I 
108TH CONGRESS 
1ST SESSION H. R. 1158
To modify the antitrust exemption applicable to the business of medical 
malpractice insurance, to address current issues for health care providers, 
to reform medical malpractice litigation by making available alternative 
dispute resolution methods, requiring plaintiffs to submit affidavits of 
merit before proceeding, and enabling judgments to be satisfied through 
periodic payments, to reform the medical malpractice insurance market, 
and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 6, 2003
Mr. SANDLIN introduced the following bill; which was referred to the Com-
mittee on the Judiciary, and in addition to the Committees on Energy 
and Commerce, Ways and Means, and Education and the Workforce, for 
a period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the com-
mittee concerned 
A BILL 
To modify the antitrust exemption applicable to the business 
of medical malpractice insurance, to address current 
issues for health care providers, to reform medical mal-
practice litigation by making available alternative dispute 
resolution methods, requiring plaintiffs to submit affida-
vits of merit before proceeding, and enabling judgments 
to be satisfied through periodic payments, to reform the 
medical malpractice insurance market, and for other pur-
poses.
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 Liability Insurance Crisis Response Act of 
2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
TITLE I—ANTITRUST MATTERS: AMENDMENTS TO THE 
MCCARRAN-FERGUSON ACT 
Sec. 101. Short title. 
Sec. 102. Rules of construction. 
Sec. 103. Amendments. 
Sec. 104. Study and report. 
Sec. 105. Effective date. 
TITLE II—ADDRESSING CURRENT ISSUES FOR HEALTH CARE 
PROVIDERS 
Sec. 201. Prompt payment of claims. 
Sec. 202. Eliminating nurse shortages. 
‘‘PART H—NATIONAL NURSE SERVICE CORPS SCHOLARSHIP PROGRAM 
‘‘Sec. 851. National Nurse Service Corps Scholarship Program. 
‘‘PART I—INITIATIVES TO RECRUIT NURSES AND COMBAT THE NURSING 
SHORTAGE 
‘‘Sec. 855. Nurse recruitment grant program. 
‘‘PART J—INITIATIVES TO STRENGTHEN THE NURSE WORKFORCE 
‘‘Sec. 857. Grants for career ladder programs. 
‘‘Sec. 858. Grants for nurse training in long-term care for the elderly. 
‘‘Sec. 859. Grants for internship and residency programs. 
‘‘Sec. 860. Developing retention strategies and best practices in nursing 
staff management. 
‘‘Sec. 861. Stipend and scholarship program. 
TITLE III—MEDICAL MALPRACTICE LIABILITY REFORM 
Sec. 301. Definitions. 
Sec. 302. Federal tort reform. 
Sec. 303. Alternative dispute resolution methods. 
Sec. 304. Preventing frivolous malpractice suits.
Sec. 305. Requirement for affidavit of merit. 
TITLE IV—MEDICAL MALPRACTICE INSURANCE REFORMS 
Sec. 401. Advisory Commission on Medical Malpractice. 
Sec. 402. Limitation on rate of increase in medical malpractice insurance rates. 
Sec. 403. Withdrawal from medical malpractice insurance market. 
Sec. 404. Guaranteed renewability of coverage. 
Sec. 405. Guaranteed coverage for certain health care providers. 
Sec. 406. Medical malpractice insurance disclosure. 
Sec. 407. Medical malpractice insurance price comparison. 
TITLE V—TAX-RELATED PROVISIONS 
Sec. 501. Deduction for premiums for medical liability insurance for high risk 
specialties. 
Sec. 502. Deduction for premiums for medical liability insurance for practices 
serving medically underserved communities. 
TITLE VI—ADDITIONAL PROVISIONS 
Sec. 601. State consideration of additional and alternative methods. 
Sec. 602. Mandating equal treatment between traditional insurers and risk re-
tention groups, including medical malpractice risk retention 
groups.
TITLE I—ANTITRUST MATTERS: 
AMENDMENTS 
TO 
THE 
McCARRAN-FERGUSON ACT 
SEC. 101. SHORT TITLE. 
This title may be cited as the ‘‘Medical Malpractice 
Insurance Competitive Pricing Act of 2003’’. 
SEC. 102. RULES OF CONSTRUCTION. 
