the expenditures from the National Health Care Trust 
Fund for such services. 
SEC. 104. ELIGIBILITY FOR BENEFITS. 
(a) IN GENERAL.—Subject to section 701, every indi-
vidual shall be eligible for benefits under this Act through-
out any benefit year if the individual— 
(1) has received (or, in the case of income from 
self-employment, has accrued)— 
(A) not less than $2,000 in wages during 
the first four of the last six calendar quarters 
preceding the beginning of the benefit year; or 
(B) not less than $1,500 in wages in each 
of six calendar quarters during the first twelve 
of the last fourteen calendar quarters preceding 
the beginning of the benefit year (not counting 
as one of such fourteen calendar quarters any 
quarter in any part of which the individual was 
under a total disability which continued for six 
months or more); 
(2) is entitled, for the first month in the benefit 
year, to a benefit under title II of the Social Secu-
rity Act or to an annuity under subchapter III (re-
lating to civil service retirement) of chapter 83 of 
title 5, United States Code; or 
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(3) the individual is on the first day of the ben-
efit year a dependent of an individual who is eligible 
under paragraph (1) or paragraph (2). 
(b) ADDITIONAL ELIGIBILITY.—Subject to section 
701, every individual, not eligible therefor under sub-
section (a), shall be eligible for benefits under this Act 
during the remainder of a benefit year, beginning with— 
(1) the first day of any calendar quarter in 
such benefit year, if the individual has received (or, 
in the case of income from self-employment, has ac-
crued) not less than $150 in wages during the first 
four of the last six calendar quarters preceding the 
beginning of such calendar quarter; 
(2) the first day of the first month in such ben-
efit year for which the individual is entitled to a ben-
efit or annuity referred to in subsection (a)(2); or 
(3) the first day in such benefit year on which 
the is or becomes a dependent of an individual who 
is eligible for benefits under subsection (a) (1) or (2) 
under paragraph (1) or (2). 
(c) COVERAGE UNDER WORKERS’ COMPENSATION.— 
(1) NO
COVERAGE.—No individual shall be 
deemed eligible for any personal health services as a 
benefit under this Act which are required by reason 
of any injury, disease, or disability on account of 
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which any medical, dental, home-nursing, hospital, 
or auxiliary service is being received, or upon appli-
cation therefor would be received, under a work-
men’s compensation law of the United States or of 
any State, unless equitable reimbursements to the 
National Health Care Trust Fund for the provision 
of such services as benefits have been made or as-
sured under section 105. 
(2) SUBROGATION.—In any case in which an 
individual receives any personal health service as a 
benefit under this Act with respect to any such in-
jury, disease, or disability, for which no reimburse-
ment to the National Health Care Trust Fund has 
been made or assured, the United States shall to the 
extent permitted by State law be subrogated to all 
rights of such individual, or of the person who fur-
nished such service, to be paid or reimbursed, pursu-
ant to such workmen’s compensation law, for the 
cost of furnishing such service. 
SEC. 105. PROVISION OF BENEFITS FOR NONINSURED 
NEEDY AND OTHER INDIVIDUALS. 
(a) IN GENERAL.—Subject to section 701, any or all 
benefits provided under this Act to individuals eligible for 
such benefits may be furnished to individuals (including 
the needy) not otherwise eligible therefor, for any period 
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for which equitable reimbursements to the National 
Health Care Trust Fund on behalf of such needy or other 
individuals have been made, or for which reasonable assur-
ance of such reimbursements have been given, by public 
agencies of the United States, the several States, or any 
of them or of their political subdivisions, such reimburse-
ments to be in accordance with agreements and working 
arrangements negotiated with such public agencies. Serv-
ices furnished to such needy or other individuals as bene-
fits shall be of the same quality, be furnished by the same 
methods, and be paid for through the same arrangements, 
as services furnished to individuals eligible for benefits 
under this Act. 
(b) AVAILABILITY
OF FEDERAL FUNDS.—Federal 
grants to States under title XIX, and part A of title IV, 
of the Social Security Act, and Federal grants to States 
for aid or assistance under other provisions of such Act, 
shall be available to the States for provision of personal- 
health services for noninsured needy individuals in accord-
ance with the provisions of subsection (a). 
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TITLE 
II—PARTICIPATION 
OF 
PHYSICIANS, 
DENTISTS, 
NURSES, 
HOSPITALS, 
AND 
OTHERS 
SEC. 201. PHYSICIANS AND DENTISTS; SPECIALISTS. 
(a) QUALIFICATIONS.—Any individual who is a physi-
cian, dentist, or podiatrist legally authorized in a State 
to render any services included as general medical, dental, 
or podiatric services shall be deemed qualified to render 
such services in that State as benefits under this Act. 
(b) SPECIALISTS.— 
(1) IN GENERAL.—Any such individual who is 
found to possess skill and experience of a degree and 
kind sufficient to meet standards established for a 
class of specialist services shall be deemed qualified 
to receive compensation for specialist services of 
such class as benefits under this Act. 
(2) STANDARDS.—The Board, after consulta-
tion with the Advisory Council, shall establish stand-
ards as to the special skills and experience required 
to qualify an individual to render each such class of 
specialist services as benefits under this Act, and to 
receive compensation for such specialist services. In 
establishing such standards and in determining 
whether individuals qualify thereunder, standards 
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and certifications developed by professional agencies 
shall be utilized as far as is consistent with the pur-
poses of this Act, and regard shall be had for the 
varying needs and the available resources in profes-
sional personnel of the States and of local health- 
service areas. 
SEC. 202. NURSES. 
Any individual shall be deemed qualified to render 
home-nursing services in a State as benefits under this 
title if such individual is— 
(1) a professional nurse registered in such 
State; or 
(2) a practical nurse— 
(A) who is qualified as such under State 
standards or requirements, or, in the absence of 
State standards or requirements, is found to be 
qualified under standards established by the 
Board after consultation with the Advisory 
Council and with nursing agencies; and 
(B) who furnishes nursing care under the 
direction or supervision of the State health 
agency, the health agency of a political subdivi-
sion of the State, or an organization supplying 
and supervising the services of registered pro-
fessional nurses in the State. 
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shall be deemed qualified to furnish such class of auxiliary 
services in that State as benefits under this Act. 
SEC. 205. AGREEMENTS WITH INDIVIDUAL PRACTITIONERS, 
HOSPITALS, AND OTHERS. 
Any individual (or, in the case of hospital or auxiliary 
services, any person) qualified under this title to furnish 
any class or classes of personal health services as benefits 
may enter into an agreement with the State agency which 
in accordance with title IV has assumed responsibility for 
the administration in the State of benefits under this Act 
(in this Act referred to as the ‘‘State agency’’), to furnish 
such class or classes of services as benefits to individuals 
eligible therefor under this Act. 
SEC. 206. AGREEMENTS WITH VOLUNTARY HEALTH INSUR-
ANCE AND OTHER ORGANIZATIONS. 
(a) IN GENERAL.—In the provision of personal health 
services, it shall be the policy to utilize individuals or orga-
nizations qualified under this title to render such services, 
including— 
(1) any organized group of individuals; 
(2) any partnership, association, or consumer 
cooperative; 
(3) any hospital or any hospital and its staff; 
or 
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(4) any organization operating a voluntary 
health-service insurance plan or other voluntary 
health-service plan. 
(b) AUTHORIZATION.—The State agency is author-
ized to enter into an agreement with any organization re-
ferred to in subsection (a) for the provision of personal 
health services under this Act. Any such organization, 
whether or not it enters into an agreement with the State 
agency on its own behalf, shall be permitted to act as 
agent for individuals or other persons in negotiating or 
in carrying out agreements with the State agency for ren-
dering personal health services under this Act. 
(c) QUALIFICATION OF PROVIDERS.—Any agreement 
under this section shall provide that each class of personal 
health services will be furnished only by individuals (or, 
in the case of hospital or auxiliary benefits, by persons, 
as defined in section 901(1)) who are qualified under this 
title to render such class of services and each of whom 
has agreed or has authorized an agreement to be made 
on the individual’s behalf with the State agency that the 
individual will furnish such services in accordance with 
this Act and with regulations prescribed thereunder. Each 
such individual or person shall be responsible, both to the 
State agency and (in accordance with applicable State 
law) to individuals eligible for personal health services as 
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benefits, for carrying out such agreement made by the in-
dividual or person or on behalf of the individual or person. 
SEC. 207. PROVISIONS COMMON TO ALL AGREEMENTS. 
(a) IN GENERAL.—Each agreement made under this 
title shall— 
(1) specify the class or classes of services to be 
furnished or provided pursuant to its terms; 
(2) contain an undertaking to comply with this 
Act and with regulations prescribed thereunder; 
(3) be made upon terms and conditions con-
sistent with the efficient and economical administra-
tion of this Act; and 
(4) continue in force for such period and be ter-
minable upon such notice as may be agreed upon. 
(b) TERM.—No agreement under section 206, and no 
designation of an agent, shall for more than one year pre-
clude any individual or person qualified to furnish per-
sonal health services from exercising such rights as the 
individual or person would otherwise have under this 
title— 
(1) to negotiate and enter into an agreement di-
rectly with the State agency; 
(2) to designate another agent for such negotia-
tion; or 
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(3) to participate in another agreement under 
section 206. 
(c) NON EXCLUSIVE AGREEMENTS.—No agreement 
made under this title shall confer upon any individual or 
other person, or any group or other organization, the right 
of furnishing or providing personal health services as bene-
fits, to the exclusion in whole or in part of other individ-
uals, persons, groups, or organizations qualified to furnish 
or provide such services. 
(d) DISQUALIFICATION.— 
(1) IN GENERAL.—If the State agency after in-
vestigation finds that an individual or other person 
under agreement to furnish or provide personal 
health services as benefits is no longer qualified to 
furnish or provide such services, or has committed a 
substantial breach of the agreement, it shall notify 
such person of its findings, together with the rea-
sons therefor, and in the absence of a request for a 
hearing by such person under title VI, or in the 
event of a final decision sustaining its findings after 
any hearing and further review provided under title 
VI, may terminate the agreement and withdraw the 
person’s name from the list published pursuant to 
title III. 
