Quality, the Agency for Toxic Substances and Disease 
Registry, the Centers for Disease Control and Prevention, 
the National Institutes of Health (established under title 
IV of the Public Health Service Act), and the Substance 
Abuse and Mental Health Services Administration. In ad-
dition, the National Health Board shall establish the fol-
lowing institutes: 
(1) NATIONAL INSTITUTE OF EPIDEMIOLOGY.— 
A National Institute of Epidemiology, which shall— 
(A) gather and analyze disease-related sta-
tistics collected by the Service; 
(B) plan, conduct, support, and assist in 
epidemiologic research conducted by the Serv-
ice; 
(C) conduct and support research on epi-
demiologic methodology and experimental epide-
miology; 
(D) establish and maintain an early warn-
ing system for the detection of new diseases 
and epidemics; 
(E) assist in the formulation of policies to 
eliminate or reduce the causes of illness and in-
jury and to prevent and curtail epidemics of 
these conditions; and
(F) provide technical assistance and sup-
port to regional and local jurisdictions related 
to measures to prevent and curtail outbreaks of 
illness and injury. 
(2) NATIONAL
INSTITUTE
OF
EVALUATIVE 
CLINICAL RESEARCH.—A National Institute of Eval-
uative Clinical Research, which shall— 
(A) create a uniform electronic data base 
for research on quality improvement in clinical 
care and the organization and delivery of serv-
ices, and for research on outcomes of care; 
(B) assess and analyze evidence on newly 
discovered or proposed preventive, diagnostic, 
and therapeutic methods and agents, including 
new technologies, and assist the National 
Health Board, in cooperation with other bodies, 
including the National Institute of Pharmacy 
and Medical Supply, in developing guidelines 
and standards for their introduction; 
(C) analyze evidence on newly discovered 
or proposed preventive, diagnostic, and thera-
peutic methods and agents; 
(D) plan and conduct clinical trials, in con-
formance with the limitations of subtitle A of 
title II;
(E) assist the National Health Board, in 
cooperation with other bodies, including the Na-
tional Institute of Pharmacy and Medical Sup-
ply, in developing guidelines and standards for 
the introduction of new methods of prevention, 
diagnosis, and treatment; 
(F)(i) regularly assess and recommend 
measures to improve the health status of the 
population, which methods shall include anal-
ysis of the national health data base, regular 
surveys of the population regarding their expe-
rience and evaluation of their health and health 
services, and such other methods as designated 
by the Institute; 
(ii) identify the most effective methods of 
prevention, diagnosis and treatment, as deter-
mined by the most recent evidence, and assist 
the National Health Board, in cooperation with 
other bodies, in establishing guidelines to im-
prove clinical practice, including clinical deci-
sion criteria per section 221(f); 
(iii) regularly monitor and report to the 
National Health Board for further action the 
extent of inappropriate care, including under-
service and overservice, and its consequences;
(iv) develop additional methods of quality 
improvement for implementation by the Na-
tional Health Board and other entities, includ-
ing systematic review of patterns of practice 
that compromise the quality of care and rec-
ommendations to redress such practices, edu-
cation for health care workers to improve the 
quality of care, and guidelines for the optimal 
organization of health services and the use of 
tertiary care facilities; 
(G) administer the periodic convening of 
the U.S. Preventive Health Services Task 
Force, which shall recommend to the National 
Health Board a schedule for preventive health 
services based on age and sex, which schedule 
shall reflect the most recent medical evidence; 
and 
(H) provide education for users on clinical 
effectiveness guidelines and the most effective 
preventive, diagnostic, and treatment practices. 
(3) NATIONAL
INSTITUTE
OF
HEALTH
CARE 
SERVICES.—A National Institute of Health Care 
Services, which shall—
(A) analyze data and statistics on the 
health care resources and needs of the Nation 
and on the quality of present services; 
(B) conduct comparative studies of health 
care services in the various regions of the Na-
tion, and make recommendations for the im-
provement of health care services in areas with 
inferior quality of health care services; 
(C) plan and conduct research on alter-
native methods of health care delivery, on the 
functions, tasks, performance and work rela-
tionships of various kinds and categories of 
health workers, on patterns of organization of 
health care, and on the effectiveness and bene-
fits of health care in relation to costs; and 
(D) assist the National Health Board in 
formulating national policies to improve the 
quality of health care services. 