The amendments made by this title preserve—
(1) the provisions relating to State taxing and 
regulatory authority in section 2 of the Act of March 
9, 1945 (59 Stat. 34; 15 U.S.C. 1012), commonly 
known as the McCarran-Ferguson Act; 
(2) the availability, to persons engaged in the 
business of medical malpractice insurance, of the de-
fense of State action in the same manner and to the 
same extent as such defense is available to other 
persons; 
(3) the availability, to persons engaged in the 
business of medical malpractice insurance, of any 
antitrust immunity or defense that may be applica-
ble under law other than the McCarran-Ferguson 
Act; 
(4) the legal standards applicable under the 
McCarran-Ferguson Act, as in effect before such Act 
is amended by this title, to all conduct described in 
the safe harbors found in subparagraphs (B) and 
(C) of section 2(b)(1) of the McCarran-Ferguson 
Act, as amended by this title; and 
(5) the provisions relating to boycott, coercion, 
or intimidation in section 3(b) of the McCarran-Fer-
guson Act. 
SEC. 103. AMENDMENTS. 
Section 2 of the Act of March 9, 1945 (59 Stat. 34; 
15 U.S.C. 1012), commonly known as the McCarran-Fer-
guson Act, is amended—
(1) in subsection (b) by striking ‘‘: Provided,’’ 
and all that follows through ‘‘law.’’ and inserting the 
following: ‘‘except as follows:
‘‘(1)(A) The antitrust laws shall be applicable 
to the business of medical malpractice insurance ex-
cept as provided in subparagraphs (B) and (C). 
‘‘(B) The antitrust laws shall not be applicable 
to conduct that consists of making an agreement or 
engaging in joint conduct—
‘‘(i)(I) to collect, compile, classify, or dis-
seminate historical data; 
‘‘(II) to develop procedures to collect, com-
pile, classify, or disseminate historical data; or 
‘‘(III) to verify that historical data is accu-
rate and complete; 
‘‘(ii) to determine, using standard actuarial 
techniques, or disseminate, a loss development 
factor or developed losses; 
‘‘(iii) to develop or disseminate a standard 
medical malpractice insurance policy form (in-
cluding a standard addendum to a medical mal-
practice insurance policy form and standard 
terminology in such a policy form) if such 
agreement or joint conduct does not include an 
agreement to adhere to such standard form, or 
to require adherence to such standard form, ex-
cept that the fact that 2 or more persons en-
gaged in the business of medical malpractice in-
surance use such standard form—
‘‘(I) shall not be sufficient in itself to 
support a finding that an agreement to ad-
here, or to require adherence, to such 
standard form exists; and 
‘‘(II) may be used only for the pur-
pose of supplementing or explaining direct 
evidence of the existence of an agreement 
to adhere, or to require adherence, to such 
standard form; 
‘‘(iv) to develop or disseminate, for use in 
providing medical malpractice insurance in a 
State, a manual that is filed, before dissemina-
tion, with the State entity that regulates the 
business of medical malpractice insurance under 
State law, if such manual includes only—
‘‘(I) information and conduct de-
scribed in clauses (i), (ii), and (iii), includ-
ing relativity factors; 
‘‘(II) during the transition period, a 
trend factor or information to which a 
trend factor has been applied, to the extent 
permitted under subparagraph (C); and
‘‘(III) explanations and instructions 
for using the manual (or any of the infor-
mation contained in the manual), if such 
agreement or joint conduct does not in-
clude an agreement among competitors to 
adhere, or to require adherence, to any of 
such explanations or instructions; 
‘‘(v) to provide medical malpractice insur-
ance pursuant to a public necessity market 
mechanism; or 
‘‘(vi) to administer a public necessity mar-
ket mechanism in a State, pursuant to the au-
thorization of and under the supervision of such 
State, if all persons who provide medical mal-
practice insurance in such State pursuant to 
such mechanism, and all persons seeking to ob-
tain medical malpractice insurance through 
such mechanism, have a reasonable opportunity 
to appeal determinations affecting them to a 
governmental entity; 
to the extent that such conduct is regulated by State 
law. 
‘‘(C) During the transition period, the antitrust 
laws shall not be applicable to conduct that consists 
of making an agreement or engaging in joint con-
duct to determine or disseminate a trend factor, to 
the extent that such conduct is regulated by State 
law. 
