I 
115TH CONGRESS 
1ST SESSION H. R. 1307 
To amend the Patient Protection and Affordable Care Act to establish a 
public health insurance option. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 2, 2017 
Mr. DEFAZIO (for himself and Mr. COHEN) introduced the following bill; 
which was referred to the Committee on Energy and Commerce 
A BILL 
To amend the Patient Protection and Affordable Care Act 
to establish a public health insurance option. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Public Option Deficit 
Reduction Act’’. 
SEC. 2. PUBLIC HEALTH INSURANCE OPTION. 
(a) IN GENERAL.—Part 3 of subtitle D of title I of 
the Patient Protection and Affordable Care Act (Public 
Law 111–148) is amended by adding at the end the fol-
lowing new section: 
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‘‘SEC. 1325. PUBLIC HEALTH INSURANCE OPTION. 
‘‘(a) ESTABLISHMENT AND ADMINISTRATION OF A 
PUBLIC HEALTH INSURANCE OPTION.— 
‘‘(1) ESTABLISHMENT.—For years beginning 
with 2018, the Secretary of Health and Human 
Services (in this subtitle referred to as the ‘Sec-
retary’) shall provide for the offering through Ex-
changes established under this title of a health bene-
fits plan (in this Act referred to as the ‘public health 
insurance option’) that ensures choice, competition, 
and stability of affordable, high-quality coverage 
throughout the United States in accordance with 
this section. In designing the option, the Secretary’s 
primary responsibility is to create a low-cost plan 
without compromising quality or access to care. 
‘‘(2) OFFERING THROUGH EXCHANGES.— 
‘‘(A) EXCLUSIVE
TO
EXCHANGES.—The 
public health insurance option shall only be 
made available through Exchanges established 
under this title. 
‘‘(B) 
ENSURING
A
LEVEL
PLAYING 
FIELD.—Consistent with this section, the public 
health insurance option shall comply with re-
quirements that are applicable under this title 
to health benefits plans offered through such 
Exchanges, including requirements related to 
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benefits, benefit levels, provider networks, no-
tices, consumer protections, and cost sharing. 
‘‘(C) PROVISION OF BENEFIT LEVELS.— 
The public health insurance option— 
‘‘(i) shall offer bronze, silver, and gold 
plans; and 
‘‘(ii) may offer platinum plans. 
‘‘(3) 
ADMINISTRATIVE
CONTRACTING.—The 
Secretary may enter into contracts for the purpose 
of performing administrative functions (including 
functions described in subsection (a)(4) of section 
1874A of the Social Security Act) with respect to 
the public health insurance option in the same man-
ner as the Secretary may enter into contracts under 
subsection (a)(1) of such section. The Secretary has 
the same authority with respect to the public health 
insurance option as the Secretary has under sub-
sections (a)(1) and (b) of section 1874A of the So-
cial Security Act with respect to title XVIII of such 
Act. Contracts under this subsection shall not in-
volve the transfer of insurance risk to such entity. 
‘‘(4) OMBUDSMAN.—The Secretary shall estab-
lish an office of the ombudsman for the public 
health insurance option which shall have duties with 
respect to the public health insurance option similar 
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to the duties of the Medicare Beneficiary Ombuds-
man under section 1808(c)(2) of the Social Security 
Act. In addition, such office shall work with States 
to ensure that information and notice is provided 
that the public health insurance option is one of the 
health plans available through an Exchange. 
‘‘(5) DATA COLLECTION.—The Secretary shall 
collect such data as may be required to establish 
premiums and payment rates for the public health 
insurance option and for other purposes under this 
section, including to improve quality and to reduce 
racial, ethnic, and other disparities in health and 
health care. 
‘‘(6) ACCESS TO FEDERAL COURTS.—The provi-
sions of Medicare (and related provisions of title II 
of the Social Security Act) relating to access of 
Medicare beneficiaries to Federal courts for the en-
forcement of rights under Medicare, including with 
respect to amounts in controversy, shall apply to the 
public health insurance option and individuals en-
rolled under such option under this title in the same 
manner as such provisions apply to Medicare and 
Medicare beneficiaries. 
‘‘(b) PREMIUMS AND FINANCING.— 
‘‘(1) ESTABLISHMENT OF PREMIUMS.— 
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‘‘(A) IN
GENERAL.—The Secretary shall 
establish geographically adjusted premium rates 
for the public health insurance option— 
‘‘(i) in a manner that complies with 
the premium rules under paragraph (3); 
and 
‘‘(ii) at a level sufficient to fully fi-
nance the costs of— 
‘‘(I) health benefits provided by 
the public health insurance option; 
and 
‘‘(II) administrative costs related 
to operating the public health insur-
ance option. 
‘‘(B) CONTINGENCY
MARGIN.—In estab-
lishing premium rates under subparagraph (A), 
the Secretary shall include an appropriate 
amount for a contingency margin. 
‘‘(2) ACCOUNT.— 
‘‘(A) ESTABLISHMENT.—There is estab-
lished in the Treasury of the United States an 
account for the receipts and disbursements at-
tributable to the operation of the public health 
insurance option, including the start-up funding 
under subparagraph (B). Section 1854(g) of 
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the Social Security Act shall apply to receipts 
described in the previous sentence in the same 
manner as such section applies to payments or 
premiums described in such section. 