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(2) LIMITATION
ON
SUBSEQUENT
AGREE-
MENTS.—After an agreement has been so termi-
nated, no new agreement shall be entered into with 
such person under this Act unless and until such 
person gives reasonable assurances to the State 
agency of the person’s ability and willingness to dis-
charge all obligations and responsibilities under a 
new agreement satisfactorily in accordance with its 
provisions. 
SEC. 208. METHODS OF PAYMENTS FOR SERVICES. 
(a) PROFESSIONAL SERVICES.—Agreements for the 
furnishing of medical, dental, or podiatric services (other 
than specialist services) as benefits under this Act shall 
provide for payment— 
(1) on the basis of fees for services rendered as 
benefits, according to a fee schedule; 
(2) on a per capita basis, the amount being ac-
cording to the number of individuals eligible for ben-
efits who are on the practitioner’s list; 
(3) on a salary basis, whole time or part time; 
or 
(4) on such combinations or modifications of 
these bases, including separate provision for travel 
and related expenses, as may be approved by the 
State agency; 
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according in each health-service area as the majority of 
the medical practitioners or of the dental practitioners, re-
spectively, under agreement to furnish such services shall 
elect. Provision shall be made for another method or meth-
ods of payment (from among the methods listed in this 
subsection) to those medical practitioners or to those den-
tal practitioners who do not elect the method of such ma-
jority, when it is found that such alternative method of 
making payments contributes to carrying out the provi-
sions of section 305 or otherwise promotes the efficient 
and economical provision of medical or dental services in 
the area. 
(b) SPECIALIST SERVICES.—Agreements for the fur-
nishing of specialist services as benefits under this Act 
may provide for payments on the basis of fee for service, 
per case, per session, per capita, on salary (whole time 
or part time), or other basis, or combination thereof. 
(c) TREATMENT OF GROUPS.—Any of the methods 
of making payments from among the methods listed in 
subsection (a) or subsection (b) may be used in making 
payments to groups or practitioners or organizations or 
other agencies which undertake to provide specialist serv-
ices as well as general medical or general dental services. 
(d) HOSPITAL SERVICES.— 
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(1) USE OF REASONABLE COSTS.—Agreements 
for the furnishing of hospital services as benefits 
under this Act shall provide for payment on the 
basis of the reasonable costs of hospitalization fur-
nished as benefits. 
(2) MAXIMUM RATES.—The Board, after con-
sultation with the Advisory Council and with rep-
resentatives of interested hospital organizations, may 
by regulation prescribe maximum rates for hos-
pitalization furnished as benefits under this Act, and 
such maximum rates may be varied according to 
classes of localities or types of service. 
(3) PAYMENT
BASIS.—Payments to hospitals 
shall be based on the least expensive multiple-bed ac-
commodations available in the hospital unless the 
patient’s condition makes the use of private accom-
modations essential for the patient’s proper medical 
care. 
(4) ADDITIONAL
CHARGES.—An agreement 
made for furnishing such services shall not affect the 
right of the hospital or other person with whom the 
agreement is made to require payments from pa-
tients with respect to the additional cost of more ex-
pensive facilities occupied at the request of the pa-
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tient, or with respect to services not included as ben-
efits under this Act. 
(e) HOME-NURSING
SERVICES
AND
AUXILIARY 
SERVICES.—Agreements for the furnishing of home-nurs-
ing services or auxiliary services as benefits under this Act 
shall provide for payment in accordance with such meth-
ods as the State agency may approve from among those 
set forth in regulations prescribed pursuant to this Act. 
(f) PRO-RATING CERTAIN PER CAPITA PAYMENTS.— 
In any health-service area where agreements for the fur-
nishing of general medical or general dental services pro-
vide for payment only on a per capita basis, the per capita 
payments with respect to those individuals residing in the 
area who have failed to select a practitioner or other per-
son to furnish such services to them shall be made on a 
pro rata basis among the practitioners and other persons 
under agreement to furnish such services in the area. 
SEC. 209. AMOUNT OF PAYMENTS FOR SERVICES. 
(a) CONSIDERATION OF LOCAL CONDITIONS.— 
(1) IN GENERAL.—Rates or amounts of pay-
ment for particular services or classes of services 
furnished as benefits under this Act shall be adapted 
to take account of relevant regional, State, or local 
conditions and practices. 
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(2) PROFESSIONAL SERVICES.—In arriving at 
the payments to be made for services of general 
medical and dental practitioners, specialists, profes-
sional and practical nurses, or other practitioners, 
regard shall be had for the annual income or its 
equivalent which the payments will provide, and con-
sideration shall be given to degree of specialization, 
and to the skill, experience, and responsibility in-
volved in rendering the services. 
(3) ADEQUACY.—Such payments, together with 
the other terms and conditions of the agreements 
made under this title, shall be adequate to provide 
professional and financial incentives to practitioners 
to advance in their professions and to practice in lo-
calities where their services are most needed, to en-
courage high standards in the quality of services fur-
nished, to give assistance in their use of opportuni-
ties for postgraduate study, and to allow for ade-
quate vacation. 
(b) EQUIVALENCE IN CHOICE OF PAYMENT METH-
ODS.—The rates and amounts of payments fixed under 
the different methods of payments specified in subsections 
(a), (b), (c), and (e) of section 208, and the methods of 
making payments, shall assure reasonably equivalent 
awards for practitioners selecting different methods of 
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payment, in consideration of the value of the services they 
render. 
(c) LIMITATIONS
ON MAXIMUM NUMBER
OF PA-
TIENTS.—Maximum limits upon the number of eligible in-
dividuals with respect to whom any person may undertake 
to render services in any local health-service area may be 
fixed by the local administrative committee or local admin-
istrative officer of that health-service area only on the 
basis of a recommendation of the professional committee 
in that area that such limitation is necessary to maintain 
high standards in the quality of medical, dental, or other 
services furnished as benefits. Any such limits shall take 
account of professional needs and practices and shall pro-
vide suitable exceptions for emergency and temporary situ-
ations. 
(d) TREATMENT OF GROUPS.—The making of an 
agreement under section 206 with a group or other organi-
zation shall not operate to increase the payments to be 
made pursuant to any such agreement over the amounts 
which, in the absence of such group or organization would 
be payable for the same services pursuant to agreements 
made under section 205 directly with the person or per-
sons who furnish the services. 
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SEC. 210. PROFESSIONAL RIGHTS AND RESPONSIBILITIES. 
(a) TERMINATION
ARRANGEMENTS.—Any person 
who enters into an agreement under this title may termi-
nate such agreement after reasonable notice and after 
suitable arrangements are made to fulfill professional obli-
gations to eligible individuals. 
(b) FREEDOM OF PRACTICE.—Every physician, den-
tist, or nurse agreeing to render services as benefits under 
this Act shall be free to practice such professional’s profes-
sion in the locality of the professional’s own choosing, con-
sistent with the requirements of the laws of the States. 
(c) FREEDOM IN ACCEPTANCE OF PATIENTS.—Every 
physician, dentist, nurse, hospital, or other person enter-
ing into an agreement under this title shall be free to the 
extent consistent with applicable State law and customary 
professional ethics to accept or reject as a patient any in-
dividual requesting the professional’s services. 
(d) FREEDOM FROM SUPERVISION OR CONTROL.— 
No supervision or control over the details of administra-
tion or operation, or over the selection, tenure, or com-
pensation of personnel, shall be exercised under the au-
thority of this Act over any hospital which has agreed to 
furnish personal health services as benefits. 
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TITLE III—LOCAL 
ADMINISTRATION 
SEC. 301. DECENTRALIZATION OF ADMINISTRATION. 
(a) IN GENERAL.—In order that personal health- 
service benefits may be made available promptly and in 
a manner best adapted to local practices, conditions, and 
needs, responsibility for administration of the benefits pro-
vided under this Act in the several local health-service 
areas shall be decentralized as fully as practicable to local 
administrative committees or local administrative officers, 
acting with the advice and assistance, as provided in this 
title, of local professional committees and, in the case of 
local administrative officers, the advice and assistance of 
local area committees. 
(b) DESIGNATION OF HEALTH-SERVICE AREAS.— 
The health-service areas of a State shall be those so des-
ignated in the State plan of operations. 
SEC. 302. LOCAL ADMINISTRATIVE COMMITTEE OR OFFI-
CER. 
(a) IN GENERAL.—The local administrative agency 
for each local health-service area may, as determined by 
the State, be either— 
(1) a local administrative committee established 
in accordance with section 303, which shall act 
through a local executive officer; or 
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(2) a local administrative officer, who shall act 
with the advice and assistance of a local advisory 
committee established in accordance with section 
303. 
(b) ARRANGEMENTS FOR SERVICES.—The local ad-
ministrative committee or officer, with the advice and as-
sistance of such local professional committees as may from 
time to time be established, shall arrange for the fur-
nishing of personal health-service benefits to eligible indi-
viduals in the area and to that end shall— 
(1) publish, and make readily available to eligi-
ble individuals in the area, lists of the names of all 
persons who have agreed to furnish personal health 
services in the area, together with the class or class-
es of services which each has undertaken to furnish; 
(2) disseminate pertinent information con-
cerning the rights and privileges under this Act of 
eligible individuals and of persons qualified to fur-
nish personal health services as benefits; 
(3) maintain effective relationships with physi-
cians, dentists, nurses, hospitals, and other persons 
who have entered into agreements to furnish per-
sonal health services in the area, in order to facili-
tate the furnishing of such services in accordance 
with such agreements, to assure full and prompt 
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payment to such persons for services so furnished, 
and to enlist their full cooperation in the administra-
tion of benefits under this Act in the area; 
(4) receive and, to the extent possible in the 
local area, adjust any complaints which may be 
made concerning the administration of benefits 
under this Act in the area; 
(5) perform such other duties (including the 
making of payments to persons furnishing personal 
health services in the area) as may be assigned by 
the State agency; and 
(6) take or initiate such other administrative 
action as the committee or officer finds will best 
carry out, within the area, the provisions of this Act, 
and best effectuate its purposes. 
SEC. 303. LOCAL AREA COMMITTEES. 
