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‘‘(i) types of items and services (in-
cluding any special disease management
program); and
‘‘(ii) types of health care professionals
providing such items and services.
‘‘(B) EMERGENCY MEDICAL CARE.—A de-
scription of the extent to which the plan covers
emergency medical care (including the extent to
which the plan provides for access to urgent
care centers), and any definitions provided
under the plan for the relevant plan terminol-
ogy referring to such care.
‘‘(C) PREVENTATIVE
SERVICES.—A de-
scription of the extent to which the plan pro-
vides benefits for preventative services.
‘‘(D) DRUG FORMULARIES.—A description
of the extent to which covered benefits are de-
termined by the use or application of a drug
formulary and a summary of the process for de-
termining what is included in such formulary.
‘‘(E) 
COBRA 
CONTINUATION
COV-
ERAGE.—A description of the requirements
under section 4980B.
‘‘(2) LIMITATIONS, EXCLUSIONS, AND RESTRIC-
TIONS ON COVERED BENEFITS.—
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‘‘(A) 
CATEGORIZATION
OF
EXCLUDED
BENEFITS.—A description of benefits specifi-
cally excluded from coverage, categorized by
types of items and services.
‘‘(B) 
UTILIZATION
REVIEW
AND
PREAUTHORIZATION REQUIREMENTS.—Whether
coverage for medical care is limited or excluded
on 
the 
basis 
of 
utilization 
review 
or
preauthorization requirements.
‘‘(C) LIFETIME, ANNUAL, OR OTHER PE-
RIOD LIMITATIONS.—A description of the cir-
cumstances under which, and the extent to
which, coverage is subject to lifetime, annual, or
other period limitations, categorized by types of
benefits.
‘‘(D) CUSTODIAL CARE.—A description of
the circumstances under which, and the extent
to which, the coverage of benefits for custodial
care is limited or excluded, and a statement of
the definition used by the plan for custodial
care.
‘‘(E) 
EXPERIMENTAL
TREATMENTS.—
Whether coverage for any medical care is lim-
ited or excluded because it constitutes experi-
mental treatment or technology, and any defini-
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tions provided under the plan for the relevant
plan terminology referring to such limited or
excluded care.
‘‘(F) MEDICAL APPROPRIATENESS OR NE-
CESSITY.—Whether coverage for medical care
may be limited or excluded by reason of a fail-
ure to meet the plan’s requirements for medical
appropriateness or necessity, and any defini-
tions provided under the plan for the relevant
plan terminology referring to such limited or
excluded care.
‘‘(G) SECOND
OR
SUBSEQUENT
OPIN-
IONS.—A description of the circumstances
under which, and the extent to which, coverage
for second or subsequent opinions is limited or
excluded.
‘‘(H) SPECIALTY CARE.—A description of
the circumstances under which, and the extent
to which, coverage of benefits for specialty care
is conditioned on referral from a primary care
provider.
‘‘(I) CONTINUITY OF CARE.—A description
of the circumstances under which, and the ex-
tent to which, coverage of items and services
provided by any health care professional is lim-
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ited or excluded by reason of the departure by
the professional from any defined set of provid-
ers.
‘‘(J) RESTRICTIONS
ON
COVERAGE
OF
EMERGENCY
SERVICES.—A description of the
circumstances under which, and the extent to
which, the plan, in covering emergency medical
care furnished to a participant or beneficiary of
the plan imposes any financial responsibility de-
scribed in subsection (c) on participants or
beneficiaries or limits or conditions benefits for
such care subject to any other term or condition
of such plan.
‘‘(c) 
PARTICIPANT’S
FINANCIAL
RESPONSIBIL-
ITIES.—The information required under subsection (a) in-
cludes an explanation of—
‘‘(1) a participant’s financial responsibility for
payment of premiums, coinsurance, copayments,
deductibles, and any other charges; and
‘‘(2) the circumstances under which, and the
extent to which, the participant’s financial respon-
sibility described in paragraph (1) may vary, includ-
ing any distinctions based on whether a health care
provider from whom covered benefits are obtained is
included in a defined set of providers.
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‘‘(d) DISPUTE RESOLUTION PROCEDURES.—The in-
formation required under subsection (a) includes a de-
scription of the processes adopted by the plan pursuant
to section 503(b) of Employee Retirement Income Secu-
rity Act of 1974, including—
‘‘(1) descriptions thereof relating specifically
to—
‘‘(A) coverage decisions;
‘‘(B) internal review of coverage decisions;
and
‘‘(C) any external review of coverage deci-
sions; and
‘‘(2) the procedures and time frames applicable
to each step of the processes referred to in subpara-
graphs (A), (B), and (C) of paragraph (1).
‘‘(e) INFORMATION AVAILABLE ON REQUEST.—
‘‘(1) ACCESS TO PLAN BENEFIT INFORMATION
IN ELECTRONIC FORM.—
‘‘(A) IN GENERAL.—A group health plan
shall, upon written request (made not more fre-
quently than annually), make available to par-
ticipants and beneficiaries, in a generally recog-
nized electronic format, the following informa-
tion:
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‘‘(i) the latest summary plan descrip-
tion, including the latest summary of ma-
terial modifications; and
‘‘(ii) the actual plan provisions setting
forth the benefits available under the plan
to the extent such information relates to the
coverage options under the plan available to the
participant or beneficiary. A reasonable charge
may be made to cover the cost of providing
such information in such generally recognized
electronic format. The Secretary may by regula-
tion prescribe a maximum amount which will
constitute a reasonable charge under the pre-
ceding sentence.
‘‘(B) ALTERNATIVE ACCESS.—The require-
ments of this paragraph may be met by making
such information generally available (rather
than upon request) on the Internet or on a pro-
prietary computer network in a format which is
readily accessible to participants and bene-
ficiaries.
‘‘(2) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED ON REQUEST.—
‘‘(A) INCLUSION IN SUMMARY PLAN DE-
SCRIPTION
OF
SUMMARY
OF
ADDITIONAL
IN-
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FORMATION.—The information required under
subsection (a) includes a summary description
of the types of information required by this
subsection to be made available to participants
and beneficiaries on request.
‘‘(B) 
INFORMATION
REQUIRED
FROM
PLANS ON REQUEST.—In addition to informa-
tion required to be included in summary plan
descriptions under this subsection, a group
health plan shall provide the following informa-
tion to a participant or beneficiary on request:
‘‘(i) NETWORK CHARACTERISTICS.—If
the plan (or a health insurance issuer of-
fering health insurance coverage in connec-
tion with the plan) utilizes a defined set of
providers under contract with the plan (or
issuer), a detailed list of the names of such
providers and their geographic location, set
forth separately with respect to primary
care providers and with respect to special-
ists.
‘‘(ii) CARE
MANAGEMENT
INFORMA-
TION.—A description of the circumstances
under which, and the extent to which, the
plan has special disease management pro-
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grams or programs for persons with dis-
abilities, indicating whether these pro-
grams are voluntary or mandatory and
whether a significant benefit differential
results from participation in such pro-
grams.
‘‘(iii) INCLUSION
OF
DRUGS
AND
BIOLOGICALS IN FORMULARIES.—A state-
ment of whether a specific drug or biologi-
cal is included in a formulary used to de-
termine benefits under the plan and a de-
scription of the procedures for considering
requests for any patient-specific waivers.
‘‘(iv) PROCEDURES FOR DETERMINING
EXCLUSIONS BASED ON MEDICAL NECES-
SITY OR EXPERIMENTAL TREATMENTS.—
Upon receipt by the participant or bene-
ficiary of any notification of an adverse
coverage decision based on a determination
relating to medical necessity or an experi-
mental treatment or technology, a descrip-
tion of the procedures and medically-based
criteria used in such decision.
