I
107TH CONGRESS
1ST SESSION
H. R. 2178
To amend the Internal Revenue Code of 1986 and title XVIII of the Social
Security Act to provide for comprehensive financing for graduate medical
education.
IN THE HOUSE OF REPRESENTATIVES
JUNE 14, 2001
Mr. CARDIN (for himself, Mr. STARK, Mr. KLECZKA, Mr. LEVIN, Mrs. THUR-
MAN, Mr. COYNE, Mr. TOWNS, Mr. LEWIS of Georgia, Mr. BENTSEN, Ms.
HOOLEY of Oregon, Mr JEFFERSON, and Mr. WAXMAN) introduced the
following bill; which was referred to the Committee on Ways and Means,
and in addition to the Committee on Energy and Commerce, for a period
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To amend the Internal Revenue Code of 1986 and title
XVIII of the Social Security Act to provide for com-
prehensive financing for graduate medical education.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘All-Payer Graduate Medical Education Act of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—HEALTH CARE WORKFORCE TRUST FUND; PAYMENTS
TO TEACHING HOSPITALS
Subtitle A—Establishment and Financing of Fund
Sec. 101. Establishment.
Sec. 102. Financing for fund; fees on insured and self-insured health plans.
Subtitle B—Additional Payments to Teaching Hospitals
Sec. 111. Formula payments regarding private-sector share of costs of graduate
medical education.
Sec. 112. Application for payments.
Sec. 113. Annual amount of payments.
Sec. 114. Definitions.
Sec. 115. Study.
Subtitle C—Conforming Changes in Medicare Payment for Direct Costs of
Graduate Medical Education
Sec. 121. Changes in medicare formula for payment of direct GME costs.
Sec. 122. Exception from limitation on number of residents for rural and un-
derserved urban areas.
Sec. 123. Study on appropriate levels of documentation for professional services
of teaching physicians.
Sec. 124. No impact on support of graduate medical education programs in
children’s hospitals.
TITLE II—HEALTH WORKFORCE PRIORITIES
Sec. 201. Plan to reduce residency training positions.
TITLE III—MODIFICATION IN MEDICARE PAYMENT FOR IME AND
DSH
Sec. 301. Modification regarding payments for indirect costs of graduate med-
ical education.
Sec. 302. Modification of DSH.
TITLE IV—ADDITIONAL PAYMENTS FOR GRADUATE EDUCATION
FOR NON-PHYSICIAN HEALTH PROFESSIONALS
Sec. 401. Payments for graduate education for non-physician health profes-
sionals.
TITLE I—HEALTH CARE WORK-
FORCE 
TRUST 
FUND; 
PAY-
MENTS TO TEACHING HOS-
PITALS
Subtitle A—Establishment and
Financing of Fund
SEC. 101. ESTABLISHMENT.
(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. HEALTH CARE WORKFORCE 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 ‘Health Care Workforce Trust Fund’,
consisting of such amounts as may be appropriated or
credited to such Trust Fund as provided in this section
and section 9602(b).
‘‘(b) TRANSFERS TO FUND.—
‘‘(1) IN GENERAL.—There are hereby appro-
priated to the Health Care Workforce Trust Fund—
‘‘(A) amounts equivalent to the net reve-
nues received in the Treasury from the fees im-
posed under subchapter B of chapter 34 (relat-
ing to fees on health insurance and health-re-
lated administrative services);
‘‘(B) subject to paragraph (2), from the
Federal Hospital Insurance Trust Fund (estab-
lished under section 1817 of the Social Security
Act) amounts determined by the Secretary of
Health and Human Services to be equivalent to
the reductions in payments made from such
Trust Fund by virtue of the amendments made
by the All-Payer Graduate Medical Education
Act of 2001; and
‘‘(C) subject to paragraph (2), from the
Federal 
Supplementary 
Medical 
Insurance
Trust Fund (established under section 1841 of
the Social Security Act) amounts determined by
the Secretary of Health and Human Services to
be equivalent to the reductions in payments
made from such Trust Fund by virtue of the
amendments made by the All-Payer Graduate
Medical Education Act of 2001.
‘‘(2) LIMITATION ON TRANSFERS FROM MEDI-
CARE TRUST FUNDS.—If the sum of the amounts
otherwise transferred (but for this paragraph) under
subparagraph (B) and (C) of paragraph (1) for a
fiscal year would exceed $300,000,000, the amounts
so transferred under each respective subparagraph
shall be reduced in a pro-rated manner so that the
total so transferred is equal to $300,000,000.
‘‘(c) EXPENDITURES FROM FUND.—Amounts in the
Health Care Workforce Trust Fund are available to the
Secretary of Health and Human Services for making pay-
ments under sections 111 and 401 of the All-Payer Grad-
uate Medical Education Act of 2001.
‘‘(d) NET REVENUES.—For purposes of this section,
the term ‘net revenues’ means the amount estimated by
the Secretary based on the excess of—
‘‘(1) the fees received in the Treasury under
subchapter B of chapter 34, over
‘‘(2) the decrease in the tax imposed by chapter
1 resulting from the fees imposed by such sub-
chapter.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter A is amended by adding at the end
thereof the following new item:
‘‘Sec. 9511. Health Care Workforce Trust Fund.’’.
SEC. 102. FINANCING FOR FUND; FEES ON INSURED AND
SELF-INSURED HEALTH PLANS.
(a) GENERAL RULE.—Chapter 34 of the Internal
Revenue Code of 1986 is amended by adding at the end
the following new subchapter:
‘‘Subchapter B—Insured and Self-Insured
Health Plans
‘‘Sec. 4375. Health insurance and health-related administrative
services.
‘‘Sec. 4376. Self-insured health plans.
‘‘Sec. 4377. Definitions and special rules.