(a) ESTABLISHMENT.— 
(1) IN GENERAL.—A local area committee shall 
be established in each health-service area. 
(2) FUNCTIONS.—If designated by the State as 
a local administrative committee, the local area com-
mittee shall perform the functions specified in sec-
tion 302 and shall formulate policies for the admin-
istration of benefits under this Act in the area. If 
designated as an advisory committee, it shall advise 
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and assist in the performance of such functions and 
the formulation of such policies. The committee, 
whether administrative or advisory, shall— 
(A) participate in the solution of problems 
affecting the administration of such benefits; 
(B) promote impartiality and freedom from 
political influence in such administration; 
(C) perform related functions to the end 
that administration in the area may be respon-
sive to the wishes and needs of persons fur-
nishing and receiving benefits in the area, be 
adapted to local practices and resources; and 
(D) provide adequate and high quality per-
sonal health services to all eligible individuals. 
(b) COMPOSITION.—Each local area committee shall 
consist of not less than 8 nor more than 16 members. The 
members shall be so selected that— 
(1) a majority of the committee shall be rep-
resentative of the interests of individuals in the area 
who are eligible for benefits; and 
(2) the remaining members shall be chosen 
from the several professions, hospitals, and other or-
ganizations in the area by whom such benefits will 
be provided. 
(c) MEETINGS.— 
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(1) IN
GENERAL.—The local area committee 
shall meet— 
(A) as often as may be necessary, and 
whenever one-third or more of the members re-
quest a meeting; and 
(B) in the case of a local administrative 
committee, not less frequently than once each 
month, and, in the case of a local advisory com-
mittee, not less frequently than once in each 
quarter of the year. 
(2) ANNUAL PUBLIC MEETING.—At least one 
meeting of the committee each year shall be open to 
the public, notice of which shall be published and at 
which any person in the area may participate. 
(3) ANNUAL STATEWIDE MEETINGS.— 
(A) ADMINISTRATIVE OFFICERS.—At least 
once each year there shall be a statewide meet-
ing of local administrative officers and rep-
resentatives of local administrative committees. 
(B) LOCAL
ADVISORY
COMMITTEES.—At 
least once in each year there shall be a state-
wide meeting of representatives of all local advi-
sory committees in the State, and any reports 
or recommendations made at such meeting shall 
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on the request of such meeting be transmitted 
through the State agency to the Board. 
SEC. 304. LOCAL PROFESSIONAL COMMITTEES. 
(a) ESTABLISHMENT.—Local committees representa-
tive of the persons furnishing personal health services in 
the area shall be established in each health-service area. 
(b) FUNCTIONS.—Each local professional committee 
shall assist the local administrative committee and its ex-
ecutive officer, or the local administrative officer and the 
local advisory committee, as the case may be, in— 
(1) the preservation of the customary freedom 
and responsibility (under applicable State law) of 
practitioners in the exercise of professional judgment 
as to the care of patients; and 
(2) in the solution of technical problems con-
cerning the participation of professional personnel, 
hospitals, and other qualified persons in the provi-
sion of personal health services as benefits, and to 
advise the local administrative or executive officer 
and the local area committee regarding matters of 
professional practice or conduct arising in connec-
tion with the performance of agreements for the pro-
vision of such services. 
(c) MEETINGS.—Such local committees shall meet on 
call of the local administrative committee or officer, as the 
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case may be, or upon their own motion. The members of 
any such local professional committee may be professional 
members of the local area committee or other professional 
persons or both. 
SEC. 305. METHODS OF ADMINISTRATION. 
(a) IN GENERAL.—In each health-service area the 
methods of administration shall be such as to— 
(1) insure the prompt and efficient care of indi-
viduals entitled to personal health services as bene-
fits; 
(2) promote personal relationships between phy-
sician and patients; 
(3) promote coordination among and between 
general practitioners, specialists, those who furnish 
auxiliary services, nurses, and hospitals, in the fur-
nishing of services under this Act, between them and 
public-health centers and agencies, and educational 
service, research, and other related agencies or insti-
tutions, and between preventive, diagnostic, and cu-
rative services, public and private; 
(4) aid in the prevention of disease, disability, 
and premature death; 
(5) encourage improvement in the number and 
distribution of professional personnel and facilities; 
and 
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(6) insure the provision of adequate service with 
the greatest economy consistent with high standards 
of quality. 
(b) APPOINTMENT.—Local administrative officers 
shall be appointed by the State agency or the head thereof, 
in accordance with the merit system provided for in the 
State plan of operations. Local administrative committees 
shall be appointed by such agency or the head thereof, 
from individuals residing in the respective health-service 
areas, and the executive officers of such committees shall 
be appointed by the committees in accordance with the 
merit system. The local health-service areas shall be those 
so designated in such plan. Members of local advisory 
committees and of local professional committees shall be 
selected in accordance with methods set forth in such plan. 
(c) COMPLIANCE WITH PROVISIONS.—In exercising 
their functions and discharging their responsibilities under 
this Act, local administrative officers and communities, 
local advisory committees, and local professional commit-
tees shall observe the provisions of this Act, and of regula-
tions prescribed thereunder, and of any regulations, stand-
ards, and procedures prescribed by the State agency. 
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TITLE IV—STATE 
ADMINISTRATION 
SEC. 401. DECLARATION OF POLICY. 
It is the intent of Congress that the benefits provided 
under this Act be administered wherever possible by the 
several States, in accordance with plans of operations sub-
mitted and approved as provided in this title, and in each 
State insofar as feasible by the same State agency which 
administers, or supervises the administration of, the 
State’s general public health and maternal and child 
health programs. 
SEC. 402. STATE PLAN OF OPERATIONS. 
(a) IN GENERAL.—Any State desiring to assume re-
sponsibility for the administration in the State of the per-
sonal health-service benefits provided under this Act to all 
individuals in the State who are eligible for such benefits, 
may do so for the period beginning October 1, 2010 (when 
benefits first become available under this Act), or for the 
period beginning October 1 of any succeeding year, if it 
has undertaken, through its legislature, to administer such 
benefits in accordance with the provisions of this Act and 
with the provisions of regulations and standards pre-
scribed thereunder, and, at least 12 months in advance, 
has submitted and had approved a State plan of oper-
ations which provides for the following: 
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(1) The plan must designate as the sole agency 
for the statewide administration of benefits under 
this Act a single State agency duly authorized under 
the law of the State to administer such benefits 
within the State in accordance with the provisions of 
this Act, the provisions of regulations and standards 
prescribed thereunder, and the provisions of the 
State plan. 
(2) The plan must provide for the designation 
of a State advisory committee which shall include 
members who are familiar with the needs for per-
sonal health services in urban and rural areas, and 
who are representative of the interests of individuals 
in the State who are eligible for benefits, such mem-
bers to constitute a majority, and members chosen 
from the several professions, hospitals, and other or-
ganizations in the State by whom such benefits will 
be provided, to advise the State agency in carrying 
out the administration of such benefits in the State. 
(3) The plan must provide for the decentralized 
administration of this Act in the State in accordance 
with title III for the designation of local health-serv-
ice areas, and for such methods of selecting the 
members of local advisory committees and of local 
professional committees as are calculated to insure 
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representation of the nature set forth in sections 
303 and 304, respectively. 
(4) The plan must provide for such methods of 
administration, including methods relating to the es-
tablishment and maintenance of personnel standards 
on a merit basis (except that the Board shall exer-
cise no authority with respect to the selection, tenure 
of office, or compensation of any individual employed 
in accordance with such methods), as are found by 
the Board to be necessary for the proper and effi-
cient administration of such benefits in the State. 
(5) The plan must provide for the making of 
surveys of the resources and needs of the State, in 
accordance with section 102(a), and sets forth a pro-
gram for the administration of such benefits in the 
State which gives reasonable assurance (A) that 
maximum use will be made of all available health 
personnel and facilities desiring to participate in the 
provision of benefits to eligible individuals, (B) that 
funds allotted to the State for the several classes of 
benefits will be allocated in such manner as to give 
reasonable assurance of the availability of services in 
all health-service areas in the State, and (C) that 
any maldistribution or other inadequacies in the 
health personnel or facilities available for such pur-
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pose, or in the quality of the services rendered, will 
be progressively improved as rapidly as may be prac-
ticable. 
(6) The plan must provide that the State agen-
cy will make such reports in such form and con-
taining such information as the Board may from 
time to time reasonably require, and give the Board, 
upon demand, access to the records upon which such 
information is based. 
(7) The plan must provide that all Federal 
funds paid to the State agency for purposes of car-
rying out this Act in the State shall be properly 
safeguarded and expended solely for the purposes for 
which paid, and must provide for the repayment by 
the State to the United States of any such funds 
lost by the State agency or diverted from the pur-
poses for which paid. 
(8) The plan must provide for cooperation, in-
cluding where necessary entering into working agree-
ments (with any appropriate transfer of funds), with 
other public agencies of the State or of its political 
subdivisions concerned with programs related to the 
purposes of this Act, and with appropriate agencies 
of other States or of the United States admin-
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istering this Act, or benefits under this Act, in other 
States. 
(b) APPROVAL.—The Board shall approve any State 
plan and any modification thereof submitted by the State 
which it finds complies with the provisions of subsection 
(a). No change in a State plan shall be required within 
one year after initial approval thereof, or within one year 
after any change thereafter required therein, by reason of 
any change in the regulations or standards prescribed pur-
suant to this Act, except with the consent of the State 
or in accordance with further action by Congress. 
(c) NOTICE OF DISAPPROVAL.—In the event of its 
disapproval of any plan or any modification therein sub-
mitted by a State pursuant to this title, the Board shall 
notify the State of such disapproval and shall, upon re-
quest of the State, afford it reasonable notice and oppor-
tunity for a hearing on such disapproval. 
(d) FALLBACK ADMINISTRATION.— 
(1) NOTICE TO GOVERNOR.—If a State has not 
prior to October 1, 2010, submitted and had ap-
proved a plan of operations, the Board shall notify 
the Governor of the State that the Board will be re-
quired to administer this Act in the State, com-
mencing October 1, 2010. 