‘‘(v) PREAUTHORIZATION AND UTILI-
ZATION REVIEW PROCEDURES.—Upon re-
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ceipt by the participant or beneficiary of
any notification of an adverse coverage de-
cision, a description of the basis on which
any preauthorization requirement or any
utilization review requirement has resulted
in such decision.
‘‘(vi) ACCREDITATION
STATUS
OF
HEALTH INSURANCE ISSUERS AND SERV-
ICE PROVIDERS.—A description of the ac-
creditation and licencing status (if any) of
each health insurance issuer offering
health insurance coverage in connection
with the plan and of any utilization review
organization utilized by the issuer or the
plan, together with the name and address
of the accrediting or licencing authority.
‘‘(vii) MEASURES OF ENROLLEE SAT-
ISFACTION.—The latest information (if
any) maintained by the plan, or by any
health insurance issuer offering health in-
surance coverage in connection with the
plan, relating to enrollee satisfaction.
‘‘(viii) QUALITY PERFORMANCE MEAS-
URES.—The latest information (if any)
maintained by the plan, or by any health
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insurance issuer offering health insurance
coverage in connection with the plan, relat-
ing to quality of performance of the deliv-
ery of medical care with respect to cov-
erage options offered under the plan and
of health care professionals and facilities
providing medical care under the plan.
‘‘(ix) INFORMATION RELATING TO EX-
TERNAL REVIEWS.—The number of exter-
nal reviews under section 503(b)(4) of the
Employee Retirement Income Security Act
of 1974 that have been completed during
the prior plan year and the number of such
reviews in which the recommendation re-
ported under section 503(b)(4)(C)(iii) of
such Act includes a recommendation for
modification or reversal of an internal re-
view decision under the plan.
‘‘(C) 
INFORMATION
REQUIRED
FROM
HEALTH CARE PROFESSIONALS ON REQUEST.—
Any health care professional treating a partici-
pant or beneficiary under a group health plan
shall provide to the participant or beneficiary,
on request, a description of his or her profes-
sional qualifications (including board certifi-
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cation status, licensing status, and accreditation
status, if any), privileges, and experience and a
general description by category (including sal-
ary, fee-for-service, capitation, and such other
categories as may be specified in regulations of
the Secretary) of the applicable method by
which such professional is compensated in con-
nection with the provision of such medical care.
‘‘(D) 
INFORMATION
REQUIRED
FROM
HEALTH CARE FACILITIES ON REQUEST.—Any
health care facility from which a participant or
beneficiary has sought treatment under a group
health plan shall provide to the participant or
beneficiary, on request, a description of the fa-
cility’s corporate form or other organizational
form and all forms of licensing and accredita-
tion status (if any) assigned to the facility by
standard-setting organizations.
‘‘(f) ACCESS TO INFORMATION RELEVANT TO THE
COVERAGE OPTIONS UNDER WHICH THE PARTICIPANT OR
BENEFICIARY IS ELIGIBLE TO ENROLL.—In addition to
information otherwise required to be made available under
this section, a group health plan shall, upon written re-
quest (made not more frequently than annually), make
available to a participant (and an employee who, under
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the terms of the plan, is eligible for coverage but not en-
rolled) in connection with a period of enrollment the sum-
mary plan description for any coverage option under the
plan under which the participant is eligible to enroll and
any information described in clauses (i), (ii), (iii), (vi),
(vii), and (viii) of subsection (e)(2)(B).
‘‘(g) ADVANCE NOTICE
OF CHANGES
IN DRUG
FORMULARIES.—Not later than 30 days before the effec-
tive of date of any exclusion of a specific drug or biological
from any drug formulary under the plan that is used in
the treatment of a chronic illness or disease, the plan shall
take such actions as are necessary to reasonably ensure
that plan participants are informed of such exclusion. The
requirements of this subsection may be satisfied—
‘‘(1) by inclusion of information in publications
broadly distributed by plan sponsors, employers, or
employee organizations;
‘‘(2) by electronic means of communication (in-
cluding the Internet or proprietary computer net-
works in a format which is readily accessible to par-
ticipants);
‘‘(3) by timely informing participants who,
under an ongoing program maintained under the
plan, have submitted their names for such notifica-
tion; or
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‘‘(4) by any other reasonable means of timely
informing plan participants.’’.
(b) CLERICAL AMENDMENT.—The table of sections
of such subchapter of such chapter is amended by adding
at the end the following new item:
‘‘Sec. 9814. Disclosure by group health plans.’’.
SEC. 3102. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act. The Secretary
of the Treasury or the Secretary’s delegate shall first issue
all regulations necessary to carry out the amendments
made by this subtitle before such date.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
with respect to a violation of a requirement imposed by
such amendments before the date of issuance of final regu-
lations issued in connection with such requirement, if the
plan has sought to comply in good faith with such require-
ment.
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Subtitle C—Medical Savings
Accounts
SEC. 3201. EXPANSION OF AVAILABILITY OF MEDICAL SAV-
INGS ACCOUNTS.
(a) REPEAL OF LIMITATIONS ON NUMBER OF MEDI-
CAL SAVINGS ACCOUNTS.—
(1) IN GENERAL.—Subsections (i) and (j) of
section 220 of the Internal Revenue Code of 1986
are hereby repealed.
(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 220(c) of such Code is amended by strik-
ing subparagraph (D).
(b) ALL EMPLOYERS MAY OFFER MEDICAL SAVINGS
ACCOUNTS.—
(1) IN
GENERAL.—Subclause (I) of section
220(c)(1)(A)(iii) of such Code (defining eligible indi-
vidual) is amended by striking ‘‘and such employer
is a small employer’’.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 220(c) of
such Code is amended by striking subparagraph
(C).
(B) Subsection (c) of section 220 of such
Code is amended by striking paragraph (4) and
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by redesignating paragraph (5) as paragraph
(4).
(c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED
FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
220(b) of such Code is amended to read as follows:
‘‘(2) MONTHLY LIMITATION.—The monthly lim-
itation for any month is the amount equal to 1⁄12 of
the annual deductible (as of the first day of such
month) of the taxpayer’s coverage under the high
deductible health plan.’’.
(2) CONFORMING AMENDMENT.—Clause (ii) of
section 220(d)(1)(A) of such Code is amended by
striking ‘‘75 percent of’’.
(d) BOTH EMPLOYERS AND EMPLOYEES MAY CON-
TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph
(5) of section 220(b) of such Code is amended to read
as follows:
‘‘(5) COORDINATION WITH EXCLUSION FOR EM-
PLOYER
CONTRIBUTIONS.—The limitation which
would (but for this paragraph) apply under this sub-
section to the taxpayer for any taxable year shall be
reduced (but not below zero) by the amount which
would (but for section 106(b)) be includible in the
taxpayer’s gross income for such taxable year.’’.
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(e) REDUCTION
OF
PERMITTED
DEDUCTIBLES
UNDER HIGH DEDUCTIBLE HEALTH PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section
220(c)(2) of such Code (defining high deductible
health plan) is amended—
(A) by striking ‘‘$1,500’’ and inserting
‘‘$1,000’’; and
(B) by striking ‘‘$3,000’’ and inserting
‘‘$2,000’’.
(2) CONFORMING AMENDMENT.—Subsection (g)
of section 220 of such Code is amended—
(A) by striking ‘‘1998’’ and inserting
‘‘1999’’; and
(B) by striking ‘‘1997’’ and inserting
‘‘1998’’.