‘‘SEC. 4375. HEALTH INSURANCE AND HEALTH-RELATED
ADMINISTRATIVE SERVICES.
‘‘(a) 
IMPOSITION
OF
FEE.—There 
is 
hereby
imposed—
‘‘(1) on each specified health insurance policy,
a fee equal to 1 percent of the premiums received
under such policy, and
‘‘(2) on each amount received for health-related
administrative services, a fee equal to 1 percent of
the amount so received.
‘‘(b) LIABILITY FOR FEE.—
‘‘(1) HEALTH INSURANCE.—The fee imposed by
subsection (a)(1) shall be paid by the issuer of the
policy.
‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV-
ICES.—The fee imposed by subsection (a)(2) shall be
paid by the person providing the health-related ad-
ministrative services.
‘‘(c) SPECIFIED HEALTH INSURANCE POLICY.—For
purposes of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, the term ‘specified health in-
surance policy’ means any accident or health insur-
ance policy issued with respect to individuals resid-
ing in the United States.
‘‘(2) EXEMPTION OF CERTAIN POLICIES.—The
term ‘specified health insurance policy’ does not in-
clude any insurance policy if substantially all of the
coverage provided under such policy relates to—
‘‘(A) liabilities incurred under workers’
compensation laws,
‘‘(B) tort liabilities,
‘‘(C) liabilities relating to ownership or use
of property,
‘‘(D) credit insurance, or
‘‘(E) such other similar liabilities as the
Secretary may specify by regulations.
‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES
OTHER
COVERAGE.—In the case of any specified
health insurance policy under which amounts are
payable other than for accident and health coverage,
in determining the amount of the fee imposed by
subsection (a)(1) on any premium received under
such policy, there shall be excluded the amount of
the charge for the non-accident and health coverage
if—
‘‘(A) the charge for such non-accident and
health coverage is either separately stated in
the policy, or furnished to the policyholder in a
separate statement, and
‘‘(B) such charge is reasonable in relation
to the total charges under the policy.
In any other case, the entire amount of the premium
received under such a policy shall be subject to the
fees under subsection (a)(1).
‘‘(4) TREATMENT OF PREPAID HEALTH COV-
ERAGE ARRANGEMENTS.—
‘‘(A) IN GENERAL.—In the case of any ar-
rangement described in subparagraph (B)—
‘‘(i) such arrangement shall be treated
as a specified health insurance policy,
‘‘(ii) the payments or premiums re-
ferred to in subparagraph (B)(i) shall be
treated as premiums received for a speci-
fied health insurance policy, and
‘‘(iii) the person referred to in sub-
paragraph (B)(i) shall be treated as the
issuer.
‘‘(B) DESCRIPTION OF ARRANGEMENTS.—
An arrangement is described in this subpara-
graph if under such arrangement—
‘‘(i) fixed payments or premiums are
received as consideration for any person’s
agreement to provide or arrange for the
provision of accident or health coverage to
residents of the United States, regardless
of how such coverage is provided or ar-
ranged to be provided, and
‘‘(ii) substantially all of the risks of
the rates of utilization of services is as-
sumed by such person or the provider of
such services.
‘‘(d) HEALTH-RELATED
ADMINISTRATIVE
SERV-
ICES.—For purposes of this section, the term ‘health-re-
lated administrative services’ means—
‘‘(1) the processing of claims or performance of
other administrative services in connection with acci-
dent or health coverage under a specified health in-
surance policy if the charge for such services is not
included in the premiums under such policy, and
‘‘(2) processing claims, arranging for provision
of accident or health coverage, or performing other
administrative services in connection with an appli-
cable self-insured health plan (as defined in section
4376(c)) established or maintained by another per-
son.
‘‘SEC. 4376. SELF-INSURED HEALTH PLANS.
‘‘(a) IMPOSITION OF FEE.—In the case of any appli-
cable self-insured health plan, there is hereby imposed a
fee for each month equal to 1 percent of the sum of—
‘‘(1) the accident and health coverage expendi-
tures for such month under such plan, and
‘‘(2) the direct administrative expenditures for
such month under such plan.
‘‘(b) LIABILITY FOR FEE.—
‘‘(1) IN GENERAL.—The fee imposed by sub-
section (a) shall be paid by the plan sponsor.
‘‘(2) PLAN SPONSOR.—For purposes of para-
graph (1) the term ‘plan sponsor’ means—
‘‘(A) the employer in the case of a plan es-
tablished or maintained by a single employer,
‘‘(B) the employee organization in the case
of a plan established or maintained by an em-
ployee organization,
‘‘(C) in the case of—
‘‘(i) a plan established or maintained
by 2 or more employers or jointly by 1 or
more employers and 1 or more employee
organizations,
‘‘(ii) a multiple employer welfare ar-
rangement, or
‘‘(iii) a voluntary employees’ bene-
ficiary association described in section
501(c)(9),
the association, committee, joint board of trust-
ees, or other similar group of representatives of
the parties who establish or maintain the plan,
or
‘‘(D) the cooperative or association de-
scribed in subsection (c)(2)(F) in the case of a
plan established or maintained by such a coop-
erative or association.
‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—
For purposes of this section, the term ‘applicable self-in-
sured health plan’ means any plan for providing accident
or health coverage if—
‘‘(1) any portion of such coverage is provided
other than through an insurance policy, and
‘‘(2) such plan is established or maintained—
‘‘(A) by one or more employers for the
benefit of their employees or former employees,
‘‘(B) by one or more employee organiza-
tions for the benefit of their members or former
members,
‘‘(C) jointly by 1 or more employers and 1
or more employee organizations for the benefit
of employees or former employees,
‘‘(D) by a voluntary employees’ beneficiary
association described in section 501(c)(9),
‘‘(E) by any organization described in sec-
tion 501(c)(6), or
‘‘(F) in the case of a plan not described in
the preceding subparagraphs, by a multiple em-
ployer welfare arrangement (as defined in sec-
tion 3(40) of Employee Retirement Income Se-
curity Act of 1974), a rural electric cooperative
(as defined in section 3(40)(B)(iv) of such Act),
or a rural telephone cooperative association (as
defined in section 3(40)(B)(v) of such Act).
