companied by a supporting affidavit of the moving
party setting forth the reasons why such extension
is necessary to promote the interests of justice and
stating that the information likely to be discovered
is material, and is not, after reasonable inquiry, oth-
erwise available to the moving party.
(d) 
REJECTION
OF
OFFER
BY
DEFENDANT
OFFEREE.—If the defendant, as offeree, does not accept
the offer of settlement made by a claimant in accordance
with subsection (b)(1) within the time permitted pursuant
to State law for a responsive pleading or, if such pleading
includes a motion to dismiss in accordance with applicable
law, within 30 days after the court’s determination regard-
ing such motion, and a verdict is entered in such action
equal to or greater than the specific dollar amount of such
offer of settlement, the court shall enter judgment against
the defendant and shall include in such judgment an
amount for the claimant’s reasonable attorney’s fees and
costs. Such fees shall be offset against any fees owed by
the claimant to the claimant’s attorney by reason of the
verdict.
(e) 
REJECTION
OF
OFFER
BY
CLAIMANT
OFFEREE.—If the claimant, as offeree, does not accept
the offer of settlement made by a defendant in accordance
with subsection (b)(2) within 30 days after the date on
which such offer is made and a verdict is entered in such
action equal to or less than the specific dollar amount of
such offer of settlement, the court shall reduce the amount
of the verdict in such action by an amount equal to the
reasonable attorney’s fees and costs owed by the defendant
to the defendant’s attorney by reason of the verdict, except
that the amount of such reduction shall not exceed that
portion of the verdict which is allocable to noneconomic
loss and economic loss for which the claimant has received
or will receive collateral benefits.
(f) CALCULATION OF ATTORNEY’S FEES.—For pur-
poses of this section, attorney’s fees shall be calculated
on the basis of an hourly rate that should not exceed that
which is considered acceptable in the community in which
the attorney practices, considering the attorney’s quali-
fications and experience and the complexity of the case.
Subtitle C—Alternative Dispute
Resolution Procedures
SEC. 321. ESTABLISHMENT OF BOARD OF ADVISORS.
(a) IN GENERAL.—The Secretary shall establish an
Alternative Dispute Resolution Board of Advisors to make
recommendations to the Secretary concerning the estab-
lishment of a model voluntary alternative dispute resolu-
tion program.
(b) COMPOSITION.—The Board of Advisors shall be
composed of members to be appointed by the Secretary.
Such members shall include representatives of—
(1) patient advocacy groups;
(2) State governments;
(3) physicians groups;
(4) hospitals;
(5) health and medical malpractice insurers;
(6) medical product manufacturers; and
(7) other professions or industries determined
appropriate by the Secretary.
(c) DUTIES
OF BOARD.—The Board of Advisors
shall—
(1) provide advice and assistance to representa-
tives from State governments concerning the estab-
lishment of alternative dispute resolution systems;
and
(2) not later than 1 year after the date of en-
actment of this Act, submit a recommendation to the
Secretary for the implementation of a model vol-
untary alternative dispute resolution system.
(d) APPROVAL BY SECRETARY.—The Secretary shall
approve the model system submitted under subsection
(c)(2) with any modifications that the Secretary deter-
mines appropriate.
SEC. 322. DEVELOPMENT OF STATE VOLUNTARY DISPUTE
RESOLUTION PROCEDURES.
(a) PROGRAM TO ENCOURAGE ADOPTION.—The Sec-
retary shall develop and implement a program to encour-
age States to develop and implement voluntary alternative
dispute resolution procedures that meet the requirements
of this title.
(b) FAILURE TO ADOPT PROCEDURES.—With respect
to a State that has not adopted alternative dispute resolu-
tion procedures that meet the requirements of this title
by the date that occurs 2 years after the date of enactment
of this Act, such State shall be required to adopt the model
voluntary dispute resolution procedure system approved by
the Secretary under section 321(d).
SEC. 323. APPLICATION OF EXISTING PROCEDURES, RE-
BUTTABLE PRESUMPTION.
(a) OFFER TO PROCEED.—With respect to a State
that has an alternative dispute resolution system in effect
that meets the requirements of this title, in lieu of or in
addition to making an offer of settlement under section
311, a claimant or defendant may, within the time per-
mitted for the making of such an offer under section 311,
offer to proceed pursuant to any voluntary alternative dis-
pute resolution procedure established or recognized under
the law of the State in which the civil action for damages
for harm caused through a medical procedure is brought
or under the rules of the court in which such action is
maintained.
(b) REFUSAL TO PROCEED.—If the recipient of an
offer to proceed under subsection (a) refuses to proceed
pursuant to an alternative dispute resolution procedure
and the court determines that such refusal was unreason-
able or not in good faith, the court shall assess reasonable
attorney’s fees and costs against the offeree.
(c) REBUTTABLE PRESUMPTION.—For the purposes
of this section, there shall be created a rebuttable pre-
sumption that a refusal by an offeree under subsection
(b) to proceed pursuant to an alternative dispute resolu-
tion procedure was unreasonable or not in good faith, if
a verdict is rendered in favor of the offeror.
Subtitle D—Uniform Standards for
Medical Malpractice Cases
SEC. 331. APPLICATION TO CIVIL ACTIONS.
This subtitle shall apply to any medical malpractice
action brought in any Federal or State court and any med-
ical malpractice claim resolved through an alternative dis-
pute resolution system.
SEC. 332. DAMAGES.
(a) PAYMENTS.—With respect to a civil action or
claim of the type referred to in section 331, no person
may be required to pay more than $100,000 in a single
payment for future losses, but such person shall be per-
mitted to make such payments on a periodic basis. The
periods for such payments shall be determined by the
court, based upon projections of such future losses. This
subsection shall apply to awards of plaintiff’s damages.
(b) LIMITATION ON NONECONOMIC DAMAGES.—With
respect to a civil action or claim of the type referred to
in section 331, the total amount of damages that may be
awarded to an individual and the family members of such
individual for noneconomic losses resulting from an injury
alleged under such action or claim may not exceed
$250,000, regardless of the number of health care profes-
sionals and health care providers against whom the claim
is brought or the number of claims brought with respect
to the injury.
(c) MANDATORY OFFSETS FOR DAMAGES PAID BY A
COLLATERAL SOURCE.—
(1) IN GENERAL.—With respect to a civil action
or claim of the type referred to in section 331, the
total amount of damages received by an individual
under such action or claim shall be reduced, in ac-
cordance with paragraph (2), by any other payment
that has been, or will be, made to an individual to
compensate such individual for the injury that was
the subject of such action or claim.
(2) AMOUNT OF REDUCTION.—The amount by
which an award of damages to an individual for an
injury shall be reduced under paragraph (1) shall
be—
(A) the total amount of any payments
(other than such award) that have been made
or that will be made to such individual to com-
pensate such individual for the injury that was
the subject of the action or claim; minus
(B) the amount paid by such individual (or
by the spouse, parent, or legal guardian of such
individual) to secure the payments described in
subparagraph (A).
(d) ATTORNEYS’ FEES.—With respect to a civil ac-
tion or claim of the type referred to in section 331, attor-
neys’ fees may not exceed—
(1) 25 percent of the first $150,000 of any
award or settlement under such action or claim; and
(2) 15 percent of any additional amounts in ex-
cess of $150,000.
SEC. 333. JOINT AND SEVERAL LIABILITY FOR NON-
ECONOMIC DAMAGES.
(a) IN GENERAL.—With respect to a civil action or
claim of the type referred to in section 331, the liability
of each defendant for noneconomic damages shall be sev-
eral only and shall not be joint. Each defendant shall be
liable only for the amount of noneconomic damages allo-
cated to such defendant in direct proportion to such de-
fendant’s percentage of responsibility as determined under
subsection (b).
(b) PROPORTION
OF RESPONSIBILITY.—For pur-
poses of this section, the trier of fact shall determine the
proportion of responsibility of each party for the claim-
ant’s harm.
SEC. 334. UNIFORM STATUTE OF LIMITATIONS.
(a) IN GENERAL.—Except as provided in subsection
(b), no medical malpractice civil action may be initiated
after the expiration of the 2-year period that begins on
the date on which the alleged injury should reasonably
have been discovered, but in no event later than 4 years
after the date of the alleged occurrence of the injury.
(b) EXCEPTION FOR MINORS.—In the case of an al-
leged injury suffered by a minor who has not attained 6
years of age, no medical malpractice claim may be initi-
ated after the expiration of the 2-year period that begins
on the date on which the alleged injury should reasonably
have been discovered, but in no event later than 4 years
after the date of the alleged occurrence of the injury or
the date on which the minor attains 8 years of age, which-
ever is later.
SEC. 335. PROVISION FOR DROP IN DELIVERIES
With respect to a civil action of the type referred to
in section 331, for alleged medical malpractice related to
services provided during the delivery of a baby, a court
shall only find in favor of the claimant if such malpractice
on the part of the defendant health care professional is
proven by clear and convincing evidence, except that such
evidentiary standard shall only apply if a defendant did
not previously provide prenatal care to the claimant for
this pregnancy, was not part of group practice that pre-
viously treated the claimant during the pregnancy result-
ing in this delivery, or was not providing coverage pursu-
ant to an agreement with another health care professional
for this delivery.
Subtitle E—Uniform Disciplinary
Reforms
SEC. 341. REQUIREMENT OF COMPLIANCE.
Not later than 2 years after the date of enactment
of this Act, a State shall comply with the requirements
of this subtitle.
SEC. 342. FUNDS FOR STATE DISCIPLINARY ACTIVITIES.
Each State shall allocate the total amount of fees
paid to the State in each year for the licensing or certifi-
cation of each type of health care practitioner, or an
amount of State funds equal to such total amount, to the
State agency or agencies responsible for the conduct of
licensing and disciplinary actions with respect to such type
of health care practitioner.
SEC. 343. MEMBERSHIP OF STATE HEALTH CARE PRACTI-
TIONER BOARDS.
Each State shall permit the general public to be rep-
resented on State health care practitioner disciplinary
boards. Not less than 25 percent of the membership of
each such health care practitioner disciplinary board shall
be appointed from among the general public.
SEC. 344. IMMUNITY FOR MEMBERS OF STATE HEALTH
CARE PRACTITIONER BOARDS.
There shall be no monetary liability on the part of,
and no cause of action for damages shall arise against,
any current or former member, officer, administrator,
staff member, committee member, examiner, representa-
tive, agent, employee, consultant, witness, or any other in-
dividual serving or having served on a State health care
practitioner disciplinary board, either as a part of the
board’s operation or as an individual, as a result of any
act, omission, proceeding, conduct or decision related to
the duties of such individual undertaken or performed in
good faith and within the scope of the function of the
board.
SEC. 345. RISK MANAGEMENT PROGRAMS.
Not later than 2 years after the date of enactment
of this Act, each State shall have in effect a Statewide
risk management program, to reduce the incidence of med-
ical malpractice that meets any regulations promulgated
by the Secretary for the establishment of such program.
SEC. 346. PUNITIVE DAMAGES.
(a) TRUST FUND.—Each State shall establish a
health care disciplinary trust fund consisting of such
amounts as are transferred to the trust fund under sub-
section (b).
(b) TRANSFER OF AMOUNTS.—Each State shall re-
quire that all awards of punitive damages resulting from
all medical malpractice and medical products civil actions
in that State be transferred to the trust fund established
under subsection (a) in the State.
(c) OBLIGATIONS FROM TRUST FUND.—The chief
executive officer of a State shall obligate such sums as
are available in the trust fund established in that State
under subsection (a) to provide additional resources to
State health care practitioner disciplinary boards for the
disciplining of health care practitioners and to provide ad-
ditional resources for consumer protection activities of the
State.
Subtitle F—Medical Products
SEC. 351. LIMITATION ON AWARD OF PUNITIVE DAMAGES
IN PRODUCT LIABILITY ACTIONS INVOLVING
DRUGS AND DEVICES.
(a) DEFINITIONS.—As used in this section:
(1) DEVICE.—The term ‘‘device’’ has the mean-
ing given the term in section 201(h) of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)).
(2) DRUG.—The term ‘‘drug’’ has the meaning
given the term in section 201(g)(1) of the Federal
Food, 
Drug, 
and 
Cosmetic 
Act 
(21 
U.S.C.
321(g)(1)).
(3) HEALTH
CARE
PRODUCER.—The term
‘‘health care producer’’ means any firm or business
enterprise that designs, manufactures, produces, or
sells a drug or device that is the subject of a liability
action.
(b) LIMITATION.—
(1) IN GENERAL.—Punitive damages otherwise
permitted by applicable law shall not be awarded in
an action under this Act against a health care pro-
ducer of a drug or device that caused the harm com-
plained of by the claimant if—
(A) the drug or device—
(i) was subject to approval under sec-
tion 505 (21 U.S.C. 355) or premarket ap-
proval under section 515 (21 U.S.C. 360e),
respectively, of the Federal Food, Drug,
and Cosmetic Act, by the Food and Drug
Administration, with respect to—
(I) the safety of the formulation
or performance of the aspect of the
drug or device that caused the harm;
or
(II) the adequacy of the packag-
ing or labeling of the drug or device;
and
(ii) was approved by the Food and
Drug Administration; or
(B) the drug or device is generally recog-
nized as safe and effective pursuant to condi-
tions established by the Food and Drug Admin-
istration and applicable regulations, including
packaging and labeling regulations.
(2) WITHHELD
INFORMATION; MISREPRESEN-
TATION; 
ILLEGAL
PAYMENT.—The provisions of
paragraph (1) shall not apply in any case in which
the defendant—
(A) withheld from or misrepresented to the
Food and Drug Administration or any other
agency or official of the Federal Government in-
formation that is material and relevant to the
performance of the drug or device; or
(B) made an illegal payment to an official
of the Food and Drug Administration for the
purpose of securing approval of the drug or de-
vice.
(c) SEPARATE PROCEEDING.—
(1) CONSIDERATIONS.—At the request of the
health care producer in an action described in sub-
section (b), the trier of fact shall consider in a sepa-
rate proceeding—
(A) whether punitive damages are to be
awarded and the amount of the award; or
(B) the amount of punitive damages fol-
lowing a determination of punitive liability.
(2) EVIDENCE.—If a separate proceeding is re-
quested in accordance with paragraph (1), evidence
relevant only to the claim of punitive damages, as
determined by applicable State law, shall be inadmis-
sible in any proceeding to determine whether com-
pensatory damages are to be awarded.
(d) AMOUNT OF PUNITIVE DAMAGES.—In determin-
ing the amount of punitive damages in an action described
in subsection (b) or (c), the trier of fact shall consider
all relevant evidence, including—
(1) the financial condition of the health care
producer;
(2) the severity of the harm caused by the con-
duct of the health care producer;
(3) the duration of the conduct or any conceal-
ment of the conduct by the health care producer;
(4) the profitability of the conduct to the health
care producer;
(5) the number of products sold by the health
care producer of the kind causing the harm com-
plained of by the claimant;
(6) awards of punitive or exemplary damages to
persons similarly situated to the claimant;
(7) prospective awards of compensatory dam-
ages to persons similarly situated to the claimant;
(8) any criminal penalties imposed on the
health care producer as a result of the conduct com-
plained of by the claimant; and
(9) the amount of any civil fines assessed
against the defendant as a result of the conduct
complained of by the claimant.
(e) STRICT LIABILITY DEFENSE.—In a civil action
brought by a claimant in a Federal or State court under
which the claimant alleges that a health care producer of
a drug or device is strictly liable to such claimant for inju-
ries sustained from the use of such drug or device, a show-
ing by the defendant that such drug or devices was subject
to approval and was approved by the Food and Drug Ad-
ministration as described in subsection (b)(1)(A) shall be
an absolute defense to such strict liability claims.
Subtitle G—Community Health
Centers
SEC. 361. COMMUNITY AND MIGRANT HEALTH CENTERS
RISK RETENTION GROUP.
(a) IN GENERAL.—Subpart I of part D of title III
of the Public Health Service Act (42 U.S.C. 254b et seq.)
is amended by adding at the end thereof the following new
section:
‘‘SEC. 330A. RISK RETENTION GROUP.
‘‘(a) GRANT.—The Secretary shall make a grant to
an entity that represents recipients of assistance under
section 329 and 330 to enable such entity to develop a
business plan as described in subsection (b)(2) and estab-
lish a nationwide risk retention group as provided for in
Liability Risk Retention Act of 1986 (15 U.S.C. 3901 et
seq.), and that meets the requirements of this section.
‘‘(b) BUSINESS PLAN AND FORMATION.—
‘‘(1) DEVELOPMENT AND ESTABLISHMENT.—
‘‘(A) IN GENERAL.—Not later than Sep-
tember 30, 1993, the grantee shall develop a
business plan as described in paragraph (2) and
have established a risk retention group that
meets the requirements of section 2(4) of the
Product Liability Risk Retention Act of 1981
(15 U.S.C. 3901(2)(4)).
‘‘(B) ESTABLISHMENT.—In establishing
the risk retention group under subparagraph
(A), the grantee shall take all steps, in accord-
ance with this subsection, necessary to enable
such group to be prepared to issue insurance
policies under this section.