‘‘(2) Subsequent to the transition period, the 
independent purchase of a trend factor by a person 
engaged in the business of medical malpractice in-
surance from a person not engaged in providing 
such insurance (and not affiliated with a person en-
gaged in providing such insurance) shall be pre-
sumed not to violate the antitrust laws. 
‘‘(3) The Federal Trade Commission Act shall 
be applicable to the business of medical malpractice 
insurance to the extent that such business is not 
regulated by State law, except that, with respect to 
enforcement of the antitrust laws, section 5 of such 
Act shall be applicable to the business of medical 
malpractice insurance to the same extent as the 
other antitrust laws.’’, and 
(2) by adding at the end the following: 
‘‘(c) For purposes of subsection (b)—
‘‘(1) the term ‘antitrust laws’ has the meaning 
given it in subsection (a) of the first section of the 
Clayton Act (15 U.S.C. 12), except that such term 
includes section 5 of the Federal Trade Commission 
Act (15 U.S.C. 45) as such section 5 applies to con-
duct that constitutes a violation of the Sherman Act 
or the Clayton Act; 
‘‘(2) the term ‘developed losses’ means aggre-
gate paid losses and aggregate reserves held for re-
ceived claims, as adjusted by a loss development fac-
tor; 
‘‘(3) the term ‘historical data’ means informa-
tion respecting—
‘‘(A) losses paid by, claims received by, re-
serves for such claims set aside by, or units of 
exposure to loss in medical malpractice insur-
ance policies sold by any person engaged in the 
business of medical malpractice insurance; or 
‘‘(B) medical malpractice insurance pre-
miums received by any person engaged in the 
business of medical malpractice insurance, if 
such information is not disseminated in a form 
from which information respecting premiums 
received by any separately identifiable person 
engaged in the business of medical malpractice 
insurance may be derived; 
‘‘(4) the term ‘medical malpractice insurance 
policy’ means a contract under which medical mal-
practice insurance is sold to an insured;
‘‘(5) the term ‘loss’ means an amount paid or 
to be paid by a person engaged in the business of 
medical malpractice insurance to (or for the benefit 
of) a claimant to satisfy a claim on a medical mal-
practice insurance policy, and includes any attorney, 
investigatory, or litigation expenses that are sepa-
rately incurred, identified, and allocated by such per-
son with respect to that particular claim; 
‘‘(6) the term ‘loss development factor’ means 
an adjustment to be made to the aggregate of losses 
incurred during a prior period of time that have 
been paid or for which claims have been received and 
reserves are being held, in order to estimate the ag-
gregate of the losses incurred during such period 
that will ultimately be paid; 
‘‘(7) the term ‘medical malpractice insurance’ 
means insurance against loss caused by the action or 
inaction of any health care provider; 
‘‘(8) the term ‘public necessity market mecha-
nism’ means a plan established by State law or by 
the State entity that regulates the business of med-
ical malpractice insurance under State law—
‘‘(A) for providing a type of medical mal-
practice insurance in a State;
‘‘(B) in which the persons providing such 
type of medical malpractice insurance pursuant 
to such mechanism represent a substantial 
number of the persons engaged in the business 
of providing such type of insurance in such 
State and are either required by State law, or 
formally requested or ordered by such State en-
tity, to participate; 
‘‘(C) the purpose of which is to make such 
type of insurance available to persons who 
would not otherwise be able to obtain such type 
of insurance at affordable cost; and 
‘‘(D) in which the rate for such type of in-
surance is subject to the approval or dis-
approval of such State; 
‘‘(9) the term ‘relativity factor’ means a ratio 
comparing one classification of historical data to an-
other such classification, or comparing developed 
losses in one such classification to developed losses 
in another such classification; 
‘‘(10) the term ‘transition period’ means the 2-
year period beginning on the effective date of the In-
surance Competitive Pricing Act of 2003; and 
‘‘(11) the term ‘trend factor’ means an adjust-
ment to be made to developed losses in order to ac-
count for any change that is anticipated to affect 
losses.’’. 
SEC. 104. STUDY AND REPORT. 
(a) STUDY.—During the 5-year period beginning on 
the effective date of this title, the Attorney General shall 
conduct a study to determine the effect of this title, and 
the amendments made by this title, on the business of 
medical malpractice insurance. 