‘‘(d) ACCIDENT AND HEALTH COVERAGE EXPENDI-
TURES.—For purposes of this section—
‘‘(1) IN
GENERAL.—The accident and health
coverage expenditures of any applicable self-insured
health plan for any month is the aggregate expendi-
tures for such month for accident and health cov-
erage provided under such plan to the extent such
expenditures are not subject to the fees under sec-
tion 4375.
‘‘(2) TREATMENT
OF
REIMBURSEMENTS.—In
determining accident and health coverage expendi-
tures during any month of any applicable self-in-
sured health plan, reimbursements (by insurance or
otherwise) received during such month for accident
and health coverage expenditures shall be taken into
account as a reduction in accident and health cov-
erage expenditures.
‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—
Paragraph (1) shall not apply to any expenditure for
the acquisition or improvement of land or for the ac-
quisition or improvement of any property to be used
in connection with the provision of accident and
health coverage which is subject to the allowance
under section 167, except that, for purposes of para-
graph (1), allowances under section 167 shall be
considered as expenditures.
‘‘(e) DIRECT ADMINISTRATIVE EXPENDITURES.—
For purposes of this section, the term ‘direct administra-
tive expenditures’ means the administrative expenditures
under the plan to the extent such expenditures are not
subject to the fees under section 4375. In determining the
amount of such expenditures, rules similar to the rules of
subsection (d)(3) shall apply.
‘‘SEC. 4377. DEFINITIONS AND SPECIAL RULES.
‘‘(a) 
DEFINITIONS.—For 
purposes 
of 
this
subchapter—
‘‘(1) ACCIDENT AND HEALTH COVERAGE.—The
term ‘accident and health coverage’ means any cov-
erage which, if provided by an insurance policy,
would cause such policy to be a specified health in-
surance policy (as defined in section 4375(c)).
‘‘(2) INSURANCE POLICY.—The term ‘insurance
policy’ means any policy or other instrument where-
by a contract of insurance is issued, renewed, or ex-
tended.
‘‘(3) PREMIUM.—The term ‘premium’ means
the gross amount of premiums and other consider-
ation (including advance premiums, deposits, fees,
and assessments) arising from policies issued by a
person acting as the primary insurer, adjusted for
any return or additional premiums paid as a result
of endorsements, cancellations, audits, or retrospec-
tive rating.
‘‘(4) UNITED
STATES.—The term ‘United
States’ includes any possession of the United States.
‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—
‘‘(1) IN
GENERAL.—For purposes of this
subchapter—
‘‘(A) the term ‘person’ includes any gov-
ernmental entity, and
‘‘(B) notwithstanding any other law or rule
of law, governmental entities shall not be ex-
empt from the fees imposed by this subchapter
except as provided in paragraph (2).
‘‘(2) TREATMENT OF EXEMPT GOVERNMENTAL
PROGRAMS.—In the case of an exempt governmental
program—
‘‘(A) no fee shall be imposed under section
4375 on any premium received pursuant to
such program or on any amount received for
health-related administrative services pursuant
to such program, and
‘‘(B) no fee shall be imposed under section
4376 on any expenditures pursuant to such
program.
‘‘(3) EXEMPT
GOVERNMENTAL
PROGRAM
DE-
FINED.—For purposes of this subchapter, the term
‘exempt governmental program’ means—
‘‘(A) the insurance programs established
by parts A, B, and C of title XVIII of the So-
cial Security Act,
‘‘(B) the medical assistance program es-
tablished by title XIX or XXI of the Social Se-
curity Act,
‘‘(C) any program established by Federal
law for providing medical care (other than
through insurance policies) to individuals (or
the spouses and dependents thereof) by reason
of such individuals being—
‘‘(i) members of the Armed Forces of
the United States, or
‘‘(ii) veterans, and
‘‘(D) any program established by Federal
law for providing medical care (other than
through insurance policies) to members of In-
dian tribes (as defined in section 4(d) of the In-
dian Health Care Improvement Act).
‘‘(c) TREATMENT AS TAX.—For purposes of subtitle
F, the fees imposed by this subchapter shall be treated
as if they were taxes.
‘‘(d) NO COVER OVER TO POSSESSIONS.—Notwith-
standing any other provision of law, no amount collected
under this subchapter shall be covered over to any posses-
sion of the United States.’’
(b) CLERICAL AMENDMENT.—Chapter 34 of such
Code is amended by striking the chapter heading and in-
serting the following:
‘‘CHAPTER 34—TAXES ON CERTAIN
INSURANCE POLICIES
‘‘Subchapter A. Policies issued by foreign insurers.
‘‘Subchapter B. Insured and self-insured health plans.
‘‘Subchapter A—Policies Issued By Foreign
Insurers’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to premiums received
and expenses incurred after December 31, 2001.
Subtitle B—Additional Payments to
Teaching Hospitals
SEC. 111. FORMULA PAYMENTS REGARDING PRIVATE-SEC-
TOR SHARE OF COSTS OF GRADUATE MED-
ICAL EDUCATION.
(a) IN GENERAL.—In the case of each teaching hos-
pital that in accordance with section 112 submits to the
Secretary an application for calendar year 2004 or any
subsequent calendar year (referred to in this title as an
‘‘eligible hospital’’ for the year involved), the Secretary
shall in accordance with section 113 make payments for
such year to the hospital.