‘‘(2) BUSINESS PLAN.—The grantee shall de-
velop a plan for the operation of the risk retention
group that shall include all actuarial reports and
studies conducted with respect to the formation, cap-
italization, and operation of the group.
‘‘(3) STRUCTURE, RIGHTS, AND DUTIES OF THE
RISK RETENTION GROUP.—
‘‘(A) BOARD OF DIRECTORS.—
‘‘(i) APPOINTMENT.—The board of di-
rectors of the risk retention group shall
consist of 12 members to be appointed by
the recipient of the grant under subsection
(a), and approved as provided in clause
(ii).
‘‘(ii) APPROVAL.—The initial mem-
bers appointed under clause (i) shall be ap-
proved by the Secretary, and shall serve
for a term as provided in clause (iii). All
subsequent members shall be subject to the
approval of the members of the risk reten-
tion group.
‘‘(iii) TERMS.—The recipient of the
grant under subsection (a) shall appoint
the members of the board under clause (i)
as follows:
‘‘(I) Four members shall be ap-
pointed for an initial term of 1 year.
‘‘(II) Four members shall be ap-
pointed for an initial term of 2 years.
‘‘(III) Four members shall be ap-
pointed for an initial term of 3 years.
Members serving terms other than initial
terms shall serve for 3 years. Members
may serve successive terms.
‘‘(iv) 
EXECUTIVE
DIRECTOR.—The
Executive Director of the board shall be
elected by the members of the board, and
shall serve at the pleasure of such mem-
bers.
‘‘(v) VACANCIES.—Vacancies on the
board shall be filled through a vote of the
remaining members of the board, subject
to the approval of the members of the risk
retention group.
‘‘(B) BYLAWS.—The board shall develop
the bylaws of the risk retention group that shall
be subject to the disapproval of the Secretary.
Any changes that the board desires to make in
such bylaws shall also be subject to the dis-
approval of the Secretary. The Secretary shall
provide the board with 90 days notice of the
Secretary’s intent to disapprove a bylaw.
‘‘(C) ADMINISTRATION.—The risk reten-
tion group may negotiate with other entities for
the purposes of managing and administering
the risk retention group, and for purposes of
obtaining reinsurance.
‘‘(D) PROVISION
OF
INSURANCE.—The
risk retention group shall provide professional
liability insurance, and other types of profitable
insurance approved for issuance by the Sec-
retary, to migrant and community health cen-
ters that receive assistance under sections 329
and 330 and that meet the requirements of
subparagraph (E).
‘‘(E) PARTICIPANTS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), all community and mi-
grant health centers that receive assistance
under section 329 and 330 shall become
members in the risk retention group estab-
lished under this section and shall pur-
chase the professional liability insurance
that is offered by such group for such cen-
ters and any health care staff or personnel
employed by such centers or under con-
tract with such centers. All professional
staff members of such centers shall be eli-
gible to obtain the insurance offered by
such group.
‘‘(ii) EXCEPTIONS.—
‘‘(I) GOOD
CAUSE.—The Sec-
retary may, on a showing of good
cause by the center, exempt such cen-
ter from the requirements of clause
(i).
‘‘(II) FAILURE TO MEET CONDI-
TIONS.—If the risk retention group
determines that a center is not com-
plying with the established underwrit-
ing standards, such group may decline
to provide insurance to such center.
The risk retention group shall provide
a center with 60 days notice of a deci-
sion by the group not to provide in-
surance to such center.
‘‘(III) HEARING.—Prior to the
Secretary granting an exemption or
severance as requested in an applica-
tion submitted under subclause (I),
the Secretary shall require that the
applicant provide evidence concerning
its application and shall afford the
risk retention group an opportunity to
address the allegations contained in
such application. The Secretary may
grant the center temporary relief
under this subparagraph without a
hearing in emergency situations.
‘‘(F) APPLICABILITY
OF
INSURANCE
TO
CLAIMS.—Insurance provided by the risk reten-
tion group under this section shall apply to all
claims filed against a covered community or mi-
grant health center after the initiation of insur-
ance coverage by the risk retention group, in-
cluding acts that occur prior to coverage under
this section that are not covered by other insur-
ance.
‘‘(c) SUBMISSION OF BUSINESS PLAN TO OUTSIDE
EXPERTS.—After the development of the business plan
and the establishment of the risk retention group as re-
quired under subsection (b), the risk retention group shall
enter into a contract with individuals or entities who are
insurance, financing, and business experts to require such
individuals or entities to analyze and audit the group.
Such individuals and entities shall provide the group with
an evaluation of such plan and group.
‘‘(d) SUBMISSION OF PLAN AND EVALUATION.—
‘‘(1) IN GENERAL.—The risk retention group
shall submit to the Secretary the business plan re-
quired under subsection (b) and the evaluation com-
pleted under subsection (c) to the Secretary.
‘‘(2) DETERMINATION
BY
SECRETARY.—Not
later than September 30, 1993, the Secretary shall
100
make a determination, based on the plan and evalua-
tion submitted under paragraph (1), of whether the
operation of the risk retention group results in an
increase in the amount of funds available for use by
community and migrant health centers and other en-
tities that receive assistance under sections 329 and
330 in the 2-year period ending on September 30,
1995.
‘‘(3) 
IMPLEMENTATION.—If 
the 
Secretary
makes an affirmative determination under para-
graph (1), the Secretary shall permit the implemen-
tation of the plan and the operation of the risk re-
tention group as provided for in this section, and
shall capitalize such group as provided for in sub-
section (e)(2).
‘‘(e) FUNDING.—
‘‘(1) CAPITALIZATION.—There are authorized
to be appropriated to carry out this section,
$40,000,000 for each of the fiscal years 1993 and
1994. Amounts appropriated under this paragraph
may only be made available if the Secretary makes
an affirmative determination under subsection
(d)(2).
‘‘(2) REMAINING
ASSETS.—All assets of the
risk retention group that remain after the dissolu-
101
tion of such group shall become the property of the
Secretary who shall use such assets to pay the re-
maining expenses of the group.
‘‘(3) SAVINGS.—Any amount saved by the
grantees under sections 329 and 330 as a result of
the establishment of the risk retention group shall
be utilized—
‘‘(A) to provide additional services of the
type permitted under section 329 or 330, as ap-
propriate; and
‘‘(B) to defend against medical malpractice
claims arising from services provided by such
grantees.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 329(h)(1)(A) of the Public Health
Service Act (42 U.S.C. 254b(h)(1)(A)) is amended
by striking ‘‘1991’’ and inserting ‘‘1994’’.
(2) Section 330(g)(2)(A) of such Act (42
U.S.C. 254b(h)(1)(A)) is amended by inserting ‘‘,
and such sums as may be necessary for fiscal year
1993’’ after ‘‘1991’’.
102
Subtitle H—Miscellaneous
Provisions
SEC. 371. SEVERABILITY.
If any provision of this title, or an amendment made
by this title, or the application of such provision to any
person or circumstance is held to be unconstitutional, the
remainder of this title and the amendments made by this
title, and the application of the provisions of such to any
person or circumstance shall not be affected thereby.
SEC. 372. COMPLIANCE.
Except as otherwise specifically provided, not later
than 2 years after the date of enactment of this Act, a
State shall enact, adopt, or otherwise comply with the pro-
visions of this title.
TITLE IV—PUBLIC HEALTH
PROVISIONS
Subtitle A—New Basic Health Care
Program
SEC. 401. ESTABLISHMENT OF BASICARE PROGRAM.
(a) IN GENERAL.—The Social Security Act (42
U.S.C. 301 et seq.) is amended by adding at the end there-
of the following new title:
‘‘TITLE XXI—BASICARE
‘‘TABLE OF CONTENTS OF TITLE
‘‘Sec. 2101. Appropriation.
‘‘Sec. 2102. State plans for BasiCare assistance.
103
‘‘Sec. 2103. Payment to States.
‘‘Sec. 2104. Quality assurance.
‘‘Sec. 2105. Definitions.
‘‘APPROPRIATION
‘‘SEC. 2101. For the purpose of providing basic
health care benefits to low-income uninsured individuals
not eligible for coverage under title XIX of this Act, there
is hereby authorized to be appropriated for each fiscal year
a sum sufficient to carry out the purposes of this title.
The sums made available under this section shall be used
for making payments to States which have submitted, and
had approved by the Secretary, State plans for BasiCare
assistance.
‘‘STATE PLANS FOR BASICARE ASSISTANCE
‘‘SEC. 2102. (a) IN GENERAL.—A State plan for
BasiCare assistance must—
‘‘(1) provide either for the establishment or des-
ignation of a single State agency to administer or
supervise the administration of the program estab-
lished under this title;
‘‘(2) provide for financial participation by the
State equal to the non-Federal share of the expendi-
tures under the plan with respect to which payments
under section 2103 are authorized by this title;
‘‘(3) provide health assistance to all eligible in-
dividuals described in subsection (b), and at the op-
104
tion of the State, subsets of basic medical and social
benefits to subgroups of such eligible individuals;
‘‘(4) meet the quality assurance requirements of
section 2104;
‘‘(5) provide that the State will not modify its
State plan under title XIX of this Act so as to result
in individuals eligible under the State’s plan under
such title becoming eligible for enrollment under
BasiCare;
‘‘(6) meet the requirements of paragraphs (4),
(6), (7), (19), (45), (46), (48), and (49) of section
1902(a); and
‘‘(7) meet such further requirements as the
Secretary may specify.
‘‘(b) ELIGIBILITY FOR BASICARE.—An individual is
eligible to receive benefits under this title if such individ-
ual—
‘‘(1) has a family income below 200 percent of
the income official poverty line (as defined by the
Office of Management and Budget and revised an-
nually in accordance with section 673(2) of the Om-
nibus Budget Reconciliation Act of 1981);
‘‘(2) is not otherwise eligible for medical assist-
ance under a State plan under title XIX of this Act;
and
105
‘‘(3) is not otherwise covered under a health
plan offered by the individual’s employer.
‘‘PAYMENT TO STATES
‘‘SEC. 2103. (a) IN GENERAL.—From the sums ap-
propriated therefor (subject to the expenditure limitation
described in subsection (b)), the Secretary shall pay to
each State which has a plan approved under this title, for
each quarter, beginning with the quarter commencing
January 1, 1993—
‘‘(1) an amount equal to the Federal health as-
sistance percentage (as defined in section 2105(b));
plus
‘‘(2) an amount equal to 3 percent of the aver-
age per person expenditures under the plan for each
individual under the plan enrolled in a managed care
setting (including health maintenance organizations,
community health centers and such other types of
providers as designated by the Secretary).
‘‘(b) LIMIT
ON
FEDERAL
EXPENDITURES
AS
HEALTH ASSISTANCE.—Payments under this section to a
State may not exceed an average of $10,000 per year, per
enrolled individual.
‘‘(c) COST-SHARING.—(1) With respect to individuals
eligible for health assistance under this title whose income
is between 100 and 200 percent of the income official pov-
erty line (as defined by the Office of Management and
106
Budget and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of
1981), the State may impose such deductibles, copayments
or premiums with respect to such individual’s coverage
under this title as the State may deem appropriate, sub-
ject to the limitation in paragraph (2).
‘‘(2) A State may not impose a deductible, copayment
or premium with respect to an individual described in
paragraph (1) that is in excess of 5 percent of such indi-
vidual’s gross income during a calendar year.
‘‘QUALITY ASSURANCE
‘‘SEC. 2104. The Secretary shall establish a program
to assure the quality of services provided under this title.
In establishing such program, the Secretary shall provide
that Federal employees and contractors are utilized in en-
suring compliance with the quality assurance provisions
of this title and provide for criteria to disallow payment
under section 2103 for services found not to meet the
quality assurance provisions of this title established by the
Secretary.
‘‘DEFINITIONS
‘‘SEC. 2105. (a) HEALTH ASSISTANCE.—For pur-
poses of this title, the term ‘health assistance’ means a
set of basic medical and social benefits as defined by the
State, including services provided in skilled nursing facili-
107
ties or in other long-term care settings for a period not
to exceed 45 days in a calendar year.
‘‘(b) FEDERAL
HEALTH
ASSISTANCE
PERCENT-
AGE.—For purposes of this title, the term ‘Federal health
assistance percentage’ means the Federal medical assist-
ance percentage as defined in section 1905(b).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall become effective with respect to pay-
ments for health assistance beginning on or after January
1, 1993.
SEC. 402. GAO STUDY OF PAYMENTS UNDER BASICARE.
The Comptroller General of the Government Account-
ing Office shall study and report to Congress by no later
than January 1, 1995, on payments to providers of serv-
ices under title XXI of the Social Security Act and shall
include in such report recommendations on whether or not
payments under such title to managed care programs need
to be increased in order to encourage greater participation
of such entities under such title.
SEC. 411. EXPANSION OF MEDICAID WAIVER AUTHORITY.
(a) IN GENERAL.—Section 1115 of the Social Secu-
rity Act (42 U.S.C. 1315) is amended by adding at the
end the following new subsection:
‘‘(e)(1) Notwithstanding any other provision of this
title, with respect to any waiver granted by the Secretary
108
under title XIX (except waivers under section 1915(c))
after such a waiver has been in effect for over a period
of 3 years, the Secretary shall not require a State operat-
ing under such a waiver to conduct an independent assess-
ment of such waiver unless the State proposes a substan-
tial (as determined by the Secretary) amendment to the
waiver agreement.
‘‘(2) Any waiver granted under title XIX which has
been in effect for over a period of 3 years shall be consid-
ered, at the option of a State, to be a permanent amend-
ment to the State’s plan for medical assistance in effect
under section 1902.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall become effective with respect to waiv-
ers granted under title XIX of the Social Security Act be-
ginning before, on or after January 1, 1993.
SEC. 412. ESTABLISHMENT OF FEDERAL MEDICAL WAIVER
DEMONSTRATION BOARD.
(a) ESTABLISHMENT.—There is established a board
to be known as the Federal Medical Waiver Demonstra-
tion Board (hereinafter referred to as the ‘‘Board’’).
(b) MEMBERSHIP.—The Board shall be composed
of—
(1) the Secretary of Health and Human Serv-
ices;
109
(2) the Secretary of Labor; and
(3) the Secretary of Veterans Affairs.
(c) DUTIES AND POWERS OF THE BOARD.—
(1) REVIEW
OF
STATE
APPLICATIONS.—The
Board shall review applications submitted by States
to conduct health care related demonstration
projects in the State and shall approve within 3
months of receiving such applications those applica-
tions which meet the requirements of this section.
The Board in reviewing and approving the applica-
tion of a State shall make a determination whether
such application provides for a demonstration
project which—
(A) would provide that at least 95 percent
of the residents of the State would have access
to basic health care services (as defined by the
Board);
(B) would improve the delivery of and in-
crease access to health care services for a sig-
nificant number of individuals in the State; and
(C) would assure the quality of care of
health care services provided under such
project.
(2) DEVELOPMENT OF MODEL STATE PLANS.—
The Board shall develop and publish in the Federal
110
Register, no later than 6 months after the date of
enactment of this Act, at least 3 different model
health care delivery plans that provide for new ap-
proaches that may be adopted by States in providing
and furnishing health care services to residents of
the State.
(3) WAIVER OF CERTAIN FEDERAL HEALTH RE-
LATED PROVISIONS.—The Board upon approving the
application of a State to conduct a demonstration
project under this section shall waive to the extent
necessary to allow the State to conduct such a dem-
onstration project the following provisions of Federal
law:
(A) The Public Health Service Act.
(B) Subject to paragraph (4), title XVIII
of the Social Security Act.
(C) Titles XIX and XXI of the Social Se-
curity Act.
(D) All health care programs operated
under laws administered by the Secretary of
Veterans Affairs.
(E) The Employee Retirement Income Se-
curity Act of 1974.
(4) LIMITED
WAIVER
OF
MEDICARE.—The
Board may waive the provisions of title XVIII of the
111
Social Security Act only if a State provides that all
individuals residing in the State receiving benefits
under the medicare program under such title are eli-
gible for health care benefits under the program op-
erated by the State under a waiver granted under
this section and that such health care benefits pro-
vided to such individuals are equal in amount, dura-
tion, and scope to the benefits provided under such
title.
(d) 3-YEAR RENEWAL OF WAIVER.—A waiver ap-
proved by the Board for a State shall be in effect in the
State for a 36-month period commencing from the date
of such approval. At the end of the 36-month period such
waiver shall be renewed unless the Board determines that
the State is not substantially in compliance with the re-
quirements described in subparagraphs (A) through (C)
of subsection (c)(1).
(e) BUDGET NEUTRALITY.—The Board in carrying
out its duties under this section shall provide that total
Federal expenditures under the programs for which waiv-
ers are granted under this section are no greater than
what such expenditures would have been but for the waiv-
ers granted under this section.
112
TITLE V—MEDICALLY
UNDERSERVED AREAS
Subtitle A—Public Health Service
Act Provisions
SEC. 501. NATIONAL HEALTH SERVICE CORPS.
