I
107TH CONGRESS
1ST SESSION
H. R. 16
To provide a program of national health insurance, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 3, 2001
Mr. DINGELL introduced the following bill; which was referred to the Com-
mittee on Energy and Commerce, and in addition to the Committee on
Ways and Means, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To provide a program of national health insurance, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SHORT TITLE; TABLE OF CONTENTS
SEC. 1. (a) SHORT TITLE.—This Act may be cited
as the ‘‘National Health Insurance Act’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Secs. 2–5. Declaration of purpose.
TITLE I—BENEFITS AND ELIGIBILITY
Sec. 101. Classes of personal health services.
Sec. 102. Availability of benefits.
Sec. 103. How benefits obtained; free choice by patient.
Sec. 104. Eligibility for benefits.
Sec. 105. Provision of benefits for noninsured needy and other individuals.
TITLE II—PARTICIPATION OF PHYSICIANS, DENTISTS, NURSES,
HOSPITALS, AND OTHERS
Sec. 201. Physicians and dentists; specialists.
Sec. 202. Nurses.
Sec. 203. Hospitals.
Sec. 204. Auxiliary services.
Sec. 205. Agreements with individual practitioners, hospitals, and others.
Sec. 206. Agreements with voluntary health insurance and other organizations.
Sec. 207. Provisions common to all agreements.
Sec. 208. Methods of payments for services.
Sec. 209. Amount of payments for services.
Sec. 210. Professional rights and responsibilities.
TITLE III—LOCAL ADMINISTRATION
Sec. 301. Decentralization of administration.
Sec. 302. Local administrative committee or officer.
Sec. 303. Local area committees.
Sec. 304. Local professional committees.
Sec. 305. Methods of administration.
TITLE IV—STATE ADMINISTRATION
Sec. 401. Declaration of policy.
Sec. 402. State plan of operations.
TITLE V—NATIONAL HEALTH INSURANCE BOARD; NATIONAL AD-
VISORY MEDICAL POLICY COUNCIL; GENERAL ADMINISTRATIVE
PROVISIONS
Sec. 501. National Health Insurance Board.
Sec. 502. Advisory Council.
Sec. 503. Studies, recommendations, and reports.
Sec. 504. Nondisclosure of information.
Sec. 505. Prohibition against discrimination.
TITLE VI—ELIGIBILITY DETERMINATIONS, COMPLAINTS,
HEARINGS, AND JUDICIAL REVIEW
Sec. 601. Determinations as to eligibility for benefits.
Sec. 602. Complaints of eligible individuals and of persons furnishing benefits.
TITLE VII—APPLICATION OF ACT TO INDIVIDUALS COVERED
UNDER MEDICARE PROGRAM
Sec. 701. Eligibility; benefits available.
Sec. 702. Study and report.
TITLE VIII—FISCAL PROVISIONS
Sec. 801. Personal health services account.
Sec. 802. Allotment of funds.
Sec. 803. Grants-in-aid for training and education.
TITLE IX—MISCELLANEOUS PROVISIONS
Sec. 901. Definitions.
Sec. 902. Effective date.
TITLE X—VALUE ADDED TAX AND NATIONAL HEALTH CARE
TRUST FUND
Sec. 1001. Imposition of value added tax.
Sec. 1002. Revenue from value added tax to fund National Health Care Trust
Fund.
TITLE XI—STUDY AND DEVELOPMENT OF COST CONTROL
MECHANISMS
Sec. 1101. Development of cost control mechanisms.
FINDINGS AND DECLARATION OF PURPOSE
SEC. 2. (a) The Congress finds that—
(1) the health of the Nation’s people is the
foundation of our Nation’s strength, productivity,
and wealth;
(2) the assurance of adequate medical care to
all of our people is essential to the general welfare
and to the Nation’s security;
(3) since the tremendous advances in medical
science in recent years have necessarily meant great
advances in the cost of health services, our archaic
system of paying for medical care—based on public
and private charity for the poor, on unpredictable
and often unbearable costs to the otherwise self-sup-
porting, and on disproportionate charges for the
well-to-do—has resulted in the following conditions:
(A) the inability of the vast majority of our
people to meet the shattering cost of serious or
chronic illness;
(B) the inability of most of our people to
benefit from modern preventive medicine; and
(C) wholly inadequate provision for the
health needs of our farm families and agricul-
tural workers;
(4) the conditions described in the preceding
paragraph cannot effectively be remedied under the
present system of payment for medical care, or
under any voluntary insurance system; and
(5) a medical dole as an answer to this problem
is repugnant to the American people and would cer-
tainly result in a system of state medicine, paid for
from tax funds and rendered by regimented doctors.
(b) The Congress declares the purposes of this Act
to be to provide a sound economic foundation for our free
system of medicine and to correct the maldistribution of
health personnel and facilities by establishing a system of
prepaid personal health insurance on the principle of social
insurance.
SEC. 3. In establishing a system of national health
insurance, it is the policy of this Act that those persons
and their dependents who are insured under the provisions
of the Act shall be assured full freedom to choose their
physicians and to change their choice as they may desire;
that physicians and other professions furnishing services
in accordance with the provisions of this Act shall be as-
sured full freedom in the practice of their professions, in-
cluding the right to accept or reject patients except as this
right may be restricted by their own professional ethics
or by the laws of the several States; and that the adminis-
tration of this Act shall be based upon the American prin-
ciple of decentralization.
SEC. 4. In carrying out these policies, it is the inten-
tion of Congress that the major administrative responsibil-
ities be placed in the hands of local bodies representing
both those who pay for and receive services and those who
render services, and operating within the framework of
plans made by the several States, and approved by the
Federal agency; that the National Health Care Trust
Fund created by this Act shall be allotted equitably among
the several States and by the States to their local areas;
that voluntary as well as governmental organizations shall
be recognized and utilized; and that all eligible individuals
and their dependents as specified in this Act shall be enti-
tled to its benefits without discrimination because of race,
color, or creed.
TITLE I—BENEFITS AND ELIGIBILITY
CLASSES OF PERSONAL HEALTH SERVICES
SEC. 101. (a) The personal health services to be made
available as benefits to eligible individuals as provided in
this title are medical services, dental services, podiatric
services, home-nursing services, hospital services, and aux-
iliary services. Each class of services shall be provided by
persons (including individuals, partnerships, corporations,
associations, consumer cooperatives, and other organiza-
tions) who are authorized by applicable State law, and who
are qualified under title II of this Act, to do so.
(b) Medical services consist of (1) general medical
services such as can be rendered by a physician engaged
in the general or family practice of medicine, including
preventive, diagnostic, and therapeutic care and periodic
medical examinations; and (2) specialist services rendered
by a physician who is a specialist in the class of services
rendered, as defined in section 201 of this Act. Such
services may be rendered at the office, home, hospital,
or elsewhere, as necessary.
(c) Dental services consist of (1) general dental serv-
ices rendered by a dentist engaged in the general practice
of dentistry, including preventive, diagnostic, and thera-
peutic care, and periodic dental examinations; and (2) spe-
cialist services rendered by a dentist who is a specialist
in the class of services rendered, as defined in section 201
of this Act. Such services may be rendered at the office,
home, hospital, or elsewhere, as necessary.
(d) Podiatric services consist of those professional
services of a podiatrist who is legally authorized to per-
form such services in the State in which he practices.
(e) Home-nursing services consist of nursing care of
the sick rendered in the home by a registered professional
nurse or a qualified practical nurse.
(f) Hospital services consist of hospitalization, includ-
ing necessary nursing services, and such physician, labora-
tory, ambulance, and other services in connection with
hospitalization as the National Health Insurance Board
(hereinafter in this Act referred to as the ‘‘Board’’), after
consultation with the National Advisory Medical Policy
Council (hereinafter in this Act referred to as the ‘‘Advi-
sory Council’’), by regulation designates as essential to
good hospital care, for a maximum of sixty days in any
benefit year; but hospital services shall not include hos-
pitalization in a mental disease hospital or institution, or
hospitalization for any day more than thirty days following
the diagnosis of a psychosis. Whenever the Board, after
consultation with the Advisory Council, finds that moneys
in the account (established by section 701) are adequate
and that facilities are available, it may by regulation in-
crease the maximum days of hospitalization in any benefit
year.