‘‘(B) START-UP FUNDING.— 
‘‘(i) IN GENERAL.—In order to pro-
vide for the establishment of the public 
health insurance option there is hereby ap-
propriated to the Secretary, out of any 
funds in the Treasury not otherwise appro-
priated, $2,000,000,000. In order to pro-
vide for initial claims reserves before the 
collection of premiums, there is hereby ap-
propriated to the Secretary, out of any 
funds in the Treasury not otherwise appro-
priated, such sums as necessary to cover 
90 days worth of claims reserves based on 
projected enrollment. 
‘‘(ii) AMORTIZATION
OF
START-UP 
FUNDING.—The Secretary shall provide for 
the repayment of the startup funding pro-
vided under clause (i) to the Treasury in 
an amortized manner over the 10-year pe-
riod beginning with 2018. 
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‘‘(iii) LIMITATION
ON
FUNDING.— 
Nothing in this subsection shall be con-
strued as authorizing any additional appro-
priations to the account, other than such 
amounts as are otherwise provided with re-
spect to other health benefits plans partici-
pating under the Exchange involved. 
‘‘(3) INSURANCE
RATING
RULES.—The pre-
mium rate charged for the public health insurance 
option may not vary except as provided under sec-
tion 2701 of the Public Health Service Act. 
‘‘(c) PAYMENT RATES FOR ITEMS AND SERVICES.— 
‘‘(1) RATES ESTABLISHED BY SECRETARY.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
establish payment rates for the public health in-
surance option for services and health care pro-
viders consistent with this subsection and may 
change such payment rates in accordance with 
subsection (d). 
‘‘(B) INITIAL PAYMENT RULES.— 
‘‘(i) IN
GENERAL.—During 2018, 
2019, and 2020, the Secretary shall set 
the payment rates under this subsection 
for services and providers described in sub-
paragraph (A) equal to the payment rates 
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for equivalent services and providers under 
parts A and B of Medicare, subject to 
clause (ii), paragraphs (2)(A) and (4), and 
subsection (d). 
‘‘(ii) EXCEPTIONS.— 
‘‘(I) 
PRACTITIONERS’ 
SERV-
ICES.—Payment 
rates 
for 
practi-
tioners’ services otherwise established 
under the fee schedule under section 
1848 of the Social Security Act shall 
be applied without regard to the pro-
visions under subsection (f) of such 
section and the update under sub-
section (d)(4) under such section for a 
year as applied under this paragraph 
shall be not less than 1 percent. 
‘‘(II) ADJUSTMENTS.—The Sec-
retary may determine the extent to 
which Medicare adjustments applica-
ble to base payment rates under parts 
A and B of Medicare for graduate 
medical 
education 
and 
dispropor-
tionate share hospitals shall apply 
under this section. 
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‘‘(C) FOR NEW SERVICES.—The Secretary 
shall modify payment rates described in sub-
paragraph (B) in order to accommodate pay-
ments for services, such as well-child visits, that 
are not otherwise covered under Medicare. 
‘‘(D) 
PRESCRIPTION
DRUGS.—Payment 
rates under this subsection for prescription 
drugs that are not paid for under part A or 
part B of Medicare shall be at rates negotiated 
by the Secretary. 
‘‘(2) INCENTIVES
FOR
PARTICIPATING
PRO-
VIDERS.— 
‘‘(A) INITIAL INCENTIVE PERIOD.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall provide, in the case of services de-
scribed in clause (ii) furnished during 
2018, 2019, and 2020, for payment rates 
that are 5 percent greater than the rates 
established under paragraph (1). 
‘‘(ii) 
SERVICES
DESCRIBED.—The 
services described in this clause are items 
and professional services, under the public 
health insurance option by a physician or 
other health care practitioner who partici-
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pates in both Medicare and the public 
health insurance option. 
‘‘(iii) SPECIAL RULES.—A pediatrician 
and any other health care practitioner who 
is a type of practitioner that does not typi-
cally participate in Medicare (as deter-
mined by the Secretary) shall also be eligi-
ble for the increased payment rates under 
clause (i). 
‘‘(B) SUBSEQUENT
PERIODS.—Beginning 
with 2021 and for subsequent years, the Sec-
retary shall continue to use an administrative 
process to set such rates in order to promote 
payment accuracy, to ensure adequate bene-
ficiary access to providers, and to promote af-
fordability and the efficient delivery of medical 
care consistent with subsection (a)(1). Such 
rates shall not be set at levels expected to in-
crease average medical costs per enrollee cov-
ered under the public health insurance option 
beyond what would be expected if the process 
under paragraph (1)(B) and subparagraph (A) 
were continued, as certified by the Office of the 
Actuary of the Centers for Medicare & Medicaid 
Services. 
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‘‘(C) ESTABLISHMENT
OF
A
PROVIDER 
NETWORK.—Health care providers participating 
under Medicare are participating providers in 
the public health insurance option unless they 
opt out in a process established by the Sec-
retary. 