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(2) PUBLICATION OF NOTICE.—The Board shall 
provide for the publication of such notice in at least 
two newspapers of general circulation in the State. 
(3) CONTINUED
ADMINISTRATION.—If within 
60 days after such notification to the Governor the 
State has not submitted an approvable plan, the 
Board shall continue such administration until one 
year after the submission and approval of a plan of 
operations in accordance with this section. 
(4) WAIVER.—The Board may waive the re-
quirement that a State plan must be submitted and 
approved one year prior to commencement of State 
administration if it is satisfied in a particular case 
that the substitution of a shorter preparatory period 
will not prejudice the interests of eligible individuals 
in the State. 
(e) NONCOMPLIANCE.— 
(1) NOTICE.—Whenever the Board, after rea-
sonable notice and opportunity for hearing to the 
State, finds that the State, having submitted and 
had approved a plan of operations under this title— 
(A) is not complying substantially with the 
provisions of such plan, or with the provisions 
of this Act or any regulations or standards pre-
scribed thereunder, or 
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(B) has withdrawn its plan or failed to 
change it when and as required by a change in 
this Act or in regulations prescribed thereunder, 
the Board shall notify the Governor of the State of 
such findings, together with its reasons therefor and 
a statement concerning the effect of such findings 
under this Act, and shall provide for the publication 
of such notice in at least two newspapers of general 
circulation in the State. 
(2) BOARD ASSUMPTION OF RESPONSIBILITY.— 
If within 60 days following such a notice the State 
has not taken appropriate action to bring its plan or 
its administration thereof into conformity with this 
Act and regulations and standards thereunder, the 
Board shall immediately assume responsibility for 
the administration of this Act in the State and shall 
administer the same in such State for so long there-
after as the State fails to give reasonable assurances 
of substantial compliance or fails to submit an ap-
provable plan, as the case may be. 
(f) BOARD AUTHORITY.—In any State in which the 
Board has assumed responsibility for the administration 
of benefits under this Act as provided in subsections (d) 
and (e), the Board shall have and discharge all authority 
and duties, in accordance with the provisions of this Act, 
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which it finds necessary for that purpose, and the term 
‘‘State agency’’ wherever used in title II or title III shall 
be deemed to refer to the Board. 
(g) ADDITIONAL STATE-FUNDED SERVICES.—Noth-
ing in this Act shall preclude any State or any political 
subdivision thereof, whether or not the State has assumed 
responsibility for the administration of benefits under this 
Act, from furnishing, with funds available from sources 
other than the National Health Care Trust Fund, any ad-
ditional health services to individuals who are eligible for 
benefits under this Act or any or all health services to 
individuals who are not so eligible. 
TITLE V—NATIONAL HEALTH IN-
SURANCE BOARD; NATIONAL 
ADVISORY MEDICAL POLICY 
COUNCIL; GENERAL ADMINIS-
TRATIVE PROVISIONS 
SEC. 501. NATIONAL HEALTH INSURANCE BOARD. 
(a) ESTABLISHMENT.— 
(1) IN GENERAL.—There is hereby established 
in the Department of Health and Human Services a 
National Health Insurance Board. 
(2) COMPOSITION.—The Board shall be com-
posed of 5 members, three of whom shall be ap-
pointed by the President by and with the advice and 
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consent of the Senate, and the other two of whom 
shall be the Surgeon General of the Public Health 
Service and the Administrator of Social Security. At 
least one of the appointed members shall be a doctor 
of medicine licensed to practice medicine or surgery 
in one of the States. 
(3) NO OTHER EMPLOYMENT.—During an ap-
pointment member’s term of membership on the 
Board, the member shall not shall engage in any 
other business, vocation, or employment. 
(4) COMPENSATION.—Each appointed member 
shall receive a salary at an annual rate of basic pay, 
established by the President, which is not less than 
the annual rate of basic pay for positions at level V 
of the Executive Schedule and which is not greater 
than the annual rate of basic pay for positions at 
level IV of the Executive Schedule. 
(5) TERM.—Each appointed member shall hold 
office for a term of six years, except that— 
(A) any member appointed to fill a vacancy 
occurring prior to the expiration of the term for 
which the member’s predecessor was appointed 
shall be appointed for the remainder of such 
term; and 
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(B) the terms of office of the members 
first taking office after the date of the enact-
ment of this Act shall expire, as designated by 
the President at the time of appointment, one 
at the end of two years, one at the end of four 
years, and one at the end of six years, after the 
date of the enactment of this Act. 
(6) DESIGNATION OF CHAIRMAN.—The Presi-
dent shall designate one of the appointed members 
as the Chairman of the Board. 
(b) FUNCTIONS.— 
(1) SUPERVISION.—All functions of the Board 
shall be administered by the Board under the direc-
tion and supervision of the Secretary of Health and 
Human Services. The board shall perform such 
functions as it finds necessary to carry out the pro-
visions of this Act, and shall make all regulations 
and standards specifically authorized to be made in 
this Act and such other regulations not inconsistent 
with this Act as may be necessary. 
(2) DELEGATION.—The Board may delegate to 
any of its members, officers, or employees, or with 
the approval of the Secretary to any other officer or 
employee of the Department of Health and Human 
Services, such of its powers or duties, except that of 
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making regulations, as it may consider necessary 
and proper to carry out the provisions of this Act. 
(3) CONTRACT AUTHORITY.—The Board may 
also enter into agreements for the furnishing or pro-
vision of personal health services under this Act 
without regard to the provisions of title 5, United 
States Code, pertaining to the appointment, status, 
or compensation of Federal employees, or pertaining 
to contracts for personal services, and without re-
gard to section 3709 of the Revised Statutes (41 
U.S.C. 5), and any person rendering services pursu-
ant to an agreement so made shall not by reason 
thereof be deemed to be an employee of the United 
States. 
(c) USE
OF EXECUTIVE AGENCIES.—In admin-
istering the provisions of this Act, the Board is authorized 
to utilize the services and facilities of any executive depart-
ment or other agency of the United States in accordance 
with an agreement with the head thereof. Payment for 
such services and facilities shall be made in advance or 
by way of reimbursement, as may be agreed upon with 
the head of the executive department or other agency fur-
nishing them. 
(d) PERSONNEL.— 
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(1) IN GENERAL.—Personnel of the Board shall 
be appointed by the Secretary upon recommendation 
of the Board. 
(2) DETAILING OF EMPLOYEES TO BOARD.— 
The Secretary is authorized to detail to the Board, 
upon its request, any officer or employee of the De-
partment of Health and Human Services, and in the 
Secretary’s discretion to reimburse, from funds 
available for the administration of this Act, the ap-
propriation from which the salary or, in the case of 
commissioned officers of the Public Health Service, 
the pay and allowances of such officer or employee 
are paid. 
(e) DETAILING OF BOARD EMPLOYEES.—Upon the 
request of any State agency administering a State plan 
of operations pursuant to title IV, or upon the request 
of any State desiring to prepare and submit a plan of op-
erations, any officer or employee of the Board (including 
any officer or employee detailed to the Board pursuant 
to subsection (d)) may be detailed by the Board to assist 
in the administration, or in the preparation, of such State 
plan of operations. The funds available for the Federal 
administration of this Act may, in the discretion of the 
Secretary, be reimbursed from funds allotted to the State 
pursuant to section 802 and available for State adminis-
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tration, for the salary (or for the pay and allowances) of 
any officer or employee so detailed. 
SEC. 502. ADVISORY COUNCIL. 
(a) ESTABLISHMENT.— 
(1) IN GENERAL.—There is hereby established 
a National Advisory Medical Policy Council. 
(2) COMPOSITION.—The Council shall consist of 
the Chairman of the Board, who shall serve as 
Chairman of the Advisory Council ex officio, and 16 
members appointed by the Secretary of Health and 
Human Services. At least 8 of the 16 appointed 
members shall be individuals who are familiar with 
the need for personal health services in urban or 
rural areas and who are representative of the inter-
ests of individuals eligible for benefits under this 
Act, and at least 6 of the members shall be individ-
uals who are outstanding in the medical or other 
professions concerned with the provision of services 
provided as benefits under this Act and who are rep-
resentative of the individuals, organizations, and 
other persons by whom personal health services will 
be provided. 
(3) TERM.—Each appointed member shall hold 
office for a term of 4 years, except that any member 
appointed to fill a vacancy occurring prior to the ex-
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piration of the term for which the member’s prede-
cessor was appointed shall be appointed for the re-
mainder of that term, and the terms of the members 
first taking office shall expire, as designated by the 
Secretary at the time of appointment, four at the 
end of the first year, four at the end of the second 
year, four at the end of the third year, and four at 
the end of the fourth year after the date of appoint-
ment. 
(4) TECHNICAL AND PROFESSIONAL ADVISORY 
COMMITTEES.—The Advisory Council is authorized 
to appoint such special advisory technical or profes-
sional committees as may be useful in carrying out 
its functions, and the members of such committees 
may be members of the Advisory Council, or other 
persons, or both. 
(5) 
COMPENSATION.—Appointed 
Advisory 
Council members and members of technical or pro-
fessional committees, while serving on business of 
the Council (inclusive of traveltime), shall receive 
compensation at rates fixed by the Secretary, but 
not exceeding $200 per day, and shall be entitled to 
receive actual and necessary traveling expenses and 
per diem in lieu of subsistence while so serving away 
from their places of residence. 
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(6) SUPPORT SERVICES.—The Advisory Coun-
cil, its appointed members, and its committees, shall 
be provided with such secretarial, clerical, or other 
assistance as may be provided by the Congress for 
carrying out their respective functions. 
(7) MEETINGS.—The Advisory Council shall 
meet as frequently as the Board deems necessary, 
but not less than twice each year. Upon request by 
six or more members, it shall be the duty of the 
Chairman to call a meeting of the Council. 
(b) FUNCTIONS.—The Advisory Council shall advise 
the Board with reference to matters of general policy and 
administration arising in connection with the making of 
regulations, the establishment of professional standards, 
and the performance of its other duties under this Act. 
(c) INDEFINITE DURATION.—Section 14 of the Fed-
eral Advisory Committee Act shall not apply to the Advi-
sory Council. 
