H.R. 4529 (111th): Roadmap for America’s Future Act of 2010

The text of the bill below is as of Jan 27, 2010 (Introduced).

Source: GPO

I

111th CONGRESS

2d Session

H. R. 4529

IN THE HOUSE OF REPRESENTATIVES

January 27, 2010

(for himself, Mr. Bartlett, Mrs. Blackburn, Mr. Burgess, Mr. Campbell, Mr. Hensarling, Mr. Nunes, and Mr. Price of Georgia) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, Education and Labor, Rules, the Budget, and the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide for the reform of health care, the Social Security system, the tax code for individuals and business, job training, and the budget process.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Roadmap for America’s Future Act of 2010.

(b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings and purpose.

Title I—Health Care Reform

Subtitle A—Expanding Patient’s Health Care Choices

Part 1—State-Based Health Care Exchanges

Sec. 101. State-based health care exchanges.

Sec. 102. Requirements.

Sec. 103. State Exchange incentives.

Part 2—Fair Tax Treatment for all Americans to Afford Health Care

Sec. 111. Reference.

Subpart A—Refundable and Advanceable Credit for Certain Health Insurance Coverage

Sec. 112. Refundable and advanceable credit for certain health insurance coverage.

Sec. 113. Requiring employer transparency about employee benefits.

Sec. 114. Changes to existing tax preferences for medical coverage, etc., for individuals eligible for qualified health insurance credit.

Subpart B—Health Savings Accounts

Sec. 121. Improvements to health savings accounts.

Sec. 122. Exception to requirement for employers to make comparable health savings account contributions.

Subtitle B—Health Plan Choice; Small Business Health Fairness; Tax Amendments

Sec. 131. Cooperative governing of individual health insurance coverage.

Sec. 132. Small business health fairness.

Sec. 133. Repeal of certain tax exemptions for health insurance payments.

Subtitle C—Health Care Services Commission

Part I—Establishment and General Duties

Sec. 141. Establishment.

Sec. 142. General authorities and duties.

Sec. 143. Dissemination.

Part II—Forum for Quality and Effectiveness in Health Care

Sec. 151. Establishment of office.

Sec. 152. Membership.

Sec. 153. Duties.

Sec. 154. Adoption and enforcement of guidelines and standards.

Sec. 155. Additional requirements.

Part III—General Provisions

Sec. 161. Certain administrative authorities.

Sec. 162. Funding.

Sec. 163. Definitions.

Part IV—Terminations and Transition

Sec. 171. Termination of Agency for Healthcare Research and Quality.

Sec. 172. Transition.

Part V—Independent Health Record Trust

Sec. 181. Short title of part.

Sec. 182. Purpose.

Sec. 183. Definitions.

Sec. 184. Establishment, certification, and membership of independent health record trusts.

Sec. 185. Duties of IHRT to IHRT participants.

Sec. 186. Availability and use of information from records in IHRT consistent with privacy protections and agreements.

Sec. 187. Voluntary nature of trust participation and information sharing.

Sec. 188. Financing of activities.

Sec. 189. Regulatory oversight.

Title II—Fairness for Every American Patient

Subtitle A—Medicaid Modernization

Sec. 201. Medicaid modernization.

Sec. 202. Outreach.

Sec. 203. Transition rules; miscellaneous provisions.

Subtitle B—Supplemental Health Care Assistance for Low-Income Families

Sec. 211. Supplemental health care assistance for low-income families.

Title III—Medicare Reform

Subtitle A—New Medicare Program

Sec. 301. Benefit changes.

Sec. 302. Increase in Medicare eligibility age.

Sec. 303. Unified Medicare Trust Fund.

Subtitle B—Changes in Current Medicare Program

Sec. 311. Income-related reduction in part D premium subsidy.

Sec. 312. Reduction in hospital marketbasket increases.

Sec. 313. Elimination of indexing of income thresholds for part B income-related premiums.

Sec. 314. Reinstatement of the Medicare trigger.

Sec. 315. Eliminating inefficiencies and increasing choice in Medicare Advantage.

Subtitle C—Medical Liability Reform

Part 1—Enacting Real Medical Liability Reform

Sec. 321. Encouraging speedy resolution of claims.