‘‘(3) ADMINISTRATIVE PROCESS FOR SETTING 
RATES.—Chapter 5 of title 5, United States Code, 
shall apply to the process for the initial establish-
ment of payment rates under this subsection but not 
to the specific methodology for establishing such 
rates or the calculation of such rates. 
‘‘(4) CONSTRUCTION.—Nothing in this section 
shall be construed as limiting the Secretary’s author-
ity to correct for payments that are excessive or defi-
cient, taking into account the provisions of sub-
section (a)(1) and any appropriate adjustments 
based on the demographic characteristics of enrollees 
covered under the public health insurance option, 
but in no case shall the correction of payments 
under this paragraph result in a level of expendi-
tures per enrollee that exceeds the level of expendi-
tures that would have occurred under paragraphs 
(1)(B) and (2)(A), as certified by the Office of the 
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Actuary of the Centers for Medicare & Medicaid 
Services. 
‘‘(5) CONSTRUCTION.—Nothing in this section 
shall be construed as affecting the authority of the 
Secretary to establish payment rates, including pay-
ments to provide for the more efficient delivery of 
services, such as the initiatives provided for under 
subsection (d). 
‘‘(6) LIMITATIONS ON REVIEW.—There shall be 
no administrative or judicial review of a payment 
rate or methodology established under this sub-
section or under subsection (d). 
‘‘(d) MODERNIZED PAYMENT INITIATIVES AND DE-
LIVERY SYSTEM REFORM.— 
‘‘(1) IN GENERAL.—For plan years beginning 
with 2018, the Secretary may utilize innovative pay-
ment mechanisms and policies to determine pay-
ments for items and services under the public health 
insurance option. The payment mechanisms and 
policies under this subsection may include patient- 
centered medical home and other care management 
payments, accountable care organizations, value- 
based purchasing, bundling of services, differential 
payment rates, performance or utilization based pay-
ments, partial capitation, and direct contracting with 
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providers. Payment rates under such payment mech-
anisms and policies shall not be set at levels ex-
pected to increase average medical costs per enrollee 
covered under the public health insurance option be-
yond what would be expected if the process under 
paragraphs (1)(B) and (2)(A) of subsection (c) were 
continued, as certified by the Office of the Actuary 
of the Centers for Medicare & Medicaid Services. 
‘‘(2) REQUIREMENTS
FOR
INNOVATIVE
PAY-
MENTS.—The Secretary shall design and implement 
the payment mechanisms and policies under this 
subsection in a manner that— 
‘‘(A) seeks to— 
‘‘(i) improve health outcomes; 
‘‘(ii) reduce health disparities (includ-
ing racial, ethnic, and other disparities); 
‘‘(iii) provide efficient and affordable 
care; 
‘‘(iv) address geographic variation in 
the provision of health services; or 
‘‘(v) prevent or manage chronic ill-
ness; and 
‘‘(B) promotes care that is integrated, pa-
tient-centered, high-quality, and efficient. 
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‘‘(3) ENCOURAGING THE USE OF HIGH VALUE 
SERVICES.—To the extent allowed by the benefit 
standards applied to all health benefits plans partici-
pating under the Exchange involved, the public 
health insurance option may modify cost sharing and 
payment rates to encourage the use of services that 
promote health and value. 
‘‘(4) NON-UNIFORMITY
PERMITTED.—Nothing 
in this subtitle shall prevent the Secretary from 
varying payments based on different payment struc-
ture models (such as accountable care organizations 
and medical homes) under the public health insur-
ance option for different geographic areas. 
‘‘(e) PROVIDER PARTICIPATION.— 
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish conditions of participation for health care pro-
viders under the public health insurance option. 
‘‘(2) LICENSURE OR CERTIFICATION.—The Sec-
retary shall not allow a health care provider to par-
ticipate in the public health insurance option unless 
such provider is appropriately licensed or certified 
under State law. 
‘‘(3) PAYMENT TERMS FOR PROVIDERS.— 
‘‘(A) PHYSICIANS.—The Secretary shall 
provide for the annual participation of physi-
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cians under the public health insurance option, 
for which payment may be made for services 
furnished during the year, in one of 2 classes: 
‘‘(i) PREFERRED PHYSICIANS.—Those 
physicians who agree to accept the pay-
ment rate established under this section 
(without regard to cost sharing) as the 
payment in full. 
‘‘(ii) 
PARTICIPATING, 
NON-PRE-
FERRED
PHYSICIANS.—Those physicians 
who agree not to impose charges (in rela-
tion to the payment rate described in sub-
section (c) for such physicians) that exceed 
the 
ratio 
permitted 
under 
section 
1848(g)(2)(C) of the Social Security Act. 
‘‘(B) OTHER PROVIDERS.—The Secretary 
shall provide for the participation (on an annual 
or other basis specified by the Secretary) of 
health care providers (other than physicians) 
under the public health insurance option under 
which payment shall only be available if the 
provider agrees to accept the payment rate es-
tablished under subsection (c) (without regard 
to cost sharing) as the payment in full. 
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