(b) DEFINITIONS.—For purposes of this subtitle, the
term ‘‘teaching hospital’’ means any hospital that operates
an approved medical residency training program (as de-
fined in section 1886(h)(5)(A) of the Social Security Act).
SEC. 112. APPLICATION FOR PAYMENTS.
For purposes of section 111(a), an application for
payments under such section for a calendar year is in ac-
cordance with this section if—
(1) the application is submitted not later than
the date specified by the Secretary;
(2) the application contains the agreements re-
quired in this subtitle; and
(3) the application is in such form, is made in
such manner, and contains such agreements, assur-
ances, and information as the Secretary determines
to be necessary to carry out this subtitle.
SEC. 113. ANNUAL AMOUNT OF PAYMENTS.
(a) IN GENERAL.—From amounts in the Health Care
Workforce Trust Fund under section 9511 of the Internal
Revenue Code of 1986, the Secretary shall make payments
under section 111 to an eligible hospital for a calendar
year as follows:
(1) Payments, made on a periodic basis, whose
sum is equal to the amount determined under sub-
section (c) for the hospital for the year (which
amount relates to the direct costs for graduate med-
ical education attributable to certain individuals).
(2) Payments (in addition to payments under
paragraph (1)), made on a periodic basis, whose sum
is equal to the amount determined under subsection
(d) for the hospital for the year (which amount re-
lates to the per-discharge indirect costs of the hos-
pital for graduate medical education attributable to
certain individuals).
(b) EFFECTIVE DATES FOR PAYMENTS.—Payments
under paragraph (1) of subsection (a) are effective for por-
tions of cost reporting periods occurring on or after Janu-
ary 1, 2003. Payments under paragraph (2) of such sub-
section are effective for patient discharges occurring on
or after such date.
(c) AMOUNT OF PAYMENTS; DIRECT COSTS.—
(1) IN GENERAL.—For purposes of paragraph
(1) of subsection (a), the amount determined under
this subsection for an eligible hospital for a calendar
year is the product of—
(A) the aggregate nonmedicare training
amount for the hospital, as defined in para-
graph (2); and
(B) the direct-cost Fund payout percent-
age, as defined in paragraph (4).
(2) 
AGGREGATE
NONMEDICARE
TRAINING
AMOUNT.—For purposes of this subtitle, the term
‘‘aggregate nonmedicare training amount’’, with re-
spect to the eligible hospital involved, means (subject
to paragraph (3)(D)) an amount equal to the prod-
uct of subparagraphs (A) and (B), as follows:
(A) The number of full-time-equivalent
training participants in the approved physician
training programs of the hospital for the aca-
demic year in which the calendar year begins,
not to exceed the maximum total number per-
mitted under section 1886(h)(4)(F) of the So-
cial Security Act.
(B) An amount equal to the product of—
(i) the national average FTE wage-re-
lated compensation, as defined in para-
graph (3); and
(ii) a percentage equal to the fraction
of the total inpatient hospital and out-
patient hospital revenues (as established by
the Secretary) during the cost reporting
period which are attributable to patients
with respect to whom payment may be
made under health insurance coverage
(whether through a group health plan or
otherwise) or under a group health plan.
For purposes of clause (ii), payment made
under the medicare or medicaid programs
(under titles XVIII or XIX of the Social Secu-
rity Act) shall not be treated as payment under
health insurance coverage.
(3) NATIONAL
AVERAGE
FTE
WAGE-RELATED
COMPENSATION.—
(A) IN GENERAL.—For purposes of this
subtitle, the term ‘‘national average FTE wage-
related compensation’’ means the national aver-
age of the costs of resident salaries and related
fringe benefits per training participant for all
approved physician training programs and all
medical specialities, as adjusted under subpara-
graphs (B) and (C). Such national average shall
be based upon a national resident wage survey
for salaries and related fringe benefits as of
July 1, 2000, as determined by the Secretary
and shall not include costs of overhead or su-
pervision.
(B) ANNUAL
ADJUSTMENTS
PER
CON-
SUMER
PRICE
INDEX.—The national average
applicable under subparagraph (A) for a cal-
endar year for such programs is, subject to sub-
paragraph (C), the amount determined under
subparagraph (A) increased by the estimated
percentage change in the Consumer Price Index
for All Urban Consumers (United States city
average) from January 2001 through the mid-
point of the year involved, with appropriate ad-
justments to reflect previous under- or over-es-
timations under this subparagraph in the pro-
jected percentage change in such consumer
price index.
(C) INDIVIDUAL ADJUSTMENTS PER AREA
WAGE
INDEX.—The national average deter-
mined under subparagraph (A) and adjusted
under subparagraph (B) for a calendar year
shall, in the case of the approved physician
training programs of the eligible hospital in-
volved, be adjusted by a factor to reflect re-
gional differences in wage and wage-related
costs, as determined in accordance with the
area wage index applicable (as of the beginning
of such year) to hospitals in the labor-market
area involved, as determined under section
1886(d)(3)(E) of the Social Security Act.
(D) ALTERNATIVE
RULE
FOR
CERTAIN
HOSPITALS.—
(i) ELECTION FOR APPLICABILITY OF
RULE.—In the case of an eligible hospital
for which the election under section
1861(b)(7) of the Social Security Act was
in effect on July 1, 2000, and has re-
mained in effect continuously from such
date, the following applies:
(I) The hospital may, with re-
spect to the determination under
paragraph (2) of the aggregate non-
medicare training amount for the hos-
pital, elect to have the alternative rule
described in clause (ii) applied to the
hospital.
(II) If the election under such
section 1861(b)(7) ceases to be in ef-
fect, any election made by the hospital
under subclause (I) is terminated.