Sec. 322. Compensating patient injury.

Sec. 323. Maximizing patient recovery.

Sec. 324. Additional health benefits.

Sec. 325. Punitive damages.

Sec. 326. Authorization of payment of future damages to claimants in health care lawsuits.

Sec. 327. Definitions.

Sec. 328. Effect on other laws.

Sec. 329. State flexibility and protection of States’ rights.

Sec. 330. Applicability; effective date.

Part 2—Ending Lawsuit Abuse

Sec. 331. State grants to create health court solutions.

Title IV—Social Security reform

Sec. 401. Short title.

Sec. 402. Establishment of Personal Social Security Savings Program.

Sec. 403. Monthly insurance benefits for participating individuals.

Sec. 404. Tax treatment of accounts.

Sec. 405. Self-Liquidating Social Security Transition Fund.

Sec. 406. Budgetary treatment of Social Security.

Sec. 407. Accounting for the Old-Age, Survivors, and Disability Insurance Program and the Personal Social Security Savings Program.

Sec. 408. Progressive indexing of benefits for old-age, wife’s, and husband’s insurance benefits.

Sec. 409. Adjustments to schedule for increases in normal retirement age.

Title V—Simplified Income Tax

Sec. 501. Short title.

Sec. 502. Repeal of alternative minimum tax for noncorporate taxpayers.

Sec. 503. Simplified income tax system.

Sec. 504. Exclusion for capital gains, dividends, and interest.

Sec. 505. Repeal of estate and gift taxes.

Title VI—BUSINESS CONSUMPTION TAX

Sec. 601. Short title.

Sec. 602. Repeal of corporate income tax; new tax paid by corporations and other businesses.

Sec. 603. Repeal of chapter 6.

Title VII—Job Training Results Act of 2010

Sec. 701. Short title.

Sec. 702. Purpose.

Sec. 703. Improvement of job training programs; performance metrics for WIA job training programs.

Sec. 704. Other job training programs.

Sec. 705. Transparency.

Sec. 706. Evaluations.

Sec. 707. Encouraging innovation.

Sec. 708. Making WIA Training Vouchers more accessible and flexible.

Sec. 709. Life long learning awareness campaigns.

Sec. 710. GAO reports.

Title VIII—SPENDING LIMITS AND DEFICIT CONTROL

Sec. 800. Short title.

Subtitle A—Spending Limits and Deficit Control

Sec. 801. Discretionary spending limits.

Sec. 802. Total spending limits.

Subtitle B—Reports and Orders

Sec. 811. Reports and orders.

Sec. 812. Spending limits enforcement.

Sec. 813. Spending reduction orders.

Sec. 814. Alternate spending reduction legislation in the House of Representatives.

Sec. 815. Alternate spending reduction legislation in the Senate.

Subtitle C—Long-Term Budgeting

Sec. 821. CBO and OMB projections.

Sec. 822. GAO and OMB statements of the Federal Government’s financial condition.

Sec. 823. Five-year fiscal sustainability review.

Sec. 824. Long-term reconciliation.

Sec. 825. Long-term spending increase point of order.

2.

Findings and purpose

(a)

Findings

The Congress finds as follows:

(1)

The Congressional Budget Office, the Government Accountability Office, and the Federal Reserve have all found that Social Security, Medicare, and Medicaid, as currently structured, will result in unsustainable levels of spending, deficits, and debt.

(2)

Although Americans remain committed to the missions of these initiatives, the goals can no longer be met on models created nearly 80 years ago—with large, centralized institutions, especially government, serving as sole providers for an increasingly dependent population.

(3)

The continuing failure to enact solutions makes these problems more intractable with each succeeding year.

(4)

Among the inescapable signs are the following: an unsustainable path of Government spending; levels of projected debt that threaten to bankrupt the country; trillions of dollars of unfunded liabilities in the Government’s major benefit programs; and the erosion of Americans’ security and confidence in health care and retirement.

(5)

These conditions pose significant potential burdens not only for the Government, but for the United States economy as well, threatening its ability to continue raising standards of living, and its leadership in an increasingly international marketplace.