(b) REPORT.—Not later than 1 year after the expira-
tion of the 5-year period referred to in subsection (a), the 
Attorney General shall submit, to the Speaker of the 
House of Representatives and the President pro tempore 
of the Senate, a report summarizing the results of the 
study required by subsection (a). 
SEC. 105. EFFECTIVE DATE. 
This title shall take effect 1 year after the date of 
the enactment of this Act. 
TITLE 
II—ADDRESSING 
CUR-
RENT ISSUES FOR HEALTH 
CARE PROVIDERS 
SEC. 201. PROMPT PAYMENT OF CLAIMS. 
(a) GROUP HEALTH PLANS.—
(1) PUBLIC
HEALTH
SERVICE
ACT
AMEND-
MENTS.—(A) Subpart 2 of part A of title XXVII of
the Public Health Service Act is amended by adding 
at the end the following new section: 
‘‘SEC. 2707. PROMPT PAYMENT OF CLAIMS. 
‘‘(a) IN GENERAL.—A group health plan, and a 
health insurance issuer offering health insurance coverage 
in connection with a group health plan, shall provide for 
prompt payment of claims submitted for health care serv-
ices or supplies furnished to a participant, beneficiary, or 
enrollee with respect to benefits covered by the plan or 
issuer, in a manner that is no less protective than the pro-
visions referred to in subsection (b). 
‘‘(b) PROVISIONS.—The provisions referred to in this 
subsection are the provisions of section 1842(c)(2) of the 
Social Security Act (42 U.S.C. 1395u(c)(2)), as modified 
as follows: 
‘‘(1) ALTERNATIVE INTEREST RATE.—Instead 
of applying the interest rate calculated under section 
3902(a) of title 31, United States Code, the interest 
rate shall be 1 percent of the payment amount due 
plus, in the case of payments not made within 25 
days of the due date, an additional 1 percent inter-
est due for every month the payment is past due. 
‘‘(2) COVERAGE OF 100 PERCENT OF CLAIMS.—
The reference in such section 1842(c)(2) to ‘not less 
than 95 percent of all claims submitted under this
part’ shall be deemed to be a reference to ‘100 per-
cent of all claims submitted under the plan or cov-
erage involved’. 
‘‘(c) PERMITTING ADDITIONAL PENALTIES.—State 
Insurance Commissioners may establish and impose mone-
tary penalties or other penalties for failure by a group 
health plan, and a health insurance issuer offering health 
insurance coverage in connection with a group health plan, 
to comply with the provisions referred to in subsection 
(b).’’. 
(2) ERISA AMENDMENTS.—(A) Subpart B of 
part 7 of subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 is amended by 
adding at the end the following new section: 
‘‘SEC. 714. PROMPT PAYMENT OF CLAIMS. 
‘‘(a) IN GENERAL.—A group health plan, and a 
health insurance issuer offering health insurance coverage 
in connection with a group health plan, shall provide for 
prompt payment of claims submitted for health care serv-
ices or supplies furnished to a participant or beneficiary 
with respect to benefits covered by the plan or issuer, in 
a manner that is no less protective than the provisions 
referred to in subsection (b). 
‘‘(b) PROVISIONS.—The provisions referred to in this 
subsection are the provisions of section 1842(c)(2) of the
Social Security Act (42 U.S.C. 1395u(c)(2)), as modified 
as follows: 
‘‘(1) ALTERNATIVE INTEREST RATE.—Instead 
of applying the interest rate calculated under section 
3902(a) of title 31, United States Code, the interest 
rate shall be 1 percent of the payment amount due 
plus, in the case of payments not made within 25 
days of the due date, an additional 1 percent inter-
est due for every month the payment is past due. 
‘‘(2) COVERAGE OF 100 PERCENT OF CLAIMS.—
The reference in such section 1842(c)(2) to ‘not less 
than 95 percent of all claims submitted under this 
part’ shall be deemed to be a reference to ‘100 per-
cent of all claims submitted under the plan or cov-
erage involved’. 
‘‘(c) PERMITTING ADDITIONAL PENALTIES.—State 
Insurance Commissioners may establish and impose mone-
tary penalties or other penalties for failure by a group 
health plan, and a health insurance issuer offering health 
insurance coverage in connection with a group health plan, 
to comply with the provisions referred to in subsection 
(b).’’. 
(D) The table of contents in section 1 of such 
Act is amended by inserting after the item relating 
to section 713 the following new item:
‘‘Sec. 714. Prompt payment of claims.’’.