(III) If the hospital has made the
election under subclause (I) and sub-
sequently requests that the election be
terminated, the Secretary shall ap-
prove the request. Upon the approval
of the request, the hospital may not
subsequently elect to have the alter-
native rule applied to the hospital.
(ii) DESCRIPTION
OF
ALTERNATIVE
RULE.—With respect to a determination
under paragraph (2) of the aggregate non-
medicare training amount for an eligible
hospital that has made the election under
clause (i), the alternative rule described in
this clause is as follows:
(I) In lieu of the applicability of
the national FTE training amount
(for purposes of paragraph (2)(B)(i)),
the Secretary shall apply an amount
equal to the approved FTE resident
amount in effect for the hospital
under section 1886(h)(2) of the Social
Security Act.
(II) Subject to the modification
applied under subclause (I), the Sec-
retary shall determine an amount
under paragraph (2).
(III) The Secretary shall deter-
mine an amount equal to the product
of the fraction determined under
paragraph (2)(B)(ii) and the amount
of the physician costs of services rec-
ognized under section 1861(v)(1) of
the Social Security Act pursuant to
the election of the hospital under sec-
tion 1861(b)(7) of such Act.
(IV) In lieu of the applicability of
the aggregate nonmedicare training
amount (for purposes of paragraph
(1)(A)), the Secretary shall apply an
amount equal to the sum of the
amount determined under subclause
(II) and the amount determined under
subclause (III).
(4) DIRECT-COST
FUND
PAYOUT
PERCENT-
AGE.—For purposes of this subtitle, the term ‘‘di-
rect-cost Fund payout percentage’’, with respect to
the calendar year involved, means a percentage equal
to the ratio of—
(A) the amount available in the Health
Care Workforce Trust Fund for such year (as
estimated by the Secretary); to
(B) an amount equal to the total amount
of payments under subsection (a)(1) that would
be made to eligible hospitals for such year if
each hospital received, pursuant to paragraph
(1), 100 percent of the aggregate nonmedicare
training amount determined for the hospital.
(d) AMOUNT OF PAYMENTS; INDIRECT COSTS.—
(1) IN GENERAL.—For purposes of paragraph
(2) of subsection (a), the amount determined under
this subsection for an eligible hospital for a calendar
year is the product of—
(A) an amount equal to the sum of the
nonmedicare per-discharge supplemental pay-
ments, as defined in paragraph (2); and
(B) the indirect-cost Fund payout percent-
age, as defined in paragraph (3).
(2) NONMEDICARE
PER-DISCHARGE
SUPPLE-
MENTAL PAYMENT.—
(A) IN GENERAL.—For purposes of this
subtitle, the term ‘‘nonmedicare per-discharge
supplemental payment’’, with respect to a cal-
endar year, means a payment made to an eligi-
ble hospital for a discharge during the year of
a patient described in subparagraph (B), the
amount of which payment is determined in ac-
cordance with subparagraph (C).
(B) RELEVANT PATIENTS.—For purposes
of subparagraph (A), a patient described in this
subparagraph is a patient who is not—
(i) entitled to benefits under part A of
title XVIII of the Social Security Act; or
(ii) eligible for medical assistance
under title XIX of such Act.
(C) AMOUNT
OF
PER-DISCHARGE
PAY-
MENT.—For purposes of subparagraph (A), the
amount of the payment under such subpara-
graph for the discharge of a patient described
in subparagraph (B) is the product of—
(i) the amount which would be deter-
mined with respect to the discharge under
section 1886(d)(1)(A)(iii) of the Social Se-
curity Act if the patient were entitled to
benefits under part A of title XVIII of
such Act, adjusted by the Secretary to take
into account differences in health status,
utilization of services, and other demo-
graphic characteristics among individuals
entitled to benefits under part A of title
XVIII of such Act and individuals who are
not so entitled; and
(ii) the percentage applicable to the
hospital under section 1886(d)(5)(B)(ii) of
such Act.
(D) SPECIAL
RULE
FOR
CERTAIN
HOS-
PITALS.—In the case of a hospital that is lo-
cated in a State for which a demonstration pro-
gram under section 1814(b)(3) of the Social Se-
curity Act is in effect, the Secretary shall, for
purposes of applying subparagraph (C) to dis-
charges from the hospital, make determinations
under such subparagraph as if paragraphs
(1)(A)(iii) and (5)(B)(ii) of section 1886(d) of
such Act applied to the hospital.
(3) INDIRECT-COST
FUND
PAYOUT
PERCENT-
AGE.—For purposes of this subtitle, the term ‘‘indi-
rect-cost Fund payout percentage’’, with respect the
calendar year involved, means a percentage equal to
the ratio of—
(A) the amount available in the Health
Care Workforce Trust Fund for such year re-
maining after payments for the year have been
made under subsection (a)(1) (as such amount
is estimated by the Secretary); to
(B) the total amount of payments under
subsection (a)(2) that would be made to eligible
hospitals for such year if each hospital received,
pursuant to paragraph (1), 100 percent of an
amount equal to the sum of the nonmedicare
per-discharge supplemental payments deter-
mined for the hospital.
(e) DEFINITIONS.—For purposes of this subtitle, the
term ‘‘full-time-equivalent training participant’’ means a
full-time equivalent resident of the hospital as determined
under section 1886(h)(4) of the Social Security Act for
the cost reporting period involved.
SEC. 114. DEFINITIONS.
For purposes of this subtitle:
(1) The term ‘‘aggregate nonmedicare training
amount’’ has the meaning given such term in section
113(c)(2).
(2) The term ‘‘direct-cost Fund payout percent-
age’’ has the meaning given such term in section
113(c)(4).