(6)

A comprehensive plan is needed, and this legislation aims to gain control of Federal spending, deficits, and debt while energizing the productive capacities of Americans to generate sustained economic growth.

(b)

Purpose

The purpose of this Act is as follows:

(1)

Health care reform

To provide access to health care coverage for uninsured Americans by establishing a new tax credit; to reform health insurance markets, high-risk pools, and electronic health records; and to create a new agency to promote the dissemination of industry-defined health care price and quality data.

(2)

Medicaid and SCHIP reform

To ensure health care coverage for those who need it most and can be sustained, reforms the Medicaid and SCHIP to expand coverage options for beneficiaries, gives greater flexibility, and slows the growth in spending.

(3)

Medicare reform

To ensure the Medicare benefit continues to provide health care coverage for seniors by establishing modernizing the program to slowly phase in reforms for those younger than 55 years of age, and to make the program permanently solvent and fiscally sustainable.

(4)

Social Security reform

To reform Social Security to ensure retirement security for future generations and to make it solvent for the foreseeable future; to address inequities in the system and provide millions of Americans with the opportunity to build a retirement nest egg that they can pass on to their heirs.

(5)

Individual income tax reform

To offer taxpayers a choice in paying their Federal income taxes; to allow individuals to choose between the current tax code or a highly simplified tax system with virtually no deductions or credits (apart from an individual health care credit), two low tax rates and a generous standard deduction and personal exemption; to fully repeal the alternative minimum tax (AMT), eliminate the tax on interest, capital gains and dividends in order to promote saving; and to repeal the estate tax.

(6)

Business tax reform

To eliminate the United States corporate income tax and establishes a border-adjustable business consumption tax in its place; to provide a new method of business taxation that will level the playing field for United States businesses to compete with foreign businesses and will promote sustained economic growth, investment and job creation in America.

(7)

Job Training

To assist working Americans in an increasingly global economy, reforms 49 job training programs across eight agencies to enhance transparency, accountability, and performance.

(8)

Budget process

To keep total spending of the Government under control, nondefense discretionary spending limits are set forth, a limit on total outlays as a percentage of the gross domestic produce is established, and the process is reformed to put a greater focus on long-term budgetary trends.

I

Health Care Reform

A

Expanding Patient’s Health Care Choices

1

State-Based Health Care Exchanges

101.

State-based health care exchanges

(a)

State-Based health care exchanges

(1)

In general

The Secretary of Health and Human Services (referred to in this part as the Secretary) shall establish a process for the review of applications submitted by States for the establishment and implementation of State-based health care Exchanges (referred to in this part as a State Exchange) and for the certification of such Exchanges. The Secretary shall certify a State Exchange if the Secretary determines that such Exchange meets the requirements of this part.

(2)

Continued certification

The certification of a State Exchange under subsection (a) shall remain in effect until the Secretary determines that the Exchange has failed to meet any of the requirements under this part.

102.

Requirements

(a)

General requirements for certification

An application for certification under section 101(a) shall demonstrate compliance with the following:

(1)

Purpose

The primary purpose of a State Exchange shall be the facilitation of the individual purchase of innovative private health insurance and the creation of a market where private health plans compete for enrollees based on price and quality.

(2)

Administration

A State shall ensure the operation of the State Exchange through direct contracts with the health insurance plans that are participating in the State Exchange or through a contract with a third party administrator for the operation of the Exchange.

(3)

Plan participation

A State shall not restrict or otherwise limit the ability of a health insurance plan to participate in, and offer health insurance coverage through, the State Exchange, so long as the health insurance issuers involved are duly licensed under State insurance laws applicable to all health insurance issuers in the State and otherwise comply with the requirements of this part.

(4)

Premiums

(A)

Amount

A State shall not determine premium or cost sharing amounts for health insurance coverage offered through the State Exchange.

(B)

Collection method

A State shall ensure the existence of an effective and efficient method for the collection of premiums for health insurance coverage offered through the State Exchange.

(b)

Benefit parity with Members of Congress

With respect to health insurance issuers offering health insurance coverage through the State Exchange, the State shall not impose any requirement that such issuers provide coverage that includes benefits different than requirements on plans offered to Members of Congress under chapter 89 of title 5, United States Code.