(g) Auxiliary services consist of such chemical, bac-
teriological, pathological, diagnostic X-ray and related lab-
oratory services; X-ray, radium, and related therapy; phys-
iotherapy; services of optometrists; and prescribed drugs
which are unusually expensive, special appliances, and eye-
glasses; as the Board, after consultation with the Advisory
Council, by regulation designates as auxiliary services on
the basis of its finding that their provision under this Act
is practicable and is essential to good health care.
AVAILABILITY OF BENEFITS
SEC. 102. (a) Medical services, hospital services, and,
except as otherwise provided in subsection (b) of this sec-
tion, all other personal health services specified in section
101 shall be made available (subject to section 701) as
benefits to eligible individuals in all health-service areas
within the United States as rapidly and as completely as
possible having regard for the availability of the profes-
sional and technical personnel and the hospital and other
facilities needed to provide such services. To this end the
resources and needs of each State shall be surveyed and
a program developed in each State to assure the maximum
participation and use of health personnel and facilities in
the provision of benefits, and to encourage improvement
in the number and distribution of such personnel and fa-
cilities throughout the State. Additional surveys shall be
undertaken as required, and the program in the State
from time to time modified on the basis thereof.
(b) If the Board, after consultation with the Advisory
Council, finds that the personnel or facilities or funds that
are or can be made available are inadequate to insure the
provision of all services included as dental, home-nursing,
or auxiliary services under section 101 of this Act, it may
by regulation limit for a specified period the services which
may be provided as benefits, or modify the extent to which,
or the circumstances under which, they will be provided
to eligible individuals. Any such restriction or limitation
shall be reduced or withdrawn as rapidly as may be prac-
ticable; and, in the case of dental services, priority in the
reduction or withdrawal of any such restriction or limita-
tion shall be given to children.
(c) The Board shall have the duty of studying and
making recommendations as to needed services and facili-
ties for the care of the chronic sick afflicted with physical
ailments, and for the care of individuals afflicted with
mental or nervous diseases, and as to needed provisions
for the prevention of chronic physical diseases and of men-
tal or nervous diseases; and of making reports from time
to time, with recommendations as to legislation, but the
first such report shall be made not later than two years
after benefits under this Act first become available.
HOW BENEFITS OBTAINED: FREE CHOICE BY PATIENT
SEC. 103. Every individual eligible for personal
health services available under this Act may freely select
the physician, dentist, podiatrist, nurse, medical group,
hospital, or other person of his choice to render such serv-
ices, and may change such selection if the practitioner,
medical group, hospital, or other person has agreed under
title II of this Act to furnish the class of services required
and consents to furnish such services to the individual.
General medical, dental, and podiatric services may be ob-
tained by request made by the individual directly to the
practitioner of the individual’s choice. Specialist, home-
nursing, hospital, and auxiliary services shall be obtained
from the specialist, nurse, hospital, or other person of the
individual’s choice, whenever the practitioner from whom
he is receiving medical or dental services as benefits under
this Act refers him for specialist, home-nursing, hospital,
or auxiliary services upon determining that such services
are required in the proper care of his particular case; or
whenever, upon request of the individual, an administra-
tive medical officer, upon a like determination, refers him
for such services. The Board, by regulation, shall dispense
with the necessity of referral in cases of emergency, and
may dispense with the necessity of referral under specified
circumstances or as respects specified classes of services,
or both, if it finds, after consultation with the Advisory
Council, that such action will be conducive to the provision
of a more adequate amount and quality of health care and
will not unreasonably increase the expenditures from the
account for such services.
ELIGIBILITY FOR BENEFITS
SEC. 104. (a) Subject to section 701, every individual
shall be eligible for benefits under this Act throughout any
benefit year if—
(1) he 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) he is entitled, for the first month in the
benefit year, to a benefit under title II of the Social
Security Act or to an annuity under subchapter III
(relating to civil service retirement) of chapter 83 of
title 5, United States Code; or
(3) he is on the first day of the benefit year a
dependent of an individual who is eligible under
paragraph (1) or paragraph (2).
(b) Subject to section 701, every individual, not eligi-
ble therefor under subsection (a), shall be eligible for bene-
fits 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 he has received (or, in the case
of income from self-employment, has accrued) 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 he is entitled to a benefit or an-
nuity referred to in subsection (a)(2); or
(3) the first day in such benefit year on which
he is or becomes a dependent of an individual who
is eligible for benefits under subsection (a)(1) or (2)
under paragraph (1) or (2) of this subsection.
(c) No individual shall be deemed eligible for any per-
sonal health services as a benefit under this Act which
are required by reason of any injury, disease, or disability
on account of which any medical, dental, home-nursing,
hospital, or auxiliary service is being received, or upon ap-
plication therefor would be received, under a workmen’s
compensation law of the United States or of any State,
unless equitable reimbursements to the fund for the provi-
sion of such services as benefits have been made or as-
sured under section 105 of this Act. In any case in which
an individual receives any personal health service as a ben-
efit under this Act with respect to any such injury, dis-
ease, or disability, for which no reimbursement to the 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 furnished such
service, to be paid or reimbursed, pursuant to such work-
men’s compensation law, for the cost of furnishing such
service.
PROVISION OF BENEFITS FOR NONINSURED NEEDY AND
OTHER INDIVIDUALS
SEC. 105. (a) Subject to section 701, any or all bene-
fits 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 for
which equitable reimbursements to the account on behalf
of such needy or other individuals have been made, or for
which reasonable assurance of such reimbursements have
been given, by public agencies of the United States, the
several States, or any of them or of their political subdivi-
sions, such reimbursements to be in accordance with
agreements and working arrangements negotiated with
such public agencies. Services furnished to such needy or
other individuals as benefits 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) 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 provi-
sions of such Act, shall be available to the States for provi-
sion of personal-health services for noninsured needy indi-
viduals in accordance with the provisions of subsection (a)
of this section.
TITLE II—PARTICIPATION OF PHYSICIANS,
DENTISTS, NURSES, HOSPITALS, AND OTHERS
PHYSICIANS AND DENTISTS; SPECIALISTS
SEC. 201. Any individual who is a physician, 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. Any such indi-
vidual 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. The Board, after consultation
with the Advisory Council, shall establish standards as to
the special skills and experience required to qualify an in-
dividual 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 there-
under, standards and certifications developed by profes-
sional agencies shall be utilized as far as is consistent with
the purposes of this Act, and regard shall be had for the
varying needs and the available resources in professional
personnel of the States and of local health-service areas.
NURSES
SEC. 202. Any individual shall be deemed qualified
to render home-nursing services in a State as benefits
under this title if such individual is (a) a professional
nurse registered in such State, or (b) a practical nurse
(1) who is qualified as such under State standards or re-
quirements, or, in the absence of State standards or re-
quirements, is found to be qualified under standards es-
tablished by the Board after consultation with the Advi-
sory Council and with nursing agencies, and (2) who fur-
nishes nursing care under the direction or supervision of
the State health agency, the health agency of a political
subdivision of the State, or an organization supplying and
supervising the services of registered professional nurses
in the State.
HOSPITALS
SEC. 203. Any hospital or other institution shall be
deemed qualified to furnish all or particular classes of hos-
pital services as benefits under this Act if it is qualified
to furnish such services under State standards or require-
ments for the maintenance and operation of hospitals
which apply to the class or classes of services to be fur-
nished, or if, in the absence of such State standards or
requirements, it is found to afford professional services,
personnel, and equipment adequate to promote the health
and safety of individuals requiring the class or classes of
hospital services to be furnished, according to standards
which the Board shall establish after consultation with the
Advisory Council.
AUXILIARY SERVICES
SEC. 204. Any person (as defined in section 901(1))
who is qualified under State standards or requirements
to furnish a class of services included as auxiliary services,
or, in the absence of State standards or requirements, is
found to be qualified to furnish a class of such services
under standards established for such class by the Board
after consultation with the Advisory Council, shall be
deemed qualified to furnish such class of auxiliary services
in that State as benefits under this Act.
AGREEMENTS WITH INDIVIDUAL PRACTITIONERS,
HOSPITALS, AND OTHERS
SEC. 205. 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 re-
sponsibility for the administration in the State of benefits
under this Act (hereinafter in this Act referred to as the
‘‘State agency’’), to furnish such class or classes of serv-
ices as benefits to individuals eligible therefor under this
Act.
AGREEMENTS WITH VOLUNTARY HEALTH INSURANCE
AND OTHER ORGANIZATIONS
SEC. 206. (a) 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 (4) any organiza-
tion operating a voluntary health-service insurance plan
or other voluntary health-service plan.