Section 338H(b) of the Public Health Service Act (42
U.S.C. 254q(b)) is amended—
(1) in paragraph (1), by striking ‘‘and such
sums’’ and all that follows through the end thereof
and inserting ‘‘$118,900,000 for each of the fiscal
years 1993 through 1997.’’; and
(2) in paragraph (2)—
(A) by redesignating subparagraphs (A)
and (B) as subparagraphs (B) and (C), respec-
tively; and
(B) by inserting before subparagraph (B)
(as so redesignated) the following new subpara-
graph:
‘‘(A) IN GENERAL.—Of the amount appro-
priated under paragraph (1) for each fiscal
year, the Secretary shall utilize 25 percent of
such amount to carry out section 338A and 75
percent of such amount to carry out section
338B.’’.
113
SEC. 502. ESTABLISHMENT OF GRANT PROGRAM.
Subpart I of part D of title III of the Public Health
Service Act (42 U.S.C. 254b et seq.) is amended by adding
at the end thereof the following new section:
‘‘SEC. 330A. COMMUNITY BASED PRIMARY HEALTH CARE
GRANT PROGRAM.
‘‘(a) ESTABLISHMENT.—The Secretary shall estab-
lish and administer a program to provide allotments to
States to enable such States to provide grants for the cre-
ation or enhancement of community based primary health
care entities that provide services to pregnant women and
children up to age three.
‘‘(b) ALLOTMENTS TO STATES.—
‘‘(1) IN GENERAL.—From the amounts avail-
able for allotment under subsection (h) for a fiscal
year, the Secretary shall allot to each State an
amount equal to the product of the grant share of
the State (as determined under paragraph (2)) mul-
tiplied by the amount available for allotment for
such fiscal year.
‘‘(2) GRANT SHARE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the grant share of a State shall be
the product of the need-adjusted population of
the State (as determined under subparagraph
(B)) multiplied by the Federal matching per-
114
centage of the State (as determined under sub-
paragraph (C)), expressed as a percentage of
the sum of the products of such factors for all
States.
‘‘(B) NEED-ADJUSTED POPULATION.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the need-adjusted popu-
lation of a State shall be the product of
the total population of the State (as esti-
mated by the Secretary of Commerce) mul-
tiplied by the need index of the State (as
determined under clause (ii)).
‘‘(ii) NEED INDEX.—For purposes of
clause (i), the need index of a State shall
be the ratio of—
‘‘(I) the weighted sum of the geo-
graphic percentage of the State (as
determined under clause (iii)), the
poverty percentage of the State (as
determined under clause (iv)), and the
multiple grant percentage of the State
(as determined under clause (v)); to
‘‘(II) the general population per-
centage of the State (as determined
under clause (vi)).
115
‘‘(iii) GEOGRAPHIC PERCENTAGE.—
‘‘(I) IN GENERAL.—For purposes
of clause (ii)(I), the geographic per-
centage of the State shall be the esti-
mated population of the State that is
residing in nonurbanized areas (as de-
termined under subclause (II)) ex-
pressed as a percentage of the total
nonurbanized population of all States.
‘‘(II) 
NONURBANIZED
POPU-
LATION.—For purposes of subclause
(I), the estimated population of the
State that is residing in non-urban-
ized areas shall be one minus the ur-
banized population of the State (as
determined using the most recent de-
cennial census), expressed as a per-
centage of the total population of the
State (as determined using the most
recent decennial census), multiplied by
the current estimated population of
the State.
‘‘(iv) POVERTY
PERCENTAGE.—For
purposes of clause (ii)(I), the poverty per-
centage of the State shall be the estimated
116
number of people residing in the State
with incomes below 200 percent of the in-
come official poverty line (as determined
by the Office of Management and Budget)
expressed as a percentage of the total
number of such people residing in all
States.
‘‘(v) MULTIPLE
GRANT
PERCENT-
AGE.—For purposes of clause (ii)(I), the
multiple grant percentage of the State
shall be the amount of Federal funding re-
ceived by the State under grants awarded
under sections 329, 330 and 340, ex-
pressed as a percentage of the total
amounts received under such grants by all
States. With respect to a State, such
amount shall not exceed twice the general
population percentage of the State under
clause (vi) or be less than one half of the
States general population percentage.
‘‘(vi) GENERAL
POPULATION
PER-
CENTAGE.—For purposes of clause (ii)(II),
the general population percentage of the
State shall be the total population of the
State (as determined by the Secretary of
117
Commerce) expressed as a percentage of
the total population of all States.
‘‘(C) FEDERAL MATCHING PERCENTAGE.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the Federal matching
percentage of the State shall be equal to
one less the State matching percentage (as
determined under clause (ii)).
‘‘(ii) STATE
MATCHING
PERCENT-
AGE.—For purposes of clause (ii), the
State matching percentage of the State
shall be 0.25 multiplied by the ratio of the
total taxable resource percentage (as deter-
mined under clause (iii)) to the need-ad-
justed population of the State (as deter-
mined under subparagraph (B)).
‘‘(iii) TOTAL
TAXABLE
RESOURCE
PERCENTAGE.—For purposes of clause (ii),
the total taxable resources percentage of
the State shall be the total taxable re-
sources of a State (as determined by the
Secretary of the Treasury) expressed as a
percentage of the sum of the total taxable
resources of all States.
‘‘(3) ANNUAL ESTIMATES.—
118
‘‘(A) IN
GENERAL.—If the Secretary of
Commerce does not produce the annual esti-
mates required under paragraph (2)(B)(iv),
such estimates shall be determined by multiply-
ing the percentage of the population of the
State that is below 200 percent of the income
official poverty line as determined using the
most recent decennial census by the most recent
estimate of the total population of the State.
Except as provided in subparagraph (B), the
calculations required under this subparagraph
shall be made based on the most recent 3 year
average of the total taxable resources of individ-
uals within the State.
‘‘(B) DISTRICT
OF
COLUMBIA.—Notwith-
standing subparagraph (A), the calculations re-
quired under such subparagraph with respect to
the District of Columbia shall be based on the
most recent 3 year average of the personal in-
come of individuals residing within the District
as a percentage of the personal income for all
individuals residing within the District, as de-
termined by the Secretary of Commerce.
‘‘(4) MATCHING REQUIREMENT.—A State that
receives an allotment under this section shall make
119
available State resources (either directly or indi-
rectly) to carry out this section in an amount that
shall equal the State matching percentage for the
State (as determined under paragraph (2)(C)(II))
divided by the Federal matching percentage (as de-
termined under paragraph (2)(C)).
‘‘(c) APPLICATION.—
‘‘(1) IN GENERAL.—To be eligible to receive an
allotment under this section, a State shall prepare
and submit an application to the Secretary at such
time, in such manner, and containing such informa-
tion as the Secretary may by regulation require.
‘‘(2) ASSURANCES.—A State application sub-
mitted under paragraph (1) shall contain an assur-
ance that—
‘‘(A) the State will use amounts received
under it’s allotment consistent with the require-
ments of this section; and
‘‘(B) the State will provide, from non-Fed-
eral sources, the amounts required under sub-
section (b)(4).
‘‘(d) USE OF FUNDS.—
‘‘(1) IN
GENERAL.—The State shall use
amounts received under this section to award grants
to eligible public and nonprofit private entities, or
120
consortia of such entities, within the State to enable
such entities or consortia to provide services of the
type described in paragraph (2) of section 329(h) to
pregnant women and children up to age three.
‘‘(2) ELIGIBILITY.—To be eligible to receive a
grant under paragraph (1), an entity or consortium
shall—
‘‘(A) prepare and submit to the admin-
istering entity of the State, an application at
such time, in such manner and containing such
information as such administering entity may
require, including a plan for the provision of
services;
‘‘(B) provide assurances that services will
be provided under the grant at fee rates estab-
lished or determined in accordance with section
330(e)(3)(F); and
‘‘(C) provide assurances that in the case of
services provided to individuals with health in-
surance, such insurance shall be used as the
primary source of payment for such services.
‘‘(3) TARGET POPULATIONS.—Entities or con-
sortia receiving grants under paragraph (1) shall, in
providing the services described in paragraph (3),
121
substantially target populations of pregnant women
and children within the State who—
‘‘(A) lack the health care coverage, or abil-
ity to pay, for primary or supplemental health
care services; or
‘‘(B) reside in medically underserved or
health professional shortage areas, areas cer-
tified as underserved under the rural health
clinic program, or other areas determined ap-
propriate by the State, within the State.
‘‘(4) PRIORITY.—In awarding grants under
paragraph (1), the State shall—
‘‘(A) give priority to entities or consortia
that can demonstrate through the plan submit-
ted under paragraph (2) that—
‘‘(i) the services provided under the
grant will expand the availability of pri-
mary care services to the maximum num-
ber of pregnant women and children who
have no access to such care on the date of
the grant award; and
‘‘(ii) the delivery of services under the
grant will be cost-effective; and
122
‘‘(B) ensure that an equitable distribution
of funds is achieved among urban and rural en-
tities or consortia.
‘‘(e) REPORTS AND AUDITS.—Each State shall pre-
pare and submit to the Secretary annual reports concern-
ing the State’s activities under this section which shall be
in such form and contain such information as the Sec-
retary determines appropriate. Each such State shall es-
tablish fiscal control and fund accounting procedures as
may be necessary to assure that amounts received under
this section are being disbursed properly and are ac-
counted for, and include the results of audits conducted
under such procedures in the reports submitted under this
subsection.
‘‘(f) PAYMENTS.—
‘‘(1) ENTITLEMENT.—Each State for which an
application has been approved by the Secretary
under this section shall be entitled to payments
under this section for each fiscal year in an amount
not to exceed the State’s allotment under subsection
(b) to be expended by the State in accordance with
the terms of the application for the fiscal year for
which the allotment is to be made.
‘‘(2) METHOD OF PAYMENTS.—The Secretary
may make payments to a State in installments, and
123
in advance or, by way of reimbursement, with nec-
essary adjustments on account of overpayments or
underpayments, as the Secretary may determine.
‘‘(3) STATE
SPENDING
OF
PAYMENTS.—Pay-
ments to a State from the allotment under sub-
section (b) for any fiscal year must be expended by
the State in that fiscal year or in the succeeding fis-
cal year.
‘‘(g) DEFINITION.—As used in this section, the term
‘administering entity of the State’ means the agency or
official designated by the chief executive officer of the
State to administer the amounts provided to the State
under this section.
‘‘(h) FUNDING.—Notwithstanding any other provi-
sion of law, the Secretary shall use 50 percent of the
amounts that the Secretary is required to utilize under
section 330B(h) in each fiscal year to carry out this sec-
tion.’’.
124
SEC. 503. ESTABLISHMENT OF NEW PROGRAM TO PROVIDE
FUNDS TO ALLOW FEDERALLY QUALIFIED
HEALTH CENTERS AND OTHER ENTITIES OR
ORGANIZATIONS 
TO 
PROVIDE 
EXPANDED
SERVICES TO MEDICALLY UNDERSERVED IN-
DIVIDUALS.
(a) IN GENERAL.—Subpart I of part D of title III
of the Public Health Service Act (42 U.S.C. 254b et seq.)
(as amended by section 502) is further amended by adding
at the end thereof the following new section:
‘‘SEC. 330B. ESTABLISHMENT OF NEW PROGRAM TO PRO-
VIDE FUNDS TO ALLOW FEDERALLY QUALI-
FIED HEALTH CENTERS AND OTHER ENTI-
TIES OR ORGANIZATIONS TO PROVIDE EX-
PANDED SERVICES TO MEDICALLY UNDER-
SERVED INDIVIDUALS.
‘‘(a) ESTABLISHMENT OF HEALTH SERVICES AC-
CESS PROGRAM.—From amounts appropriated under this
section, the Secretary shall, acting through the Bureau of
Health Care Delivery Assistance, award grants under this
section to federally qualified health centers (hereinafter re-
ferred to in this section as ‘FQHC’s’) and other entities
and organizations submitting applications under this sec-
tion (as described in subsection (c)) for the purpose of
providing access to services for medically underserved pop-
ulations (as defined in section 330(b)(3)) or in high im-
125
pact areas (as defined in section 329(a)(5)) not currently
being served by a FQHC.
‘‘(b) ELIGIBILITY FOR GRANTS.—
‘‘(1) IN GENERAL.—The Secretary shall award
grants under this section to entities or organizations
described in this paragraph and paragraph (2) which
have submitted a proposal to the Secretary to ex-
pand such entities or organizations operations (in-
cluding expansions to new sites (as determined nec-
essary by the Secretary)) to serve medically under-
served populations or high impact areas not cur-
rently served by a FQHC and which—
‘‘(A) have as of January 1, 1992, been cer-
tified by the Secretary as a FQHC under sec-
tion 1905(l)(2)(B) of the Social Security Act;
‘‘(B) have submitted applications to the
Secretary to qualify as FQHC’s under such sec-
tion 1905(l)(2)(B); or
‘‘(C) have submitted a plan to the Sec-
retary which provides that the entity will meet
the requirements to qualify as a FQHC when
operational.
‘‘(2) NON FQHC ENTITIES.—
‘‘(A) ELIGIBILITY.—The Secretary shall
also make grants under this section to public or
126
private nonprofit agencies, health care entities
or organizations which meet the requirements
necessary to qualify as a FQHC except, the re-
quirement that such entity have a consumer
majority governing board and which have sub-
mitted a proposal to the Secretary to provide
those services provided by a FQHC as defined
in section 1905(l)(2)(B) of the Social Security
Act and which are designed to promote access
to primary care services or to reduce reliance on
hospital emergency rooms or other high cost
providers of primary health care services, pro-
vided such proposal is developed by the entity
or organizations (or such entities or organiza-
tions acting in a consortium in a community)
with the review and approval of the Governor of
the State in which such entity or organization
is located.
‘‘(B) LIMITATION.—The Secretary shall
provide in making grants to entities or organi-
zations described in this paragraph that no
more than 10 percent of the funds provided for
grants under this section shall be made avail-
able for grants to such entities or organizations.
‘‘(c) APPLICATION REQUIREMENTS.—
127
‘‘(1) IN GENERAL.—In order to be eligible to
receive a grant under this section, a FQHC or other
entity or organization must submit an application in
such form and at such time as the Secretary shall
prescribe and which meets the requirements of this
subsection.
‘‘(2) REQUIREMENTS.—An application submit-
ted under this section must provide—
‘‘(A)(i) for a schedule of fees or payments
for the provision of the services provided by the
entity designed to cover its reasonable costs of
operations; and
‘‘(ii) for a corresponding schedule of dis-
counts to be applied to such fees or payments,
based upon the patient’s ability to pay (deter-
mined by using a sliding scale formula based on
the income of the patient);
‘‘(B) assurances that the entity or organi-
zation provides services to persons who are eli-
gible for benefits under title XVIII of the Social
Security Act, for medical assistance under title
XIX of such Act or for assistance for medical
expenses under any other public assistance pro-
gram or private health insurance program; and
128
‘‘(C) assurances that the entity or organi-
zation has made and will continue to make
every reasonable effort to collect reimbursement
for services—
‘‘(i) from persons eligible for assist-
ance under any of the programs described
in subparagraph (B); and
‘‘(ii) from patients not entitled to ben-
efits under any such programs.
‘‘(d) LIMITATIONS ON USE OF FUNDS.—
‘‘(1) IN GENERAL.—From the amounts award-
ed to an entity or organization under this section,
funds may be used for purposes of planning but may
only be expended for the costs of—
‘‘(A) assessing the needs of the populations
or proposed areas to be served;
‘‘(B) preparing a description of how the
needs identified will be met;
‘‘(C) development of an implementation
plan that addresses—
‘‘(i) recruitment and training of per-
sonnel; and
‘‘(ii) activities necessary to achieve
operational status in order to meet FQHC
129
requirements under 1905(l)(2)(B) of the
Social Security Act.
‘‘(2) RECRUITING, TRAINING AND COMPENSA-
TION OF STAFF.—From the amounts awarded to an
entity or organization under this section, funds may
be used for the purposes of paying for the costs of
recruiting, training and compensating staff (clinical
and associated administrative personnel (to the ex-
tent such costs are not already reimbursed under
title XIX of the Social Security Act or any other
State or Federal program)) to the extent necessary
to allow the entity to operate at new or expanded ex-
isting sites.
‘‘(3) FACILITIES AND EQUIPMENT.—From the
amounts awarded to an entity or organization under
this section, funds may be expended for the purposes
of acquiring facilities and equipment but only for the
costs of—
‘‘(A) construction of new buildings (to the
extent that new construction is found to be the
most cost-efficient approach by the Secretary);
‘‘(B) acquiring, expanding, or modernizing
of existing facilities;
‘‘(C) purchasing essential (as determined
by the Secretary) equipment; and
130
‘‘(D) amortization of principal and pay-
ment of interest on loans obtained for purposes
of site construction, acquisition, modernization,
or expansion, as well as necessary equipment.