(f) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED
UNDER CAFETERIA PLANS.—Subsection (f) of section
125 of such Code is amended by striking ‘‘106(b),’’.
(g) INDIVIDUALS RECEIVING IMMEDIATE FEDERAL
ANNUITIES
ELIGIBLE
FOR
MEDICAL
SAVINGS
AC-
COUNTS.—Paragraph (1) of section 220(c) of such Code
(defining eligible individual), as amended by subsections
(a) and (b), is amended by adding at the end the following
new subparagraph:
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‘‘(C) SPECIAL
RULES
FOR
INDIVIDUALS
RECEIVING IMMEDIATE FEDERAL ANNUITIES.—
‘‘(i) 
IN
GENERAL.—Subparagraph
(A)(iii) and subsection (b)(4) shall not
apply for any month to an individual—
‘‘(I) who, as of the first day of
such month, is enrolled in a high de-
ductible health plan under chapter 89
of title 5, United States Code; and
‘‘(II) who is entitled to receive
for such month any amount by reason
of being an annuitant (as defined in
section 8901(3) of such title 5).
‘‘(ii) SPECIAL RULE FOR SPOUSE OF
ANNUITANT.—In the case of the spouse of
an individual described in clause (i) who is
not also described in clause (i), subsection
(b)(4) shall not apply to such spouse if
such individual and spouse have family
coverage under the same plan described in
clause (i)(I).’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
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SEC. 3202. EXCEPTION FROM INSURANCE LIMITATION IN
CASE OF MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Section 220(d)(2)(B) of the Inter-
nal Revenue Code of 1986 is amended by adding at the
end the following new clause:
‘‘(iii) INSURANCE OFFERED BY COM-
MUNITY HEALTH CENTERS.—
‘‘(I) IN
GENERAL.—Subject to
clauses (II) and (III), clause (i) shall
not apply to any expense for coverage
under insurance offered by a health
center (as defined in section 330(a)(1)
of the Public Health Service Act) if
the coverage consists solely of cov-
erage for required primary health ben-
efits 
(as 
defined 
in 
section
330(b)(1)(A) of such Act) provided on
a capitated basis.
‘‘(II) INCOME LIMITATION.—Sub-
clause (I) shall only apply to expenses
for coverage of an individual who, in
the taxable year involved, has income
that is less than 200 percent of the
income official poverty line (as defined
by the Office of Management and
Budget, and revised annually in ac-
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cordance with section 673(2) of the
Omnibus Budget Reconciliation Act of
1981) applicable to a family of the
size involved.
‘‘(III) LIMITATION
ON
NUMBER
OF CONTRACTS.—For a taxable year
ending in a calendar year, subclause
(I) shall apply only to expenses for
coverage for the first 15,000 individ-
uals enrolled in insurance described in
such subclause in the year.’’.
(b) REPORTS ON ENROLLMENT.—Section 330(j)(3)
of the Public Health Service Act (42 U.S.C. 254c(j)(3))
is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (K);
(2) by striking the period at the end of sub-
paragraph (L) and inserting ‘‘; and’’; and
(3) by inserting after subparagraph (L) the fol-
lowing new subparagraph:
‘‘(M) if the center offers insurance cov-
erage to an individual with a medical savings
account 
under 
subclause 
(I) 
of 
section
220(d)(2)(B)(iii), the center shall provide such
reports in such time and manner as may be re-
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quired by the Secretary and the Secretary of
the Treasury in order to carry out subclause
(III) of such section.’’.
SEC. 3203. SENSE OF THE HOUSE OF REPRESENTATIVES.
It is the sense of the House of Representatives that
patients are best served when they are empowered to make
informed choices about their own health care. The same
is true regarding an individual’s choice of health insur-
ance. A system that gives people the power to choose the
coverage that best meets their needs, combined with insur-
ance market reforms, offers great promise of increased
choices and greater access to health insurance for Ameri-
cans.
Subtitle D—Revenue Offsets
SEC. 3301. CLARIFICATION OF DEFINITION OF SPECIFIED
LIABILITY LOSS.
(a) IN GENERAL.—Subparagraph (B) of section
172(f)(1) of the Internal Revenue Code of 1986 (defining
specified liability loss) is amended to read as follows:
‘‘(B)(i) Any amount allowable as a deduc-
tion under this chapter (other than section
468(a)(1) or 468A(a)) which is in satisfaction
of a liability under a Federal or State law re-
quiring—
‘‘(I) the reclamation of land;
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‘‘(II) the decommissioning of a nu-
clear power plant (or any unit thereof);
‘‘(III) the dismantlement of a drilling
platform;
‘‘(IV) the remediation of environ-
mental contamination; or
‘‘(V) a payment under any workers
compensation act (within the meaning of
section 461(h)(2)(C)(i)).
‘‘(ii) A liability shall be taken into account
under this subparagraph only if—
‘‘(I) the act (or failure to act) giving
rise to such liability occurs at least 3 years
before the beginning of the taxable year;
and
‘‘(II) the taxpayer used an accrual
method of accounting throughout the pe-
riod or periods during which such act (or
failure to act) occurred.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to net operating losses arising in
taxable years ending after the date of the enactment of
this Act.
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SEC. 3302. PROPERTY SUBJECT TO A LIABILITY TREATED
IN SAME MANNER AS ASSUMPTION OF LI-
ABILITY.
(a) REPEAL OF PROPERTY SUBJECT TO A LIABILITY
TEST.—
(1) SECTION 357.—Section 357(a) of the Inter-
nal Revenue Code of 1986 (relating to assumption
of liability) is amended by striking ‘‘, or acquires
from the taxpayer property subject to a liability’’ in
paragraph (2).
(2) SECTION 358.—Section 358(d)(1) of such
Code (relating to assumption of liability) is amended
by striking ‘‘or acquired from the taxpayer property
subject to a liability’’.
(3) SECTION 368.—
(A) Section 368(a)(1)(C) of such Code is
amended by striking ‘‘, or the fact that prop-
erty acquired is subject to a liability,’’.
(B) 
The 
last 
sentence 
of 
section
368(a)(2)(B) of such Code is amended by strik-
ing ‘‘, and the amount of any liability to which
any property acquired from the acquiring cor-
poration is subject,’’.
(b) CLARIFICATION
OF ASSUMPTION
OF LIABIL-
ITY.—
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(1) IN GENERAL.—Section 357 of such Code is
amended by adding at the end the following new
subsections:
‘‘(d) DETERMINATION OF AMOUNT OF LIABILITY AS-
SUMED.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, 
section 
358(d), 
section 
362(d), 
section
368(a)(1)(C), and section 368(a)(2)(B), except as
provided in regulations—
‘‘(A) a recourse liability (or portion there-
of) shall be treated as having been assumed if,
as determined on the basis of all facts and cir-
cumstances, the transferee has agreed to, and is
expected to, satisfy such liability (or portion),
whether or not the transferor has been relieved
of such liability; and
‘‘(B) a nonrecourse liability shall be treat-
ed as having been assumed by the transferee of
any asset subject to such liability.
‘‘(2) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and section
362(d). The Secretary may also prescribe regula-
tions which provide that the manner in which a li-
ability is treated as assumed under this subsection
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is applied, where appropriate, elsewhere in this
title.’’.