(3) The term ‘‘full-time-equivalent training par-
ticipant’’ has the meaning given such term in section
113(e).
(4) The term ‘‘indirect-cost Fund payout per-
centage’’ has the meaning given such term in section
113(d)(3).
(5) The term ‘‘national average FTE wage-re-
lated compensation’’ has the meaning given such
term in section 113(c)(3).
(6) The term ‘‘nonmedicare per-discharge sup-
plemental payment’’ has the meaning given such
term in section 113(d)(2).
(7) The term ‘‘Secretary’’ means the Secretary
of Health and Human Services, unless the context of
usage indicates otherwise.
(8) The term ‘‘teaching hospital’’ has the mean-
ing given such term in section 111(b).
SEC. 115. STUDY.
(a) STUDY.—The Secretary of Health and Human
Services shall conduct a study of the impact of this sub-
title.
(b) REPORT.—Not later than 5 years after the date
that payments are first made under this subtitle, the Sec-
retary shall submit to Congress a report on such study
and shall include such recommendations on the continu-
ation of payments under this subtitle, and such changes
in such payments, as the Secretary deems appropriate.
Subtitle C—Conforming Changes in
Medicare Payment for Direct
Costs of Graduate Medical Edu-
cation
SEC. 121. CHANGES IN MEDICARE FORMULA FOR PAYMENT
OF DIRECT GME COSTS.
(a) USE OF NATIONAL AVERAGE FTE WAGE-RE-
LATED COMPENSATION AS BASIS FOR PAYMENT.—Sec-
tion 1886(h)(3)(B)(i) of the Social Security Act (42
U.S.C. 1395ww(h)(3)(B)(i)) is amended by inserting ‘‘(or,
for portions of cost reporting periods occurring on or after
January 1, 2003, in the case of a hospital that does not
have in effect the election described in section
113(c)(3)(D)(i) of the All-Payer Graduate Medical Edu-
cation Act of 2001, the applicable national average FTE
wage-related compensation, as determined under section
113(c)(3) of such Act)’’ after ‘‘for that period’’.
(b) ALLOCATION
BASED
ON
MEDICARE
REVE-
NUES.—Section 1886(h)(3) of such Act (42 U.S.C.
1395ww(h)(3)) is amended—
(1) in subparagraph (C), by inserting before the
period at the end the following: ‘‘, or, for portions
of a cost reporting period occurring on or after Jan-
uary 1, 2003, in the case of a hospital that does not
have in effect the election described in section
113(c)(3)(D)(i) of the All-Payer Graduate Medical
Education Act of 2001, the fraction of the total in-
patient hospital and outpatient hospital revenues (as
established by the Secretary) during the reporting
period which is attributable to patients with respect
to whom payment may be made under this title’’;
and
(2) in subparagraph (D)(i)(II), by inserting be-
fore the period at the end the following: ‘‘or, for por-
tions of a cost reporting period occurring on or after
January 1, 2003, in the case of a hospital that does
not have in effect the election described in section
113(c)(3)(D)(i) of the All-Payer Graduate Medical
Education Act of 2001, the fraction of the total in-
patient hospital and outpatient hospital revenues (as
established by the Secretary) during the reporting
period which is attributable to such enrolled individ-
uals’’.
(c) EFFECTIVE DATE.—The amendments made by
this section apply to portions of cost reporting periods oc-
curring on or after January 1, 2003.
SEC. 122. EXCEPTION FROM LIMITATION ON NUMBER OF
RESIDENTS FOR RURAL AND UNDERSERVED
URBAN AREAS.
(a) IN GENERAL.—Section 1886 of the Social Secu-
rity Act (42 U.S.C. 1395ww) is amended—
(1) in subsection (d)(5)(B)(v), by adding at the
end the following: ‘‘The Secretary shall provide for
reasonable exemptions and exceptions from the pre-
vious sentence in the case of a hospital that has resi-
dents who are assigned to serve a rural area or an
urban underserved area.’’; and
(2) in subsection (h)(4)(F)(i), by adding at the
end the following: ‘‘The Secretary shall provide for
reasonable exemptions and exceptions from the pre-
vious sentence in the case of a hospital that has resi-
dents who are assigned to serve a rural area or an
urban underserved area.’’.
(b) EFFECTIVE DATES.—The amendments made
by—
(1) subsection (a)(1) apply to discharges occur-
ring on or after January 1, 2002; or
(2) subsection (a)(2) apply to cost reporting pe-
riods beginning on or after January 1, 2002.
SEC. 123. STUDY ON APPROPRIATE LEVELS OF DOCU-
MENTATION FOR PROFESSIONAL SERVICES
OF TEACHING PHYSICIANS.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall, in collaboration with the Institute
of Medicine, the Association of American Medical Colleges,
and the American Association of Colleges of Osteopathic
Medicine, conduct a study of the appropriateness of the
level of documentation that should be required, as a condi-
tion of payment under part B of the medicare program
for professional services of a teaching physician, in a pa-
tient’s medical record of the services provided by that phy-
sician.
(b) REPORT.—Not later than 2 years after the date
of the enactment of this Act, the Secretary shall submit
a report on the study under subsection (a) to the Commit-
tees on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the
Senate.
SEC. 124. NO IMPACT ON SUPPORT OF GRADUATE MEDICAL
EDUCATION PROGRAMS IN CHILDREN’S HOS-
PITALS.
Nothing in this Act shall be construed as applying
to, or as affecting, payment for graduate medical edu-
cation programs in children’s hospitals under section
340E of the Public Health Service Act (42 U.S.C. 256e).
TITLE II—HEALTH WORKFORCE
PRIORITIES
SEC. 201. PLAN TO REDUCE RESIDENCY TRAINING POSI-
TIONS.