‘‘(4) SERVICES.—From the amounts awarded
to an entity or organization under this section, funds
may be expended for the payment of services but
only for the costs of—
‘‘(A) providing or arranging for the provi-
sion of all services through the entity necessary
to qualify such entity as a FQHC under section
1905(l)(2)(B) of the Social Security Act;
‘‘(B) providing or arranging for any other
service that a FQHC may provide and be reim-
bursed for under title XIX of such Act; and
‘‘(C) providing any unreimbursed costs of
providing services as described in section 330(a)
to patients.
‘‘(e) PRIORITIES IN THE AWARDING OF GRANTS.—
‘‘(1) CERTIFIED FQHC’S.—The Secretary shall
give priority in awarding grants under this section
to entities which have, as of January 1, 1992, been
certified as a FQHC under section 1905(l)(2)(B) of
the Social Security Act and which have submitted a
proposal to the Secretary to expand their operations
131
(including expansion to new sites) to serve medically
underserved populations for high impact areas not
currently served by a FQHC. The Secretary shall
give first priority in awarding grants under this sec-
tion to those FQHCs or other entities which propose
to serve populations with the highest degree of
unmet need, and which can demonstrate the ability
to expand their operations in the most efficient man-
ner.
‘‘(2) QUALIFIED FQHC’S.—The Secretary shall
give second priority in awarding grants to entities
which have submitted applications to the Secretary
which demonstrate that the entity will qualify as a
FQHC under section 1905(l)(2)(B) of the Social Se-
curity Act before it provides or arranges for the pro-
vision of services supported by funds awarded under
this section, and which are serving or proposing to
serve medically underserved populations or high im-
pact areas which are not currently served (or pro-
posed to be served) by a FQHC.
‘‘(3) EXPANDED
SERVICES
AND
PROJECTS.—
The Secretary shall give third priority in awarding
grants in subsequent years to those FQHCs or other
entities which have provided for expanded services
and project and are able to demonstrate that such
132
entity will incur significant unreimbursed costs in
providing such expanded services.
‘‘(f) RETURN OF FUNDS TO SECRETARY FOR COSTS
REIMBURSED FROM OTHER SOURCES.—To the extent
that an entity or organization receiving funds under this
section is reimbursed from another source for the provi-
sion of services to an individual, and does not use such
increased reimbursement to expand services furnished,
areas served, to compensate for costs of unreimbursed
services provided to patients, or to promote recruitment,
training, or retention of personnel, such excess revenues
shall be returned to the Secretary.
‘‘(g) TERMINATION OF GRANTS.—
‘‘(1) FAILURE
TO
MEET
FQHC
REQUIRE-
MENTS.—
‘‘(A) IN GENERAL.—With respect to any
entity that is receiving funds awarded under
this section and which subsequently fails to
meet the requirements to qualify as a FQHC
under section 1905(l)(2)(B) or is an entity that
is not required to meet the requirements to
qualify as a FQHC under section 1905(l)(2)(B)
of the Social Security Act but fails to meet the
requirements of this section, the Secretary shall
133
terminate the award of funds under this section
to such entity.
‘‘(B) NOTICE.—Prior to any termination
of funds under this section to an entity, the en-
tities shall be entitled to 60 days prior notice of
termination and, as provided by the Secretary
in regulations, an opportunity to correct any de-
ficiencies in order to allow the entity to con-
tinue to receive funds under this section.
‘‘(2) REQUIREMENTS.—Upon any termination
of funding under this section, the Secretary may (to
the extent practicable)—
‘‘(A) sell any property (including equip-
ment) acquired or constructed by the entity
using funds made available under this section
or transfer such property to another FQHC,
provided, that the Secretary shall reimburse
any costs which were incurred by the entity in
acquiring or constructing such property (includ-
ing equipment) which were not supported by
grants under this section; and
‘‘(B) recoup any funds provided to an en-
tity terminated under this section.
‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
134
$400,000,000 for fiscal year 1993, $800,000,000 for fis-
cal year 1994, $1,200,000,000 for fiscal year 1995,
$1,600,000,000 for fiscal year 1996, and $1,600,000,000
for fiscal year 1997.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall become effective with respect to serv-
ices furnished by a federally qualified health center or
other qualifying entity described in this section beginning
on or after October 1, 1992.
(c) STUDY AND REPORT ON SERVICES PROVIDED BY
COMMUNITY HEALTH CENTERS AND HOSPITALS.—
(1) IN GENERAL.—The Secretary of Health and
Human Services (hereinafter referred to in this sub-
section as the ‘‘Secretary’’) shall provide for a study
to examine the relationship and interaction between
community health centers and hospitals in providing
services to individuals residing in medically under-
served areas. The Secretary shall ensure that the
National Rural Research Centers participate in such
study.
(2) REPORT.—The Secretary shall provide to
the appropriate committees of Congress a report
summarizing the findings of the study within 90
days of the end of each project year and shall in-
clude in such report recommendations on methods to
135
improve the coordination of and provision of services
in medically underserved areas by community health
centers and hospitals.
(3) AUTHORIZATION.—There are authorized to
be appropriated to carry out the study provided for
in this subsection $150,000 for each of fiscal years
1993 and 1994.
SEC. 504. RURAL MENTAL HEALTH OUTREACH GRANTS.
Subpart 3 of part B of title V of the Public Health
Service Act (42 U.S.C. 290cc–11 et seq.) is amended by
adding at the end thereof the following new section:
‘‘SEC. 520A. RURAL MENTAL HEALTH OUTREACH GRANTS.
‘‘(a) IN GENERAL.—The Secretary may award com-
petitive grants to eligible entities to enable such entities
to develop and implement a plan for mental health out-
reach programs in rural areas.
‘‘(b) ELIGIBLE ENTITIES.—To be eligible to receive
a grant under subsection (a) an entity shall—
‘‘(1) prepare and submit to the Secretary an
application at such time, in such form and contain-
ing such information as the Secretary may require,
including a description of the activities that the en-
tity intends to undertake using grant funds; and
‘‘(2) meet such other requirements as the Sec-
retary determines appropriate.
136
‘‘(c) PRIORITY.—In awarding grants under sub-
section (a), the Secretary shall give priority to applications
that place emphasis on mental health services for the el-
derly or children. Priority shall also be given to applica-
tions that involve relationships between the applicant and
rural managed care cooperatives.
‘‘(d) MATCHING REQUIREMENT.—An entity that re-
ceives a grant under subsection (a) shall make available
(directly or through donations from public or private enti-
ties), non-Federal contributions toward the costs of the
operations of the network in an amount equal to the
amount of the grant.
‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$5,000,000 for each of the fiscal years 1993 through
1997.’’.
SEC. 505. HEALTH PROFESSIONS TRAINING.
(a) MEDICALLY UNDERSERVED AREA TRAINING IN-
CENTIVES.—Part A of title VII of the Public Health Serv-
ice Act (42 U.S.C. 292 et seq.) is amended by adding at
the end thereof the following new section:
‘‘SEC. 711. PRIORITIES IN AWARDING OF GRANTS.
‘‘(a) 
ALLOCATION
OF
COMPETITIVE
GRANT
FUNDS.—In awarding competitive grants under this title
or title VIII, the Secretary shall, among applicants that
137
meet the eligibility requirements under such titles, give
priority to entities submitting applications that—
‘‘(1) can demonstrate that such entities—
‘‘(A) have a high permanent rate for plac-
ing graduates in practice settings which serve
residents of medically underserved communities;
and
‘‘(B) have a curriculum that includes—
‘‘(i) the rotation of medical students
and residents to clinical settings the focus
of which is to serve medically underserved
communities;
‘‘(ii) the appointment of health profes-
sionals whose practices serve medically un-
derserved communities to act as preceptors
to supervise training in such settings;
‘‘(iii) classroom instruction on practice
opportunities involving medically under-
served communities;
‘‘(iv) service contingent scholarship or
loan repayment programs for students and
residents to encourage practice in or serv-
ice to underserved communities;
‘‘(v) the recruitment of students who
are most likely to elect to practice in or
138
provide service to medically underserved
communities;
‘‘(vi) other training methodologies
that demonstrate a significant commitment
to the expansion of the proportion of grad-
uates that elect to practice in or serve the
needs of medically underserved commu-
nities; or
‘‘(2) contain an organized plan for the expedi-
tious development of the placement rate and curricu-
lum described in paragraph (1).
‘‘(b) SERVICE IN MEDICALLY UNDERSERVED COM-
MUNITIES.—Not less than 50 percent of the amounts ap-
propriated for fiscal year 1996, and for each subsequent
fiscal year, for competitive grants under this title or title
VIII, shall be used to award grants to institutions that
are otherwise eligible for grants under such titles, and that
can demonstrate that—
‘‘(1) not less than 15 percent of the graduates
of such institutions during the preceding 2-year pe-
riod are engaged in full-time practice serving the
needs of medically underserved communities; or
‘‘(2) the number of the graduates of such insti-
tutions that are practicing in a medically under-
served community has increased by not less than 50
139
percent over that proportion of such graduates for
the previous 2-year period.
‘‘(c) WAIVERS.—A health professions school may pe-
tition the Secretary for a temporary waiver of the prior-
ities of this section. Such waiver shall be approved if the
health professions school demonstrates that the State in
which such school is located is not suffering from a short-
age of primary care providers, as determined by the Sec-
retary. Such waiver shall not be for a period in excess of
2 years.
‘‘(d) DEFINITIONS.—As used in this section:
‘‘(1) GRADUATE.—The term ‘graduate’ means,
unless otherwise specified, an individual who has
successfully completed all training and residency re-
quirements necessary for full certification in the
health professions discipline that such individual has
selected.
‘‘(2) MEDICALLY UNDERSERVED COMMUNITY.—
The 
term 
‘medically 
underserved 
community’
means—
‘‘(A) an area designated under section 332
as a health professional shortage area;
‘‘(B) an area designated as a medically un-
derserved area under this Act;
140
‘‘(C) populations served by migrant health
centers under section 329, community health
centers under section 330, or Federally quali-
fied health centers under section 1905(l)(2)(B)
of the Social Security Act;
‘‘(D) a community that is certified as un-
derserved by the Secretary for purposes of par-
ticipation in the rural health clinic program
under title XVIII of the Social Security Act; or
‘‘(E) a community that meets the criteria
for the designation described in subparagraph
(A) or (B) but that has not been so des-
ignated.’’.
(b) MEDICALLY
UNDERSERVED
AREA TRAINING
GRANTS.—Part F of title VII (42 U.S.C. 295g et seq.)
of such Act is amended by adding at the end thereof the
following new section:
‘‘SEC. 790B. MEDICALLY UNDERSERVED AREA TRAINING
GRANT PROGRAM.
‘‘(a) GRANTS.—The Secretary shall award grants to
health professions institutions to expand training pro-
grams that are targeted at those individuals desiring to
practice in or serve the needs of medically underserved
communities.
141
‘‘(b) PLAN.—As part of an application submitted for
a grant under this section, the applicant shall prepare and
submit a plan that describes the proposed use of funds
that may be provided to the applicant under the grant.
‘‘(c) PRIORITY.—In awarding grants under this sec-
tion, the Secretary shall give priority to applicants that
demonstrate the greatest likelihood of expanding the pro-
portion of graduates who choose to practice in or serve
the needs of medically underserved areas.
‘‘(d) USE OF FUNDS.—An institution that receives
a grant under this section shall use amounts received
under such grant to establish or enhance procedures or
efforts to—
‘‘(1) rotate health professions students from
such institution to clinical settings the focus of
which is to serve the residents of medically under-
served communities;
‘‘(2) appoint health professionals whose prac-
tices serve medically underserved areas to serve as
preceptors to supervise training in such settings;
‘‘(3) provide classroom instruction on practice
opportunities involving medically underserved com-
munities;
‘‘(4) provide service contingent scholarship or
loan repayment programs for students and residents
142
to encourage practice in or service to underserved
communities;
‘‘(5) recruit students who are most likely to
elect to practice in or provide service to medically
underserved communities; or
‘‘(6) provide other training methodologies that
demonstrate a significant commitment to the expan-
sion of the proportion of graduates that elect to
practice in or serve the needs of medically under-
served communities.
‘‘(e) ADMINISTRATION.—
‘‘(1) REQUIRED
CONTRIBUTION.—An institu-
tion that receives a grant under this section shall
contribute, from non-Federal sources, either in cash
or in-kind, an amount equal to the amount of the
grant to the activities to be undertaken with the
grant funds.
‘‘(2) LIMITATION.—An institution that receives
a grant under this section, shall use amounts re-
ceived under such grant to supplement, not sup-
plant, amounts made available by such institution
for activities of the type described in subsection (d)
in the fiscal year preceding the year for which the
grant is received.
‘‘(f) DEFINITIONS.—As used in this section:
143
‘‘(1) GRADUATE.—The term ‘graduate’ means,
unless otherwise specified, an individual who has
successfully completed all training and residency re-
quirements necessary for full certification in the
health professions discipline that such individual has
selected.
‘‘(2) MEDICALLY UNDERSERVED COMMUNITY.—
The 
term 
‘medically 
underserved 
community’
means—
‘‘(A) an area designated under section 332
as a health professional shortage area;
‘‘(B) an area designated as a medically un-
derserved area under this Act;
‘‘(C) populations served by migrant health
centers under section 329, community health
centers under section 330, or Federally quali-
fied health centers under section 1905(l)(2)(B)
of the Social Security Act;
‘‘(D) a community that is certified as un-
derserved by the Secretary for purposes of par-
ticipation in the rural health clinic program
under title XVIII of the Social Security Act; or
‘‘(E) a community that meets the criteria
for the designation described in subparagraph
(A) or (B) but that has not been so designated.
144
‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$15,000,000 for each of the fiscal years 1993 and 1994,
and such sums as may be necessary for each of the fiscal
years 1995 through 1997.’’.
(c) HEALTH PROFESSIONS TRAINING GRANTS.—
Part F of title VII (42 U.S.C. 295g et seq.) of such Act
(as amended by subsection (b)) is further amended by
adding at the end thereof the following new section:
‘‘SEC. 790C. HEALTH PROFESSIONS INTEGRATION GRANT
PROGRAM.
‘‘(a) GRANTS.—The Secretary shall award grants to
eligible regional consortia to enhance and expand coordi-
nation among various health professions programs, par-
ticularly in medically underserved rural areas.
‘‘(b) ELIGIBLE REGIONAL CONSORTIUM.—
‘‘(1) IN GENERAL.—To be eligible to receive a
grant under subsection (a), an entity must—
‘‘(A) be a regional consortium consisting of
at least one medical school and at least one
other health professions school that is not a
medical school; and
‘‘(B) prepare and submit an application
containing a plan of the type described in para-
graph (2).
145
‘‘(2) PLAN.—As part of the application submit-
ted by a consortium under paragraph (1)(B), the
consortium shall prepare and submit a plan that de-
scribes the proposed use of funds that may be pro-
vided to the consortium under the grant.
‘‘(c) USE OF FUNDS.—A consortium that receives a
grant under this section shall use amounts received under
such grant to establish or enhance—
‘‘(1) strategies for better clinical cooperation
among different types of health professionals;
‘‘(2) classroom instruction on integrated prac-
tice opportunities, particularly targeted toward rural
areas;
‘‘(3) integrated clinical clerkship programs that
make use of students in differing health professions
schools; or
‘‘(4) other training methodologies that dem-
onstrate a significant commitment to the expansion
of clinical cooperation among different types of
health professionals, particularly in underserved
rural areas.
‘‘(d) LIMITATION.—A consortium that receives a
grant under this section, shall use amounts received under
such grant to supplement, not supplant, amounts made
available by such institution for activities of the type de-
146
scribed in subsection (c) in the fiscal year preceding the
year for which the grant is received.
‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$7,000,000 for each of the fiscal years 1993 and 1994,
and such sums as may be necessary for each of the fiscal
years 1995 through 1997.’’.
SEC. 506. AREA HEALTH EDUCATION CENTERS.
(a) STIPENDS FOR PERSONNEL.—Section 781(a) of
the Public Health Service Act (42 U.S.C. 295g–1(a)) is
amended by adding at the end thereof the following new
paragraph:
‘‘(3)(A) The Secretary may award grants under this
section to rural communities to enable such communities
to provide stipends to physicians, nurses or other health
professional trainees to encourage such individuals to con-
tinue to provide health care services in such rural commu-
nities.
‘‘(B) A community that receives a grant under sub-
paragraph (A) shall make available (directly or through
donations from public or private entities), non-Federal
contributions towards the costs of the operations of the
network in an amount equal to the amount of the grant.’’.
(b) REAUTHORIZATION.—Section 781(h) of such Act
(42 U.S.C. 295g–1(h)) is amended to read as follows:
147
‘‘(h)(1) For purposes of carrying out this section,
other than subsection (f), there are authorized to be ap-
propriated $40,000,000 for each of the fiscal years 1993
through 1997.
‘‘(2) For purposes of carrying out subsection (f),
there are authorized to be appropriated $12,000,000 for
each of the fiscal years 1993 through 1997.