(2) LIMITATION ON BASIS INCREASE ATTRIB-
UTABLE
TO
ASSUMPTION
OF
LIABILITY.—Section
362 of such Code is amended by adding at the end
the following new subsection:
‘‘(d) LIMITATION
ON
BASIS
INCREASE
ATTRIB-
UTABLE TO ASSUMPTION OF LIABILITY.—
‘‘(1) IN GENERAL.—In no event shall the basis
of any property be increased under subsection (a) or
(b) above fair market value (determined without re-
gard to section 7701(g)) by reason of any gain rec-
ognized to the transferor as a result of the assump-
tion of a liability.
‘‘(2) TREATMENT OF GAIN NOT SUBJECT TO
TAX.—Except as provided in regulations, if—
‘‘(A) gain is recognized to the transferor as
a result of an assumption of a nonrecourse li-
ability by a transferee which is also secured by
assets not transferred to such transferee; and
‘‘(B) no person is subject to tax under this
title on such gain,
then, for purposes of determining basis under sub-
sections (a) and (b), the amount of gain recognized
by the transferor as a result of the assumption of
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the liability shall be determined as if the liability as-
sumed by the transferee equaled such transferee’s
ratable portion of such liability determined on the
basis of the relative fair market values (determined
without regard to section 7701(g)) of all of the as-
sets subject to such liability.’’.
(c) APPLICATION TO PROVISIONS OTHER THAN SUB-
CHAPTER C.—
(1) SECTION 584.—Section 584(h)(3) of such
Code is amended—
(A) by striking ‘‘, and the fact that any
property transferred by the common trust fund
is subject to a liability,’’ in subparagraph (A);
and
(B) by striking clause (ii) of subparagraph
(B) and inserting:
‘‘(ii) 
ASSUMED
LIABILITIES.—For
purposes of clause (i), the term ‘assumed
liabilities’ means any liability of the com-
mon trust fund assumed by any regulated
investment company in connection with the
transfer referred to in paragraph (1)(A).
‘‘(C) ASSUMPTION.—For purposes of this
paragraph, in determining the amount of any li-
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ability assumed, the rules of section 357(d)
shall apply.’’.
(2) SECTION 1031.—The last sentence of section
1031(d) of such Code is amended—
(A) by striking ‘‘assumed a liability of the
taxpayer or acquired from the taxpayer prop-
erty subject to a liability’’ and inserting ‘‘as-
sumed (as determined under section 357(d)) a
liability of the taxpayer’’; and
(B) by striking ‘‘or acquisition (in the
amount of the liability)’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 351(h)(1) of such Code is amended
by striking ‘‘, or acquires property subject to a li-
ability,’’.
(2) Section 357 of such Code is amended by
striking ‘‘or acquisition’’ each place it appears in
subsection (a) or (b).
(3) Section 357(b)(1) of such Code is amended
by striking ‘‘or acquired’’.
(4) Section 357(c)(1) of such Code is amended
by striking ‘‘, plus the amount of the liabilities to
which the property is subject,’’.
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(5) Section 357(c)(3) of such Code is amended
by striking ‘‘or to which the property transferred is
subject’’.
(6) Section 358(d)(1) of such Code is amended
by striking ‘‘or acquisition (in the amount of the li-
ability)’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers after the date of the
enactment of this Act.
SEC. 
3303. 
LIMITATION 
ON 
REQUIRED 
ACCRUAL 
OF
AMOUNTS RECEIVED FOR PERFORMANCE OF
CERTAIN PERSONAL SERVICES.
(a) IN GENERAL.—Paragraph (5) of section 448(d)
of the Internal Revenue Code of 1986 (relating to special
rule for services) is amended by inserting ‘‘in fields re-
ferred to in paragraph (2)(A)’’ after ‘‘services by such per-
son’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1998.
(c) COORDINATION WITH SECTION 481.—In the case
of any taxpayer required by this section to change its
method of accounting for any taxable year—
(1) such change shall be treated as initiated by
the taxpayer;
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(2) such change shall be treated as made with
the consent of the Secretary of the Treasury; and
(3) the period for taking into account the ad-
justments under section 481 by reason of such
change shall be 3 years.
SEC. 3304. RETURNS RELATING TO CANCELLATIONS OF IN-
DEBTEDNESS BY ORGANIZATIONS LENDING
MONEY.
(a) 
IN
GENERAL.—Paragraph 
(2) 
of 
section
6050P(c) of the Internal Revenue Code of 1986 (relating
to definitions and special rules) is amended by striking
‘‘and’’ at the end of subparagraph (B), by striking the
period at the end of subparagraph (C) and inserting ‘‘;
and’’, and by inserting after subparagraph (C) the follow-
ing new subparagraph:
‘‘(D) any organization a significant trade
or business of which is the lending of money.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to discharges of indebtedness
after December 31, 1998.
SEC. 3305. CLARIFICATION AND EXPANSION OF MATHE-
MATICAL ERROR ASSESSMENT PROCEDURES.
(a) TIN DEEMED INCORRECT IF INFORMATION ON
RETURN DIFFERS WITH AGENCY RECORDS.—Section
6213(g)(2) of the Internal Revenue Code of 1986 (defin-
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ing mathematical or clerical error) is amended by adding
at the end the following flush sentence:
‘‘A taxpayer shall be treated as having omitted a
correct TIN for purposes of the preceding sentence
if information provided by the taxpayer on the re-
turn with respect to the individual whose TIN was
provided differs from the information the Secretary
obtains from the person issuing the TIN.’’.
(b) EXPANSION OF MATHEMATICAL ERROR PROCE-
DURES TO CASES WHERE TIN ESTABLISHES INDIVIDUAL
NOT ELIGIBLE FOR TAX CREDIT.—Section 6213(g)(2) of
such Code is amended by striking ‘‘and’’ at the end of
subparagraph (J), by striking the period at the end of the
subparagraph (K) and inserting ‘‘; and’’, and by adding
at the end the following new subparagraph:
‘‘(L) the inclusion on a return of a TIN re-
quired to be included on the return under sec-
tion 21, 24, or 32 if—
‘‘(i) such TIN is of an individual
whose age affects the amount of the credit
under such section; and
‘‘(ii) the computation of the credit on
the return reflects the treatment of such
individual as being of an age different
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from the individual’s age based on such
TIN.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
SEC. 3306. INCLUSION OF ROTAVIRUS GASTROENTERITIS
AS A TAXABLE VACCINE.
(a) IN GENERAL.—Section 4132(1) of the Internal
Revenue Code of 1986 (defining taxable vaccine) is
amended by adding at the end the following new subpara-
graph:
‘‘(K) 
Any 
vaccine 
against 
rotavirus
gastroenteritis.’’.
(b) EFFECTIVE DATE.—
(1) SALES.—The amendment made by this sec-
tion shall apply to sales after the date of the enact-
ment of this Act.
(2) DELIVERIES.—For purposes of paragraph
(1), in the case of sales on or before the date of the
enactment of this Act for which delivery is made
after such date, the delivery date shall be considered
the sale date.
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TITLE IV—HEALTH CARE
LAWSUIT REFORM
Subtitle A—General Provisions
SEC. 4001. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This title shall apply with re-
spect to any health care liability action brought in any
State or Federal court, except that this title shall not
apply to—
(1) an action for damages arising from a vac-
cine-related injury or death to the extent that title
XXI of the Public Health Service Act applies to the
action; or
(2) an action under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1001 et
seq.).
(b) PREEMPTION.—This title shall preempt any State
law to the extent such law is inconsistent with the limita-
tions contained in this title. This title shall not preempt
any State law that provides for defenses or places limita-
tions on a person’s liability in addition to those contained
in this title or otherwise imposes greater restrictions than
those provided in this title.