(4) NATIONAL INSTITUTE OF PHARMACY AND 
MEDICAL SUPPLY.—A National Institute of Phar-
macy and Medical Supply, which shall— 
(A) recommend to the National Health 
Board standards regarding the quality, dis-
tribution, and price of all drugs, therapeutic de-
vices, appliances and equipment to be used by 
the Service; 
(B) certify drugs, therapeutic devices, ap-
pliances, and equipment for use in the health 
facilities of the Service, and for furnishing to 
users of such health facilities; 
(C) assist the National Health Board in 
issuing a National Pharmacy and Medical Sup-
ply Formulary; and 
(D) conduct a comprehensive program of 
pharmaceutical and medical supply research 
and utilization education using regional facili-
ties to the maximum extent possible. 
(5) NATIONAL
INSTITUTE
OF
SOCIOLOGY
OF 
HEALTH AND HEALTH CARE.—A National Institute 
of Sociology of Health and Health Care, which 
shall— 
(A) conduct ongoing analyses of the basic 
epistemological assumptions of health and 
health care; 
(B) assess critically the effects of scientific 
medicine and of divisions in institutional and 
technical skills in health care;
(C) evaluate the effects of health care 
measures and policies upon population groups 
and subgroups in the Nation; 
(D) identify and analyze the social, cul-
tural, economic, occupational, distributional, 
and environmental factors in modern society af-
fecting health and well-being; 
(E) analyze alternative, holistic approaches 
to the human body, health, and causality of ill 
health and the lack of social and psychological 
well-being; and 
(F) assist the National Health Board in 
formulating national policies relating to the pro-
motion of health and the provision of health 
care. 
(b) COORDINATION
OF
EFFORT.—The National 
Health Board will establish mechanisms for internal co-
ordination of research among the five Institutes, and will 
also coordinate effort with agencies under the Department 
of Health and Human Services, including the Food and 
Drug Administration and the Health Resources and Serv-
ices Administration.
Subtitle D—Health Planning, Dis-
tribution of Drugs and Other 
Medical Supplies, and Miscella-
neous Functions 
SEC. 431. HEALTH PLANNING AND BUDGETING. 
(a) IN GENERAL.—The National Health Board shall 
develop and implement guidelines to collect data on the 
supply of and demand for health workers in facilities 
under its supervision, and on the delivery of health care 
and supplemental services in health care facilities under 
its supervision, shall evaluate such data in relation to the 
health care needs of their respective area, and shall trans-
mit such data and evaluation as necessary for implementa-
tion, and shall make available such data and evaluations 
to residents of their respective area. 
(b) COORDINATION.—The National Health Board 
shall coordinate the planning and administration of the 
delivery of health care services, health worker education, 
and health research within regions, and shall facilitate the 
planning and administration of such programs. 
(c) PLANS.—The National Health Board shall formu-
late a 1-year and 5-year national health plan and budget, 
taking into account the regional budgets prepared in ac-
cordance with section 522.
SEC. 432. DISTRIBUTION OF DRUGS AND OTHER MEDICAL 
SUPPLIES. 
(a) NATIONAL FORMULARY.— 
(1) 
PUBLICATION.—The 
National 
Health 
Board, shall, not later than the effective date of 
health services, publish and disseminate a National 
Pharmacy and Medical Supply Formulary (in this 
section referred to as the ‘‘Formulary’’). 
(2) CONTENTS.—The Formulary shall contain a 
listing of drugs, therapeutic devices, appliances, 
equipment, and other medical supplies (including 
eyeglasses, other visual aids, hearing aids, and pros-
thetic devices) (in this section referred to as ‘‘drugs 
and other medical supplies’’). For each item on such 
listing the Formulary shall contain (A) the stand-
ards of quality for the production of such item, (B) 
the medical conditions for which the item is certified 
as effective for purposes of the provision of health 
care services under this Act, and (C) such other in-
formation on such item as the National Health 
Board determines to be appropriate for the effective 
and efficient delivery of health care services under 
this Act. 
(3) UPDATING.—The National Health Board 
shall, at regular intervals, update the contents of the 
Formulary and publish a price list for items listed
in the Formulary, which prices shall reflect the ac-
tual costs of manufacture. 
(b) DRUG PURCHASE PROGRAMS.— 
(1) IN GENERAL.—The National Health Board 
shall establish a program, in accordance with this 
subsection for the purchase and distribution of 
drugs and other medical supplies for use in health 
care facilities. 