‘‘(3) A contract entered into under this section after
the date of enactment of this subsection shall require that
the entity awarded such contract make available (directly
or through donations from public or private entities), dur-
ing the fourth and remaining years of the contract, non-
Federal contributions equal to—
‘‘(A) for the fourth year for which such con-
tract is in effect, $3 for every $7 of Federal funds
provided under the contract in such year;
‘‘(B) for the fifth year for which such contract
is in effect, $4 for every $6 of Federal funds pro-
vided under the contract in such year; and
‘‘(C) for the sixth and subsequent years for
which such contract is in effect, $1 for every $1 of
Federal funds provided under the contract in such
year.’’.
148
SEC. 507. RURAL HEALTH EXTENSION NETWORKS.
Title XVII of the Public Health Service Act (42
U.S.C. 300u et seq.) is amended by adding at the end
thereof the following new section:
‘‘SEC. 1707. RURAL HEALTH EXTENSION NETWORKS.
‘‘(a) GRANTS.—The Secretary, acting through the
Health Resources and Services Administration, may
award competitive grants to eligible entities to enable such
entities to facilitate the development of networks among
rural and urban health care providers to preserve and
share health care resources and enhance the quality and
availability of health care in rural areas. Such networks
may be statewide or regionalized in focus.
‘‘(b) ELIGIBLE ENTITIES.—To be eligible to receive
a grant under subsection (a) an entity shall—
‘‘(1) be a rural health extension network that
meets the requirements of subsection (c);
‘‘(2) prepare and submit to the Secretary an
application at such time, in such form and contain-
ing such information as the Secretary may require;
and
‘‘(3) meets such other requirements as the Sec-
retary determines appropriate.
‘‘(c) NETWORKS.—For purposes of subsection (b)(1),
a rural health extension network shall be an association
or consortium of three or more rural health care providers,
149
and may include one or more urban health care providers,
for the purpose of applying for a grant under this section
and using amounts received under such grant to provide
the services described in subsection (d).
‘‘(d) SERVICES.—
‘‘(1) IN GENERAL.—An entity that receives a
grant under subsection (a) shall use amounts re-
ceived under such grant to—
‘‘(A) provide education and community de-
cision-making support for health care providers
in the rural areas served by the network;
‘‘(B) utilize existing health care provider
education programs, including but not limited
to, the program for area health education cen-
ters under section 781, to provide educational
services to health care providers in the areas
served by the network;
‘‘(C) 
make 
appropriately 
trained
facilitators available to health care providers lo-
cated in the areas served by the network to as-
sist such providers in developing cooperative ap-
proaches to health care in such area;
‘‘(D) facilitate linkage building through the
organization of discussion and planning groups
and the dissemination of information concern-
150
ing the health care resources where available,
within the area served by the network;
‘‘(E) support telecommunications and con-
sultative projects to link rural hospitals and
other health care providers, and urban or ter-
tiary hospitals in the areas served by the net-
work; or
‘‘(F) carry out any other activity deter-
mined appropriate by the Secretary.
‘‘(2) EDUCATION.—In carrying out activities
under paragraph (1)(B), an entity shall support the
development of an information and resource sharing
system, including elements targeted towards high
risk populations and focusing on health promotion,
to facilitate the ability of rural health care providers
to have access to needed health care information.
Such activities may include the provision of training
to enable individuals to serve as coordinators of
health education programs in rural areas.
‘‘(3) COLLECTION
AND
DISSEMINATION
OF
DATA.—The chief executive officer of a State shall
designate a State agency that shall be responsible
for collecting and regularly disseminating informa-
tion concerning the activities of the rural health ex-
tension networks in that State.
151
‘‘(e) MATCHING REQUIREMENT.—An entity that re-
ceives a grant under subsection (a) shall make available
(directly or through donations from public or private enti-
ties), non-Federal contributions towards the costs of the
operations of the network in an amount equal to the
amount of the grant.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$10,000,000 for each of the fiscal years 1993 through
1997.
‘‘(g) DEFINITION.—As used in this section and sec-
tion 1708, the term ‘rural health care providers’ means
health care professionals and hospitals located in rural
areas. The Secretary shall ensure that for purposes of this
definition, rural areas shall include any area that meets
any applicable Federal or State definition of rural area.’’.
SEC. 508. RURAL MANAGED CARE COOPERATIVES.
Title XVII of the Public Health Service Act (42
U.S.C. 300u et seq.) as amended by section 507 is further
amended by adding at the end thereof the following new
section:
‘‘SEC. 1708. RURAL MANAGED CARE COOPERATIVES.
‘‘(a) GRANTS.—The Secretary, acting through the
Health Resources and Services Administration, may
award competitive grants to eligible entities to enable such
152
entities to develop and administer cooperatives in rural
areas that will establish an effective case management and
reimbursement system designed to support the economic
viability of essential public or private health services, fa-
cilities, health care systems and health care resources in
such rural areas.
‘‘(b) ELIGIBLE ENTITIES.—To be eligible to receive
a grant under subsection (a) an entity shall—
‘‘(1) prepare and submit to the Secretary an
application at such time, in such form and contain-
ing such information as the Secretary may require,
including a description of the cooperative that the
entity intends to develop and operate using grant
funds; and
‘‘(2) meet such other requirements as the Sec-
retary determines appropriate.
‘‘(c) COOPERATIVES.—
‘‘(1) IN GENERAL.—Amounts provided under a
grant awarded under subsection (a) shall be used to
establish and operate a cooperative made up of all
types of health care providers, hospitals, primary ac-
cess hospitals, other alternate rural health care fa-
cilities, physicians, rural health clinics, rural nurse
practitioners and physician assistant practitioners,
public health departments and others located in, but
153
not restricted to, the rural areas to be served by the
cooperative.
‘‘(2) BOARD OF DIRECTORS.—A cooperative es-
tablished under paragraph (1) shall be administered
by a board of directors elected by the members of
the cooperative, a majority of whom shall represent
rural providers from the local community and in-
clude representatives from the local community.
Such directors shall serve at the pleasure of such
members.
‘‘(3) EXECUTIVE DIRECTOR.—The members of
a cooperative established under paragraph (1) shall
elect an executive director who shall serve as the
chief operating officer of the cooperative. The execu-
tive director shall be responsible for conducting the
day to day operation of the cooperative including—
‘‘(A) maintaining an accounting system for
the cooperative;
‘‘(B) maintaining the business records of
the cooperative;
‘‘(C) negotiating contracts with provider
members of the cooperative; and
‘‘(D) coordinating the membership and
programs of the cooperative.
‘‘(4) REIMBURSEMENTS.—
154
‘‘(A) NEGOTIATIONS.—A cooperative es-
tablished under paragraph (1) shall facilitate
negotiations among member health care provid-
ers and third party payers concerning the rates
at which such providers will be reimbursed for
services provided to individuals for which such
payers may be liable.
‘‘(B) AGREEMENTS.—Agreements reached
under subparagraph (A) shall be binding on the
members of the cooperative.
‘‘(C) EMPLOYERS.—Employer entities may
become members of a cooperative established
under paragraph (a) in order to provide,
through a member third party payer, health in-
surance coverage for employees of such entities.
Deductibles shall only be charged to employees
covered under such insurance if such employees
receive health care services from a provider that
is not a member of the cooperative if similar
services would have been available from a mem-
ber provider.
‘‘(D) MALPRACTICE INSURANCE.—A coop-
erative established under subsection (a) shall be
responsible for identifying and implementing a
malpractice insurance program that shall in-
155
clude a requirement that such cooperative as-
sume responsibility for the payment of a por-
tion of the malpractice insurance premium of
providers members.
‘‘(5) MANAGED
CARE
AND
PRACTICE
STAND-
ARDS.—A cooperative established under paragraph
(1) shall establish joint case management and pa-
tient care practice standards programs that health
care providers that are members of such cooperative
must meet to be eligible to participate in agreements
entered into under paragraph (4). Such standards
shall be developed by such provider members and
shall be subject to the approval of a majority of the
board of directors. Such programs shall include cost
and quality of care guidelines including a require-
ment 
that 
such 
providers 
make 
available
preadmission screening, selective case management
services, joint patient care practice standards devel-
opment and compliance and joint utilization review.
‘‘(6) 
CONFIDENTIALITY.—Patients 
records,
records of peer review, utilization review, and quality
assurance proceedings conducted by the cooperative
should be considered confidential and protected from
release outside of the cooperative. The provider
members of the cooperative shall be indemnified by
156
the cooperative for the good faith participation by
such members in such the required activities.
‘‘(d) LINKAGES.—A cooperative shall create linkages
among member health care providers, employers, and pay-
ers for the joint consultation and formulation of the types,
rates, costs, and quality of health care provided in rural
areas served by the cooperative.
‘‘(e) MATCHING REQUIREMENT.—An entity that re-
ceives a grant under subsection (a) shall make available
(directly or through donations from public or private enti-
ties), non-Federal contributions towards the costs of the
operations of the network in an amount equal to the
amount of the grant.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$15,000,000 for each of the fiscal years 1993 through
1997.’’.
Subtitle B—Provision Relating to
Social Security
SEC. 511. RURAL HEALTH CARE TRANSITION GRANT PRO-
GRAM.
Section 4005(e)(9) of the Omnibus Budget Reconcili-
ation Act of 1987 (42 U.S.C. 1395ww note) is amended
by striking ‘‘$15,000,000’’ and all that follows through
157
the end thereof and inserting ‘‘$50,000,000 for each of
the fiscal years 1993 through 1997.’’.
SEC. 512. ESSENTIAL ACCESS COMMUNITY HOSPITAL PRO-
GRAM.
Section 1820(k) of the Social Security Act (42 U.S.C.
1395i–4(k)) is amended to read as follows:
‘‘(k) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$50,000,000 for each of the fiscal years 1993 through
1997.’’.
TITLE VI—INCENTIVES TO EN-
COURAGE PREVENTIVE SERV-
ICES
SEC. 601. PREVENTIVE SERVICES TAX CREDIT.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits), as amended by sec-
tion 101, is further amended by inserting after section
34A the following new section:
‘‘SEC. 34B. PREVENTIVE SERVICES CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this subtitle
for the taxable year expenditures paid or incurred during
the taxable year for any qualified preventive services which
158
are included in the list under subsection (c) and which
are not compensated by insurance or otherwise, as follows:
‘‘(1) ELIGIBLE INDIVIDUAL.—In the case of an
eligible individual, the amount of the credit allowable
under this subsection shall not exceed—
‘‘(A) $250, or
‘‘(B) $200 in the case of a taxpayer with
taxable income for the taxable year in excess of
the maximum rate of taxable income to which
the 15-percent rate applies under the applicable
table under section 1.
‘‘(2) QUALIFIED
PREVENTIVE
SERVICES
PRO-
VIDER.—In the case of a qualified preventive serv-
ices provider, the amount of the credit allowable
under this subsection shall be an amount equal to
the product of—
‘‘(A) the lower of—
‘‘(i) the usual and customary charges
for qualified preventive services, or
‘‘(ii) the rate of payment established
by the Health Care Financing Administra-
tion for qualified preventive services,
multiplied by—
159
‘‘(B) the number of qualified preventive
services provided without charge during the tax-
able year to qualifying low-income individuals.
‘‘(b) DEFINITIONS.—For purposes of subsection
(a)—
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means an individual who is—
‘‘(A) the taxpayer,
‘‘(B) the taxpayer’s spouse, or
‘‘(C) any individual for whom the taxpayer
is allowed an exemption under section 151.
‘‘(2) QUALIFIED
PREVENTIVE
SERVICES
PRO-
VIDER.—The term ‘qualified preventive services pro-
vider’ means a medical practitioner, facility, hospital,
laboratory, or similar institution licensed under
State law to provide 1 or more qualified preventive
services.
‘‘(3) QUALIFYING LOW-INCOME INDIVIDUAL.—
The term ‘qualifying low-income individual’ means
an individual—
‘‘(A) whose income level does not exceed
150 percent of the official poverty line (as de-
fined by the Office of Management and Budget
and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation
160
Act of 1981) applicable to a family of the size
involved, and
‘‘(B) with respect to whom identifying in-
formation is maintained.
‘‘(c) QUALIFIED PREVENTIVE SERVICES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the Secretary, after consultation with the Sec-
retary of Health and Human Services and cancer re-
search and prevention organizations, shall publish,
not later than December 31, 1992, and annually
thereafter, a list of preventive services which qualify
for the credit allowable under this section.
‘‘(2) PREVENTIVE SERVICES.—
‘‘(A) IN GENERAL.—The list of preventive
services which qualify under this section shall
include at least the following:
‘‘(i) Cancer screening tests.
‘‘(ii) Childhood immunization.
‘‘(iii) Well child care.
‘‘(B) CANCER
SCREENING
TESTS.—The
term ‘cancer screening tests’ shall include at
least the following:
‘‘(i) Physical breast examination and
mammogram for female breast cancer.
161
‘‘(ii) 
Digital 
rectal 
examination,
proctosigmoidoscopy, and blood stool test
for colon and rectum cancer.
‘‘(iii) Rectal examination for prostate
cancer.
‘‘(iv) Pap test for uterine cancer.
‘‘(v) Pelvic examination for ovarian
cancer.
‘‘(d) IDENTIFYING INFORMATION.—No credit shall
be allowed under this section unless the qualified preven-
tive services provider maintains, to the satisfaction of the
Secretary, adequate records regarding the name and ad-
dress, date of services, and type of services provided with
respect to each qualifying low-income individual with re-
spect to whom a credit is claimed.’’.
(b) COORDINATION WITH DEDUCTIONS FOR MEDI-
CAL EXPENSES.—Section 213(e) of such Code (relating
to coordination with health expenses credit under section
34A), as added by section 101, is amended—
(1) by inserting ‘‘and the amount (if any) of
the preventive services credit allowable to the tax-
payer for the taxable year under section 34B(a)(1)’’
before the end period; and
162
(2) by inserting ‘‘AND PREVENTIVE SERVICES
CREDIT UNDER SECTION 34B’’ in the heading after
‘‘SECTION 34A’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart C of part IV of subchapter A of chapter 1
of such Code, as amended by section 101, is further
amended by inserting after the item relating to section
34A the following new item:
‘‘Sec. 34B. Preventive services credit.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 602. INCREASE IN AUTHORIZATION FOR CHILDHOOD
IMMUNIZATIONS.
Section 317(j)(1)(B) of the Public Health Service Act
(42 U.S.C. 247b(j)(1)(B)) is amended by striking ‘‘such
sums as may be necessary’’ and inserting ‘‘$238,865,000
for fiscal year 1993, and $240,000,000 for each of the
fiscal years 1994 through 1997’’.
163
Æ
TITLE VII—TAX TREATMENT OF
LONG-TERM 
CARE 
INSUR-
ANCE AND PLANS
Subtitle A—Treatment of Long-
Term Care Insurance
SEC. 701. QUALIFIED LONG-TERM CARE INSURANCE TREAT-
ED AS ACCIDENT AND HEALTH INSURANCE
FOR PURPOSES OF TAXATION OF LIFE INSUR-
ANCE COMPANIES.
(a) IN GENERAL.—Section 818 of the Internal Reve-
nue Code of 1986 (relating to other definitions and special
rules) is amended by adding at the end the following new
subsection:
‘‘(g) QUALIFIED
LONG-TERM
CARE
INSURANCE
TREATED AS ACCIDENT OR HEALTH INSURANCE.—For
purposes of this part—
‘‘(1) IN GENERAL.—Any reference to accident
or health insurance shall be treated as including a
reference to qualified long-term care insurance.
‘‘(2) QUALIFIED
LONG-TERM
CARE
INSUR-
ANCE.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the term ‘qualified long-
term care insurance’ means insurance under a
164
policy or rider, which is issued by a qualified is-
suer, which meets standards at least as strin-
gent as those set forth in the January 1990
Long-Term Care Insurance Model Regulation
of the National Association of Insurance Com-
missioners, and which is certified by the Sec-
retary of Health and Human Services (in ac-
cordance with procedures similar to the proce-
dures prescribed in section 1882 of the Social
Security Act (42 U.S.C. 1385ss) used in the
certification of medicare supplemental policies
(as defined in subsection (g)(1) of such sec-
tion)) to be advertised, marketed, offered, or
designed to provide coverage—
‘‘(i) for not less than 12 consecutive
months for each covered person who has
attained age 50,
‘‘(ii) on an expense incurred, indem-
nity, or prepaid basis,
‘‘(iii) for 1 or more medically nec-
essary, diagnostic services, preventive serv-
ices, therapeutic services, rehabilitation
services, maintenance services, or personal
care services, and
165
‘‘(iv) provided in a setting other than
an acute care unit of a hospital.
The requirement of clause (iv) shall be met only
if at least 1 of the settings in which such cov-
erage is provided is the patient’s home.
‘‘(B) 
COVERAGE
SPECIFICALLY
EX-
CLUDED.—Such term does not include any in-
surance under any policy or rider which is of-
fered primarily to provide any combination of
the following kinds of coverage:
‘‘(i) Basic Medicare supplement cov-
erage.
‘‘(ii) Basic hospital-based acute care
expense coverage.
‘‘(iii) Basic medical-surgical expense
coverage.
‘‘(iv) Hospital confinement indemnity
coverage.