(c)

Facilitating universal coverage for Americans

(1)

Automatic enrollment

The State Exchange shall ensure that health insurance coverage offered through the Exchange provides for the application of uniform mechanisms that are designed to encourage and facilitate the enrollment of all eligible individuals in Exchange-based health insurance coverage. Such mechanisms shall include automatic enrollment through various venues, which may include emergency rooms, the submission of State tax forms, places of employment in the State, and State departments of motor vehicles.

(2)

Other enrollment opportunities

(A)

In general

The State Exchange shall ensure that health insurance coverage offered through the Exchange permits enrollment, and changes in enrollment, of individuals at the time such individuals become eligible individuals in the State.

(B)

Annual open enrollment periods

The State Exchange shall ensure that health insurance coverage offered through the Exchange permits eligible individuals to annually change enrollment among the coverage offered through the Exchange, subject to subparagraph (A).

(C)

Incentives for continuous annual coverage

The State Exchange shall include an incentive for eligible individuals to remain insured from plan year to plan year, and may include incentives such as State tax incentives or premium-based incentives.

(3)

Guaranteed access for individuals

The State Exchange shall ensure that, with respect to health insurance coverage offered through the Exchange, all eligible individuals are able to enroll in the coverage of their choice provided that such individuals agree to make applicable premium and cost sharing payments.

(4)

Limitation on pre-existing condition exclusions

The State Exchange shall ensure that health insurance coverage offered through the Exchange meets the requirements of section 9801 of the Internal Revenue Code of 1986 in the same manner as if such coverage was a group health plan.

(5)

Opt-out

Nothing in this part shall be construed to require that an individual be enrolled in health insurance coverage.

(d)

Limitation on exorbitant premiums

(1)

Establishment of mechanism

With respect to health insurance coverage offered through the State Exchange, the Exchange shall establish a mechanisms to protect enrollees from the imposition of excessive premiums, to reduce adverse selection, and to share risk.

(2)

Mechanism options

The mechanisms referred to in paragraph (1) may include the following:

(A)

Independent risk adjustment

The implementation of risk-adjustment among health insurance coverage offered through the State Exchange through a contract entered into with a private, independent board. Such board shall include representation of health insurance issuers and State officials but shall be independently controlled. The State Exchange shall ensure that risk-adjustment implemented under this subparagraph shall be based on a blend of patient diagnoses and estimated costs.

(B)

Health security pools

The establishment (or continued operation under section 2745 of the Public Health Service Act) of a health security pool to guarantee high-risk individuals access to affordable, quality health care.

(C)

Reinsurance

The implementation of a successful reinsurance mechanisms to guarantee high-risk individuals access to affordable, quality health care.

(e)

Medicaid and SCHIP Beneficiaries

The State Exchange shall include procedures to permit eligible individuals who are receiving (or who are eligible to receive) health care under title XIX or XXI of the Social Security Act to enroll in health insurance coverage offered through the Exchange.

(f)

Dissemination of coverage information

The State Exchange shall ensure that each health insurance issuer that provides health insurance coverage through the Exchange disseminate to eligible individuals and employers within the State information concerning health insurance coverage options, including the plans offered and premiums and benefits for such plans.

(g)

Regional options

(1)

Interstate compacts

Two or more States that establish a State Exchange may enter into interstate compacts providing for the regulations of health insurance coverage offered within such States.

(2)

Model legislation

States adopting model legislation as developed by the National Association of Insurance Commissioners shall be eligible to enter into an interstate compact as provided for in this section.

(3)

Multi-State pooling arrangements

State Exchanges may implement a multi-state health care coverage pooling arrangement under this part.

(h)

Eligible individual

In this part, the term eligible individual means an individual who is—

(1)

a citizen or national of the United States or an alien lawfully admitted to the United States for permanent residence or otherwise residing in the United States under color of law;

(2)

a resident of the State involved;

(3)

not incarcerated; and

(4)

not eligible for coverage under parts A and B (or C) of the Medicare program under title XVIII of the Social Security Act.

103.