(b) The State agency is authorized to enter into an
agreement with any organization referred 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 rendering personal health services
under this Act.
(c) 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 agree-
ment to be made on his behalf with the State agency that
he will furnish such services in accordance with this Act
and with regulations prescribed thereunder. Each such in-
dividual 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 benefits,
for carrying out such agreement made by him or on his
behalf.
PROVISIONS COMMON TO ALL AGREEMENTS
SEC. 207. (a) Each agreement made under this title
shall specify the class or classes of services to be furnished
or provided pursuant to its terms, shall contain an under-
taking to comply with this Act and with regulations pre-
scribed thereunder, shall be made upon terms and condi-
tions consistent with the efficient and economical adminis-
tration of this Act, and shall continue in force for such
period and be terminable upon such notice as may be
agreed upon.
(b) No agreement under section 206, and no designa-
tion of an agent, shall for more than one year preclude
any individual or person qualified to furnish personal
health services from exercising such rights as he would
otherwise have under this title (1) to negotiate and enter
into an agreement directly with the State agency, or (2)
to designate another agent for such negotiation, or (3) to
participate in another agreement under section 206.
(c) 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 benefits, to the exclusion in whole or
in part of other individuals, persons, groups, or organiza-
tions qualified to furnish or provide such services.
(d) If the State agency after investigation 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 com-
mitted a substantial breach of the agreement, it shall no-
tify such person of its findings, together with the reasons
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 fur-
ther review provided under title VI, may terminate the
agreement and withdraw the person’s name from the list
published pursuant to title III. After an agreement has
been so terminated, 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
his or its ability and willingness to discharge all obliga-
tions and responsibilities under a new agreement satisfac-
torily in accordance with its provisions.
METHODS OF PAYMENTS FOR SERVICES
SEC. 208. (a) Agreements for the furnishing of med-
ical, 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;
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 of this Act or otherwise promotes the
efficient and economical provision of medical or dental
services in the area.
(b) Agreements for the furnishing of specialist serv-
ices 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) 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 practi-
tioners or organizations or other agencies which undertake
to provide specialist services as well as general medical or
general dental services.
(d) 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. The Board, after consultation with the
Advisory Council and with representatives of interested
hospital organizations, may by regulation prescribe max-
imum rates for hospitalization furnished as benefits under
this Act, and such maximum rates may be varied accord-
ing to classes of localities or types of service. Payments
to hospitals shall be based on the least expensive multiple-
bed accommodations available in the hospital unless the
patient’s condition makes the use of private accommoda-
tions essential for his proper medical care. 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 patients with respect
to the additional cost of more expensive facilities occupied
at the request of the patient, or with respect to services
not included as benefits under this Act.
(e) Agreements for the furnishing of home-nursing
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) In any health-service area where agreements for
the furnishing of general medical or general dental serv-
ices provide for payment only on a per capita basis, the
per capita payments with respect to those individuals re-
siding in the area who have failed to select a practitioner
or other person 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.
AMOUNT OF PAYMENTS FOR SERVICES
SEC. 209. (a) Rates or amounts of payment for par-
ticular 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. In arriv-
ing at the payments to be made for services of general
medical and dental practitioners, specialists, professional
and practical nurses, or other practitioners, regard shall
be had for the annual income or its equivalent which the
payments will provide, and consideration shall be given to
degree of specialization, and to the skill, experience, and
responsibility involved in rendering the services. Such pay-
ments, together with the other terms and conditions of the
agreements made under this title, shall be adequate to
provide professional and financial incentives to practi-
tioners to advance in their professions and to practice in
localities where their services are most needed, to encour-
age high standards in the quality of services furnished,
to give assistance in their use of opportunities for post-
graduate study, and to allow for adequate vacation.
(b) 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
payment, in consideration of the value of the services they
render.
(c) Maximum limits upon the number of eligible indi-
viduals 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) The making of an agreement under section 206
with a group or other organization 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 serv-
ices pursuant to agreements made under section 205 di-
rectly with the person or persons who furnish the services.
PROFESSIONAL RIGHTS AND RESPONSIBILITIES
SEC. 210. (a) Any person who enters into an agree-
ment under this title may terminate such agreement after
reasonable notice and after suitable arrangements are
made to fulfill professional obligations to eligible individ-
uals.
(b) Every physician, dentist, or nurse agreeing to
render services as benefits under this Act shall be free to
practice his profession in the locality of his own choosing,
consistent with the requirements of the laws of the States.
(c) Every physician, dentist, nurse, hospital, or other
person entering 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 individual requesting his services.
(d) No supervision or control over the details of ad-
ministration or operation, or over the selection, tenure, or
compensation of personnel, shall be exercised under the
authority of this Act over any hospital which has agreed
to furnish personal health services as benefits.
TITLE III—LOCAL ADMINISTRATION
DECENTRALIZATION OF ADMINISTRATION
SEC. 301. In order that personal health-service bene-
fits may be made available promptly and in a manner best
adapted to local practices, conditions, and needs, responsi-
bility for administration of the benefits provided 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 adminis-
trative officers, the advice and assistance of local area
committees. The health-service areas of a State shall be
those so designated in the State plan of operations.
LOCAL ADMINISTRATIVE COMMITTEE OR OFFICER
SEC. 302. 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
(2) a local administrative officer, who shall act
with the advice and assistance of a local advisory
committee established in accordance with section
303.
The local administrative committee or officer, with the ad-
vice and assistance of such local professional committees
as may from time to time be established, shall arrange
for the furnishing of personal health-service benefits to eli-
gible individuals in the area and to that end shall—
(a) 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;
(b) 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;
(c) 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
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;
(d) 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;
(e) 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
(f) take or initiate such other administrative ac-
tion as he finds will best carry out, within the area,
the provisions of this Act, and best effectuate its
purposes.
LOCAL AREA COMMITTEES
SEC. 303. (a) A local area committee shall be estab-
lished in each health-service area. If designated by the
State as a local administrative committee, the local area
committee shall perform the functions specified in section
302 and shall formulate policies for the administration of
benefits under this Act in the area. If designated as an
advisory committee, it shall advise and assist in the per-
formance of such functions and the formulation of such
policies. The committee, whether administrative or advi-
sory, shall participate in the solution of problems affecting
the administration of such benefits, shall promote impar-
tiality and freedom from political influence in such admin-
istration, and shall perform related functions to the end
that administration in the area may be responsive to the
wishes and needs of persons furnishing and receiving bene-
fits in the area, be adapted to local practices and re-
sources, and provide adequate and high quality personal
health services to all eligible individuals.
(b) Each local area committee shall consist of not less
than eight nor more than sixteen members. The members
shall be so selected that a majority of the committee shall
be representative of the interests of individuals in the area
who are eligible for benefits, and the remaining mem-
bers shall be chosen from the several professions, hos-
pitals, and other organizations in the area by whom such
benefits will be provided.
(c) The local area committee shall meet as often as
may be necessary, and whenever one-third or more of the
members request a meeting; in the case of a local adminis-
trative committee, not less frequently than once each
month, and in the case of a local advisory committee, not
less frequently than once in each quarter of the year. 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. At least
once each year there shall be a statewide meeting of local
administrative officers and representatives of local admin-
istrative committees. At least once in each year there shall
be a statewide meeting of representatives of all local advi-
sory committees in the State, and any reports or rec-
ommendations made at such meeting shall on the request
of such meeting be transmitted through the State agency
to the Board.
LOCAL PROFESSIONAL COMMITTEES
SEC. 304. Local committees representative of the per-
sons furnishing personal health services in the area shall
be established in each health-service area to assist the
local administrative committee and its executive officer, or
the local administrative officer and the local advisory com-
mittee, as the case may be, in the preservation of the cus-
tomary freedom and responsibility (under applicable State
law) of practitioners in the exercise of professional judg-
ment as to the care of patients, and in the solution of
technical problems concerning the participation of profes-
sional personnel, hospitals, and other qualified persons in
the provision 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 connection with the perform-
ance of agreements for the provision of such services. Such
local committees shall meet on call of the local administra-
tive committee or officer, as the 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.
METHODS OF ADMINISTRATION
SEC. 305. (a) 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
(6) insure the provision of adequate service with
the greatest economy consistent with high standards
of quality.
(b) 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 ap-
pointed by such agency or the head thereof, from individ-
uals 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; and members of local advisory committees
and of local professional committees shall be selected in
accordance with methods set forth in such plan.