‘‘(v) Major medical expense coverage.
‘‘(vi) Disability income protection cov-
erage.
‘‘(vii) Accident only coverage.
‘‘(viii) Specified disease coverage.
‘‘(ix) Specified accident coverage.
‘‘(x) Limited benefit health coverage.
166
‘‘(C) QUALIFIED ISSUER.—For purposes of
subparagragh (A), the term ‘qualified issuer’
means any of the following:
‘‘(i) Private insurance company.
‘‘(ii) Fraternal benefit society.
‘‘(iii) Nonprofit health corporation.
‘‘(iv) Nonprofit hospital corporation.
‘‘(v) Nonprofit medical service cor-
poration.
‘‘(vi) Prepaid health plan.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1992.
SEC. 702. QUALIFIED LONG-TERM CARE INSURANCE TREAT-
ED AS ACCIDENT AND HEALTH INSURANCE
FOR PURPOSES OF EXCLUSION FOR BENE-
FITS RECEIVED UNDER SUCH INSURANCE
AND FOR EMPLOYER CONTRIBUTIONS FOR
SUCH INSURANCE.
(a) IN GENERAL.—Section 105 of the Internal Reve-
nue Code of 1986 (relating to amounts received under ac-
cident and health plans) is amended by adding at the end
the following new subsection:
167
‘‘(j) SPECIAL
RULES
RELATING
TO
QUALIFIED
LONG-TERM CARE INSURANCE.—For purposes of section
104, this section, and section 106—
‘‘(1) BENEFITS
TREATED
AS
PAYABLE
FOR
SICKNESS, ETC.—Any benefit received through quali-
fied long-term care insurance (as defined in section
818(g)) shall be treated as received for personal in-
juries or sickness.
‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT
PROVIDED UNDER QUALIFIED LONG-TERM CARE IN-
SURANCE
TREATED
AS
INCURRED
FOR
MEDICAL
CARE.—Expenses incurred by a taxpayer for which
reimbursement is paid through qualified long-term
care insurance (as so defined) shall be treated for
purposes of subsection (b) as incurred for medical
care (as defined in section 213(d)).
‘‘(3) REFERENCES TO ACCIDENT AND HEALTH
PLANS.—Any reference to an accident or health plan
shall be treated as including a reference to a plan
providing qualified long-term care insurance.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1992.
168
SEC. 703. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
WITHDRAWN 
FROM 
INDIVIDUAL 
RETIRE-
MENT PLANS OR 401(k) PLANS FOR QUALI-
FIED LONG-TERM CARE INSURANCE.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income), as amend-
ed by section 105(b), is amended by redesignating section
137 as section 138 and by inserting after section 136 the
following new section:
‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
ACCOUNTS AND SECTION 401(k) PLANS FOR
QUALIFIED LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount includible in the
gross income of an individual for the taxable year by rea-
son of qualified distributions during such taxable year
shall not exceed the excess of—
‘‘(1) the amount which would (but for this sec-
tion) be so includible by reason of such distributions,
over
‘‘(2) the aggregate premiums paid by such indi-
vidual during such taxable year for any policy of
qualified long-term care insurance (as defined in sec-
tion 818(g)) for the benefit of such individual or the
spouse of such individual.
169
‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of
this section, the term ‘qualified distribution’ means any
distribution to an individual from an individual retirement
account or a section 401(k) plan if such individual has
attained age 591⁄2 on or before the date of the distribution
(and, in the case of a distribution used to pay premiums
for the benefit of the spouse of such individual, such
spouse has attained age 591⁄2 on or before the date of the
distribution).
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The
term ‘individual retirement account’ has the mean-
ing given such term by section 408(a).
‘‘(2) SECTION 401(k) PLAN.—The term ‘section
401(k) plan’ means any employer plan which meets
the requirements of section 401(a) and which in-
cludes a qualified cash or deferred arrangement (as
defined in section 401(k)).
‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—
‘‘(1) WITHDRAWALS
CANNOT
EXCEED
ELEC-
TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR
DEFERRED ARRANGEMENT.—This section shall not
apply to any distribution from a section 401(k) plan
to the extent the aggregate amount of such distribu-
tions for the use described in subsection (a) exceeds
170
the aggregate employer contributions made pursuant
to the employee’s election under section 401(k)(2).
‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI-
FICATION.—A plan shall not be treated as failing to
satisfy the requirements of section 401, and an ar-
rangement shall not be treated as failing to be a
qualified cash or deferred arrangement (as defined
in section 401(k)(2)), merely because under the plan
or arrangement distributions are permitted which
are excludable from gross income by reason of this
section.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 401(k) of such Code is amended by
adding at the end the following new paragraph:
‘‘(11) CROSS REFERENCE.—
‘‘For provision permitting tax-free withdrawals
for payment of long-term care premiums, see section
137.’’
(2) Section 408(d) of such Code is amended by
adding at the end the following new paragraph:
‘‘(8) CROSS REFERENCE.—
‘‘For provision permitting tax-free withdrawals
from individual retirement accounts for payment of
long-term care premiums, see section 137.’’
(3) The table of sections for such part III is
amended by striking the last item and inserting the
following new items:
171
‘‘Sec. 317. Distributions from individual retirement accounts and
section 401(k) plans for qualified long-term care in-
surance.
‘‘Sec. 138. Cross references to other Acts.’’
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1992.
SEC. 704. EXCHANGE OF LIFE INSURANCE POLICY FOR
QUALIFIED LONG-TERM CARE POLICY NOT
TAXABLE.
(a) IN GENERAL.—Subsection (a) of section 1035 of
the Internal Revenue Code of 1986 (relating to certain
exchanges of insurance policies) is amended by striking
the period at the end of paragraph (3) and inserting ‘‘;
or’’ and by adding at the end the following new paragraph:
‘‘(4) in the case of an individual who has at-
tained age 591⁄2, a contract of life insurance or a
contract of endowment insurance or an annuity con-
tract for a contract of qualified long-term care insur-
ance (as defined in section 818(g)) for the benefit of
such individual or the spouse of such individual if
such spouse has attained age 591⁄2 on or before the
date of the exchange.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1992.
172
Subtitle B—Employer Funding of
Medical Benefits
SEC. 711. MEDICAL BENEFITS FOR RETIRED EMPLOYEES
AND THEIR SPOUSES AND DEPENDENTS.
(a) IN GENERAL.—Section 401(h) of the Internal
Revenue Code of 1986 (relating to medical, etc., benefits
for retired employees and their spouses and dependents)
is amended to read as follows:
‘‘(h) RETIREE HEALTH ACCOUNTS.—
‘‘(1) GENERAL RULE.—Under regulations pre-
scribed by the Secretary, a defined benefit plan may
establish and maintain a separate health benefits ac-
count for the payment of medical benefits of retired
employees and their spouses and dependents.
‘‘(2) SEPARATE
ACCOUNTING
REQUIRED.—An
employer establishing a health benefits account shall
maintain separate accounts within the health bene-
fits account for funded reserve accounts established
under section 420A.
‘‘(3) USE OF ASSETS.—Subject to the provi-
sions of part III of this subchapter, the corpus or in-
come of a health benefits account shall not be used
for, or diverted to, any purpose other than providing
medical benefits to retired employees and their
spouses and dependents.
173
‘‘(4) KEY EMPLOYEES.—
‘‘(A) IN GENERAL.—In the case of an em-
ployee who is a key employee—
‘‘(i) a separate account shall be estab-
lished and maintained for medical benefits
payable to such employee (and the employ-
ee’s spouse or dependents), and
‘‘(ii) medical benefits of such em-
ployee, spouse, or dependents which are at-
tributable to plan years beginning after
March 31, 1984, for which the employee is
a key employee may be payable only from
such account.
‘‘(B) KEY
EMPLOYEE.—For purposes of
subparagraph (A), the term ‘key employee’
means any employee who, at any time during
the plan year or any preceding plan year during
which contributions were made on behalf of
such employee, is or was a key employee (as de-
fined in section 416(i)).
‘‘(5) APPLICABLE RULES.—For rules applicable
to health benefits accounts, see subpart F of this
part (sec. 420A et seq.).’’
(b) CONFORMING AMENDMENT.—Section 415(l)(2)
of such Code (relating to treatment of certain medical ben-
174
efits) is amended by inserting ‘‘by reason of section
401(h)(4)’’ after ‘‘dependents’’ in subparagraph (B).
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to years beginning after December 31,
1992.
(2) TRANSITION RULE.—In the case of—
(A) a plan other than a defined benefit
plan, or
(B) a defined benefit plan which elects, at
such time and in such manner as the Secretary
of the Treasury or his delegate may prescribe,
to have this paragraph apply,
which on or before the date of the enactment of this
Act established an account to which section 401(h)
of the Internal Revenue Code of 1986 (as in effect
before the amendments made by this section) ap-
plied (and which is in existence on such date), the
amendments made by this section shall not apply to
such account.
SEC. 712. TREATMENT OF HEALTH BENEFITS ACCOUNTS.
(a) IN GENERAL.—Part I of subchapter D of chapter
1 of the Internal Revenue Code of 1986 is amended by
adding at the end the following new subpart:
175
‘‘Subpart F—Treatment of Health Benefits Accounts
‘‘Sec. 420A. Deduction for employer contributions to health bene-
fits accounts.
‘‘Sec. 420B. Funded reserve account.
‘‘Sec. 420C. Definitions; special rules.
‘‘SEC. 420A. DEDUCTION FOR EMPLOYER CONTRIBUTIONS
TO HEALTH BENEFITS ACCOUNTS.
‘‘(a) GENERAL RULE.—Amounts paid by an em-
ployer to a defined benefit plan which are allocated to a
health benefits account—
‘‘(1) shall not be allowed as a deduction under
this chapter, but
‘‘(2) if they would otherwise be deductible, shall
be allowed as a deduction under this section for the
taxable year in which paid.
‘‘(b) LIMITATION.—The amount of the deduction al-
lowable under subsection (a)(2) for any taxable year shall
not exceed the health benefits account’s qualified cost for
the taxable year.
‘‘(c) QUALIFIED COST.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The term ‘qualified cost’
means, with respect to any taxable year, the sum
of—
‘‘(A) the qualified direct cost for such tax-
able year, plus
176
‘‘(B) subject to the limitation of section
420B(b), any addition to the funded reserve ac-
count established under section 420B.
‘‘(2) QUALIFIED DIRECT COST.—
‘‘(A) IN
GENERAL.—The term ‘qualified
direct cost’ means, with respect to any taxable
year, the aggregate amount (including adminis-
trative expenses) which would have been allow-
able as a deduction to the employer with re-
spect to the qualified section 401(h) medical
benefits provided through the health benefits
account during the taxable year if—
‘‘(i) such benefits were provided di-
rectly by the employer, and
‘‘(ii) the employer used the cash re-
ceipts and disbursements method of ac-
counting.
‘‘(B) TIME WHEN BENEFITS PROVIDED.—
For purposes of subparagraph (A), a benefit
shall be treated as provided when such benefit
would be includible in the gross income of the
employee if provided directly by the employer
(or would be so includible but for any provision
of this chapter excluding such benefit from
gross income).
177
‘‘SEC. 420B. FUNDED RESERVE ACCOUNT.
‘‘(a) GENERAL RULE.—For purposes of this subpart
and section 401(h), the term ‘funded reserve account’
means an account within a health benefits account—
‘‘(1) to which contributions paid or accrued to
a defined benefit plan are allocated to provide a re-
serve for the payment of qualified section 401(h)
medical benefits of employees and their spouses and
dependents,
‘‘(2) with respect to which the only contribu-
tions allocated are employer contributions, and
‘‘(3) with respect to which—
‘‘(A) the vesting requirements of sub-
section (c),
‘‘(B) the portability requirements of sub-
section (d), and
‘‘(C) the availability requirements of sub-
section (e),
are met.
‘‘(b) LIMITATION ON ALLOCATION TO ACCOUNT.—
‘‘(1) IN GENERAL.—No amount may be allo-
cated to a funded reserve account (and taken into
account under section 420A(c)(1)(B)) to the extent
such addition results in the amount allocated to such
account exceeding the account limit.
178
‘‘(2) ACCOUNT LIMIT.—The account limit for
any taxable year is an amount equal to 125 percent
of the termination liability of the account as of the
close of the last plan year ending with or within the
taxable year.
‘‘(3) TERMINATION
LIABILITY.—For purposes
of this section—
‘‘(A) IN GENERAL.—The term ‘termination
liability’ means the present value of the quali-
fied section 401(h) medical benefits—
‘‘(i) which are to be provided to em-
ployees (and their spouses and depend-
ents), and
‘‘(ii) any portion of which is to be pro-
vided through a funded reserve account.
‘‘(B) DETERMINATIONS.—The termination
liability under subparagraph (A) shall be deter-
mined—
‘‘(i) on the basis of actuarial assump-
tions which are used in determining the
full-funding limitation of the plan under
section 412(c)(7),
‘‘(ii) as if the benefits under the plan
commenced at Social Security retirement
age, and
179
‘‘(iii) by not taking into account any
portion of the maximum annual benefit
under the plan for—
‘‘(I) benefits (other than post-re-
tirement long-term health care bene-
fits) in excess of $1,500, or
‘‘(II) post-retirement long-term
health care benefits in excess of
$1,500.
‘‘(C) ADJUSTMENTS
TO
ACCOUNT.—The
amount in the account shall be adjusted at such
time and in such manner as the Secretary may
prescribe to take into account income, gains,
deductions, or losses which are properly alloca-
ble to amounts in the account.
‘‘(D) ACTUARIAL ADJUSTMENT.—For pur-
poses of determining termination liability, the
benefits provided to any participant under the
plan shall be actuarially adjusted to reflect any
commencement of benefits before or after Social
Security retirement age.
‘‘(E) EMPLOYEE.—For purposes of this
paragraph, the term ‘employee’ does not include
a former employee.
180
‘‘(F) COST-OF-LIVING
ADJUSTMENT.—In
the case of years beginning after 1995, the
$1,500 amounts in subparagraph (B) shall be
adjusted annually at the same time and in the
same manner as under section 415(d).
‘‘(c) VESTING REQUIREMENTS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met if the requirements of either sub-
paragraph (A) or (B) of section 411(a)(2) are met
with respect to the accrued qualified section 401(h)
medical benefits derived from amounts which are al-
located to the funded reserve account.
‘‘(2) UNIFORM RATE OF ACCRUAL OF BENE-
FITS.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, a plan shall not be treated as
meeting the requirements of this subsection un-
less the rate at which benefits accrue during a
plan year is the same for all participants.
‘‘(B) SPECIAL RULES FOR CERTAIN INDI-
VIDUALS AGE 55 AND OVER.—A plan shall not
be treated as failing to meet the requirements
of this subsection if the plan provides that an
employee who as of the close of the plan year
in which he attains age 55 has accrued less
181
than 30 percent of the maximum amount of
benefits which may be accrued under the plan
may accrue benefits during succeeding plan
years at a greater rate than the rate for other
employees (but not in excess of 125 percent of
such other rate).
‘‘(C) MINIMUM HOURS OF SERVICE.—For
purposes of subparagraph (A), an employee
shall not be treated as a participant for any
plan year unless such individual completes more
than 500 hours of service during such year.
‘‘(3) CERTAIN RULES MADE APPLICABLE.—Ex-
cept to the extent inconsistent with the provisions of
this subpart, the rules of section 411 shall apply for
purposes of this subsection.
‘‘(d) PORTABILITY REQUIREMENTS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the requirements of this subsection are
met if, in accordance with procedures determined by
the Secretary, the plan provides that—
‘‘(A) except as provided in regulations, the
plan shall transfer, within 120 days after an
employee separates from service with the em-
ployer or after the termination of the plan, the
present value of the nonforfeitable accrued
182
qualified section 401(h) medical benefits of the
employee attributable to amounts which are al-
located to the funded reserve account to—
‘‘(i) a plan which is maintained by an
employer of such employee and which
maintains a health benefits account, or
‘‘(ii) if the employer does not main-
tain a plan described in clause (i), an indi-
vidual retirement account established for
the benefit of such employee, and
‘‘(B) the plan accepts transfers under sub-
paragraph (A) from another plan or individual
retirement account.
‘‘(2) NO TRANSFERS AFTER EMPLOYEE IS DIS-
ABLED OR ATTAINS RETIREMENT AGE.—Except in
the case of a termination of a plan, a plan shall not
meet the requirements of this subsection if it per-
mits the transfer of a benefit after—
‘‘(A) an employee has attained Social Se-
curity retirement age, or
‘‘(B) an employee has become disabled
(within the meaning of section 72(m)(7)).
‘‘(3) INCLUSION
IN
INCOME
WHERE
MORE
THAN 1 ACCOUNT.—
‘‘(A) IN GENERAL.—If—
183
‘‘(i) an individual is a participant or
beneficiary under 2 or more plans main-
taining a funded reserve account or indi-
vidual retirement account to which assets
were transferred from such a plan, and
‘‘(ii) such individual does not (within
a 
reasonable 
period) 
consolidate 
the
present value of the individual’s nonforfeit-
able accrued benefit in all such plans and
the assets so transferred to all such ac-
counts into 1 such plan or into 1 such ac-
count,
then an amount equal to the sum of the present
value of such benefits and the fair market value
of such assets shall be treated as distributed in
cash to such individual at the close of the plan
year for the plan or account involved and such
distribution shall be included in gross income.