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(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (b) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
(d) AMOUNT
IN CONTROVERSY.—In an action to
which this title applies and which is brought under section
1332 of title 28, United States Code, the amount of non-
economic damages or punitive damages, and attorneys’
fees or costs, shall not be included in determining whether
the matter in controversy exceeds the sum or value of
$50,000.
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(e) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this title shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of section 1331 or 1337 of
title 28, United States Code.
SEC. 4002. DEFINITIONS.
As used in this title:
(1) ACTUAL DAMAGES.—The term ‘‘actual dam-
ages’’ means damages awarded to pay for economic
loss.
(2) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means a system established
under Federal or State law that provides for the res-
olution of health care liability claims in a manner
other than through health care liability actions.
(3) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and any person on whose behalf such an action is
brought. If such action is brought through or on be-
half of an estate, the term includes the claimant’s
decedent. If such action is brought through or on be-
half of a minor or incompetent, the term includes
the claimant’s legal guardian.
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(4) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established.
Such measure or degree of proof is more than that
required under preponderance of the evidence but
less than that required for proof beyond a reason-
able doubt.
(5) COLLATERAL
SOURCE
PAYMENTS.—The
term ‘‘collateral source payments’’ means any
amount paid or reasonably likely to be paid in the
future to or on behalf of a claimant, or any service,
product, or other benefit provided or reasonably like-
ly to be provided in the future to or on behalf of a
claimant, as a result of an injury or wrongful death,
pursuant to—
(A) any State or Federal health, sickness,
income-disability, accident or workers’ com-
pensation Act;
(B) any health, sickness, income-disability,
or accident insurance that provides health bene-
fits or income-disability coverage;
(C) any contract or agreement of any
group, organization, partnership, or corporation
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to provide, pay for, or reimburse the cost of
medical, hospital, dental, or income disability
benefits; and
(D) any other publicly or privately funded
program.
(6) DRUG.—The term ‘‘drug’’ has the meaning
given such term in section 201(g)(1) of the Federal
Food, 
Drug, 
and 
Cosmetic 
Act 
(21 
U.S.C.
321(g)(1)).
(7) ECONOMIC
LOSS.—The term ‘‘economic
loss’’ means any pecuniary loss resulting from injury
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs,
and loss of business or employment opportunities),
to the extent recovery for such loss is allowed under
applicable State law.
(8) HARM.—The term ‘‘harm’’ means any le-
gally cognizable wrong or injury for which punitive
damages may be imposed.
(9) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ means—
(A) a hospital or medical expense incurred
policy or certificate;
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(B) a hospital or medical service plan con-
tract;
(C) a health maintenance subscriber con-
tract; or
(D) a Medicare+Choice plan (offered
under part C of title XVIII of the Social Secu-
rity Act),
that provides benefits with respect to health care
services.
(10) HEALTH
CARE
LIABILITY
ACTION.—The
term ‘‘health care liability action’’ means a civil ac-
tion brought in a State or Federal court against—
(A) a health care provider;
(B) an entity which is obligated to provide
or pay for health benefits under any health ben-
efit plan (including any person or entity acting
under a contract or arrangement to provide or
administer any health benefit); or
(C) the manufacturer, distributor, supplier,
marketer, promoter, or seller of a medical prod-
uct,
in which the claimant alleges a claim (including third
party claims, cross claims, counter claims, or contribution
claims) based upon the provision of (or the failure to pro-
vide or pay for) health care services or the use of a medical
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product, regardless of the theory of liability on which the
claim is based or the number of plaintiffs, defendants, or
causes of action.
(11) HEALTH
CARE
LIABILITY
CLAIM.—The
term ‘‘health care liability claim’’ means a claim in
which the claimant alleges that injury was caused by
the provision of (or the failure to provide) health
care services.
(12) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any person that is en-
gaged in the delivery of health care services in a
State and that is required by the laws or regulations
of the State to be licensed or certified by the State
to engage in the delivery of such services in the
State.
(13) 
HEALTH
CARE
SERVICE.—The 
term
‘‘health care service’’ means any service eligible for
payment under a health benefit plan, including serv-
ices related to the delivery or administration of such
service.
(14) MEDICAL DEVICE.—The term ‘‘medical de-
vice’’ has the meaning given such term in section
201(h) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(h)).
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(15) NON-ECONOMIC
DAMAGES.—The term
‘‘non-economic damages’’ means damages paid to an
individual for pain and suffering, inconvenience,
emotional distress, mental anguish, loss of consor-
tium, injury to reputation, humiliation, and other
nonpecuniary losses.
(16) PERSON.—The term ‘‘person’’ means any
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any
other entity, including any governmental entity.
(17) PRODUCT SELLER.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘‘product seller’’ means a
person who, in the course of a business con-
ducted for that purpose—
(i) sells, distributes, rents, leases, pre-
pares, blends, packages, labels, or is other-
wise involved in placing, a product in the
stream of commerce; or
(ii) installs, repairs, or maintains the
harm-causing aspect of a product.
(B) EXCLUSION.—Such term does not in-
clude—
(i) a seller or lessor of real property;
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(ii) a provider of professional services
in any case in which the sale or use of a
product is incidental to the transaction and
the essence of the transaction is the fur-
nishing of judgment, skill, or services; or
(iii) any person who—
(I) acts in only a financial capac-
ity with respect to the sale of a prod-
uct; or
(II) leases a product under a
lease arrangement in which the selec-
tion, possession, maintenance, and op-
eration of the product are controlled
by a person other than the lessor.
(18) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means damages awarded against any per-
son not to compensate for actual injury suffered, but
to punish or deter such person or others from en-
gaging in similar behavior in the future.
(19) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, American Samoa,
the Northern Mariana Islands, and any other terri-
tory or possession of the United States.
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SEC. 4003. EFFECTIVE DATE.
This title will apply to—
(1) any health care liability action brought in a
Federal or State court; and
(2) any health care liability claim subject to an
alternative dispute resolution system,
that is initiated on or after the date of enactment of this
title, except that any health care liability claim or action
arising from an injury occurring before the date of enact-
ment of this title shall be governed by the applicable stat-
ute of limitations provisions in effect at the time the injury
occurred.
Subtitle B—Uniform Standards for
Health Care Liability Actions
SEC. 4011. STATUTE OF LIMITATIONS.
A health care liability action may not be brought
after the expiration of the 2-year period that begins on
the date on which the alleged injury that is the subject
of the action was discovered or should reasonably have
been discovered, but in no case after the expiration of the
5-year period that begins on the date the alleged injury
occurred.
SEC. 4012. CALCULATION AND PAYMENT OF DAMAGES.
(a) TREATMENT OF NON-ECONOMIC DAMAGES.—
(1) LIMITATION
ON
NON-ECONOMIC
DAM-
AGES.—The total amount of non-economic damages
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that may be awarded to a claimant for losses result-
ing from the injury which is the subject of a health
care liability action may not exceed $250,000, re-
gardless of the number of parties against whom the
action is brought or the number of actions brought
with respect to the injury. The limitation under this
paragraph shall not apply to an action for damages
based solely on intentional denial of medical treat-
ment necessary to preserve a patient’s life that the
patient is otherwise qualified to receive, against the
wishes of a patient, or if the patient is incompetent,
against the wishes of the patient’s guardian, on the
basis of the patient’s present or predicated age, dis-
ability, degree of medical dependency, or quality of
life.