(3) 
INTERNAL
REVENUE
CODE
AMEND-
MENTS.—
(A) IN GENERAL.—Subchapter B of chap-
ter 100 of the Internal Revenue Code of 1986 
is amended—
(i) in the table of sections, by insert-
ing after the item relating to section 9812 
the following new item:
‘‘Sec. 9813. Prompt payment of claims.’’;
and
(ii) by inserting after section 9812 the 
following: 
‘‘SEC. 9813. PROMPT PAYMENT OF CLAIMS. 
‘‘A group health plan shall provide for prompt pay-
ment of claims submitted for health care services or sup-
plies furnished to a participant or beneficiary with respect 
to benefits covered by the plan, in a manner that is no 
less protective than the provisions referred to in subsection 
(b). 
‘‘(b) PROVISIONS.—The provisions referred to in this 
subsection are the provisions of section 1842(c)(2) of the 
Social Security Act (42 U.S.C. 1395u(c)(2)), as modified 
as follows: 
‘‘(1) ALTERNATIVE INTEREST RATE.—Instead 
of applying the interest rate calculated under section 
3902(a) of title 31, United States Code, the interest
rate shall be 1 percent of the payment amount due 
plus, in the case of payments not made within 25 
days of the due date, an additional 1 percent inter-
est due for every month the payment is past due. 
‘‘(2) COVERAGE OF 100 PERCENT OF CLAIMS.—
The reference in such section 1842(c)(2) to ‘not less 
than 95 percent of all claims submitted under this 
part’ shall be deemed to be a reference to ‘100 per-
cent of all claims submitted under the plan involved’. 
‘‘(c) PERMITTING ADDITIONAL PENALTIES.—State 
Insurance Commissioners may establish and impose mone-
tary penalties or other penalties for failure by a group 
health plan to comply with the provisions referred to in 
subsection (b).’’.
(b) INDIVIDUAL HEALTH INSURANCE.—(1) Part B 
of title XXVII of the Public Health Service Act is amend-
ed by inserting after section 2752 the following new sec-
tion: 
‘‘SEC. 2753. PROMPT PAYMENT OF CLAIMS. 
‘‘The provisions of section 2707 shall apply to health 
insurance coverage offered by a health insurance issuer 
in the individual market in the same manner as they apply 
to health insurance coverage offered by a health insurance 
issuer in connection with a group health plan in the small 
or large group market.’’.
(c) PROTECTION OF STATES’ RIGHTS.—Any issue re-
lating to prompt payment for health care services or sup-
plies that is not governed by any provision of law as 
amended by this section shall be governed by otherwise 
applicable State or Federal law. This section (and the pro-
visions amended by this section) does not preempt or 
supercede any law that imposes shorter time frames for 
payment, greater penalties for non-payment, and, in gen-
eral, provides greater assurances that group health plans 
and health insurance issuers provide for prompt payment 
of claims submitted for health care services or supplies 
furnished to a participant, beneficiary, or enrollee with re-
spect to benefits covered by the plan or issuer. 
(d) EFFECTIVE DATES.—
(1) 
GROUP
HEALTH
PLANS
AND
GROUP 
HEALTH INSURANCE COVERAGE.—The amendments 
made by subsection (a) apply with respect to group 
health plans for plan years beginning on or after 
January 1, 2003. 
(2) INDIVIDUAL
HEALTH
INSURANCE
COV-
ERAGE.—The amendment made by subsection (b) 
apply with respect to health insurance coverage of-
fered, sold, issued, renewed, in effect, or operated in 
the individual market on or after such date.
SEC. 202. ELIMINATING NURSE SHORTAGES. 
Title VIII of the Public Health Service Act (42 
U.S.C. 296 et seq.) is amended—
(1) in section 846(a)(3), by inserting ‘‘in a 
nursing home, in a hospice, in a home health agency, 
in a nurse-managed health center, in a public health 
department,’’ after ‘‘in a public hospital,’’; 
(2) in section 801, by adding at the end the fol-
lowing: 
‘‘(9) HEALTH
CARE
FACILITY.—The term 
‘health care facility’ means an Indian Health service 
health center, a Native Hawaiian health center, a 
hospital, a migrant health center, a community 
health center, a Federally qualified health center, a 
nurse-managed health center, a rural health clinic, a 
nursing home, a home health care agency, a hospice, 
a public health clinic, a long-term care facility, a 
skilled nursing facility, or any other public, non-
profit, or private facility designated by the Sec-
retary.’’; and 
(3) by adding at the end the following:
‘‘PART H—NATIONAL NURSE SERVICE CORPS 
SCHOLARSHIP PROGRAM 
‘‘SEC. 851. NATIONAL NURSE SERVICE CORPS SCHOLAR-
SHIP PROGRAM. 