(a) IN GENERAL.—Not later than 1 year after the
date of the enactment of this Act, the Secretary of Health
and Human Services shall develop a plan to reduce, begin-
ning with the residency year that begins July 1, 2007,
the number of first year training positions in medical resi-
dency training programs in the United States to 110 per-
cent of the annual number of students graduating from
a medical school in the United States.
(b) MONITORING DISTRIBUTION.—In implementing
the plan under this section, the Secretary shall monitor
the distribution of resident specialties in order to assure
that there is an adequate proportion of physicians to fulfill
the country’s needs and to ensure access to health care
for underserved populations.
(c) IMPLEMENTATION.—In implementing the plan
under this section, the Secretary shall take into consider-
ation the reduced revenues to affected hospitals and shall
develop a formula to restore to such hospitals a portion
of the funds that would have been expended had the plan
under this section not been in effect.
(d) CONSULTATION.—The plan under this section
shall be developed in conjunction with the Institute of
Medicine, the Council on Graduate Medical Education, the
Association of American Medical Colleges, the American
Hospital Association, the American Medical Association,
the American Osteopathic Association, the American Asso-
ciation of Colleges of Osteopathic Medicine, and other or-
ganizations deemed appropriate by the Secretary.
(e) REPORT TO CONGRESS.—Not later than 1 year
after the date of the enactment of this Act, the Secretary
shall submit to the Committee on Ways and Means in the
House of Representatives, and to the Committee on Fi-
nance in the Senate, a report on the plan developed under
this section.
(f) ENFORCEMENT.—
(1) IN GENERAL.—Notwithstanding any other
provision of law, but subject to paragraph (2), for
purposes of computing the amount of payment to be
made under subsection (d)(5)(B) or (h) of section
1886 of the Social Security Act (42 U.S.C. 1395ww)
for any hospital that the Secretary determines has
a medical residency training program in which the
number of first year residents exceeds the maximum
number permitted for such program under the plan
implemented under subsection (a), the number of
residents counted shall be reduced by 5 multiplied by
the number of such excess.
(2) EXCEPTION FOR HOSPITALS ELECTIVE AL-
TERNATIVE TREATMENT.—Paragraph (1) does not
apply to a hospital for which the election under sec-
tion 1861(b)(7) of the Social Security Act was in ef-
fect on July 1, 2000.
TITLE 
III—MODIFICATION 
IN
MEDICARE 
PAYMENT 
FOR
IME AND DSH
SEC. 301. MODIFICATION REGARDING PAYMENTS FOR INDI-
RECT COSTS OF GRADUATE MEDICAL EDU-
CATION.
(a) MODIFICATION FROM 5.5 PERCENT TO 4.8 PER-
CENT.—Section 1886(d)(5)(B)(ii) of the Social Security
Act (42 U.S.C. 1395ww(d)(5)(B)(ii)), as amended by sec-
tion 302(a) of Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (113 Stat.
2763A–493), as enacted into law by section 1(a)(6) of
Public Law 106–554, is amended—
(1) by striking ‘‘and’’ at the end of subclause
(IV),
(2) by amending subclause (VII) to read as fol-
lows:
‘‘(V) during fiscal year 2003, ‘c’ is
equal to 1.35; and’’; and
(3) by adding at the end the following:
‘‘(VI) on or after October 1, 2003, ‘c’
is equal to 1.18.’’.
(b) REPORTING OF IME PAYMENTS.—The Secretary
of Health and Human Services, in collaboration with the
Institute of Medicine, the Council on Graduate Medical
Education, the Association of American Medical Colleges,
the American Hospital Association, the American Osteo-
pathic Association, the American Association of Colleges
of Osteopathic Medicine, and other organizations deemed
appropriate by the Secretary, shall develop and implement
a plan for hospitals that receive additional payments
under section 1886(d)(5)(B) of the Social Security Act to
report annually to the Secretary information on how such
hospitals contributed to education, improvements in clin-
ical services and research infrastructure, and community
services operated by or in such hospitals. The first such
report shall be submitted for cost reporting periods begin-
ning during fiscal year 2004.
(c) REPORT ON STRATEGIES TO REDUCE MEDICAL
ERRORS AND LOWER HEALTH CARE COSTS IN ACADEMIC
MEDICAL CENTERS.—The Director of the Agency for
Healthcare Research and Quality shall develop, in close
cooperation with the medical community and health plans,
a plan of strategies that can be tested in academic medical
centers to reduce the number of medical errors and lower
health care costs in such centers. Not later than January
1, 2004, the Director shall submit a report to Congress
on the plan so developed.
SEC. 302. MODIFICATION OF DSH.
(a) 
COLLECTION
OF
CHARGE
DATA.—Section
1886(d)(5)(F) of the Social Security Act (42 U.S.C.
1395ww(d)(5)(F)) is amended by adding at the end the
following new clause:
‘‘(xiv) The Secretary shall collect from all subsection
(d) hospitals annual data on inpatient and outpatient
charges, including all such charges—
‘‘(I) for all patients;
‘‘(II) for patients who are eligible for benefits
(excluding any State supplementation) under the
supplemental security income program under title
XVI and entitled to benefits under part A;
‘‘(III) for patients who are entitled to (or, if
they applied, would be eligible for) medical assist-
ance under title XIX;
‘‘(IV) for patients who are beneficiaries of indi-
gent care programs sponsored by State or local gov-
ernments; and
‘‘(V) to the extent that payment is not made
because of an inability of the patient to pay (or have
payment made on the patient’s behalf for) such
charges.’’.