(c) In exercising their functions and discharging their
responsibilities under this Act, local administrative officers
and communities, local advisory committees, and local pro-
fessional committees shall observe the provisions of this
Act, and of regulations prescribed thereunder, and of any
regulations, standards, and procedures prescribed by the
State agency.
TITLE IV—STATE ADMINISTRATION
DECLARATION OF POLICY
SEC. 401. It is the intent of Congress that the bene-
fits provided under this Act be administered wherever pos-
sible by the several States, in accordance with plans of
operations submitted and approved as provided in this
title, and in each State insofar as feasible by the same
State agency which administers, or supervises the admin-
istration of, the State’s general public health and maternal
and child health programs.
STATE PLAN OF OPERATIONS
SEC. 402. (a) Any State desiring to assume responsi-
bility for the administration in the State of the personal
health-service benefits provided under this Act to all indi-
viduals in the State who are eligible for such benefits, may
do so for the period beginning October 1, 2002 (when ben-
efits first become available under this Act), or for the pe-
riod 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 twelve months in ad-
vance, has submitted and had approved a State plan of
operations which—
(1) designates as the sole agency for the state-
wide administration of benefits under this Act a sin-
gle 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 pre-
scribed thereunder, and the provisions of the State
plan;
(2) provides for the designation of a State advi-
sory committee which shall include members who are
familiar with the needs for personal 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 members to constitute a
majority, and members chosen from the several pro-
fessions, hospitals, and other organizations in the
State by whom such benefits will be provided, to ad-
vise the State agency in carrying out the administra-
tion of such benefits in the State;
(3) provides for the decentralized administra-
tion of this Act in the State in accordance with title
III for the designation of local health-service areas,
and for such methods of selecting the members of
local advisory committees and of local professional
committees as are calculated to insure representa-
tion of the nature set forth in sections 303 and 304,
respectively;
(4) provides such methods of administration, in-
cluding methods relating to the establishment and
maintenance of personnel standards on a merit basis
(except that the Board shall exercise no authority
with respect to the selection, tenure of office, or
compensation of any individual employed in accord-
ance with such methods), as are found by the Board
to be necessary for the proper and efficient adminis-
tration of such benefits in the State;
(5) provides for the making of surveys of the
resources and needs of the State, in accordance with
section 102(a), and sets forth a program for the ad-
ministration of such benefits in the State which
gives reasonable assurance (A) that maximum use
will be made of all available health personnel and fa-
cilities desiring to participate in the provision of ben-
efits 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 as-
surance of the availability of services in all health-
service areas in the State, and (C) that any mal-
distribution or other inadequacies in the health per-
sonnel or facilities available for such purpose, or in
the quality of the services rendered, will be progres-
sively improved as rapidly as may be practicable;
(6) provides that the State agency will make
such reports in such form and containing such infor-
mation as the Board may from time to time reason-
ably require, and give the Board, upon demand, ac-
cess to the records upon which such information is
based;
(7) provides that all Federal funds paid to the
State agency for purposes of carrying out this Act
in the State shall be properly safeguarded and ex-
pended solely for the purposes for which paid, and
provides for the repayment by the State to the
United States of any such funds lost by the State
agency or diverted from the purposes for which paid;
and
(8) provides for cooperation, including where
necessary entering into working agreements (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 administering this
Act, or benefits under this Act, in other States.
(b) 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 pursu-
ant to this Act, except with the consent of the State or
in accordance with further action by Congress.
(c) In the event of its disapproval of any plan or any
modification therein submitted by a State pursuant to this
title, the Board shall notify the State of such disapproval
and shall, upon request of the State, afford it reasonable
notice and opportunity for a hearing on such disapproval.
(d) If a State has not prior to October 1, 2002, sub-
mitted and had approved a plan of operations, the Board
shall notify the Governor of the State that the Board will
be required to administer this Act in the State, com-
mencing October 1, 2002. The Board shall provide for the
publication of such notice in at least two newspapers of
general circulation in the State. If within sixty days after
such notification to the Governor the State has not sub-
mitted an approvable plan, the Board shall continue such
administration until one year after the submission and ap-
proval of a plan of operations in accordance with this sec-
tion. The Board may waive the requirement 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 pre-
paratory period will not prejudice the interests of eligible
individuals in the State.
(e) Whenever the Board, after reasonable notice and
opportunity for hearing to the State, finds that the State,
having submitted and had approved a plan of operations
under this title—
(1) is not complying substantially with the pro-
visions of such plan, or with the provisions of this
Act or any regulations or standards prescribed
thereunder, or
(2) 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 state-
ment 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.
If within sixty days following such a notice the State has
not taken appropriate action to bring its plan or its admin-
istration thereof into conformity with this Act and regula-
tions and standards thereunder, the Board shall imme-
diately assume responsibility for the administration of this
Act in the State and shall administer the same in such
State for so long thereafter as the State fails to give rea-
sonable assurances of substantial compliance or fails to
submit an approvable plan, as the case may be.
(f) In any State in which the Board has assumed re-
sponsibility for the administration of benefits under this
Act as provided in subsections (d) and (e) of this section,
the Board shall have and discharge all authority and du-
ties, in accordance with the provisions of this Act, which
it finds necessary for that purpose, and the term ‘‘State
agency’’ wherever used in title II or title III of this Act
shall be deemed to refer to the Board.
(g) Nothing in this Act shall preclude any State or
any political subdivision thereof, whether or not the State
has assumed responsibility for the administration of bene-
fits under this Act, from furnishing, with funds available
from sources other than the account, any additional 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 
INSURANCE
BOARD; 
NATIONAL 
ADVISORY 
MEDICAL
POLICY COUNCIL; GENERAL ADMINISTRA-
TIVE PROVISIONS
NATIONAL HEALTH INSURANCE BOARD
SEC. 501. (a) There is hereby established in the De-
partment of Health and Human Services a National
Health Insurance Board, to be composed of five members,
three of whom shall be appointed by the President by and
with the advice and consent of the Senate, and the other
two of whom shall be the Surgeon General of the Public
Health Service and the Commissioner of Social Security.
During his term of membership on the Board, no ap-
pointed member shall engage in any other business, voca-
tion, or employment. At least one of the appointed mem-
bers shall be a doctor of medicine licensed to practice med-
icine or surgery in one of the States. Each appointed mem-
ber 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 an-
nual rate of basic pay for positions at level IV of the Exec-
utive Schedule, and shall hold office for a term of six
years, except that (1) any member appointed to fill a va-
cancy occurring prior to the expiration of the term for
which his predecessor was appointed shall be appointed
for the remainder of such term; and (2) the terms of office
of the members first taking office after the date of the
enactment 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. The President shall designate one of the appointed
members as the Chairman of the Board.
(b) All functions of the Board shall be administered
by the Board under the direction and supervision of the
Secretary of Health and Human Services. The board shall
perform such functions as it finds necessary to carry out
the provisions 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. The Board may delegate to any
of its members, officers, or employees, or with the ap-
proval 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 making regulations,
as it may consider necessary and proper to carry out the
provisions of this Act. The Board may also enter into
agreements for the furnishing or provision of personal
health services under this Act without regard to the provi-
sions of title 5, United States Code, pertaining to the ap-
pointment, status, or compensation of Federal employees,
or pertaining to contracts for personal services, and with-
out regard to section 3709 of the Revised Statutes (41
U.S.C. 5), and any person rendering services pursuant to
an agreement so made shall not by reason thereof be
deemed to be an employee of the United States.
(c) In administering the provisions of this Act, the
Board is authorized to utilize the services and facilities
of any executive department 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 furnishing them.
(d) Personnel of the Board shall be appointed by the
Secretary upon recommendation of the Board. The Sec-
retary is authorized to detail to the Board, upon its re-
quest, any officer or employee of the Department of
Health and Human Services, and in his discretion to reim-
burse, from funds available for the administration of this
Act, the appropriation 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) Upon the request of any State agency admin-
istering a State plan of operations pursuant to title IV
of this Act, or upon the request of any State desiring to
prepare and submit a plan of operations, 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 administration, for the salary (or
for the pay and allowances) of any officer or employee so
detailed.
ADVISORY COUNCIL
SEC. 502. (a) There is hereby established a National
Advisory Medical Policy Council to consist of the Chair-
man of the Board, who shall serve as Chairman of the
Advisory Council ex officio, and sixteen members ap-
pointed by the Secretary of Health and Human Services.