‘‘(a) PROGRAM AUTHORIZED.—The Secretary shall 
establish a National Nurse Service Corps Scholarship pro-
gram (referred to in this section as the ‘program’) that 
provides scholarships to individuals seeking nursing edu-
cation in exchange for service by such individuals in crit-
ical nursing shortage areas or facilities. 
‘‘(b) PREFERENCE.—In awarding scholarships under 
this section, the Secretary shall give preference to appli-
cants with the greatest financial need, applicants who 
agree to serve in health care facilities experiencing nursing 
shortages in medically underserved areas, applicants cur-
rently working in a health care facility who agree to serve 
the period of obligated service at such facility, minority 
nurse applicants, and applicants with an interest in a 
practice area of nursing that has unmet needs. 
‘‘(c) REQUIREMENTS.—To be eligible to participate 
in the program, an individual must—
‘‘(1) be accepted for enrollment, or be enrolled, 
in an accredited school of nursing, on a full- or part-
time basis, to take courses leading to a collegiate or 
associate degree in nursing, or a diploma in nursing;
‘‘(2) submit an application to participate in the 
program; and 
‘‘(3) enter into an agreement with the Sec-
retary, at the time of submittal of such application, 
to—
‘‘(A) accept the conditions of the scholar-
ship and remain enrolled in a school of nursing; 
‘‘(B) maintain an acceptable level of aca-
demic standing;
‘‘(C) maintain enrollment in a course of 
study until the individual completes the course 
of study; and 
‘‘(D) serve as a nurse for a period of not 
less than 2 years in a critical nursing shortage 
area or facility, or the individual may complete 
such required period of service on a part-time 
basis subject to—
‘‘(i) an agreement entered into by the 
facility and the individual which is ap-
proved by the Secretary; and 
‘‘(ii) the individual agrees in writing 
that the period of obligated service will be 
extended so that the aggregate amount of 
less than full-time service performed will
equal the amount of service that would be 
performed through full-time service. 
‘‘(d) RULE OF CONSTRUCTION.—In selecting individ-
uals to participate in the program, the Secretary shall give 
preference to individuals serving at public or nonprofit pri-
vate facilities, unless only a private facility is present in 
the geographic area that the Secretary determines is expe-
riencing a nursing shortage. While giving priority to indi-
viduals who propose to provide service in public or non-
profit private facilities, the Secretary must not disregard 
the needs of areas that individuals seek to provide services 
in which no public or nonprofit private facility is oper-
ating, including rural areas. 
‘‘(e) APPLICATIONS.—
‘‘(1) IN GENERAL.—The application forms for 
the programs shall include—
‘‘(A) a fair summary of the rights and li-
abilities of an individual whose application is 
approved by the Secretary; and 
‘‘(B) information respecting meeting a 
service obligation and such other information as 
may be necessary for the individual to under-
stand the program. 
‘‘(2) ACCESSIBILITY.—The application form 
and all other information furnished by the Secretary
shall be written so that it may be understood by the 
average individual applying to participate in the pro-
gram. The Secretary shall make such application 
forms, and other information available to individuals 
desiring to participate in the program, on a date 
sufficiently early to ensure that such individuals 
have adequate time to carefully review and evaluate 
such forms and information. 
‘‘(3) DISTRIBUTION.—The Secretary shall dis-
tribute to junior and senior high schools, community 
colleges, universities, and schools of nursing mate-
rials providing information on the program and shall 
encourage the schools to disseminate the materials 
to students of the schools. 
‘‘(f) SCHOLARSHIP.—
‘‘(1) IN GENERAL.—A scholarship provided to a 
student for a school year under a written contract 
under the program shall consist of—
‘‘(A) payment to, or (in accordance with 
paragraph (2)) on behalf of the student of—
‘‘(i) the tuition of the student in such 
school year; and 
‘‘(ii) all other reasonable educational 
expenses and support services, including 
fees, books, and laboratory expenses in-
curred by the student in such school year; 
and 
‘‘(B) payment to the student of a stipend 
of $400 per month (adjusted in accordance with 
paragraph (3)) for each month that the student 
is enrolled. 