(b) REVISION OF FORMULA FOR DISPROPORTIONATE
PATIENT PERCENTAGE.—Clause (vi) of such section is
amended to read as follows:
‘‘(vi) In this subparagraph, the term ‘dispropor-
tionate patient percentage’ means, with respect to a cost
reporting period of a hospital—
‘‘(I) the charges described in subclauses (II)
through (V) of clause (xiv) for such period; divided
by
‘‘(II) the charges described in clause (xiv)(I) for
such period.’’.
(c) CARVING OUT DSH PAYMENTS FROM PAYMENTS
TO MEDICARE+CHOICE ORGANIZATIONS
AND PAYING
THE AMOUNTS DIRECTLY TO DSH HOSPITALS TREATING
MEDICARE+CHOICE ENROLLEES.—
(1) IN
GENERAL.—Section 1853(c)(3) of the
Social Security Act (42 U.S.C. 1395w–23(c)(3)) is
amended—
(A) in subparagraph (A), by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs
(B) and (D)’’;
(B) by redesignating subparagraph (D) as
subparagraph (E); and
(C) by inserting after subparagraph (C)
the following new subparagraph:
‘‘(D) REMOVAL
OF
PAYMENTS
ATTRIB-
UTABLE
TO
DISPROPORTIONATE
SHARE
PAY-
MENTS FROM CALCULATION OF ADJUSTED AV-
ERAGE PER CAPITA COST.—
‘‘(i) IN
GENERAL.—In determining
the area-specific Medicare+Choice capita-
tion rate under subparagraph (A) for a
year (beginning with 2004), the annual per
capita rate of payment for 2000 deter-
mined under section 1876(a)(1)(C) shall be
adjusted, subject to clause (ii) to exclude
from the rate the additional payments that
the Secretary estimates were payment dur-
ing 1999 for additional payments described
in section 1886(d)(5)(F).
‘‘(ii) TREATMENT OF PAYMENTS COV-
ERED
UNDER
STATE
HOSPITAL
REIM-
BURSEMENT SYSTEM.—To the extent that
the Secretary estimates that an annual per
capita rate of payment for 2000 described
in clause (i) reflects payments to hospitals
reimbursed under section 1814(b)(3), the
Secretary shall estimate a payment adjust-
ment that is comparable to the payment
adjustment that would have been made
under clause (i) if the hospitals had not
been reimbursed under such section.’’.
(2) ADDITIONAL
PAYMENTS
FOR
MANAGED
CARE ENROLLEES.—Section 1886(d)(5)(F) of such
Act (42 U.S.C. 1395ww(d)(5)(F)), as amended by
211(b) of Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (113 Stat.
2763A–484), as enacted into law by section 1(a)(6)
of Public Law 106–554 and by section 302 of this
Act, is amended—
(A) in clause (ii), by striking ‘‘clause (ix)’’
and inserting ‘‘clauses (ix) and (xv)’’, and
(B) by adding at the end the following:
‘‘(xv)(I) For portions of cost reporting periods occur-
ring on or after January 1, 2004, the Secretary shall pro-
vide for an additional payment amount for each applicable
discharge of any subsection (d) hospital that is a dis-
proportionate share hospital (as described in clause (i)).
‘‘(II) For purposes of this clause, the term ‘applicable
discharge’ means the discharge of any individual who is
enrolled under a risk-sharing contract with an eligible or-
ganization under section 1876 and who is entitled to bene-
fits under part A or any individual who is enrolled with
a Medicare+Choice organization under part C.
‘‘(III) The amount of the payment under this clause
with respect to any applicable discharge shall be equal to
the estimated average per discharge amount that would
otherwise have been paid under this subparagraph if the
individuals had not been enrolled as described in subclause
(II).
‘‘(IV) The Secretary shall establish rules for an addi-
tional payment amount, for any hospital reimbursed under
a reimbursement system authorized under section
1814(b)(3) if such hospital would qualify as a dispropor-
tionate share hospital under clause (i) were it not so reim-
bursed. Such payment shall be determined in the same
manner as the amount of payment is determined under
this clause for disproportionate share hospitals.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section apply to payments for discharges occurring on
or after January 1, 2004.
TITLE 
IV—ADDITIONAL 
PAY-
MENTS FOR GRADUATE EDU-
CATION FOR NON-PHYSICIAN
HEALTH PROFESSIONALS
SEC. 401. PAYMENTS FOR GRADUATE EDUCATION FOR
NON-PHYSICIAN HEALTH PROFESSIONALS.
(a) DEVELOPMENT OF PLAN.—
(1) IN GENERAL.—Not later than 2 years after
the date of the enactment of this Act, the Secretary
of Health and Human Services shall develop (and
submit to Congress a report on) a plan to provide
support to institutions that provide graduate health
care education for non-physician health profes-
sionals.
(2) CONSULTATION.—The Secretary shall de-
velop the plan in consultation with the Council on
Graduate Medical Education, the Institute of Medi-
cine, the American Hospital Association, the Asso-
ciation of American Medical Colleges, the American
Association of Colleges of Nursing, the American
Nurses Association, the American Physical Therapy
Association, the American Occupational Therapy As-
sociation, the American Speech-Language-Hearing
Association, the Association of Schools of Allied
Health Professions, the National Association of Chil-
dren’s Hospitals, the American Osteopathic Associa-
tion, the American Association of Colleges of Osteo-
pathic Medicine, and other organizations as deemed
appropriate by the Secretary.
(b) PAYMENTS.—For each fiscal year, beginning with
first fiscal year that begins after the report under sub-
section (a) has been submitted to Congress, the Secretary
of Health and Human Services shall provide from the
Health Care Workforce Trust Fund (established under
section 9511 of the Internal Revenue Code of 1986) for
support in the aggregate amount of $300,000,000 for in-
stitutions providing graduate health care education for
non-physician health professionals. Such support shall be
provided under such terms and conditions as the Secretary
establishes in order to carry out the plan developed under
subsection (a).
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