At least eight of the sixteen appointed members shall be
individuals who are familiar with the need for personal
health services in urban or rural areas and who are rep-
resentative of the interests of individuals eligible for bene-
fits under this Act, and at least six of the members shall
be individuals who are outstanding in the medical or other
professions concerned with the provision of services pro-
vided as benefits under this Act and who are representa-
tive of the individuals, organizations, and other persons
by whom personal health services will be provided. Each
appointed member shall hold office for a term of four
years, except that any member appointed to fill a vacancy
occurring prior to the expiration of the term for which
his predecessor was appointed shall be appointed for the
remainder of that term, and the terms of the members
first taking office shall expire, as designated by the Sec-
retary 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 appointment. The Advisory Council
is authorized to appoint such special advisory technical or
professional 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. Appointed Advisory Council members and members
of technical or professional committees, while serving on
business of the Council (inclusive of traveltime), shall re-
ceive compensation at rates fixed by the Secretary, but
not exceeding $200 per day, and shall be entitled to re-
ceive actual and necessary traveling expenses and per diem
in lieu of subsistence while so serving away from their
places of residence. The Advisory Council, 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 func-
tions. 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) 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 perform-
ance of its other duties under this Act.
(c) Section 14 of the Federal Advisory Committee Act
shall not apply to the Advisory Council.
STUDIES, RECOMMENDATIONS, AND REPORTS
SEC. 503. The Board shall have the duty of studying
and making recommendations as to the most effective
methods of providing health services, and as to legislation
and matters of administrative policy concerning health
and related subjects. At the beginning of each regular ses-
sion 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 provisions con-
tained 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 Council, rec-
ommendations of the Advisory Council, and comments
thereon.
NONDISCLOSURE OF INFORMATION
SEC. 504. Information concerning an individual, ob-
tained from him or from any physician, dentist, nurse, or
hospital, or from any other person pursuant to or as a
result of the administration of this Act, shall be held con-
fidential (except for statistical purposes) and shall not be
disclosed or be open to public inspection in any manner
revealing the identity of the individual or other person
from whom the information was obtained 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. Any person who shall violate any provision of
this section shall be deemed guilty of a misdemeanor and,
upon conviction thereof, shall be punished by a fine not
exceeding $50,000 or by imprisonment not exceeding one
year, or both.
PROHIBITION AGAINST DISCRIMINATION
SEC. 505. 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 benefits to all eligible individuals, and all persons quali-
fied under title II to enter into agreements to furnish or
provide such services shall be permitted to do so.
TITLE 
VI—ELIGIBILITY 
DETERMINATIONS,
COMPLAINTS, HEARINGS, AND JUDICIAL
REVIEW
DETERMINATIONS AS TO ELIGIBILITY FOR BENEFITS
SEC. 601. (a) The Secretary of Health and Human
Services through such units of the Department of Health
and Human Services as he may determine, shall upon his
own initiative or upon application of any individual make
determinations as to the eligibility of individuals for bene-
fits 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 notice and opportunity for a hearing with re-
spect to such determination and on the basis of the evi-
dence adduced at the hearing shall affirm, modify, or re-
verse his determination.
(b) In carrying out his responsibility under this sec-
tion, the Secretary shall have all the powers and duties
conferred upon him under sections 205 and 206 of the
Social Security Act. Such powers and duties shall be sub-
ject to the same limitations and rights of judicial review
as are contained in section 205 of such Act. Eligibility
for benefits under this title based on entitlement to an
annuity under subchapter III (relating to civil service re-
tirement) of chapter 83 of title 5, United States Code,
shall be determined on the basis of certification by the
Office of Personnel Management.
(c) Nothing in title IV of this Act shall be deemed
to require or authorize any assumption by the State agen-
cy, designated in accordance with an approved State plan
of operations approved under such title, of any of the Sec-
retary’s responsibilities under this section, but the Sec-
retary may utilize existing facilities and services of any
such agency on the basis of mutual agreements with such
agency.
COMPLAINTS OF ELIGIBLE INDIVIDUALS AND OF
PERSONS FURNISHING BENEFITS
SEC. 602. (a) Any eligible individual aggrieved by
reason of his failure to receive any personal health-service
benefits to which he believes himself entitled, or dissatis-
fied with any service rendered him 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 fail-
ure 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 oc-
curred, or to such other officer as may be provided in reg-
ulations. If the officer to whom such complaint is made
finds, after investigation, that the complaint is well found-
ed, he shall promptly take such steps as may be necessary
and appropriate to correct the action or inaction com-
plained of; and he shall notify the individual or other per-
son making the complaint of his disposition thereof. Any
such individual or other person dissatisfied with the action
taken may in writing request a hearing thereon and shall
be afforded opportunity for the same pursuant to sub-
section (b) of this section.
(b) Provision shall be made for the establishment of
necessary and sufficient impartial tribunals to afford hear-
ings to individuals and other persons entitled thereto
under subsection (a) of this section, or section 207(d) of
this Act, and for further review of the findings, conclu-
sions, and recommendations of such tribunals, in accord-
ance with regulations made by the Board, after consulta-
tion with the Advisory Council. With respect to any com-
plaint involving matters or questions of professional prac-
tice or conduct, the hearing body shall contain competent
and disinterested professional representation; and with re-
spect to any complaint involving only matters or questions
of professional practice or conduct the hearing body shall
consist exclusively of such professional persons.
(c) In administering this section 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 functions under this Act, have
all the powers and duties conferred upon the Secretary
by sections 205 and 206 of the Social Security Act. Such
powers and duties shall be subject to the limitations and
rights of judicial review contained in section 205 of such
Act.
(d) In any State which has assumed responsibility for
the administration of benefits under this Act as provided
in title IV the powers and duties 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.
TITLE VII—APPLICATION OF ACT TO INDIVID-
UALS COVERED UNDER MEDICARE PRO-
GRAM
ELIGIBILITY; BENEFITS AVAILABLE
SEC. 701. (a) 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 he is otherwise eligible for benefits
under this Act in accordance with section 104 or would
otherwise be furnished such benefits in accordance with
section 105, the personal health services (specified in sec-
tion 101) which may be made available to him as benefits
under this Act shall be limited to those services (otherwise
available to him in accordance with section 102) for which
he is ineligible under part A or B of such title XVIII. For
purposes of the preceding sentence, an individual shall be
considered ineligible under part A or B of such title XVIII
if no payment is or can be made to him or on his behalf
thereunder with respect to the item or service involved,
whether because he is not entitled to benefits under which-
ever such part is applicable, because no payment is pro-
vided under either such part for the item or service in-
volved, or because he has exhausted his entitlement to
have payment made thereunder for items or services of
the type involved; and shall also be considered ineligible
under part A or B of such title XVIII with respect to any
item or service (for which he 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 Security
Act.
(b) The Board, after consultation with the Advisory
Council, shall prescribe such regulations as may be nec-
essary 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.
(c) The limitation under subsection (a) of an individ-
ual’s benefits under this Act shall not be construed as af-
fecting the eligibility of his dependents for such benefits
in accordance with subsection (a)(3) or (b)(3) of section
104.
STUDY AND REPORT
SEC. 702. As soon as practicable after 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 insur-
ance for the aged under title XVIII of the Social Security
Act, in order to determine the way in which the latter pro-
gram may be most effectively and equitably transferred
to and incorporated in the program under this Act. In con-
ducting such study, the Secretary shall give particular at-
tention to the transitional problems which would result
from such a transfer, and shall consider in detail (with
respect to each such program) the benefits provided, the
standards of eligibility therefor, the standards and quali-
fications for participation by providers of services of var-
ious types, the methods of administration, the costs and
methods of financing, and 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 extent fea-
sible be preserved with respect to the individuals covered
by that program (and, in appropriate cases, included in
the program under this Act for all individuals who are eli-
gible thereunder, without regard to any transfer). 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 his findings as to the most
effective and equitable way in which the transfer under
consideration could be effected and his detailed rec-
ommendations for legislative, administrative, and other ac-
tions to accomplish it.
TITLE VIII—FISCAL PROVISIONS
USE OF TRUST FUND
SEC. 801. (a) Funds in the National Health Care
Trust Fund shall be available for all expenditures nec-
essary 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 salaries or other ad-
ministrative expenses of any department or agency of the
United States as may be authorized in annual or other
appropriation Acts.