(2) LIMIT.—If, after the date of the enactment
of this Act, a State enacts a law which prescribes
the amount of non-economic damages which may be
awarded in a health care liability action which is dif-
ferent from the amount prescribed by section
4012(a)(1), the State amount shall apply in lieu of
the amount prescribed by such section. If, after the
date of the enactment of this Act, a State enacts a
law which limits the amount of recovery in a health
care liability action without delineating between eco-
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nomic and non-economic damages, the State amount
shall apply in lieu of the amount prescribed by such
section.
(3) JOINT AND SEVERAL LIABILITY.—In any
health care liability action brought in State or Fed-
eral court, a defendant shall be liable only for the
amount of non-economic damages attributable to
such defendant in direct proportion to such defend-
ant’s share of fault or responsibility for the claim-
ant’s actual damages, as determined by the trier of
fact. In all such cases, the liability of a defendant
for non-economic damages shall be several and not
joint and a separate judgment shall be rendered
against each defendant for the amount allocated to
such defendant.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) GENERAL RULE.—Punitive damages may,
to the extent permitted by applicable State law, be
awarded in any health care liability action for harm
in any Federal or State court against a defendant if
the claimant establishes by clear and convincing evi-
dence that the harm suffered was the result of con-
duct—
(A) specifically intended to cause harm; or
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(B) conduct manifesting a conscious, fla-
grant indifference to the rights or safety of oth-
ers.
(2) 
APPLICABILITY.—This 
subsection 
shall
apply to any health care liability action brought in
any Federal or State court on any theory where pu-
nitive damages are sought. This subsection does not
create a cause of action for punitive damages. This
subsection does not preempt or supersede any State
or Federal law to the extent that such law would
further limit the award of punitive damages.
(3) BIFURCATION.—At the request of any
party, the trier of fact shall consider in a separate
proceeding whether punitive damages are to be
awarded and the amount of such award. If a sepa-
rate proceeding is requested, evidence relevant only
to the claim of punitive damages, as determined by
applicable State law, shall be inadmissible in any
proceeding to determine whether actual damages are
to be awarded.
(4) DRUGS AND DEVICES.—
(A) IN GENERAL.—
(i) 
PUNITIVE
DAMAGES.—Punitive
damages shall not be awarded against a
manufacturer or product seller of a drug
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or medical device which caused the claim-
ant’s harm where—
(I) such drug or device was sub-
ject to premarket approval by the
Food and Drug Administration with
respect to the safety of the formula-
tion or performance of the aspect of
such drug or device which caused the
claimant’s harm, or the adequacy of
the packaging or labeling of such drug
or device which caused the harm, and
such drug, device, packaging, or label-
ing was approved by the Food and
Drug Administration; or
(II) the drug is generally recog-
nized as safe and effective pursuant to
conditions established by the Food
and Drug Administration and applica-
ble regulations, including packaging
and labeling regulations.
(ii) APPLICATION.—Clause (i) shall
not apply in any case in which the defend-
ant, before or after premarket approval of
a drug or device—
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(I) intentionally and wrongfully
withheld from or misrepresented to
the Food and Drug Administration in-
formation concerning such drug or de-
vice required to be submitted under
the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 301 et seq.) or
section 351 of the Public Health Serv-
ice Act (42 U.S.C. 262) that is mate-
rial and relevant to the harm suffered
by the claimant; or
(II) made an illegal payment to
an official or employee of the Food
and Drug Administration for the pur-
pose of securing or maintaining ap-
proval of such drug or device.
(B) PACKAGING.—In a health care liability
action for harm which is alleged to relate to the
adequacy of the packaging or labeling of a drug
which is required to have tamper-resistant
packaging under regulations of the Secretary of
Health and Human Services (including labeling
regulations related to such packaging), the
manufacturer or product seller of the drug shall
not be held liable for punitive damages unless
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such packaging or labeling is found by the court
by clear and convincing evidence to be substan-
tially out of compliance with such regulations.
(c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—
(1) GENERAL RULE.—In any health care liabil-
ity action in which the damages awarded for future
economic and non-economic loss exceeds $50,000, a
person shall not be required to pay such damages in
a single, lump-sum payment, but shall be permitted
to make such payments periodically based on when
the damages are likely to occur, as such payments
are determined by the court.
(2) FINALITY OF JUDGMENT.—The judgment
of the court awarding periodic payments under this
subsection may not, in the absence of fraud, be re-
opened at any time to contest, amend, or modify the
schedule or amount of the payments.
(3) 
LUMP-SUM
SETTLEMENTS.—This 
sub-
section shall not be construed to preclude a settle-
ment providing for a single, lump-sum payment.
(d) TREATMENT
OF COLLATERAL SOURCE PAY-
MENTS.—
(1) INTRODUCTION
INTO
EVIDENCE.—In any
health care liability action, any defendant may intro-
duce evidence of collateral source payments. If any
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defendant elects to introduce such evidence, the
claimant may introduce evidence of any amount paid
or contributed or reasonably likely to be paid or con-
tributed in the future by or on behalf of the claim-
ant to secure the right to such collateral source pay-
ments.
(2) NO SUBROGATION.—No provider of collat-
eral source payments shall recover any amount
against the claimant or receive any lien or credit
against the claimant’s recovery or be equitably or le-
gally subrogated to the right of the claimant in a
health care liability action.
(3) APPLICATION TO SETTLEMENTS.—This sub-
section shall apply to an action that is settled as well
as an action that is resolved by a fact finder.
SEC. 4013. ALTERNATIVE DISPUTE RESOLUTION.
Any ADR used to resolve a health care liability action
or claim shall contain provisions relating to statute of limi-
tations, non-economic damages, joint and several liability,
punitive damages, collateral source rule, and periodic pay-
ments which are consistent with the provisions relating to
such matters in this title.
SEC. 4014. REPORTING ON FRAUD AND ABUSE ENFORCE-
MENT ACTIVITIES.
The General Accounting Office shall—
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or payment activities, shall be made available for inspec-
tion and copying as provided in this section through the
originating provider, rather than the receiving health care
provider or health plan, unless the originating provider
does not maintain the information.
‘‘(c) INVESTIGATIONAL INFORMATION.—With respect
to protected health information that was created as part
of the requesting individual’s participation in a clinical
trial monitored by an institutional review board estab-
lished to review health research with respect to potential
risks to human subjects pursuant to Federal regulations
adopted under section 1802(b) of the Public Health Serv-
ice Act (42 U.S.C. 300v–1(b)) and the notice (informally
referred to as the ‘Common Rule’) promulgated in the
Federal Register at 56 Fed. Reg. 28003), a request under
subsection (a) shall be granted only to the extent and in
a manner consistent with such regulations.
‘‘(d) OTHER EXCEPTIONS.—Unless ordered by a
court of competent jurisdiction, a person to whom a re-
quest under subsection (a) is made is not required to grant
the request, if—
‘‘(1) the person determines that the disclosure
of the information could reasonably be expected to
endanger the life or physical safety of, or cause sub-
stantial harm to, any individual; or
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‘‘(2) the information is compiled principally—
‘‘(A) in anticipation of a civil, criminal, or
administrative action or proceeding; or
‘‘(B) for use in such action or proceeding.
‘‘(e) DENIAL
OF REQUEST
FOR INSPECTION
OR
COPYING.—If a person to whom a request under sub-
section (a) is made denies a request for inspection or copy-
ing pursuant to this section, the person shall inform the
individual making the request, in writing, of—
‘‘(1) the reasons for the denial of the request;
‘‘(2) the availability of procedures for further
review of the denial; and
‘‘(3) the individual’s right to file with the per-
son a concise statement setting forth the request.