‘‘(B) SPECIAL RULES.—
‘‘(i) EMPLOYEE
MUST
CONSOLIDATE
INTO PLAN OF CURRENT EMPLOYER.—In
the case of an employee who is employed
by an employer maintaining a plan de-
scribed in subparagraph (A)(i), a consoli-
dation satisfies subparagraph (A) only if
184
such consolidation is into such a plan
maintained by such employer.
‘‘(ii) MORE
THAN
CURRENT
EM-
PLOYER.—If an individual is a participant
in more than 1 plan described in subpara-
graph (A)(i) by reason of being currently
employed by more than 1 employer, such
plans shall be treated as 1 plan for pur-
poses of subparagraph (A).
‘‘(iii) EMPLOYEE WITH NO CURRENT
EMPLOYER
MAINTAINING
PLAN.—In the
case of an employee who is currently not
employed by an employer maintaining a
plan described in subparagraph (A)(i), a
consolidation satisfies subparagraph (A)
only if such consolidation is into—
‘‘(I) a plan described in subpara-
graph (A)(i) maintained by his most
recent employer maintaining such
plan, or
‘‘(II) an individual retirement ac-
count of the individual.
‘‘(C) AMOUNT TRANSFERRED NOT INCLUD-
IBLE IN INCOME.—No amount shall be includ-
ible in gross income by reason of any transfer
185
which is part of a consolidation required under
this paragraph.
‘‘(e) RETIRED
EMPLOYEES
NOT
COVERED
BY
HEALTH BENEFITS ACCOUNT MAY ELECT COVERAGE.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met if the plan provides that a former
employee who—
‘‘(A) is in pay status under the plan, but
‘‘(B) is not eligible to receive all or any
portion of qualified section 401(h) medical ben-
efits provided for any period through the fund-
ed reserve account,
is entitled to elect such benefits for himself or his
spouse and dependents. A plan shall not be treated
as failing to meet the requirements of this sub-
section if an employee is required to pay a premium
for such benefits as long as such premium does not
exceed 102 percent of applicable premium for the
period such benefits are provided.
‘‘(2) APPLICABLE PREMIUM.—For purposes of
paragraph (1), the applicable premium for any pe-
riod shall be determined in the same manner as
under section 4980B(f)(4).
186
SEC. 420C. DEFINITIONS; SPECIAL RULES.
‘‘(a) QUALIFIED SECTION 401(h) MEDICAL BENE-
FITS.—For purposes of this subpart, the term ‘qualified
section 401(h) medical benefits’ means benefits—
‘‘(1) which are—
‘‘(A) benefits for sickness, accident, hos-
pitalization, and medical expenses of former
employees who are in pay status under the plan
(and their spouse or dependents) after the
former employee—
‘‘(i) has attained Social Security re-
tirement age, or
‘‘(ii) is disabled (within the meaning
of section 72(m)(7)), or
‘‘(B) post-retirement long-term health care
benefits, and
‘‘(2) which are provided through 1 or more of
the following:
‘‘(A) insurance acquired by the plan, or
‘‘(B) self-insurance by the employer or the
plan.
‘‘(b) 
POST-RETIREMENT
LONG-TERM
HEALTH
CARE.—For purposes of this subpart—
‘‘(1) IN GENERAL.—The term ‘post-retirement
long-term health care’ means long-term health care
benefits provided to a former employee (or the
187
spouse of the former employee) who is in pay status
under the plan after the former employee—
‘‘(A) has attained Social Security retire-
ment age, or
‘‘(B) is disabled (within the meaning of
section 72(m)(7)).
‘‘(2) SPOUSE OF DECEASED EMPLOYEE.—For
purposes of paragraph (1), the spouse of a deceased
employee shall be treated—
‘‘(A) as a former employee, and
‘‘(B) as satisfied the requirements of para-
graph (1) if such spouse was receiving benefits
immediately before the death of the employee.
‘‘(3) LONG-TERM HEALTH CARE BENEFIT.—
‘‘(A) IN GENERAL.—The term ‘long-term
health care benefit’ means a benefit which con-
sists of the providing by a qualified provider in
a qualified facility of necessary diagnostic, pre-
ventive, therapeutic, rehabilitative, and personal
care services, required by a chronically ill indi-
vidual.
‘‘(B) CERTAIN
ITEMS
NOT
INCLUDED.—
The term ‘long-term health care benefits’ does
not include basic medicare supplement cov-
erage, basic hospital expense coverage, basic
188
medical-surgical expense coverage, hospital con-
finement indemnity coverage, major medical ex-
pense coverage, disability income protection cov-
erage, accident only coverage, specified disease
or specified accident coverage, or limited benefit
health coverage.
‘‘(4) QUALIFIED FACILITY.—The term ‘quali-
fied facility’ means—
‘‘(A) a rehabilitative, hospice, or adult day
care facility, including a hospital, retirement
home, skilled nursing facility (within the mean-
ing of section 1919(a) of the Social Security
Act), or other similar facility determined by the
plan administrator, or
‘‘(B) a home where the chronically ill indi-
vidual resides.
‘‘(5) CHRONICALLY ILL INDIVIDUAL.—The term
‘chronically ill individual’ means an individual whose
disability is such that the individual has been cer-
tified as requiring assistance with daily living (as de-
fined by the plan administrator) for a period of at
least 90 days.
‘‘(6) QUALIFIED PROVIDER.—The term ‘quali-
fied provider’ means a medical practitioner licensed
under State law, registered nurse, licensed vocational
189
nurse, qualified therapist, or trained home health
aide (or any organization employing such providers),
but does not include a relative or other person who
ordinarily resides in the home where the chronically
ill individual resides.
‘‘(c) HEALTH BENEFITS ACCOUNT.—For purposes of
this subpart, the term ‘health benefits account’ means an
account established and maintained under section 401(h).
‘‘(d) SOCIAL SECURITY RETIREMENT AGE.—For
purposes of this subpart, the term ‘Social Security retire-
ment age’ has the meaning given such term by section
415(b)(8).’’
(b) INDIVIDUAL RETIREMENT ACCOUNTS.—
(1) IN GENERAL.—Section 408 of such Code is
amended by redesignating subsection (p) as sub-
section (q) and by inserting after subsection (o) the
following new subsection:
‘‘(p) SPECIAL RULES FOR FUNDED RESERVE AC-
COUNTS.—
‘‘(1) IN GENERAL.—A trust shall not be treated
as an individual retirement account under subsection
(a) unless the trust instrument provides that the
trust will accept transfers of assets as provided in
section 420B(d)(1).
190
‘‘(2) ACCOUNTING.—The trustee of an individ-
ual retirement account shall maintain separate ac-
counting for assets transferred to the account under
section 420B(d)(1) (and any income allocable there-
to).’’
‘‘(2) PENALTY FOR EARLY DISTRIBUTIONS.—
Section 72(t) of such Code (relating to 10-percent
additional tax on early distributions) is amended by
adding at the end the following new paragraph:
‘‘(6) EARLY DISTRIBUTION OF MEDICAL BENE-
FITS.—If—
‘‘(A) a taxpayer receives a distribution of
amounts transferred to an individual retirement
account under section 420B(d)(1) (or any in-
come or gain allocable thereto), and
‘‘(B) such distribution—
‘‘(i) is made before the individual at-
tains Social Security retirement age (with-
in the meaning of section 415(b)(8)) or be-
comes disabled (within the meaning of sub-
section (m)(7)), or
‘‘(ii) exceeds the amount of qualified
section 401(h) medical expenses of the tax-
payer, his spouse, or dependents for the
taxable year, then paragraph (1) shall
191
apply to such distribution or such excess,
except that ‘50 percent’ shall be sub-
stituted for ‘10 percent’. Paragraph (2)
shall not apply to a distribution to which
this paragraph applies.’’
(c) EXCISE TAX ON ALLOCATED ASSETS NOT USED
TO
PROVIDE
RETIREE
HEALTH
BENEFITS.—Section
4980 of such Code (relating to tax on reversion of quali-
fied plan assets to employers) is amended by adding at
the end the following new subsection:
‘‘(e) ASSETS ALLOCATED TO RETIREE HEALTH BEN-
EFITS ACCOUNTS.—In the case of a plan which establishes
a health benefits account described in section 401(h), if—
‘‘(1) amounts are allocated to a funded reserve
account under section 420B, and
‘‘(2) any amount in such account is paid or dis-
tributed other than to pay for qualified section
401(h) medical benefits (as defined in section
420C(a)) provided through such account,
the amount so paid or distributed shall be treated as an
employer reversion for purposes of this section, except that
subsection (a) shall be applied by substituting ‘100 per-
cent’ for ‘25 percent’.’’
(d) CONFORMING AMENDMENTS.—
192
(1) Section 419(e) of such Code (defining wel-
fare benefit fund) is amended by adding at the end
the following new paragraph:
‘‘(5) HEALTH BENEFITS ACCOUNTS.—The term
‘welfare benefits fund’ does not include any health
benefits account established under section 401(h).’’
(2) The table of subparts for part I of sub-
chapter D of chapter 1 of such Code is amended by
adding at the end the following new item:
‘‘Subpart F. Treatment of health benefit accounts.’’
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to contributions after December 31,
1992.
(2) INDIVIDUAL RETIREMENT ACCOUNTS.—The
amendments made by subsection (b) shall apply to
accounts established after December 31, 1992.
Subtitle C—Reverse Mortgage
Insurance for Older Americans
SEC. 721. MAXIMUM AMOUNT INSURED.
Section 255(g) of the National Housing Act (12
U.S.C. 1715z–20(g)) is amended by striking the third sen-
tence and inserting the following new sentence: ‘‘In no
case may the benefits of insurance under this section ex-
ceed the greater of 95 percent of the median 1-family
193
house price in the United States or 95 percent of the me-
dian 1-family house price in the area, as determined by
the Secretary.’’
Subtitle D—Income Tax Credits
SEC. 731. REFUNDABLE CREDIT FOR CUSTODIAL CARE OF
CERTAIN 
DEPENDENTS 
IN 
TAXPAYER’S
HOME.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by redes-
ignating section 35 as section 37 and by inserting after
section 34 the following new section:
‘‘SEC. 35. CREDIT FOR TAXPAYERS WITH CERTAIN PERSONS
REQUIRING 
CUSTODIAL 
CARE 
IN 
THEIR
HOUSEHOLDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual who maintains a household which includes as a
member one or more qualified persons, there shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $2,000 for each
such person.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED PERSON.—The term ‘qualified
person’ means any individual—
194
‘‘(A) who is a parent, grandparent, de-
pendent (as defined in section 152), or spouse
of the taxpayer,
‘‘(B) who has been certified by a physician
as—
‘‘(i) being unable to perform (without
substantial assistance from another indi-
vidual) at least 2 activities of daily living
(as defined in paragraph (2)), or
‘‘(ii) having a similar level of disabil-
ity due to cognitive impairment, and
‘‘(C) who has as his principal place of
abode for more than half of the taxable year the
home of the taxpayer.
‘‘(2) ACTIVITIES OF DAILY LIVING.—For pur-
poses of paragraph (1), each of the following is an
activity of daily living:
‘‘(A) BATHING.—The overall complex be-
havior of getting water and cleansing the whole
body, including turning on the water for a bath,
shower, or sponge bath, getting to, in, and out
of a tub or shower, and washing and drying
oneself.
195
‘‘(B) DRESSING.—The overall complex be-
havior of getting clothes from closets and draw-
ers and then getting dressed.
‘‘(C) TOILETING.—The act of going to the
toilet room for bowel and bladder function,
transferring on and off the toilet, cleaning after
elimination, and arranging clothes.
‘‘(D) TRANSFER.—The process of getting
in and out of bed or in and out of a chair or
wheelchair.
‘‘(E) EATING.—The process of getting
food from a plate or its equivalent into the
mouth.
‘‘(3) PHYSICIAN.—The term ‘physician’ means
a doctor of medicine or osteopathy legally authorized
to practice medicine or surgery in the jurisdiction in
which he makes the determination under paragraph
(1).
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) MAINTAINING A HOUSEHOLD.—An individ-
ual shall be treated as maintaining a household for
any period if over half the cost of maintaining the
household for such period is furnished by such indi-
196
vidual (or, is such individual is married during such
period, by such individual and his spouse).
‘‘(2) MARRIED COUPLES MUST FILE JOINT RE-
TURN.—If the taxpayer is married at the close of
the taxable year, the credit under subsection (a)
shall be allowed only if the taxpayer and his spouse
file a joint return for the taxable year.
‘‘(3) MARITAL STATUS.—An individual legally
separated from his spouse under a decree of divorce
or separate maintenance shall not be considered as
married.
‘‘(4) CERTAIN
MARRIED
INDIVIDUALS
LIVING
APART.—If—
‘‘(A) an individual who is married and who
files a separate return—
‘‘(i) maintains a household which in-
cludes as a member one or more qualified
persons, and
‘‘(ii) furnishes over half of the cost of
maintaining such household during such
taxable year, and
‘‘(B) during the last 6 months of such tax-
able year such individual’s spouse is not a mem-
ber of such household,
such individual shall not be considered as married.
197
‘‘(e) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart C of part IV of subchapter A of chapter 1
of such Code is amended by striking the item relating to
section 35 and inserting the following:
‘‘Sec. 35. Credit for taxpayers with certain persons requiring cus-
todial care in their households.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 732. CREDIT FOR EXPENSES FOR LONG-TERM CARE
SERVICES 
PROVIDED 
TO 
CERTAIN 
INDE-
PENDENT PERSONS REQUIRING SUCH CARE.
(a) GENERAL RULE.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by insert-
ing after section 35 the following new section:
‘‘SEC. 36. CREDIT FOR EXPENSES FOR LONG-TERM CARE
SERVICES 
PROVIDED 
TO 
CERTAIN 
INDE-
PENDENT PERSONS REQUIRING SUCH CARE.
‘‘(a) GENERAL RULE.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this subtitle for the taxable year an amount equal to
198
25 percent of the qualified long-term care expenses paid
during such taxable year.
‘‘(b) MAXIMUM CREDIT.—
‘‘(1) IN GENERAL.—The credit allowed by sub-
section (a) for any taxable year shall not exceed
$2,000 with respect to each independent qualified
person.
‘‘(2) PHASEOUT
OF
CREDIT
FOR
TAXPAYERS
WITH INCOMES EXCEEDING 150 PERCENT OF THE
POVERTY LEVEL.—If the adjusted gross income of
the taxpayer for the taxable year exceeds the base
amount, the $2,000 amount in paragraph (1) shall
be reduced (but not below zero) by an amount which
bears the same ratio to $2,000 as—
‘‘(A) the excess of the taxpayer’s adjusted
gross income for the taxable year over the base
amount, bears to
‘‘(B) $10,000.
For purposes of the preceding sentence, the base
amount is 150 percent of the poverty level applicable
to the taxpayer.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) 
QUALIFIED
LONG-TERM
CARE
EX-
PENSES.—
199
‘‘(A) IN
GENERAL.—The term ‘qualified
long-term care expenses’ means the amount
paid by the taxpayer during the taxable year for
1 or more medically necessary, diagnostic serv-
ices, preventive services, therapeutic services,
rehabilitation services, maintenance services, or
personal care services which are required by an
independent qualified person and which are pro-
vided in the household referred to in paragraph
(2)(C).
‘‘(B) 
COVERAGE
SPECIFICALLY
EX-
CLUDED.—Such term does not include any com-
bination of the following kinds of coverage:
‘‘(i) Basic Medicare supplement cov-
erage.
‘‘(ii) Basic hospital-based acute care
expense coverage.
‘‘(iii) Basic medical-surgical expense
coverage.
‘‘(iv) Hospital confinement indemnity
coverage.
‘‘(v) Major medical expense coverage.
‘‘(vi) Disability income protection cov-
erage.
‘‘(vii) Accident only coverage.
200
‘‘(viii) Specified disease coverage.
‘‘(ix) Specified accident coverage.
‘‘(x) Limited benefit health coverage.
‘‘(2) INDEPENDENT QUALIFIED PERSON.—The
term ‘independent qualified person’ means any indi-
vidual—
‘‘(A) who is a parent, grandparent, or de-
pendent (as defined in section 152) of the tax-
payer,
‘‘(B) who has been certified by a physician
as—
‘‘(i) being unable to perform (without
substantial assistance from another indi-
vidual) at least 2 activities of daily living
(as defined in section 35(b)(2)), or
‘‘(ii) having a similar level of disabil-
ity due to cognitive impairment, and
‘‘(C) who maintains a household which is
his principal place of abode for more than half
of the taxable year of the taxpayer.