(b) Sums received as reimbursements to the account
pursuant to section 104(c) or section 105, or by virtue
of subrogation pursuant to section 104(c), shall be depos-
ited in the account and shall be available in accordance
with the provisions of subsection (a) of this section.
ALLOTMENT OF FUNDS
SEC. 802. (a) The Board, after consultation 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 dur-
ing the fiscal year of all classes, and of each of the five
classes, of personal health-service benefits specified in sec-
tion 101(a). Such sums shall be determined, after taking
into consideration the estimated amount which will be in
the Trust Fund at the beginning of the fiscal year and
the anticipated income of the account thereafter, with a
view (1) 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
facilities available to furnish personal health-service bene-
fits and on account of reduction or withdrawal of restric-
tions or limitations pursuant to section 102(b), and (2)
to establishing and maintaining a reserve in the Trust
Fund adequate to meet emergency demands in accordance
with subsection (d) of this section and adequate to main-
tain 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) In accordance with regulations 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 2002, 2003, and 2004, 90 per-
cent, and for each fiscal year thereafter 95 percent of each
sum determined pursuant to subsection (a). Such regula-
tions shall provide for allotments on the basis of—
(1) the population in the several States eligible
for benefits under this Act;
(2) professional and other personnel, hospitals,
and other facilities, and supplies and commodities,
to be available in the several States in the provision
of such benefits; and
(3) the cost of reasonable and equitable com-
pensation to such personnel and facilities and for
such supplies and commodities.
Such allotments 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 ade-
quacy of services where personnel and facilities are below
the national average.
(c) From time to time during each fiscal year, the
Board shall allot to the several States the remaining 10
percent or the remaining 5 percent, as the case may be,
of each sum determined pursuant to subsection (a). In
making allotments under this subsection, the Board shall
take into consideration 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 reasonably
adequate benefits under this Act.
(d) In addition to the sums determined pursuant to
subsection (a) to be available for the provision of personal
health-service benefits, the Board, after consultation with
the Advisory Council, is authorized to make emergency al-
lotments from the account if it finds that a disaster, epi-
demic, or other cause has substantially increased the vol-
ume 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) The Board shall from time to time determine the
amounts to be paid to 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) 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 adminis-
trative costs of the State in administering personal health-
service benefits under this Act may be met from the allot-
ments to the State. Such administrative costs, which in
any fiscal year shall not exceed 5 percent of the aggregate
allotments to the State for such fiscal year, shall be appor-
tioned as between the several allotments in accordance
with the costs of administering the respective classes of
benefits; and such apportionment may be made in such
manner, and by such sampling, statistical, or other meth-
ods, as may be agreed upon between the Board and the
State agency.
(g) In any case in which the Board has assumed re-
sponsibility for the administration in a State of benefits
under this Act in accordance with section 402 (d) or (e),
all allotments 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.
GRANTS-IN-AID FOR TRAINING AND EDUCATION
SEC. 803. (a) For the purpose of increasing the avail-
ability of training and education for professional and tech-
nical 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
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) Such grants, in such amounts and for payment
at such times as are approved by the Board, shall be cer-
tified for payment to the Secretary of the Treasury, who
shall pay them from the account to the designated individ-
uals, institutions, or agencies.
(c) For the purposes of this section there shall be
available for the fiscal year 2002 the sum of $5,000,000,
for the fiscal year 2003 the sum of $5,000,000, and for
each fiscal year thereafter an 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
DEFINITION
SEC. 901. As used in this Act:
(1) 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, including
the cash value of all remuneration paid in any me-
dium 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 sys-
tem established by an employer which makes
provision for his employees generally or for a
class or classes of his employees (including any
amount paid by an employer for insurance or
annuities, or into a fund to provide for any
such payment), on account of retirement, or
sickness or accident disability, or medical and
hospitalization expenses in connection with sick-
ness or accident disability, or death; provided,
in the case of a death benefit, that the employee
(I) has not the option to receive, instead of pro-
vision for such death benefit, any part of such
payment or, if such death benefit is insured,
any part of the premiums (or contributions to
premiums) paid by his 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 ben-
efit either upon his withdrawal from the plan or
system providing for such benefit or upon ter-
mination of such plan or system or policy of in-
surance or of his employment with such em-
ployer;
(ii) the payment by an employer (without
deductions from the remuneration of the em-
ployee) of any social-insurance taxes or con-
tributions 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, profes-
sional, or other self-employment.
(2) The term ‘‘employment’’ means any service of
whatever nature performed by an employee for the person
employing him, 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 ves-
sel 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;
(B) service performed in the employ of a State
or any political subdivision thereof, or any instru-
mentality of any one or more of the foregoing which
is wholly owned by one or more States or political
subdivisions;
(C) casual labor not in the course of the em-
ployer’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 connection 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 his ministry and
service performed by a regular 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 defined in
section 1 of the Railroad Retirement Act of 1937 or
section 1 of the Railroad Retirement Act of 1974;
(G) service performance in any calendar quarter
in the employ of any organization exempt from in-
come tax under section 501 of the Internal Revenue
Code of 1986 if—
(i) the renumeration 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 association, and is
performed away from the home office or is rit-
ualistic service in connection with any such so-
ciety, order, or association; or
(iii) such service is performed by a student
who is enrolled and is regularly attending class-
es at a school, college, or university;
(H) service performed in the employ of a for-
eign government (including service as a consular or
other officer or employee or a nondiplomatic rep-
resentative);
(I) service performed in the employ of an in-
strumentality wholly owned by a foreign government,
if—
(i) the service is of a character similar to
that performed in foreign countries by employ-
ees of the United States Government 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 employees thereof
exemption is claimed, grants an equivalent ex-
emption with respect to similar service per-
formed in the foreign country by employees of
the United States Government and of instru-
mentalities thereof; and
(J) service performed in the employ of an inter-
national organization entitled to enjoy privileges, ex-
emptions, and immunities as an international orga-
nization under the International Organizations Im-
munities Act.
(3) In any case in which an individual has received
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 him in the quarter during which the first
of such wages were in fact received by him and in each
quarter of such calendar year thereafter.
(4) The term ‘‘benefit year’’ means a period com-
mencing on July 1 of any year and ending on June 30
of the succeeding year.
(5) The term ‘‘quarter’’ and the term ‘‘calendar quar-
ter’’ mean a period of three calendar months ending on
March 31, June 30, September 30, or December 31.
(6) 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 his own independently estab-
lished business. The term ‘‘employee’’ also includes an of-
ficer of a corporation.
(7) The term ‘‘American vessel’’ means any vessel
documented or numbered under the laws of the United
States; and includes any vessel which is neither docu-
mented nor numbered under the laws of any foreign coun-
try, if its crew is employed solely by one or more citizens
or residents of the United States or corporations orga-
nized under the laws of the United States or of any State.
(8) The term ‘‘American aircraft’’ means an aircraft
registered under the laws of the United States.
(9) The term ‘‘State’’ includes the District of Colum-
bia.
(10) The term ‘‘United States’’, when used in a geo-
graphic sense, means the several States, as defined in
paragraph (9).
(11) The term ‘‘dependent’’ means an unmarried
child (including a stepchild, adopted, or foster child) of
an individual, who is under the age of eighteen, 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 him; a wife of an individual living with such indi-
vidual or receiving regular support from him; a husband
who is under a total disability which has continued for
a period of not less than six consecutive calendar months,
and is living with or receiving regular and substantial sup-
port from such individual; and a parent who is living with
or receiving regular and substantial support from such in-
dividual.
(12) The term ‘‘person’’ means an individual, a trust
or estate, a partnership, a corporation, an association, a
consumer cooperative, or other organization.
EFFECTIVE DATE
SEC. 902. 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 October 1, 2002.
TITLE X—VALUE ADDED TAX AND NATIONAL
HEALTH CARE TRUST FUND
IMPOSITION OF VALUE ADDED TAX
SEC. 1001. (a) IN GENERAL.—Subtitle D of the In-
ternal Revenue 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.
‘‘SUBCHAPTER C. Taxable amount; rate of tax for certain trans-
actions; credit against tax.
‘‘SUBCHAPTER D. Administration.
‘‘SUBCHAPTER E. Definitions and special rules; treatment of cer-
tain 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.
‘‘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-
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—
‘‘(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-
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 his employer shall not be
treated as the performance of services.
‘‘(B) SERVICES FOR EMPLOYEE.—An em-
ployer’s services for his employee shall not be
treated as the performance of services 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.
‘‘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).