(2) PRICING.—Such program shall provide for 
the purchase of each drug or other medical supply 
item only (A) following competitive bidding on such 
item or (B) based on the price listed for such item 
in the price list published under subsection (a)(3). 
(3) GENERIC
DISTRIBUTION.—Such program 
shall provide for the distribution and dispensing of 
drugs under their generic names. 
(4) GENERIC NAMES DEFINED.—For purposes 
of paragraph (3), the term ‘‘generic names’’ means 
the established names, as defined in section 
502(e)(2) of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 352(e)(2)). 
(c) AUTHORITY TO MANUFACTURE.—The National 
Health Board is authorized to establish and operate drug 
and medical supply manufacturing facilities, if it deter-
mines that such operation will result in reduced expendi-
tures by the Service. 
SEC. 433. MISCELLANEOUS FUNCTIONS OF THE NATIONAL 
HEALTH BOARD. 
(a) ANNUAL REPORT.—The appropriate National 
Health Board shall publish, not later than December 31 
of each year, a report presenting and evaluating oper-
ations of the Service during the fiscal year ending in such 
year and surveying the future health needs of the Nation 
and plans the Board has for the Service to meet such 
needs. 
(b) DISSEMINATION.—The National Health Board 
shall, not later than the effective date of health services, 
prepare and disseminate, for use by users, information 
about health and health services deemed essential to en-
sure users’ active and informed participation in the health 
care system, including information that is culturally ap-
propriate for each area’s principal cultural and ethnic 
groupings, a comprehensive dictionary of terms used in 
health care records and services maintained or provided 
by the Service. Such dictionary shall explain terms related 
to symptoms, signs, diagnoses, etiologic agents and condi-
tions, diagnostic procedures, and the treatment and pre-
vention of, and rehabilitation following, illnesses, and shall 
include extensive citations of lay and professional sources
100 
which a user might consult for additional information on 
such terms. 
TITLE V—FINANCING OF THE 
SERVICE 
Subtitle A—Health Service Taxes 
SEC. 501. INDIVIDUAL AND CORPORATE INCOME TAXES. 
(a) HEALTH SERVICE TAXES.— 
(1) IN GENERAL.—Subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to 
normal taxes and surtaxes) is amended by adding at 
the end the following new part: 
‘‘PART VIII—HEALTH SERVICE TAXES 
‘‘Sec. 59B. Tax imposed. 
‘‘SEC. 59B. TAX IMPOSED. 
‘‘(a) INDIVIDUALS, ESTATES, AND TRUSTS.—In ad-
dition to other taxes, there is hereby imposed for each tax-
able year on the taxable income of every individual and 
of every estate and trust taxable under section 1(d), a tax 
in an amount equal to 10 percent of the total tax imposed 
by section 1 for such taxable year. 
‘‘(b) CORPORATION.—In addition to the other taxes, 
there is hereby imposed for each taxable year on the tax-
able income of every corporation, a tax in an amount equal 
to 90 percent of the total amount of the normal tax and 
surtax imposed by section 11 for such taxable year.’’
101 
(2) CLERICAL
AMENDMENT.—The table of 
parts of such subchapter A is amended by adding 
after the item relating to part VII the following new 
item: 
‘‘PART VIII. HEALTH SERVICE TAXES’’. 
(b) EFFECTIVE DATE.—The amendments made in 
this section shall apply to taxable years beginning on or 
after the effective date of health services. 
SEC. 502. OTHER CHANGES IN THE INTERNAL REVENUE 
CODE OF 1986. 
(a) DENIAL OF EXCLUSION FROM GROSS INCOME 
FOR AMOUNTS PAID BY THIRD PARTIES FOR MEDICAL 
CARE.—Section 105 of the Internal Revenue Code of 1986 
(relating to amounts received under accident and health 
plans) is amended by striking subsection (b). 
(b) DENIAL OF EXCLUSION FROM GROSS INCOME OF 
CERTAIN
CONTRIBUTIONS
BY
THE
EMPLOYER
TO 
HEALTH PLANS.—Subsection (a) of section 106 of such 
Code (relating to contributions by employer to accident 
and health plans) is amended to read as follows: 
‘‘(a) GENERAL RULE.—Except as otherwise provided 
in this section, gross income does not include contributions 
by the employer to accident or health plans for compensa-
tion (through insurance or otherwise) to his employees for 
personal injuries or sickness to the extent that such con-
tributions do not provide for health care and supplemental