‘‘(2) CONTRACTS.—
‘‘(A) WITH A SCHOOL OF NURSING.—The 
Secretary may contract with a school of nurs-
ing, in which a participant in the program is 
enrolled, for the payment to the school of nurs-
ing of the amounts of tuition and other reason-
able educational expenses described in para-
graph (1)(A). 
‘‘(B) WITH
AN
INDIVIDUAL.—The Sec-
retary shall prepare a written contract for the 
program that shall be provided to any indi-
vidual who is enrolled or accepted for enroll-
ment at a school of nursing and who desires to 
participate in the program at the time that an 
application is provided to such individual. The 
contract described in this paragraph shall con-
tain a provision that any financial obligation of 
the United States arising out of a contract en-
tered into under this section and any obligation
of the individual which is conditioned thereon, 
is contingent upon funds being appropriated for 
scholarships under this section. 
‘‘(3) MONTHLY STIPEND.—The amount of the 
monthly stipend for each month that a student is 
enrolled, specified in paragraph (1)(B) and as pre-
viously adjusted (if at all) in accordance with this 
paragraph, shall be increased by the Secretary as 
the Secretary determines to be reasonable. 
‘‘(g) BREACH OF AGREEMENT.—In the case of an in-
dividual who enters into an agreement under this section 
to provide service as a nurse in consideration for receiving 
a scholarship, such individual is liable to the Federal Gov-
ernment in accordance with sections 338E and 338F as 
amended in the future. If the individual begins providing 
less than full-time service but fails to begin or complete 
the period of obligated service, the methods stated in sec-
tion 338E(c) for determining the damages for breach of 
the individual’s written contract will be used after con-
verting periods of obligated service or of service performed 
into their full-time equivalence. 
‘‘(h) FUND REGARDING USE OF AMOUNTS RECOV-
ERED FOR CONTRACT BREACH.—There is established in 
the Treasury of the United States a fund to be known
as the National Nurse Service Corps Replacement Fund. 
Such fund shall be governed under section 338F. 
‘‘(i) SERVICE INFORMATION.—The Secretary shall 
provide to an individual who has participated in the pro-
gram and is nearing the conclusion of his or her service 
obligation, information regarding other opportunities for 
nursing in critical nursing shortage areas or facilities. 
‘‘(j) REPORT.—Not later than 18 months after the 
first loan cycle, and annually thereafter, the Secretary 
shall prepare and submit to Congress a report describing 
the program, including statements regarding—
‘‘(1) the number of enrollees, scholarships, and 
grant recipients by year of study; 
‘‘(2) the number of graduates; 
‘‘(3) the amount of scholarship payments made 
for each of tuition, stipends, and other expenses; 
‘‘(4) which educational institution the scholar 
attended; 
‘‘(5) the number and placement location of the 
scholars; 
‘‘(6) the default rate and actions required; 
‘‘(7) the amount of outstanding default funds; 
‘‘(8) to the extent that it can be determined, 
the reason for the default;
‘‘(9) the demographics of the individuals par-
ticipating in the scholarship program; and 
‘‘(10) recommendations for future modifications 
of the scholarship program. 
‘‘(k) DEFINITIONS.—In this section: 
‘‘(1) COMMUNITY HEALTH CENTER.—The term 
‘community health center’ has the meaning given 
such term in section 330(a). 
‘‘(2) CRITICAL NURSING SHORTAGE AREA OR 
FACILITY.—
‘‘(A) IN
GENERAL.—The term ‘critical 
nursing shortage area or facility’ means—
‘‘(i) an urban or rural area that the 
Secretary determines is experiencing a 
nursing shortage; 
‘‘(ii) a population that the Secretary 
determines has such a shortage; or 
‘‘(iii) a health care facility or other 
public, nonprofit, or private facility that 
the Secretary determines has a shortage. 
‘‘(B) FACTORS TO CONSIDER.—In making 
a determination regarding a critical nursing 
shortage area or facility, the Secretary shall use 
the criteria in section 846 for not more than 12 
months, and after such period—