‘‘(f) STATEMENT REGARDING REQUEST.—If an indi-
vidual has filed with a person a statement under sub-
section (e)(3) with respect to protected health information,
the person, in any subsequent disclosure of the informa-
tion—
‘‘(1) shall include a notation concerning the in-
dividual’s statement; and
‘‘(2) may include a concise statement of the
reasons for denying the request for inspection or
copying.
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‘‘(g) PROCEDURES.—A person providing access to
protected health information for inspection or copying
under this section may set forth appropriate procedures
to be followed for such inspection or copying and may re-
quire an individual to pay reasonable costs associated with
such inspection or copying.
‘‘(h) INSPECTION
AND COPYING
OF SEGREGABLE
PORTION.—A person to whom a request under subsection
(a) is made shall permit the inspection and copying of any
reasonably segregable portion of a record after deletion of
any portion that the person is not required to disclose
under this section.
‘‘(i) DEADLINE.—A person described in subsection
(a) shall comply with or deny, in accordance with this sec-
tion, a request for inspection or copying of protected
health information under this section not later than 30
days after the date on which the person receives the re-
quest.
‘‘(j) RULES GOVERNING AGENTS.—An agent of a
person described in subsection (a) shall not be required
to provide for the inspection and copying of protected
health information, except where—
‘‘(1) the protected health information is re-
tained by the agent; and
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‘‘(2) the agent has been asked by the person to
fulfill the requirements of this section.
‘‘SUPPLEMENTATION OF PROTECTED HEALTH
INFORMATION
‘‘SEC. 1182. (a) IN GENERAL.—Subject to subsection
(b), not later than 45 days after the date on which a per-
son who is a health care provider, health plan, employer,
health or life insurer, or educational institution receives,
from an individual who is a subject of protected health
information that is maintained by the person, a request
in writing to amend the information by adding a concise
written supplement to it, the person—
‘‘(1) shall make the amendment requested;
‘‘(2) shall inform the individual of the amend-
ment that has been made; and
‘‘(3) shall make reasonable efforts to inform
any person who is identified by the individual, who
is not an officer, employer, or agent of the person
receiving the request, and to whom the unamended
portion of the information was disclosed during the
preceding year, by sending a notice to the person’s
last known address that an amendment, consisting
of the addition of a supplement, has been made to
the protected health information of the individual.
‘‘(b) REFUSAL TO AMEND.—If a person described in
subsection (a) refuses to make an amendment requested
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by an individual under such subsection, the person shall
inform the individual, in writing, of—
‘‘(1) the reasons for the refusal to make the
amendment;
‘‘(2) any procedures for further review of the
refusal; and
‘‘(3) the individual’s right to file with the per-
son a concise statement setting forth the requested
amendment and the individual’s reasons for dis-
agreeing with the refusal.
‘‘(c) STATEMENT OF DISAGREEMENT.—If an individ-
ual has filed a statement of disagreement with a person
under subsection (b)(3), the person, in any subsequent dis-
closure of the disputed portion of the information—
‘‘(1) shall include a notation that such individ-
ual has filed a statement of disagreement; and
‘‘(2) may include a concise statement of the
reasons for not making the requested amendment.
‘‘(d) RULES GOVERNING AGENTS.—The agent of a
person described in subsection (a) shall not be required
to make amendments to individually identifiable health in-
formation, except where—
‘‘(1) the information is retained by the agent;
and
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‘‘(2) the agent has been asked by such person
to fulfill the requirements of this section.
‘‘(e) DUPLICATIVE REQUESTS FOR AMENDMENTS.—
If a person described in subsection (a) receives a duplica-
tive request for an amendment of information as provided
for in such subsection and a statement of disagreement
with respect to the request has been filed pursuant to sub-
section (c), the person shall inform the individual of such
filing and shall not be required to carry out the procedures
under this section.
‘‘(f) RULE OF CONSTRUCTION.—This section shall
not be construed—
‘‘(1) to permit an individual to modify state-
ments in his or her record that document the factual
observations of another individual or state the re-
sults of diagnostic tests; or
‘‘(2) to permit an individual to amend his or
her record as to the type, duration, or quality of
treatment the individual believes he or she should
have been provided.
‘‘NOTICE OF CONFIDENTIALITY PRACTICES
‘‘SEC. 1183. (a) PREPARATION OF WRITTEN NO-
TICE.—A person who is a health care provider, health
plan, health oversight agency, public health authority, em-
ployer, health or life insurer, health researcher, or edu-
cational institution shall post or provide, in writing and
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in a clear and conspicuous manner, notice of the person’s
protected health information confidentiality practices. The
notice shall include—
‘‘(1) a description of an individual’s rights with
respect to protected health information;
‘‘(2) the intended uses and disclosures of pro-
tected health information;
‘‘(3) the procedures established by the person
for the exercise of an individual’s rights with respect
to protected health information; and
‘‘(4) the procedures established by the person
for obtaining copies of the notice.
‘‘(b) MODEL NOTICE.—The Secretary, after notice
and opportunity for public comment, and based on the ad-
vice of the National Committee on Vital and Health Sta-
tistics established under section 306(k) of the Public
Health Service Act (42 U.S.C. 242k(k)), shall develop and
disseminate, not later than 6 months after the date of the
enactment of the Patient Protection Act of 1998, model
notices of confidentiality practices, for use under this sec-
tion. Use of a model notice developed by the Secretary
shall serve as a complete defense in any civil action to an
allegation that a violation of this section has occurred.
‘‘ESTABLISHMENT OF SAFEGUARDS
‘‘SEC. 1184. (a) IN GENERAL.—A person who is a
health care provider, health plan, health oversight agency,
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public health authority, employer, health or life insurer,
health researcher, or educational institution shall estab-
lish, maintain, and enforce reasonable and appropriate ad-
ministrative, technical, and physical safeguards to protect
the confidentiality, security, accuracy, and integrity of
protected health information created, received, obtained,
maintained, used, transmitted, or disposed of by the per-
son.
‘‘(b) FACTORS TO BE CONSIDERED.—A person sub-
ject to subsection (a) shall consider the following factors
in establishing safeguards under such subsection:
‘‘(1) The need for protected health information.
‘‘(2) The categories of personnel who will have
access to protected health information.
‘‘(3) The feasibility of limiting access to individ-
ual identifiers.
‘‘(4) The appropriateness of the policy or proce-
dure to the person, and to the medium in which pro-
tected health information is stored and transmitted.
‘‘(5) The value of audit trails in computerized
records.
‘‘(c) RELATIONSHIP TO PART C REQUIREMENT.—
Any safeguard established under this section shall be con-
sistent with the requirement in section 1173(d)(2).
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‘‘(d) CONVERSION TO NONIDENTIFIABLE HEALTH
INFORMATION.—A person subject to subsection (a) shall,
to the extent practicable and consistent with the purpose
for which protected health information is maintained, con-
vert such information into nonidentifiable health informa-
tion.
‘‘AVAILABILITY OF PROTECTED HEALTH INFORMATION
FOR PURPOSES OF HEALTH CARE OPERATIONS
‘‘SEC. 1185. (a) DISCLOSURE.—Any person who
maintains protected health information may disclose the
information to a health care provider or a health plan for
the purpose of permitting the provider or plan to conduct
health care operations.
‘‘(b) USE.—A health care provider or a health plan
that maintains protected health information may use it for
the purposes described in subsection (a).
‘‘(c) LIMITATION ON SALE OR BARTER.—Notwith-
standing subsection (b), no health care provider or health
plan may, as part of conducting health care operations,
sell or barter protected health information.