Such term shall not include any qualified person as
defined in section 35(b).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart C of part IV of subchapter A of chapter 1
201
of such Code is amended by adding at the end the follow-
ing:
‘‘Sec. 36. Credit for expenses for long-term care services provided
to certain independent persons requiring such
care.’’
‘‘Sec. 37. Overpayments of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
Subtitle E—Treatment of
Accelerated Death Benefits
SEC. 741. TAX TREATMENT OF ACCELERATED DEATH BENE-
FITS UNDER LIFE INSURANCE CONTRACTS.
(a) GENERAL RULE.—Section 101 of the Internal
Revenue Code of 1986 (relating to certain death benefits)
is amended by adding at the end thereof the following new
subsection:
‘‘(g) TREATMENT
OF
CERTAIN
ACCELERATED
DEATH BENEFITS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, any amount paid to an individual under a life
insurance contract on the life of an insured who is
a terminally ill individual or who is permanently con-
fined to a nursing home shall be treated as an
amount paid by reason of the death of such insured.
‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur-
poses of this subsection, the term ‘terminally ill indi-
202
vidual’ means an individual who has been certified
by a physician, licensed under State law, as having
an illness or physical condition which can reasonably
be expected to result in death in 12 months or less.
‘‘(3) PERMANENTLY CONFINED TO A NURSING
HOME.—For purposes of this subsection, an individ-
ual has been permanently confined to a nursing
home if the individual is presently confined to a
nursing home and has been certified by a physician,
licensed under State law, as having an illness or
physical condition which can reasonably be expected
to result in the individual remaining in a nursing
home for the rest of his life.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 742. TAX TREATMENT OF COMPANIES ISSUING QUALI-
FIED ACCELERATED DEATH BENEFIT RID-
ERS.
(a) QUALIFIED ACCELERATED DEATH BENEFIT RID-
ERS TREATED AS LIFE INSURANCE.—Section 818 of the
Internal Revenue Code of 1986 (relating to other defini-
tions and special rules), as amended by section 701(a),
is amended by adding at the end thereof the following new
subsection:
203
‘‘(h) QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS TREATED AS LIFE INSURANCE.—For purposes of
this part—
‘‘(1) IN GENERAL.—Any reference to a life in-
surance contract shall be treated as including a ref-
erence to a qualified accelerated death benefit rider
on such contract.
‘‘(2) QUALIFIED ACCELERATED DEATH BENE-
FIT RIDERS.—For purposes of this subsection, the
term ‘qualified accelerated death benefit rider’
means any rider or addendum on, or other provision
of, a life insurance contract which provides for pay-
ments to an individual on the life of an insured upon
such insured becoming a terminally ill individual (as
defined in section 101(g)(2)) or being permanently
confined to a nursing home (as defined in section
101(g)(3)).’’
(b) DEFINITIONS OF LIFE INSURANCE AND MODI-
FIED ENDOWMENT CONTRACTS.—
(1) RIDER
TREATED
AS
QUALIFIED
ADDI-
TIONAL
BENEFIT.—Paragraph (5)(A) of section
7702(f) of such Code is amended by striking ‘‘or’’
at the end of clause (iv), by redesignating clause (v)
as clause (vi), and by inserting after clause (iv) the
following new clause:
204
‘‘(v) any qualified accelerated death
benefit 
rider 
(as 
defined 
in 
section
818(h)(2)) or any qualified long-term care
insurance rider which reduces the death
benefit, or’’.
(2) TRANSITIONAL RULE.—For purposes of ap-
plying section 7702 or 7702A of the Internal Reve-
nue Code of 1986 to any contract (or determining
whether either such section applies to such con-
tract), the issuance of a rider or addendum on, or
other provision of, a life insurance contract permit-
ting the acceleration of death benefits (as described
in section 101(g) of such Code) or for qualified long-
term care insurance (as defined in section 849(b) of
such Code) shall not be treated as a modification or
material change of such contract.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning before,
on, or after December 31, 1992.
205
Subtitle F—Federal National Long-
Term Care Reinsurance Cor-
poration
SEC. 751. AUTHORIZATION FOR ESTABLISHMENT OF COR-
PORATION.
The Secretary of Health and Human Services (in this
subtitle referred to as the ‘‘Secretary’’) is authorized to
provide, in accordance with this subtitle, for the incorpora-
tion of a corporation to be known as the Federal National
Long-Term Care Reinsurance Corporation (in this subtitle
referred to as the ‘‘Corporation’’), which shall not be an
agency or establishment of the United States Government.
SEC. 752. BOARD OF DIRECTORS AND OFFICERS.
(a) BOARD OF DIRECTORS.—The Corporation shall
have a Board of Directors (in this subtitle referred to as
the ‘‘Board’’) consisting of 9 members, of which—
(1) 3 shall be appointed by the President of the
United States, of which one shall be representative
of entities providing long-term care, one shall be a
representative from an insurer, and one shall be a
representative of consumers of long-term care; and
(2) 6 shall be elected annually by the stockhold-
ers of the Corporation entitled to vote for such mem-
bers.
206
Within the limitations of law and regulation, the Board
shall determine the general policies which shall govern the
operations of the Corporation, and shall have power to
adopt, amend, and repeal bylaws governing the perform-
ance of the powers and duties granted to or imposed upon
it by law.
(b) INITIAL BOARD.—Notwithstanding subsection
(a), the members described in subsection (a)(1) shall serve
as incorporators and are authorized to assist the Secretary
in taking whatever actions are necessary to incorporate
the Corporation.
(c) TERMS OF OFFICE.—The terms of office of each
member of the Board shall be one year, expiring on the
date of the annual meeting of the stockholders of the Cor-
poration, except that (1) in the case of a vacancy occurring
prior to the expiration of the term of a member, the va-
cancy shall be filled by the President (for members de-
scribed in subsection (a)(1)) or by the remaining members
of the Board (for other members) for the remainder of
such term, and (2) any member may be removed by the
President for good cause. Any vacancy in the Board shall
not affect its power.
(d) CHAIRMAN.—The President shall designate one
of the members described in subsection (a)(1) as the initial
Chairman of the Board. Thereafter, the members of the
207
Boards shall annually elect one of their number as Chair-
man.
(e) TREATMENT OF MEMBERS.—
(1) The members of the Board shall not by rea-
son of such membership, be deemed to be employees
of the United States Government. Except as pro-
vided in paragraph (2), each member of the Board
shall be entitled to receive the daily equivalent of the
maximum annual rate of basic pay in effect for
grade GS–18 of the General Schedule for each day
(including travel time) during which he is engaged
in the actual performance of duties vested in the
Corporation.
(2) Members of the Board who are full-time of-
ficers or employees of the United States shall receive
no additional pay by reason of their service on the
Board.
(f) OFFICERS.—The Corporation shall have a Presi-
dent and such other executive officers and employees as
may be appointed by the Board at rates of compensation
fixed by the Board, without regard to any provisions of
title 5, United States Code. No such executive officer may
receive any salary or other compensation from any source
other than the Corporation during the period of his em-
ployment by the Corporation.
208
SEC. 753. PURPOSE AND AUTHORITY OF CORPORATION.
(a) PURPOSE.—The Corporation shall confine its ac-
tivities to providing for the reinsurance of insurance com-
panies for extraordinary loss in the issuance or payment
of benefits for qualified long-term care insurance (as de-
fined in section 848(b) of the Internal Revenue Code of
1986). Except as may be provided by the Secretary in reg-
ulations, the Corporation may not refuse to provide for
such reinsurance for any insurance meeting the require-
ments of such section (other than paragraph (4)(C)(iii)
thereof).
(b) PREMIUMS.—The Corporation shall impose for
such reinsurance reasonable premiums which—
(1) are related to actuarial estimates of the
type and amount of financial risk assumed by the
Corporation, and
(2) in the aggregate (in conjunction with other
income which the Corporation may have) provide for
all the expenses of the Corporation.
(c) NO POLITICAL CONTRIBUTIONS.—The Corpora-
tion shall not contribute or otherwise support any political
party or candidate for elective public office.
(d) GENERAL POWERS.—Except as otherwise specifi-
cally provided in this subtitle, the Corporation and Board
shall have the powers of a corporation and board of direc-
tors in the State in which incorporated.
209
SEC. 754. CAPITALIZATION.
(a) COMMON STOCK.—The Corporation shall have
common stock, with such par value as the Board estab-
lishes, which shall be vested with all voting rights, each
share being entitled to one vote with rights of cumulative
voting at all elections of directors. The free transferability
of the common stock at all times to any person, firm, cor-
poration, or other entity shall not be restricted, except
that, as to the Corporation, it shall be transferable only
on the books of the Corporation. The Corporation shall
only issue such common stock with the approval of the
Secretary.
(b) DEBT.—
(1) For purposes of carrying out this subtitle,
the Corporation may with the approval of the Sec-
retary and consistent with section 258, issue obliga-
tions having such maturities and bearing such rate
or rates and having such conditions (including sub-
ordination to other such obligations) as the Board
determines to be appropriate.
(2) The full faith and credit of the United
States is not pledged to the obligations and debts of
the Corporation. The Corporation shall insert appro-
priate language in all of its obligations issued under
this subsection clearly indicating that such obliga-
tions, together with the interest thereon, are not
210
guaranteed by the United States and do not con-
stitute debt or obligation of the United States or of
any agency or instrumentality thereof. The Corpora-
tion may purchase in the open market any of its ob-
ligations outstanding under the subsection at any
time and at any price.
(3) All obligations, participations, or other in-
struments issued by the Corporation shall be lawful
investments, and may be accepted as security for all
fiduciary, trust, and public funds, the investment or
deposit of which shall be under the authority and
control of the United States or any officer or officers
thereof.
SEC. 755. EXEMPTION FROM STATE REGULATION AND TAX-
ATION.
(a) TAXATION.—The Corporation, including its cap-
ital, reserves, surplus, security holdings, and income, shall
be exempt from all taxation now or hereafter imposed by
any State, district, Commonwealth, county, municipality,
or local taxing authority, except that any real property of
the Corporation shall be subject to such taxation to the
same extent according to its value as other real property
is taxed.
(b) INSURANCE REGULATION.—Except to the extent
specified by the Secretary in regulations, the Corporation
211
shall not be subject to any regulation under the insurance
laws of any State, district, or Commonwealth.
SEC. 756. AUDIT AND ANNUAL REPORT.
(a) AUDIT.—The Board shall provide for an annual
audit of the operations of the Corporation. Such audit
shall be conducted by a certified public accountant in ac-
cordance with generally accepted auditing principles (as
recognized by the Comptroller General).
(b) ANNUAL REPORT.—The Board shall report annu-
ally to the President and the Congress on the activities
of the Corporation. Such report shall include a presen-
tation of the financial status of the Corporation, as cer-
tified under the audit described in subsection (a).
SEC. 757. PROTECTION OF NAME.
No individual association, partnership, or corpora-
tion, except the Corporation, shall hereafter use the world
‘‘Federal National Long-Term Care Reinsurance Corpora-
tion’’, or any combination of such words, as the name or
a part thereof under which he or it shall do business. Vio-
lations of the foregoing sentence may be enjoined by any
court of general jurisdiction at the suit of the Corporation.
In any such suit, the Corporation may recover any actual
damages flowing from such violations, and, in addition,
shall be entitled to punitive damages (regardless of the
existence or nonexistence of actual damages) of not ex-
212
ceeding $10,000 for each day during which such violation
is committed or repealed.
SEC. 758. TERMINATION.
The Corporation shall terminate its activities not
later than 10 years after the date of the enactment of this
Act.
TITLE VIII—IMPROVEMENTS IN
PORTABILITY 
OF 
PRIVATE
HEALTH INSURANCE
SEC. 801. EXCISE TAX IMPOSED ON FAILURE TO PROVIDE
FOR PREEXISTING CONDITION.
(a) IN GENERAL.—Chapter 47 (relating to taxes on
group health plans) is amended by adding at the end
thereof the following new section:
‘‘SEC. 5000A. FAILURE TO SATISFY PREEXISTING CONDI-
TION REQUIREMENTS OF GROUP HEALTH
PLANS.
‘‘(a) GENERAL RULE.—There is hereby imposed a
tax on the failure of—
‘‘(1) a group health plan to meet the require-
ments of subsection (e), or
‘‘(2) any person to meet the requirements of
subsection (f),
with respect to any covered individual.
‘‘(b) AMOUNT OF TAX.—
213
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect
to a covered individual shall be $100 for each day
in the noncompliance period with respect to such
failure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes
of this section, the term ‘noncompliance period’
means, with respect to any failure, the period—
‘‘(A) beginning on the date such failure
first occurs, and
‘‘(B) ending on the date such failure is
corrected.
‘‘(3) CORRECTION.—A failure of a group health
plan to meet the requirements of subsection (e) with
respect to any covered individual shall be treated as
corrected if—
‘‘(A) such failure is retroactively undone to
the extent possible, and
‘‘(B) the covered individual is placed in a
financial position which is as good as such indi-
vidual would have been in had such failure not
occurred.
For purposes of applying subparagraph (B), the cov-
ered individual shall be treated as if the individual
had elected the most favorable coverage in light of
214
the expenses incurred since the failure first oc-
curred.
‘‘(e) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed by subsection (a)
on any failure during any period for which it is es-
tablished to the satisfaction of the Secretary that
none of the persons referred to in subsection (d)
knew, or exercising reasonable diligence would have
known, that such failure existed.
‘‘(2) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed
by subsection (a) on any failure if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the first day any of
the persons referred to in subsection (d) knew,
or exercising reasonable diligence would have
known, that such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
215
that the payment of such tax would be excessive rel-
ative to the failure involved.
‘‘(d) LIABILITY FOR TAX.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the following shall be liable
for the tax imposed by subsection (a) on a failure:
‘‘(A) In the case of a group health plan
other than a self-insured group health plan, the
issuer.
‘‘(B)(i) In the case of a self-insured group
health plan other than a multiemployer group
health plan, the employer.
‘‘(ii) In the case of a self-insured multiem-
ployer group health plan, the plan.
‘‘(C) Each person who is responsible (other
than in a capacity as an employee) for admin-
istering or providing benefits under the group
health plan, health insurance plan, or other
health benefit arrangement (including a self-in-
sured plan) and whose act or failure to act
caused (in whole or in part) the failure.
‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED
IN PARAGRAPH (1)(C).—A person described in sub-
paragraph (C) (and not in subparagraphs (A) and
(B)) of paragraph (1) shall be liable for the tax im-
216
posed by subsection (a) on any failure only if such
person assumed (under a legally enforceable written
agreement) responsibility for the performance of the
act to which the failure relates.
‘‘(e) NO DISCRIMINATION BASED ON HEALTH STA-
TUS FOR CERTAIN SERVICES.—
‘‘(1) IN GENERAL.—Except as provided under
paragraph (2), group health plans may not deny,
limit, or condition the coverage under (or benefits
of) the plan based on the health status, claims expe-
rience, receipt of health care, medical history, or
lack of evidence of insurability, of an individual.
‘‘(2) TREATMENT OF PREEXISTING CONDITION
EXCLUSIONS FOR ALL SERVICES.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this paragraph, group
health plans may exclude coverage with respect
to services related to treatment of a preexisting
condition, but the period of such exclusion may
not exceed 6 months. The exclusion of coverage
shall not apply to services furnished to
newborns.
‘‘(B) 
CREDITING
OF
PREVIOUS
COV-
ERAGE.—
217
‘‘(i) IN
GENERAL.—A group health
plan shall provide that if an individual
under such plan is in a period of continu-
ous coverage (as defined in clause (ii)(I))
with respect to particular services as of the
date of initial coverage under such plan
(determined without regard to any waiting
period under such plan), any period of ex-
clusion of coverage with respect to a pre-
existing condition for such services or type
of services shall be reduced by 1 month for
each month in the period of continuous
coverage without regard to any waiting pe-
riod.
‘‘(ii) DEFINITIONS.—As used in this
subparagraph:
‘‘(I) PERIOD
OF
CONTINUOUS
COVERAGE.—The term ‘period of con-
tinuous coverage’ means, with respect
to particular services, the period be-
ginning on the date an individual is
enrolled under a health insurance
plan, title XVIII or XIX of the Social
Security Act, or other health benefit
arrangement (including a self-insured
218
plan) which provides benefits with re-
spect to such services and ends on the
date the individual is not so enrolled
for a continuous period of more than
3 months.
‘‘(II) 
PREEXISTING
CONDI-
TION.—The term ‘preexisting condi-
tion’ means, with respect to coverage
under a group health plan, a condition
which has been diagnosed or treated
during the 3-month period ending on
the day before the first date of such
coverage without regard to any wait-
ing period.
‘‘(f) DISCLOSURE OF COVERAGE, ETC.—Any person
who has provided coverage (other than under title XVIII
or XIX of the Social Security Act) during a period of con-
tinuous coverage (as defined in subsection (e)(2)(B)(ii)(I))
with respect to a covered individual shall disclose, upon
the request of a group health plan subject to the require-
ments of subsection (e), the coverage provided the covered
individual, the period of such coverage, and the benefits
provided under such coverage.
‘‘(g) DEFINITIONS.—For purposes of this section—