘(D) Private duty nursing services (as re-
ferred to in section 1905(a)(8)).
‘‘(E) Home or community-based services
furnished under a waiver granted under sub-
section (c), (d), or (e) of section 1915.
‘‘(F) Home and community care furnished
to functionally disabled elderly individuals
under section 1929.
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‘‘(G) Community supported living arrange-
ments services under section 1930.
‘‘(H) Case-management services (as de-
scribed in section 1915(g)(2)).
‘‘(I) Home health care services (as referred
to in section 1905(a)(7)), clinic services, and re-
habilitation services that are furnished to an in-
dividual who has a condition or disability that
qualifies the individual to receive any of the
services described in a previous subparagraph.
‘‘(J) Services furnished in an institution
for mental diseases (as defined in section
1905(i)).
‘‘(c) ENTITLEMENT.—This section constitutes budget
authority in advance of appropriations Acts and rep-
resents the obligation of the Federal Government to pro-
vide for the payment to the Non-Medicare Teaching Hos-
pital Indirect Account, the Non-Medicare Teaching Hos-
pital Direct Account, and the Medical School Account of
amounts determined in accordance with subsections (a)
and (b).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall be effective on and after October 1,
1997.