‘‘RELATIONSHIP TO OTHER LAWS
‘‘SEC. 1186. (a) STATE LAW.—
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the provisions of this part shall
preempt a provision of State law to the extent that
such provision—
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‘‘(A) otherwise would be preempted as in-
consistent with this part under article VI of the
Constitution of the United States;
‘‘(B) relates to authorization for the use or
disclosure of—
‘‘(i) protected health information for
health care operations; or
‘‘(ii) nonidentifiable health informa-
tion; or
‘‘(C) relates to any of the following:
‘‘(i) Inspection or copying of protected
health information by a person who is a
subject of the information.
‘‘(ii) Amendment of protected health
information by a person who is a subject
of the information.
‘‘(iii) Notice of confidentiality prac-
tices with respect to protected health infor-
mation.
‘‘(iv) Establishment of safeguards for
protected health information.
‘‘(2) EXCEPTIONS.—Nothing in this part shall
be construed to preempt or modify a provision of
State law to the extent that such provision relates
to protected health information and—
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‘‘(A) the confidentiality of the records
maintained by a licensed mental health profes-
sional;
‘‘(B) the provision of health care to a
minor, or the disclosure of information about a
minor to a parent or guardian of the minor;
‘‘(C) condition-specific limitations on dis-
closure;
‘‘(D) the use or disclosure of information
for use in legally authorized—
‘‘(i) disease or injury reporting;
‘‘(ii) public health surveillance, inves-
tigation, or intervention;
‘‘(iii) vital statistics reporting, such as
reporting of birth or death information;
‘‘(iv) reporting of abuse or neglect in-
formation;
‘‘(v) reporting of information concern-
ing a communicable disease status; or
‘‘(vi) reporting concerning the safety
or effectiveness of a biological product reg-
ulated under section 351 of the Public
Health Service Act (42 U.S.C. 262) or a
drug or device regulated under the Federal
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Food, Drug, and Cosmetic Act (21 U.S.C.
301 et seq.);
‘‘(E) the disclosure to a person by a health
care provider of information about an individ-
ual, in any case in which the provider has de-
termined—
‘‘(i) in the provider’s reasonable medi-
cal judgment, that the individual is uncon-
scious, incompetent, or otherwise incapable
of deciding whether to authorize disclosure
of the protected health information; and
‘‘(ii) in the provider’s reasonable judg-
ment, that the person is a spouse, relative,
guardian, or close friend of the individ-
ual’s; or
‘‘(F) the use of information by, or the dis-
closure of information to, a person holding a
valid and applicable power of attorney that in-
cludes the authority to make health care deci-
sions on behalf of an individual who is a subject
of the information.
‘‘(3) PRIVILEGES.—Nothing in this part shall
be construed to preempt or modify a provision of
State law to the extent that such provision relates
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to a privilege of a witness or other person in a court
of that State.
‘‘(b) FEDERAL LAW.—Nothing in this part shall be
construed to preempt, modify, or repeal a provision of any
other Federal law relating to protected health information
or relating to an individual’s access to protected health
information or health care services. Nothing in this part
shall be construed to preempt, modify, or repeal a provi-
sion of Federal law to the extent that such provision re-
lates to a privilege of a witness or other person in a court
of the United States.
‘‘CIVIL PENALTIES
‘‘SEC. 1187. (a) VIOLATION.—A person who the Sec-
retary determines has substantially and materially failed
to comply with this part shall be subject, in addition to
any other penalties that may be prescribed by law—
‘‘(1) in a case in which the violation relates to
section 1181 or 1182, to a civil penalty of not more
than $500 for each such violation but not to exceed
$5,000 in the aggregate for all violations of an iden-
tical requirement or prohibition during a calendar
year;
‘‘(2) in the case in which the violation relates
to section 1183 or 1184, to a civil penalty of not
more than $10,000 for each such violation, but not
to exceed $50,000 in the aggregate for all violations
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of an identical requirement or prohibition during a
calendar year; or
‘‘(3) in a case in which the Secretary finds that
such violations have occurred with such frequency as
to constitute a general business practice, to a civil
penalty of not more than $100,000.
‘‘(b) PROCEDURES
FOR
IMPOSITION
OF
PEN-
ALTIES.—Section 1128A, other than subsections (a) and
(b) and the second sentence of subsection (f) of that sec-
tion, shall apply to the imposition of a civil or monetary
penalty under this section in the same manner as such
provisions apply with respect to the imposition of a penalty
under section 1128A.
‘‘DEFINITIONS
‘‘SEC. 1188. As used in this part:
‘‘(1) AGENT.—The term ‘agent’ means a per-
son, including a contractor, who represents and acts
for another under the contract or relation of agency,
or whose function is to bring about, modify, affect,
accept performance of, or terminate contractual obli-
gations between the principal and a third person.
‘‘(2) CONDITION-SPECIFIC LIMITATIONS ON DIS-
CLOSURE.—The term ‘condition-specific limitations
on disclosure’ means State laws that prohibit the
disclosure of protected health information relating to
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a health condition or disease that has been identified
by the Secretary as posing a public health threat.
‘‘(3) DISCLOSE.—The term ‘disclose’ means to
release, transfer, provide access to, or otherwise di-
vulge protected health information to any person
other than an individual who is the subject of such
information.
‘‘(4) EDUCATIONAL
INSTITUTION.—The term
‘educational institution’ means an institution or
place accredited or licensed for purposes of providing
for instruction or education, including an elementary
school, secondary school, or institution of higher
learning, a college, or an assemblage of colleges
united under one corporate organization or govern-
ment.
‘‘(5) EMPLOYER.—The term ‘employer’ has the
meaning given such term under section 3(5) of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1002(5)), except that such term shall in-
clude only employers of two or more employees.
‘‘(6) HEALTH CARE.—The term ‘health care’
means—
‘‘(A) preventive, diagnostic, therapeutic,
rehabilitative, maintenance, or palliative care,
including appropriate assistance with disease or
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symptom management and maintenance, coun-
seling, service, or procedure—
‘‘(i) with respect to the physical or
mental condition of an individual; or
‘‘(ii) affecting the structure or func-
tion of the human body or any part of the
human body, including the banking of
blood, sperm, organs, or any other tissue;
or
‘‘(B) any sale or dispensing, pursuant to a
prescription or medical order, of a drug, device,
equipment, or other health care-related item to
an individual, or for the use of an individual.
‘‘(7) HEALTH
CARE
OPERATIONS.—The term
‘health care operations’ means services, provided di-
rectly by or on behalf of a health plan or health care
provider or by its agent, for any of the following
purposes:
‘‘(A) Coordinating health care, including
health care management of the individual
through risk assessment, case management, and
disease management.
‘‘(B) Conducting quality assessment and
improvement activities, including outcomes eval-
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uation, clinical guideline development and im-
provement, and health promotion.
‘‘(C) Carrying out utilization review activi-
ties, 
including 
precertification 
and
preauthorization of services, and health plan
rating activities, including underwriting and ex-
perience rating.
‘‘(D) Conducting or arranging for auditing
services.
‘‘(8) HEALTH
CARE
PROVIDER.—The term
‘health care provider’ means a person, who with re-
spect to a specific item of protected health informa-
tion, receives, creates, uses, maintains, or discloses
the information while acting in whole or in part in
the capacity of—
‘‘(A) a person who is licensed, certified,
registered, or otherwise authorized by Federal
or State law to provide an item or service that
constitutes health care in the ordinary course of
business, or practice of a profession;
‘‘(B) a Federal, State, or employer-spon-
sored or any other privately-sponsored program
that directly provides items or services that con-
stitute health care to beneficiaries; or