SEC. 503. STUDIES, RECOMMENDATIONS, AND REPORTS. 
(a) IN GENERAL.—The Board shall have the duty of 
studying and making recommendations as to the most ef-
fective methods of providing health services, and as to leg-
islation and matters of administrative policy concerning 
health and related subjects. 
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(b) ANNUAL REPORTS.—At the beginning of each 
regular session of Congress, it shall make a full report 
to Congress of the administration of this Act, including 
a report with regard to the adequacy of its financial provi-
sions contained in this Act and of appropriations made 
pursuant thereto, the methods of allotment of funds 
among the States, and related matters. Such report shall 
include a record of consultations with the Advisory Coun-
cil, recommendations of the Advisory Council, and com-
ments thereon. 
SEC. 504. NONDISCLOSURE OF INFORMATION. 
(a) CONFIDENTIALITY.—Information concerning an 
individual, obtained from the individual or from any physi-
cian, dentist, nurse, or hospital, or from any other person 
pursuant to or as a result of the administration of this 
Act, shall be held confidential (except for statistical pur-
poses) and shall not be disclosed or be open to public in-
spection in any manner revealing the identity of the indi-
vidual or other person from whom the information was ob-
tained or to whom the information pertains, except as may 
be necessary for the proper administration of this Act or 
of other laws, State or Federal. 
(b) PENALTY.—Any person who shall violate any pro-
vision of subsection (a) shall be deemed guilty of a mis-
demeanor and, upon conviction thereof, shall be punished 
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by a fine not exceeding $50,000 or by imprisonment not 
exceeding one year, or both. 
SEC. 505. PROHIBITION AGAINST DISCRIMINATION. 
In carrying out the provisions of this Act there shall 
be no discrimination on account of race, creed, or color. 
Personal health services shall be made available as bene-
fits to all eligible individuals, and all persons qualified 
under title II to enter into agreements to furnish or pro-
vide such services shall be permitted to do so. 
TITLE VI—ELIGIBILITY DETER-
MINATIONS, 
COMPLAINTS, 
HEARINGS, AND JUDICIAL RE-
VIEW 
SEC. 601. DETERMINATIONS AS TO ELIGIBILITY FOR BENE-
FITS. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services through such units of the Department 
of Health and Human Services as the Secretary may de-
termine, shall upon the Secretary’s own initiative or upon 
application of any individual make determinations as to 
the eligibility of individuals for benefits under this Act. 
Whenever requested by any individual determined by the 
Secretary not to be eligible for benefits for any period, 
or by a dependent of any such individual, the Secretary 
shall give such individual or such dependent reasonable 
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notice and opportunity for a hearing with respect to such 
determination and on the basis of the evidence adduced 
at the hearing shall affirm, modify, or reverse the Sec-
retary’s determination. 
(b) AUTHORITY.— 
(1) IN
GENERAL.—In carrying out the Sec-
retary’s responsibility under this section, the Sec-
retary shall have all the powers and duties conferred 
upon the Secretary under sections 205 and 206 of 
the Social Security Act. Such powers and duties 
shall be subject to the same limitations and rights 
of judicial review as are contained in section 205 of 
such Act. 
(2) CIVIL
SERVICE
ELIGIBILITY
DETERMINA-
TIONS.—Eligibility for benefits under this title based 
on entitlement to an annuity under subchapter III 
(relating to civil service retirement) of chapter 83 of 
title 5, United States Code, shall be determined on 
the basis of certification by the Office of Personnel 
Management. 
(c) ROLE OF STATES.—Nothing in title IV shall be 
deemed to require or authorize any assumption by the 
State agency, designated in accordance with an approved 
State plan of operations approved under such title, of any 
of the Secretary’s responsibilities under this section, but 
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the Secretary may utilize existing facilities and services 
of any such agency on the basis of mutual agreements with 
such agency. 
SEC. 602. COMPLAINTS OF ELIGIBLE INDIVIDUALS AND OF 
PERSONS FURNISHING BENEFITS. 
(a) IN GENERAL.— 
(1) FILING.—Any eligible individual aggrieved 
by reason of the individual’s failure to receive any 
personal health-service benefits to which the believes 
entitled, or dissatisfied with any service rendered the 
individual as a personal health-service benefit, and 
any person who has entered into an agreement to 
furnish services as personal health-service benefits 
and who is aggrieved by the failure or alleged failure 
of a local or other administrative officer or a local 
administrative committee to carry out the agreement 
in accordance with its terms, may make a complaint 
to the local administrative officer or local executive 
officer in the area in which the action or inaction 
complained of occurred, or to such other officer as 
may be provided in regulations. 
(2) RESPONSE.—If the officer to whom such 
complaint is made finds, after investigation, that the 
complaint is well founded, the officer shall prompt-
ly— 
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(A) take such steps as may be necessary 
and appropriate to correct the action or inac-
tion complained of; and 
(B) notify the individual or other person 
making the complaint of the officer’s disposition 
thereof. 
(3) HEARING.—Any such individual or other 
person dissatisfied with the action taken may in 
writing request a hearing thereon and shall be af-
forded opportunity for the same pursuant to sub-
section (b). 
(b) HEARINGS.— 
(1) IN GENERAL.—Provision shall be made for 
the establishment of necessary and sufficient impar-
tial tribunals to afford hearings to individuals and 
other persons entitled thereto under subsection (a), 
or section 207(d), and for further review of the find-
ings, conclusions, and recommendations of such tri-
bunals, in accordance with regulations made by the 
Board, after consultation with the Advisory Council. 
(2) SPECIFIC SUBJECTS.—With respect to any 
complaint involving— 
(A) matters or questions of professional 
practice or conduct, the hearing body shall con-
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tain competent and disinterested professional 
representation; and 
(B) only matters or questions of profes-
sional practice or conduct, the hearing body 
shall consist exclusively of such professional 
persons. 
(c) POWERS OF BOARD.—In administering this sec-
tion in any State which has not assumed responsibility for 
the administration of benefits under this Act as provided 
in title IV, the Board (subject to the provisions of section 
501(b)) shall, insofar as they are applicable to its func-
tions under this Act, have all the powers and duties con-
ferred upon the Secretary by sections 205 and 206 of the 
Social Security Act. Such powers and duties shall be sub-
ject to the limitations and rights of judicial review con-
tained in section 205 of such Act. 
(d) JUDICIAL REVIEW.—In any State which has as-
sumed responsibility for the administration of benefits 
under this Act as provided in title IV the powers and du-
ties of the State agency shall be subject to such rights 
of judicial review in the courts of the State as the law 
of the State may provide; subject, however, to review by 
the Supreme Court of the United States in such cases and 
in such manner as is provided in section 1257 of title 28 
of the United States Code. 
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TITLE VII—APPLICATION OF ACT 
TO 
INDIVIDUALS 
COVERED 
UNDER MEDICARE PROGRAM 
SEC. 701. ELIGIBILITY; BENEFITS AVAILABLE. 
(a) LIMITATION TO SUPPLEMENTARY BENEFITS.— 
(1) IN GENERAL.—In the case of any individual 
who is entitled to hospital insurance benefits under 
part A of title XVIII of the Social Security Act, or 
to supplementary medical insurance benefits under 
the insurance program established by part B of such 
title, during any benefit year or part thereof in 
which the individual is otherwise eligible for benefits 
under this Act in accordance with section 104 or 
would otherwise be furnished such benefits in ac-
cordance with section 105, the personal health serv-
ices (specified in section 101) which may be made 
available to the individual as benefits under this Act 
shall be limited to those services (otherwise available 
to the individual in accordance with section 102) for 
which the individual is ineligible under part A or B 
of such title XVIII. 
(2) TREATMENT.—For purposes of paragraph 
(1), an individual shall be considered ineligible under 
part A or B of such title XVIII if no payment is or 
can be made to the individual or on the individual’s 
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behalf thereunder with respect to the item or service 
involved, whether because the individual is not enti-
tled to benefits under whichever such part is applica-
ble, because no payment is provided under either 
such part for the item or service involved, or because 
the individual has exhausted entitlement to have 
payment made thereunder for items or services of 
the type involved. An individual shall also be consid-
ered ineligible under part A or B of such title XVIII 
with respect to any item or service (for which the in-
dividual is otherwise entitled to have payment made 
thereunder) to the extent that payment is not made 
with respect to such item or service because of the 
application of the deductible and coinsurance provi-
sions of sections 1813 and 1833 of the Social Secu-
rity Act. 
(b) REGULATIONS.—The Board, after consultation 
with the Advisory Council, shall prescribe such regulations 
as may be necessary or appropriate to insure, in the case 
of individuals whose benefits under this Act are limited 
under subsection (a), that the combination of benefits 
under this Act and title XVIII of the Social Security Act 
will effectively carry out (without duplication of benefits) 
the purpose of this Act. 
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(c) NO IMPACT ON DEPENDENTS.—The limitation 
under subsection (a) of an individual’s benefits under this 
Act shall not be construed as affecting the eligibility of 
the individual’s dependents for such benefits in accordance 
with subsection (a)(3) or (b)(3) of section 104. 
SEC. 702. STUDY AND REPORT. 
(a) STUDY.—As soon as practicable after the date of 
the enactment of this Act, the Secretary of Health and 
Human Services shall undertake and carry out a full and 
complete study of the interrelationship of the program of 
national health insurance under this Act and the program 
of health insurance under title XVIII of the Social Secu-
rity Act, in order to determine the way in which the latter 
program may be most effectively and equitably transferred 
to and incorporated in the program under this Act. 
(b) CONSIDERATIONS.—In conducting such study, 
the Secretary shall give particular attention to the transi-
tional problems which would result from such a transfer, 
and shall consider in detail (with respect to each such pro-
gram)— 
(1) the benefits provided; 
(2) the standards of eligibility therefor; 
(3) the standards and qualifications for partici-
pation by providers of services of various types; 
(4) the methods of administration; 
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(5) the costs and methods of financing; and 
(6) any other matters which might assist in 
making such determination and in insuring that all 
desirable features of the program under title XVIII 
of the Social Security Act will to the maximum ex-
tent feasible be preserved with respect to the individ-
uals covered by that program (and, in appropriate 
cases, included in the program under this Act for all 
individuals who are eligible thereunder, without re-
gard to any transfer). 