‘‘(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:
‘‘(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.
‘‘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-
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).
‘‘(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
tax imposed by section 3901 for such period, such
excess shall be treated as an overpayment of the tax
imposed by section 3901.
‘‘(2) TIME WHEN OVERPAYMENT ARISES.—Any
overpayment under paragraph (1) for any taxable
period shall be treated as arising on the later of—
‘‘(A) the due date for the return for such
period, or
‘‘(B) the date on which the return is filed.
‘‘Subchapter D—Administration
‘‘Sec. 3921. Seller liable for tax.
‘‘Sec. 3922. Tax invoices.
‘‘Sec. 3923. De minimis exemption.
‘‘Sec. 3924. Time for filing return and claiming credit; deposits
of tax.
‘‘Sec. 3925. Treatment of related businesses, etc.
‘‘Sec. 3926. Secretary to be notified of certain events.
‘‘Sec. 3927. Regulations.
‘‘SEC. 3921. SELLER LIABLE FOR TAX.
‘‘The person selling the property or services shall be
liable for the tax imposed by section 3901.
‘‘SEC. 3922. TAX INVOICES.
‘‘(a) SELLER MUST GIVE PURCHASER TAX IN-
VOICE.—Any taxable person engaging in a taxable trans-
action shall give the purchaser a tax invoice with respect
to such transaction if the seller has reason to believe that
the purchaser is a taxable person.
‘‘(b) CONTENT OF INVOICE.—The tax invoice re-
quired by subsection (a) with respect to any transaction
shall set forth—
‘‘(1) the name and identification number of the
seller,
‘‘(2) the name of the purchaser,
‘‘(3) the amount of the tax imposed by section
3901, and
‘‘(4) such other information as may be pre-
scribed by regulations.
‘‘(c) NO CREDIT WITHOUT INVOICE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), a purchaser may claim a credit
with respect to a transaction only if the purchaser—
‘‘(A) has received from the seller and has
in his possession a tax invoice which meets the
requirements of subsection (b), and
‘‘(B) is named as the purchaser in such in-
voice.
‘‘(2) EMPLOYEES OR OTHER AGENTS NAMED IN
INVOICES.—To the extent provided in regulations,
the naming of an employee or other agent of the
purchaser shall be treated as the naming of the pur-
chaser.
‘‘(3) WAIVER
OF
INVOICE
REQUIREMENT
IN
CERTAIN CASES.—To the extent provided in regula-
tions, paragraph (1) shall not apply—
‘‘(A) where the purchaser without fault on
his part fails to receive or fails to have in his
possession a tax invoice,
‘‘(B) to a taxable transaction (or category
of transactions) where—
‘‘(i) the amount involved is de mini-
mis, or
‘‘(ii) the information required by sub-
section (b) can be reliably established by
sampling or by another method and can be
adequately documented.
‘‘(d) TIME FOR FURNISHING INVOICE.—Any invoice
required to be furnished by subsection (a) with respect to
any transaction shall be furnished not later than 15 busi-
ness days after the tax point for such transaction.
‘‘SEC. 3923. DE MINIMIS EXEMPTION.
‘‘(a) IN GENERAL.—Under regulations, a person—
‘‘(1) whose aggregate taxable transactions for
the calendar year do not exceed $20,000, and
‘‘(2) whose aggregate taxable transactions for
the next calendar year can reasonably be expected
not to exceed $20,000,
may elect to be treated as a person who is not a taxable
person for the next calendar year.
‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply—
‘‘(1) to any sale or leasing of real property, and
‘‘(2) to any importing of property.
‘‘(c) TERMINATION
OF ELECTION.—Any election
under subsection (a) for a calendar year shall terminate
if the aggregate taxable transactions—
‘‘(1) for the first calendar quarter in such year
exceed $7,000,
‘‘(2) for the first 2 calendar quarters in such
year exceed $12,000, or
‘‘(3) for the first 3 calendar quarters in such
year exceed $17,000.
Such termination shall take effect on the first day of the
second month following the close of the first period in
which the requirements of paragraph (1), (2), or (3) are
met.
‘‘(d) TAXABLE AMOUNT TREATED
AS ZERO
FOR
ZERO-RATED TRANSACTIONS.—For purposes of this sec-
tion, the taxable amount of any zero-rated transaction
shall be treated as zero.
‘‘(e) CONDITION OF ELECTION.—In the case of a per-
son who is a taxable person for any period, an election
under subsection (a) may be made for succeeding periods
only with the consent of the Secretary. Such consent shall
be conditioned on placing such person, for all succeeding
periods, in the same position with respect to the tax im-
posed by section 3901 (and the credit allowed by section
3916) he would have been in if all property and services
he holds at the time he becomes a nontaxable person had
been acquired as a nontaxable person.
‘‘(f) CASUAL SALES AND LEASES OF REAL PROP-
ERTY EXCLUDED.—For purposes of this section, the term
‘taxable transaction’ does not include a transaction which
is treated as a commercial-type transaction solely by rea-
son of section 3904(b)(1)(A).
‘‘SEC. 3924. TIME FOR FILING RETURN AND CLAIMING
CREDIT; DEPOSITS OF TAX.
‘‘(a) FILING RETURN.—Before the first day of the
second calendar month beginning after the close of each
taxable period, each taxable person shall file a return of
the tax imposed by section 3901 on taxable transactions
having a tax point within such taxable period.
‘‘(b) CREDIT ALLOWED FOR TAXABLE PERIOD IN
WHICH PURCHASER RECEIVES INVOICE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), a credit allowable by section 3916 with
respect to a transaction may be allowed only for the
first taxable period by the close of which the
taxpayer—
‘‘(A) has paid or accrued amounts properly
allocable to the tax imposed by section 3901
with respect to such transaction, and
‘‘(B) has a tax invoice (or equivalent) with
respect to such transaction.
‘‘(2) USE FOR LATER PERIOD.—Under regula-
tions, a credit allowable by section 3916 may be al-
lowed for a period after the period set forth in para-
graph (1).
‘‘(c) TAXABLE
PERIOD.—For purposes of this
chapter—
‘‘(1) IN GENERAL.—The term ‘taxable period’
means a calendar quarter.
‘‘(2) EXCEPTION.—
‘‘(A) ELECTION OF 1-MONTH PERIOD.—If
the taxpayer so elects, the term ‘taxable period’
means a calendar month.
‘‘(B) OTHER PERIODS.—To the extent pro-
vided in regulations, the term ‘taxable period’
includes a period, other than a calendar quarter
or month, selected by the taxpayer.
‘‘(d) TAX POINT.—For purposes of this chapter—
‘‘(1) CHAPTER
RULES
WITH
RESPECT
TO
SELLER GOVERN.—Except as provided in paragraph
(2), the tax point for any sale of property or services
is the earlier of—
‘‘(A) the time (or times) when any income
from the sale should be treated by the seller as
received or accrued (or any loss should be taken
into account by the seller) for purposes of chap-
ter 1, or
‘‘(B) the time (or times) when the seller
receives payment for the sale.
‘‘(2) IMPORTS.—In the case of the importing of
property, the tax point is when the property is en-
tered, or withdrawn from warehouse, for consump-
tion in the United States.
‘‘(e) MONTHLY DEPOSITS REQUIRED.—To the extent
provided in regulations, monthly deposits may be required
‘‘SEC. 3927. REGULATIONS.
‘‘The Secretary shall prescribe such regulations as
may be necessary to carry out the purposes of this chap-
ter.
‘‘Subchapter E—Definitions and Special
Rules; Treatment of Certain Transactions
‘‘Sec. 3931. Definitions.
‘‘Sec. 3932. Special rules.
‘‘Sec. 3933. Personal use by owner of business property or serv-
ices.
‘‘Sec. 3934. Gift of business property or services.
‘‘Sec. 3935. Special rules for dispositions of nonbusiness real
property.
‘‘Sec. 3936. Special rule for insurance contracts.
‘‘SEC. 3931. DEFINITIONS.
‘‘(a) PROPERTY.—For purposes of this chapter, the
term ‘property’ means any tangible property.
‘‘(b) BUSINESS.—For purposes of this chapter, the
term ‘business’ includes—
‘‘(1) a trade, and
‘‘(2) an activity regularly carried on for profit.
‘‘(c) EMPLOYEE.—For purposes of this chapter, the
term ‘employee’ has the meaning such term has for pur-
poses of chapter 24 (relating to withholding).