(c) REPORT.—The Secretary shall submit to the 
President and the Congress, no later than one year after 
the date of the enactment of this Act, a complete report 
of the study conducted under this section together with 
the Secretary’s findings as to the most effective and equi-
table way in which the transfer under consideration could 
be effected and detailed recommendations for legislative, 
administrative, and other actions to accomplish it. 
TITLE VIII—FISCAL PROVISIONS 
SEC. 801. USE OF TRUST FUND. 
(a) AVAILABILITY OF FUNDS.—Funds in the Na-
tional Health Care Trust Fund shall be available for all 
expenditures necessary or appropriate to carry out this 
Act; except that (subject to the provisions of section 
802(g)) only so much of such funds shall be available for 
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salaries or other administrative expenses of any depart-
ment or agency of the United States as may be authorized 
in annual or other appropriation Acts. 
(b) DEPOSIT OF REIMBURSEMENTS.—Sums received 
as reimbursements to the National Health Care Trust 
Fund pursuant to section 104(c) or section 105, or by vir-
tue of subrogation pursuant to section 104(c), shall be de-
posited in the National Health Care Trust Fund and shall 
be available in accordance with the provisions of sub-
section (a). 
SEC. 802. ALLOTMENT OF FUNDS. 
(a) FOR CLASSES OF SERVICES.— 
(1) IN GENERAL.—The Board, after consulta-
tion with the Advisory Council, shall determine, as 
far in advance of the beginning of each fiscal year 
as is possible, the sums which shall be available from 
the Trust Fund for provision during the fiscal year 
of all classes, and of each of the five classes, of per-
sonal health-service benefits specified in section 
101(a). 
(2) CONSIDERATIONS.—Such sums shall be de-
termined, after taking into consideration the esti-
mated amount which will be in the Trust Fund at 
the beginning of the fiscal year and the anticipated 
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income of the National Health Care Trust Fund 
thereafter, with a view— 
(A) to maintaining as nearly as practicable 
a uniform rate of expenditure for personal 
health-service benefits in successive fiscal years, 
except for appropriated allowance on account of 
anticipated increase in the personnel and facili-
ties available to furnish personal health-service 
benefits and on account of reduction or with-
drawal of restrictions or limitations pursuant to 
section 102(b); and 
(B) to establishing and maintaining a re-
serve in the Trust Fund adequate to meet 
emergency demands in accordance with sub-
section (d) and adequate to maintain the rate 
of expenditure or to permit its gradual reduc-
tion if the income of the Trust Fund should fall 
below the income which had been anticipated. 
(b) INITIAL STATE ALLOTMENTS.— 
(1) IN GENERAL.—In accordance with regula-
tions prescribed after consultation with the State 
agencies, the Board, prior to the beginning of each 
fiscal year shall allot to the several States, for the 
fiscal years 2010, 2011, and 2012, 90 percent, and 
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for each fiscal year thereafter 95 percent of each 
sum determined pursuant to subsection (a). 
(2) BASIS OF ALLOTMENTS.—Such regulations 
shall provide for allotments on the basis of— 
(A) the population in the several States eli-
gible for benefits under this Act; 
(B) professional and other personnel, hos-
pitals, and other facilities, and supplies and 
commodities, to be available in the several 
States in the provision of such benefits; and 
(C) the cost of reasonable and equitable 
compensation to such personnel and facilities 
and for such supplies and commodities. 
(3) OPERATION OF ALLOTMENTS.—Such allot-
ments shall operate, to the maximum extent pos-
sible, both to assure provision to eligible individuals 
of adequate personal health-service benefits in all 
States and all local health-service areas, and also to 
increase the adequacy of services where personnel 
and facilities are below the national average. 
(c) ALLOTMENT OF REMAINDER TO STATES.— 
(1) IN GENERAL.—From time to time during 
each fiscal year, the Board shall allot to the several 
States the remaining 10 percent or the remaining 5 
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percent, as the case may be, of each sum determined 
pursuant to subsection (a). 
(2) CONSIDERATIONS.—In making allotments 
under this subsection, the Board shall take into con-
sideration the factors specified in subsection (b), but 
shall, in addition, give special consideration to the 
extent of which allotments under subsection (b) have 
proved to be insufficient to permit provision of rea-
sonably adequate benefits under this Act. 
(d) EMERGENCY ALLOTMENTS.—In addition to the 
sums determined pursuant to subsection (a) to be avail-
able for the provision of personal health-service benefits, 
the Board, after consultation with the Advisory Council, 
is authorized to make emergency allotments from the Na-
tional Health Care Trust Fund if it finds that a disaster, 
epidemic, or other cause has substantially increased the 
volume of personal health-service benefits required in any 
part of the United States over the volume anticipated 
when the determinations pursuant to subsection (a) were 
made. Allotments pursuant to this subsection shall be 
made to such State or States, for such class or classes 
of personal health-service benefits, and in such amounts, 
as the Board may find necessary to meet the emergency. 
(e) PAYMENT FROM ALLOTMENTS.—The Board shall 
from time to time determine the amounts to be paid to 
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each State from its allotments under this section, and 
shall certify to the Secretary of the Treasury the amounts 
so determined. The Secretary shall thereupon, and prior 
to audit or settlement by the General Accounting Office, 
pay to the State the amounts so certified. 
(f) USE OF FUNDS.— 
(1) IN GENERAL.—Funds paid to a State for 
any class of personal health-service benefits shall be 
used exclusively for the provision of benefits of that 
class, except that the administrative costs of the 
State in administering personal health-service bene-
fits under this Act may be met from the allotments 
to the State. 
(2) LIMITATION ON ADMINISTRATIVE COSTS.— 
Such administrative costs, which in any fiscal year 
shall not exceed 5 percent of the aggregate allot-
ments to the State for such fiscal year, shall be ap-
portioned as between the several allotments in ac-
cordance with the costs of administering the respec-
tive classes of benefits. Such apportionment may be 
made in such manner, and by such sampling, statis-
tical, or other methods, as may be agreed upon be-
tween the Board and the State agency. 
(g) BOARD ASSUMPTION OF RESPONSIBILITY.—In 
any case in which the Board has assumed responsibility 
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for the administration in a State of benefits under this 
Act in accordance with section 402 (d) or (e), all allot-
ments or balances of allotments to such State shall be 
available for expenditure by the Board for the provision 
of personal health-service benefits in that State, and (until 
the Congress shall make funds available therefor pursuant 
to section 801(a)) for the costs of administration of such 
benefits in such State. Expenditures authorized pursuant 
to section 801(a) for such costs of administration shall 
be charged against allotments to such State. 
SEC. 803. GRANTS-IN-AID FOR TRAINING AND EDUCATION. 
(a) AUTHORITY.—For the purpose of increasing the 
availability of training and education for professional and 
technical personnel engaged or undertaking to engage in 
the provision or administration of personal health services 
as benefits under this Act, and to carry out the policies 
of section 209(a), the Board is authorized to make 
grants— 
(1) to public or nonprofit institutions or agen-
cies engaging in undergraduate or postgraduate pro-
fessional, technical, or administration education or 
training, for the cost (in whole or in part) of courses 
or projects which the Board finds, after consultation 
with the Advisory Council and appropriate Federal 
departments and agencies, (A) cannot be carried out 
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without financial assistance under this section, and 
(B) show promise of making valuable contributions 
to the education, training, or retraining of profes-
sional or technical personnel engaged or undertaking 
to engage in the provision or administration of bene-
fits, or 
(2) to individuals who are professional or tech-
nical persons engaged or who undertake to engage 
in the provision of personal health-service benefits, 
or who are engaged or undertake to engage in the 
administration of such benefits, for maintenance (in 
whole or in part) while in attendance at courses or 
projects assisted under paragraph (1) or approved 
by the Board for similar training or education, and 
for costs of necessary travel. 
(b) PAYMENT UNDER GRANTS.—Such grants, in 
such amounts and for payment at such times as are ap-
proved by the Board, shall be certified for payment to the 
Secretary of the Treasury, who shall pay them from the 
National Health Care Trust Fund to the designated indi-
viduals, institutions, or agencies. 
(c) AVAILABILITY OF FUNDS.—For the purposes of 
this section there shall be available for the fiscal year 2010 
the sum of $5,000,000, for the fiscal year 2011 the sum 
of $5,000,000, and for each fiscal year thereafter an 
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amount not to exceed one-half of 1 percent of the amount 
expended for benefits under this Act in the last preceding 
calendar year. 
TITLE IX—MISCELLANEOUS 
PROVISIONS 
SEC. 901. DEFINITIONS. 
As used in this Act: 
(1) WAGES.—The term ‘‘wages’’ means the 
sum of the following items, excluding any amount in 
excess of the applicable contribution and benefit 
base (as determined under section 230 of the Social 
Security Act with respect to the hospital insurance 
tax) which is received (or, in the case of income 
from self-employment, accrued) by any individual 
during any calendar year— 
(A) all remuneration for employment, in-
cluding the cash value of all remuneration paid 
in any medium other than cash; except that 
such term does not include— 
(i) the amount of any payment made 
to, or on behalf of, an employee under a 
plan or system established by an employer 
which makes provision for the employer’s 
employees generally or for a class or class-
es of the employer’s employees (including 
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any amount paid by an employer for insur-
ance or annuities, or into a fund to provide 
for any such payment), on account of re-
tirement, or sickness or accident disability, 
or medical and hospitalization expenses in 
connection with sickness or accident dis-
ability, or death; provided, in the case of a 
death benefit, that the employee (I) has 
not the option to receive, instead of provi-
sion for such death benefit, any part of 
such payment or, if such death benefit is 
insured, any part of the premiums (or con-
tributions to premiums) paid by the em-
ployee’s employer, and (II) has not the 
right, under the provisions of the plan or 
system or policy of insurance providing for 
such death benefit, to assign such benefit, 
or to receive a cash consideration in lieu of 
such benefit either upon the employee’s 
withdrawal from the plan or system pro-
viding for such benefit or upon termination 
of such plan or system or policy of insur-
ance or of the employee’s employment with 
such employer; 
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(ii) the payment by an employer 
(without deductions from the remuneration 
of the employee) of any social-insurance 
taxes or contributions imposed upon an 
employee; or 
(iii) the value of services exchanged 
for other services for which there is no 
payment other than the exchange; and 
(B) all net income from farm, business, 
professional, or other self-employment. 
(2) EMPLOYMENT.—The term ‘‘employment’’ 
means any service of whatever nature performed by 
an employee for the person employing the employee, 
irrespective of the citizenship or residence of either, 
within United States, or on or in connection with an 
American vessel or an American civil aircraft under 
a contract of service which is entered into within the 
United States or during the performance of which 
the vessel or aircraft touches at a port or airport in 
the United States, if the employee is employed on 
and in connection with such vessel or aircraft when 
outside the United States, except— 
(A) service on active duty in the Armed 
Forces of the United States; 
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(B) service performed in the employ of a 
State or any political subdivision thereof, or any 
instrumentality of any one or more of the fore-
going which is wholly owned by one or more 
States or political subdivisions; 
(C) casual labor not in the course of the 
employer’s trade or business; 
(D) service performed by an employee on 
or in connection with a vessel not an American 
vessel, or an aircraft not an American aircraft, 
if the employee is employed on and in connec-
tion with such vessel or aircraft when outside 
the United States; 
(E) service performed by a duly ordained 
or duly commissioned or licensed minister of 
any church in the regular exercise of the min-
ister’s ministry and service performed by a reg-
ular member of a religious order in the exercise 
of duties required by such order; 
(F) service performed by an individual as 
an employee or employee representative as de-
fined in section 1 of the Railroad Retirement 
Act of 1937 or section 1 of the Railroad Retire-
ment Act of 1974; 
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(G) service performance in any calendar 
quarter in the employ of any organization ex-
empt from income tax under section 501 of the 
Internal Revenue Code of 1986 if— 
(i) the remuneration for such services 
does not exceed $150; or 
(ii) such service is in connection with 
the collection of dues or premiums for a 
fraternal beneficiary society, order, or as-
sociation, and is performed away from the 
home office or is ritualistic service in con-
nection with any such society, order, or as-
sociation; or 
(iii) such service is performed by a 
student who is enrolled and is regularly at-
tending classes at a school, college, or uni-
versity; 
(H) service performed in the employ of a 
foreign government (including service as a con-
sular or other officer or employee or a nondiplo-
matic representative); 
(I) service performed in the employ of an 
instrumentality wholly owned by a foreign gov-
ernment, if— 
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(i) the service is of a character similar 
to that performed in foreign countries by 
employees of the United States Govern-
ment or of an instrumentality thereof; and 
(ii) the Secretary of State shall certify 
to the Secretary of Health and Human 
Services that the foreign government, with 
respect to whose instrumentality and em-
ployees thereof exemption is claimed, 
grants an equivalent exemption with re-
spect to similar service performed in the 
foreign country by employees of the United 
States Government and of instrumental-
ities thereof; and 
(J) service performed in the employ of an 
international organization entitled to enjoy 
privileges, exemptions, and immunities as an 
international organization under the Inter-
national Organizations Immunities Act. 
(3) In any case in which an individual has re-
ceived wages equal to the applicable contribution and 
benefit base (as determined under section 230 of the 
Social Security Act), in a calendar year, not less 
than $500 of such wages shall be deemed, for the 
purpose of section 104(a), to have been received by 
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the individual in the quarter during which the first 
of such wages were in fact received by the individual 
and in each quarter of such calendar year thereafter. 
(4) BENEFIT YEAR.—The term ‘‘benefit year’’ 
means a period commencing on July 1 of any year 
and ending on June 30 of the succeeding year. 
(5) QUARTER.—The term ‘‘quarter’’ and the 
term ‘‘calendar quarter’’ mean a period of three cal-
endar months ending on March 31, June 30, Sep-
tember 30, or December 31. 
(6) EMPLOYEE.—The term ‘‘employee’’ includes 
(in addition to any individual who is a servant under 
the law of master and servant) any individual who 
performs service, of whatever nature, for a person, 
unless the service is performed by the individual in 
pursuit of the individual’s own independently estab-
lished business. The term ‘‘employee’’ also includes 
an officer of a corporation. 
(7) AMERICAN VESSEL.—The term ‘‘American 
vessel’’ means any vessel documented or numbered 
under the laws of the United States; and includes 
any vessel which is neither documented nor num-
bered under the laws of any foreign country, if its 
crew is employed solely by one or more citizens or 
residents of the United States or corporations orga-
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nized under the laws of the United States or of any 
State. 
(8) AMERICAN
AIRCRAFT.—The term ‘‘Amer-
ican aircraft’’ means an aircraft registered under the 
laws of the United States. 
(9) STATE.—The term ‘‘State’’ includes the 
District of Columbia. 
(10) UNITED
STATES.—The term ‘‘United 
States’’, when used in a geographic sense, means the 
several States, as defined in paragraph (9). 
(11) DEPENDENT.—The term ‘‘dependent’’ 
means— 
(A) an unmarried child (including a step-
child, adopted, or foster child) of an individual, 
who is under the age of 18, or who is under a 
total disability which has continued for a period 
of not less than six consecutive calendar months 
and is living with such individual or receiving 
regular support from the individual; 
(B) a wife of an individual living with such 
individual or receiving regular support from the 
individual; 
(C) a husband who is under a total dis-
ability which has continued for a period of not 
less than six consecutive calendar months, and 
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is living with or receiving regular and substan-
tial support from such individual; and 
(D) a parent who is living with or receiving 
regular and substantial support from such indi-
vidual. 
(12) PERSON.—The term ‘‘person’’ means an 
individual, a trust or estate, a partnership, a cor-
poration, an association, a consumer cooperative, or 
other organization. 
SEC. 902. EFFECTIVE DATE. 
The effective date of this Act shall be the date of its 
enactment, but personal health services shall first become 
available as benefits in accordance with this Act on Octo-
ber 1, 2010. 
TITLE 
X—VALUE 
ADDED 
TAX 
AND 
NATIONAL 
HEALTH 
CARE TRUST FUND 
SEC. 1001. IMPOSITION OF VALUE ADDED TAX. 
(a) IN GENERAL.—Subtitle D of the Internal Rev-
enue Code of 1986 (relating to miscellaneous excise taxes) 
is amended by inserting before chapter 31 the following 
new chapter: 
‘‘CHAPTER 30—VALUE ADDED TAX 
‘‘SUBCHAPTER A. IMPOSITION OF TAX 
‘‘SUBCHAPTER B. TAXABLE TRANSACTION 
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‘‘SUBCHAPTER C. TAXABLE AMOUNT; RATE OF TAX FOR CERTAIN 
TRANSACTIONS; CREDIT AGAINST TAX 
‘‘SUBCHAPTER D. ADMINISTRATION 
‘‘SUBCHAPTER E. DEFINITIONS AND SPECIAL RULES; TREATMENT OF CERTAIN 
TRANSACTIONS 
‘‘Subchapter A—Imposition of Tax 
‘‘Sec. 3901. Imposition of tax. 
‘‘SEC. 3901. IMPOSITION OF TAX. 
‘‘(a) GENERAL RULE.—A tax is hereby imposed on 
each taxable transaction. 
‘‘(b) AMOUNT OF TAX.—Except as otherwise pro-
vided in this chapter, the amount of the tax shall be 5 
percent of the taxable amount. 
‘‘Subchapter B—Taxable Transaction 
‘‘Sec. 3903. Taxable transaction. 
‘‘Sec. 3904. Commercial-type transaction. 
‘‘Sec. 3905. Taxable person. 
‘‘Sec. 3906. Transactions in the United States. 
‘‘Sec. 3907. Rules relating to other terms used in section 3903. 
‘‘SEC. 3903. TAXABLE TRANSACTION. 
‘‘For purposes of this chapter, the term ‘taxable 
transaction’ means— 
‘‘(1) the sale of property in the United States, 
‘‘(2) the performance of services in the United 
States, and 
‘‘(3) the importing of property into the United 
States, 
by a taxable person in a commercial-type transaction. 
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‘‘SEC. 3904. COMMERCIAL-TYPE TRANSACTION. 
‘‘(a) GENERAL RULE.—For purposes of this chapter, 
the term ‘commercial-type transaction’ means a trans-
action engaged in by— 
‘‘(1) a corporation, or 
‘‘(2) any person (other than a corporation) in 
connection with a business. 
‘‘(b) SALES AND LEASES OF REAL PROPERTY; IM-
PORTS.—For purposes of this chapter— 
‘‘(1) IN GENERAL.—The term ‘commercial-type 
transaction’ includes— 
‘‘(A) any sale or leasing of real property, 
and 
‘‘(B) any importing of property, 
whether or not such transaction is described in sub-
section (a). 
‘‘(2) CERTAIN IMPORTED ARTICLES.—Notwith-
standing paragraph (1)(B), the importing of an arti-
cle which is free of duty under part 2 of schedule 
8 of the Tariff Schedules of the United States shall 
not be treated as a commercial-type transaction un-
less such transaction is described in subsection (a). 
‘‘SEC. 3905. TAXABLE PERSON. 
‘‘(a) GENERAL RULE.—Except as otherwise provided 
in this chapter, for purposes of this chapter, the term ‘tax-
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able person’ means a person who engages in a business 
or in a commercial-type transaction. 
‘‘(b) TREATMENT OF EMPLOYEES, ETC.—For pur-
poses of this chapter, an employee shall not be treated 
as a taxable person with respect to activities engaged in 
as an employee. 
‘‘SEC. 3906. TRANSACTIONS IN THE UNITED STATES. 
‘‘(a) SALES OF PROPERTY.—For purposes of this 
chapter— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the sale of property shall be treated as 
occurring where delivery takes place. 
‘‘(2) REAL PROPERTY.—The sale of real prop-
erty shall be treated as occurring where the real 
property is located. 