‘‘(d) PERSON.—For purposes of this chapter, the
term ‘person’ includes any governmental entity.
‘‘(e) BUSINESS DAY.—For purposes of this chapter,
the term ‘business day’ means any day other than Satur-
day and Sunday and other than a legal holiday (within
the meaning of section 7503).
‘‘(f) UNITED STATES.—For purposes of this chapter,
the term ‘United States’, when used in a geographical
sense, includes a Commonwealth and any possession of the
United States.
‘‘SEC. 3932. SPECIAL RULES.
‘‘(a) COORDINATION WITH SUBTITLE A.—For pur-
poses of subtitle A—
‘‘(1) TREATMENT OF CREDIT.—Any credit al-
lowable to a taxpayer under section 3916 which is
attributable to any property or services shall be
treated as a reduction in the amount paid or in-
curred by the taxpayer for such property or services.
‘‘(2) AMOUNT OF DEDUCTION FOR TAX.—The
amount allowable as a deduction for the tax imposed
by section 3901 shall be determined without regard
to any credit allowable under section 3916.
‘‘(3) COMPUTATION
OF
PERCENTAGE
DEPLE-
TION.—For purposes of sections 613 and 613A—
‘‘(A) gross income shall be reduced by the
amount of the tax imposed by section 3901,
and
‘‘(B) taxable income shall be determined
without regard to any deduction allowed for
such tax.
‘‘(b) SPECIAL RULE SALE OF PROPERTY INCLUDES
INCIDENTAL PERFORMANCE
OF SERVICES.—For pur-
poses of this chapter, if in connection with the sale of any
property there is an incidental performance of services,
such performance of services shall be treated as part of
the sale of such property.
‘‘(c) SPECIAL RULE WHERE PERFORMANCE
OF
SERVICES INCLUDES INCIDENTAL TRANSFER OF PROP-
ERTY.—For purposes of this chapter, if in connection with
the performance of any services there is an incidental
transfer of property, such transfer shall be treated as part
of the performance of such services.
‘‘(d) AUTHORITY
TO
ZERO
RATE
DE
MINIMIS
TRANSACTIONS, ETC.—The Secretary may prescribe regu-
lations providing that the rate of tax shall be zero for a
taxable transaction (or category of such transactions)
where—
‘‘(1) the amount involved is de minimis, or
‘‘(2) the revenue raised by taxing the trans-
action is not sufficient to justify the administrative
and other costs involved in the payment and collec-
tion of the tax.
‘‘(e) IMPORTING TREATED
AS SALE
AND PUR-
CHASE.—For purposes of this chapter, the importing of
any property into the United States shall be treated as
both a sale and purchase of such property by the person
importing such property.
‘‘(f) SUBCHAPTER S CORPORATION TREATED
AS
NOT A CORPORATION.—For purposes of this chapter, an
S corporation (as defined in section 1361(a)) shall be
treated as a person which is not a corporation.
‘‘(g) USE INCLUDES HELD FOR USE.—For purposes
of this chapter, property and services held for use by any
person shall be treated as used by the person.
‘‘SEC. 3933. PERSONAL USE BY OWNER OF BUSINESS PROP-
ERTY OR SERVICES.
‘‘(a) GENERAL RULE.—If any business property or
services are used by an owner of the taxpayer for personal
purposes, for purposes of this chapter such use shall be
treated as a taxable transaction.
‘‘(b) TAXABLE AMOUNT.—In the case of a use de-
scribed in subsection (a), for purposes of this chapter, the
taxable amount shall be—
‘‘(1) except as provided in paragraph (2), the
fair market value of the property or the services, or
‘‘(2) if such use is only the temporary use of
property, the fair rental value of such use.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) BUSINESS PROPERTY OR SERVICES.—The
term ‘business property or services’ means any prop-
erty or services if a sale of such property, or the per-
formance of such services, by the taxpayer would be
a taxable transaction.
‘‘(2) OWNER.—The term ‘owner’ means—
‘‘(A) in the case of a sole proprietorship,
the proprietor,
‘‘(B) in the case of any other business en-
terprise, any holder of a beneficial interest in
the corporation, partnership, or other entity,
and
‘‘(C) any member of the family (within the
meaning of section 267(c)(4)) of an individual
described in subparagraph (A) or (B).
‘‘SEC. 3934. GIFT OF BUSINESS PROPERTY OR SERVICES.
‘‘(a) GENERAL RULE.—In the case of any gift of
business property or services, for purposes of this
chapter—
‘‘(1) such gift shall be treated as a taxable
transaction, and
‘‘(2) the taxable amount shall be the amount
determined under section 3933(b).
‘‘(b) GIFTS RELATED TO BUSINESS PROMOTION AC-
TIVITIES.—For purposes of subsection (a), the term ‘gift’
includes any gift of property or services transferred in con-
nection with business promotion activities.
‘‘SEC. 3935. SPECIAL RULES FOR DISPOSITIONS OF NON-
BUSINESS REAL PROPERTY.
‘‘(a) IN GENERAL.—In the case of any sale of real
property which is treated as a commercial-type transaction
solely by reason of section 3904(b)(1)(A), for purposes of
this chapter, the taxable amount shall be the excess (if
any) of—
‘‘(1) the amount realized on such sale, over
‘‘(2) the adjusted cost to the taxpayer of such
real property.
‘‘(b) ADJUSTED COST.—For purposes of subsection
(a)—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the term ‘adjusted cost’ means, with re-
spect to any property, the basis of such property in-
creased by expenditures properly chargeable to cap-
ital account (other than taxes or other carrying
charges described in section 266) for periods during
the holding period for such property.
‘‘(2) TRANSITIONAL RULE.—The adjusted cost
of any property shall include only amounts incurred
during periods after December 31, 1999.
‘‘(c) VALUE ADDED TAX NOT TAKEN INTO AC-
COUNT.—For purposes of this section, the amount realized
on any sale of real property shall not include any amount
attributable to the tax imposed by this chapter.
‘‘SEC. 3936. SPECIAL RULE FOR INSURANCE CONTRACTS.
‘‘In the case of any contract of insurance, for pur-
poses of this chapter, the taxable amount is the excess
of—
‘‘(1) the portion of the premium attributable to
insurance coverage, over
‘‘(2) the actuarial cost to the insurer of pro-
viding such insurance coverage.’’
(b) CLERICAL AMENDMENT.—The table of chapters
for subtitle D of the Internal Revenue Code of 1986 is
amended by inserting before the item relating to chapter
31 the following:
‘‘CHAPTER 30. Value added tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to transactions occurring after De-
cember 31, 2001.
SEC. 1002. REVENUE FROM VALUE ADDED TAX TO FUND
NATIONAL HEALTH CARE TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 of the
Internal Revenue Code of 1986 (relating to trust fund
code) is amended by adding at the end the following new
section:
‘‘SEC. 9511. NATIONAL HEALTH CARE TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘National Health Care Trust Fund’,
consisting of such amounts as may be appropriated or
credited to the Trust Fund as provided in this section or
section 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—There are here-
by appropriated to the National Health Care Trust Fund
amounts equivalent to amounts received in the Treasury
from the tax imposed under section 3901 (relating to the
value added tax).
‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts
in the National Health Care Trust Fund shall be available
only for purposes of making expenditures to carry out the
program of health benefits under the National Health In-
surance Act.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter A is amended by adding at the end
the following new item:
‘‘Sec. 9511. National Health Care Trust Fund.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 2001.
TITLE XI—STUDY AND DEVELOPMENT OF
COST CONTROL MECHANISMS
DEVELOPMENT OF COST CONTROL MECHANISMS
SEC. 1101. (a) STUDY.—The Secretary of Health
and Human Services shall conduct a study analyzing var-
ious methods to control the costs of providing personal
health benefits under this Act, and shall include in such
study an analysis of the effects on such costs of medical
malpractice claims and the purchase of medical mal-
practice liability insurance by providers of the benefits.
(b) REPORTS TO CONGRESS.—Not later than Octo-
ber 1, 2003, the Secretary shall submit a report to Con-
gress describing the study conducted under subsection (a),
and shall include in the report recommendations on meth-
ods to control costs under this Act, including recommenda-
tions on the development of a system under which medical
malpractice claims brought against providers of benefits
under this Act may be resolved in an equitable and cost-
effective manner. Not later than April 1, 2004, the Sec-
retary shall promulgate regulations to implement the rec-
ommendations made in the report.
Æ