‘‘(b) PERFORMANCE OF SERVICE.—For purposes of 
this chapter— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, a service shall be treated as 
occurring where it is performed. 
‘‘(2) SERVICES PERFORMED INSIDE AND OUT-
SIDE
THE
UNITED
STATES.—If a service is per-
formed both inside and outside the United States, 
such service shall be treated as performed— 
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‘‘(A) inside the United States, if 50 per-
cent or more of such service is performed inside 
the United States, and 
‘‘(B) outside the United States, if less than 
50 percent of such service is performed inside 
the United States. 
‘‘SEC. 3907. RULES RELATING TO OTHER TERMS USED IN 
SECTION 3903. 
‘‘(a) EXCHANGES TREATED AS SALES.—For pur-
poses of this chapter— 
‘‘(1) an exchange of property for property or 
services shall be treated as a sale of property, and 
‘‘(2) an exchange of services for property or 
services shall be treated as the performance of serv-
ices. 
‘‘(b) CERTAIN TRANSFERS TO EMPLOYEES TREATED 
AS SALES.—For purposes of this chapter, the transfer of 
property to an employee as compensation (other than a 
transfer of a type for which no amount is includible in 
the gross income of employees for purposes of chapter 1) 
shall be treated as the sale of property. 
‘‘(c) PERFORMANCE OF SERVICES.—For purposes of 
this chapter— 
‘‘(1) CERTAIN
ACTIVITIES
TREATED
AS
PER-
FORMANCE OF SERVICES.—Activities treated as in-
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cluded in the performance of services shall include 
(but shall not be limited to)— 
‘‘(A) permitting the use of property, 
‘‘(B) the granting of a right to the per-
formance of services or to reimbursement (in-
cluding the granting of warranties, insurance, 
and similar items), and 
‘‘(C) the making of a covenant not to com-
pete (or similar agreement to refrain from 
doing something). 
‘‘(2) EMPLOYERS AND EMPLOYEES.— 
‘‘(A) SERVICES FOR EMPLOYER.—An em-
ployee’s services for the employee’s employer 
shall not be treated as the performance of serv-
ices. 
‘‘(B) SERVICES FOR EMPLOYEE.—An em-
ployer’s services for the employer’s employee 
shall not be treated as the performance of serv-
ices unless such services are of a type which 
constitute gross income to the employee for 
purposes of chapter 1. 
‘‘(3) PERFORMANCE OF SERVICES TREATED AS 
SALE OF SERVICES.—The performance of services 
shall be treated as the sale of services. 
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‘‘Subchapter C—Taxable Amount; Rate of Tax 
for Certain Transactions; Credit Against Tax 
‘‘Sec. 3911. Taxable amount. 
‘‘Sec. 3912. Zero rating for food, housing, and medical care. 
‘‘Sec. 3913. Zero rating for exports and interest. 
‘‘Sec. 3914. Governmental entities. 
‘‘Sec. 3915. Exempt organizations. 
‘‘Sec. 3916. Credit against tax. 
‘‘SEC. 3911. TAXABLE AMOUNT. 
‘‘(a) AMOUNT CHARGED CUSTOMER.—For purposes 
of this chapter, the taxable amount for any transaction 
for which money is the only consideration shall be the 
price charged the purchaser of the property or services by 
the seller thereof— 
‘‘(1) including all invoiced charges for transpor-
tation, and other items payable to the seller with re-
spect to this transaction, but 
‘‘(2) excluding the tax imposed by section 3901 
with respect to this transaction and excluding any 
State and local sales and use taxes with respect to 
this transaction. 
‘‘(b) EXCHANGES.—For purposes of this chapter, the 
taxable amount in any exchange of property or services 
shall be the fair market value of the property or services 
transferred by the person liable for the tax (determined 
as if such person had sold the property or services to the 
other party to the exchange). 
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‘‘(c) IMPORTS.—For purposes of this chapter, the 
taxable amount in the case of any import shall be— 
‘‘(1) the customs value plus customs duties and 
any other duties which may be imposed, or 
‘‘(2) if there is no such customs value, the fair 
market value (determined as if the importer had sold 
the property). 
‘‘(d) SPECIAL RULE IN THE CASE OF SALES OF CER-
TAIN USED CONSUMER GOODS.—For purposes of this 
chapter, if— 
‘‘(1) a taxable person acquires any tangible per-
sonal property in a transaction which was not a tax-
able transaction, and 
‘‘(2) such property had been used by an ulti-
mate consumer before such acquisition, 
the taxable amount in the case of any sale of such property 
by such taxable person (determined without regard to this 
subsection) shall be reduced by the amount paid for such 
property by such taxable person. 
‘‘SEC. 3912. ZERO RATING FOR FOOD, HOUSING, AND MED-
ICAL CARE. 
‘‘(a) ZERO RATING FOR FOOD, HOUSING, AND MED-
ICAL CARE.—The rate of the tax imposed by section 3901 
shall be zero with respect to the following: 
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‘‘(1) FOOD.—The retail sale of food and non-
alcoholic beverages for human consumption (other 
than consumption on the premises). 
‘‘(2) HOUSING.—The sale and renting of resi-
dential real property for use by the purchaser or 
tenant as a principal residence. 
‘‘(3) MEDICAL CARE.—Medical care. 
‘‘(b) DEFINITIONS.—For purposes of subsection 
(a)— 
‘‘(1) NONALCOHOLIC
BEVERAGES.—The term 
‘nonalcoholic beverages’ does not include any article 
which is taxable under chapter 51. 
‘‘(2) MEDICAL CARE.—The term ‘medical care’ 
means the performance of any service, and the retail 
sale of any property, payment for which by the pur-
chaser would constitute medical care within the 
meaning of section 213. 
‘‘(3) MOBILE HOMES, ETC., TREATED AS REAL 
PROPERTY.—A mobile or floating home shall be 
treated as real property. 
‘‘(c) ADVANCE ZERO RATING.—The Secretary shall 
prescribe regulations under which any item which becomes 
clearly identifiable as an item to which subsection (a) will 
apply when it reaches the retail stage shall be zero rated 
for all transactions after it becomes so clearly identifiable. 
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‘‘SEC. 3913. ZERO RATING FOR EXPORTS AND INTEREST. 
‘‘The rate of the tax imposed by section 3901 shall 
be zero with respect to the following: 
‘‘(1) EXPORTS.—Exports of property. 
‘‘(2) INTEREST.—Interest. 
‘‘SEC. 3914. GOVERNMENTAL ENTITIES. 
‘‘(a) ZERO RATING FOR SALES TO GOVERNMENTAL 
ENTITIES AND EDUCATIONAL ACTIVITIES OF GOVERN-
MENTAL ENTITIES.—The rate of the tax imposed by sec-
tion 3901 shall be zero with respect to the following: 
‘‘(1) SALES
TO
GOVERNMENTAL
ENTITIES.— 
Any sale of property or services to a governmental 
entity. 
‘‘(2) EDUCATIONAL ACTIVITIES.—The providing 
by a governmental entity of property and services in 
connection with the education of students. 
‘‘(b) SALES, ETC., BY GOVERNMENTAL ENTITIES 
TAXABLE ONLY WHERE SEPARATE CHARGE IS MADE.— 
For purposes of this chapter, the sale of property and the 
performance of services by a governmental entity shall be 
a taxable transaction if (and only if) a separate charge 
of fee is made therefor. 
‘‘(c) GOVERNMENTAL ENTITY DEFINED.—For pur-
poses of this chapter, the term ‘governmental entity’ 
means the United States, any State or political subdivision 
thereof, the District of Columbia, a Commonwealth or pos-
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session of the United States, or any agency or instrumen-
tality of any of the foregoing. 
‘‘SEC. 3915. EXEMPT ORGANIZATIONS. 
‘‘(a) ZERO RATING FOR SECTION 501(c)(3) ORGANI-
ZATIONS; CREDIT ALLOWED FOR ALL PURCHASES.— 
‘‘(1) ZERO RATING.—The rate of the tax im-
posed by section 3901 shall be zero with respect to 
any taxable transaction engaged in by a section 
501(c)(3) organization other than as part of an un-
related business. 
‘‘(2) CREDIT ALLOWED FOR ALL PURCHASES.— 
For purposes of this chapter, a section 501(c)(3) or-
ganization shall be treated as engaged in a business 
with respect to all of its activities. 
‘‘(b) TAXABLE TRANSACTIONS IN CASE OF OTHER 
EXEMPT ORGANIZATIONS.—For purposes of this chapter, 
the sale of property and the performance of services by 
any exempt organization other than a section 501(c)(3) 
organization shall be a taxable transaction if (and only 
if) a charge or fee is made for such services. 
‘‘(c) DEFINITIONS.—For purposes of this chapter— 
‘‘(1) SECTION 501(c)(3) ORGANIZATIONS.—The 
term ‘section 501(c)(3) organization’ means an orga-
nization described in section 501(c)(3) which is ex-
empt from tax under section 501(a). 
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‘‘(2) OTHER
EXEMPT
ORGANIZATION.—The 
term ‘other exempt organization’ means any organi-
zation (other than a section 501(c)(3) organization) 
which is exempt from tax under chapter 1. 
‘‘SEC. 3916. CREDIT AGAINST TAX. 
‘‘(a) GENERAL RULE.—There shall be allowed as a 
credit against the tax imposed by section 3901 the aggre-
gate amount of tax imposed by section 3901 which has 
been paid by sellers to the taxpayer of property and serv-
ices which the taxpayer uses in the business to which the 
transaction relates. 
‘‘(b) EXEMPT TRANSACTIONS, ETC.—If— 
‘‘(1) property or services are used partly in the 
business and partly for other purposes, or 
‘‘(2) property or services are used partly for 
taxable transactions and partly for other trans-
actions, 
the credit shall be allowable only with respect to the prop-
erty and services used for taxable transactions in the busi-
ness. No credit shall be allowable for any transaction oc-
curring when the taxpayer was a nontaxable person. 
‘‘(c) EXCESS CREDIT TREATED AS OVERPAYMENT.— 
‘‘(1) IN GENERAL.—If for any taxable period 
the aggregate amount of the credits allowable by 
subsection (a) exceeds the aggregate amount of the 
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