State Exchange incentives

(a)

Grants

The Secretary may award grants, pursuant to subsection (b), to States for the development, implementation, and evaluation of certified State Exchanges and to provide more options and choice for individuals purchasing health insurance coverage.

(b)

One-Time increase in Medicaid payment

In the case of a State awarded a grant to carry out this section, the total amount of the Federal payment determined for the State under section 1913 of the Social Security Act (as amended by section 201 of this Act) for fiscal year 2011 shall be increased by an amount equal to 1 percent of the total amount of payments made to the State for fiscal year 2010 under section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) for purposes of carrying out a grant awarded under this section. Amounts paid to a State pursuant to this subsection shall remain available until expended.

2

Fair Tax Treatment for all Americans to Afford Health Care

111.

Reference

Except as otherwise expressly provided, whenever in this part an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

A

Refundable and Advanceable Credit for Certain Health Insurance Coverage

112.

Refundable and advanceable credit for certain health insurance coverage

(a)

Advanceable credit

Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by adding at the end the following new section:

25E.

Qualified health insurance credit

(a)

Allowance of credit

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the sum of the monthly limitations determined under subsection (b) for the taxpayer and the taxpayer’s spouse and dependents.

(b)

Monthly limitation

(1)

In general

The monthly limitation for each month during the taxable year for an eligible individual is 1/12th of—

(A)

the applicable adult amount, in the case that the eligible individual is the taxpayer or the taxpayer’s spouse,

(B)

the applicable adult amount, in the case that the eligible individual is an adult dependent, and

(C)

the applicable child amount, in the case that the eligible individual is a child dependent.

(2)

Limitation on aggregate amount

Notwithstanding paragraph (1), the aggregate monthly limitations for the taxpayer and the taxpayer’s spouse and dependents for any month shall not exceed 1/12th of the applicable aggregate amount.

(3)

No credit for ineligible months

With respect to any individual, the monthly limitation shall be zero for any month for which such individual is not an eligible individual.

(4)

Applicable amount

(A)

In general

For purposes of this section—

(i)

Applicable adult amount

The applicable adult amount is $2,300.

(ii)

Applicable child amount

The applicable child amount is $1,700.

(iii)

Applicable aggregate amount

The applicable aggregate amount is $5,700.

(B)

Cost-of-living adjustments

(i)

In general

In the case of any taxable year beginning in a calendar year after 2011, each dollar amount contained in subparagraph (A) shall be increased by an amount equal to such dollar amount multiplied by the blended cost-of-living adjustment.

(ii)

Blended cost-of-living adjustment

For purposes of clause (i), the blended cost-of-living adjustment means one-half of the sum of—

(I)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins by substituting calendar year 2010 for calendar year 1992 in subparagraph (B) thereof, plus

(II)

the cost-of-living adjustment determined under section 213(d)(10)(B)(ii) for the calendar year in which the taxable year begins by substituting 2010 for 1996 in subclause (II) thereof.

(iii)

Rounding

Any increase determined under clause (i) shall be rounded to the nearest multiple of $10.

(C)

Revenue neutrality adjustments

(i)

In general

In the case of any taxable year beginning in a calendar year after 2011, each dollar amount contained in subparagraph (A), as adjusted under subparagraph (B), shall be further adjusted (if necessary) such that the aggregate of such dollar amounts allowed as credits under this section for such taxable year equals but does not exceed the total increase in revenues in the Treasury resulting from the amendments made by sections 124 and 201 of the Roadmap for America’s Future Act of 2010 for such taxable year as estimated by the Secretary.

(ii)

Date of adjustment

The Secretary shall announce the adjustments for any taxable year under this subparagraph not later than the preceding October 1.

(c)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for the taxable year shall not exceed the excess of—

(1)

the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

(2)

the sum of the credits allowable under this subpart (other than this section) and section 27 for the taxable year.

(d)

Excess credit refundable to certain tax-Favored accounts

If—

(1)

the credit which would be allowable under subsection (a) if only qualified refund eligible health insurance were taken into account under this section, exceeds

(2)

the limitation imposed by section 26 or subsection (c) for the taxable year,

such excess shall be paid by the Secretary into the designated account of the taxpayer.
(e)

Eligible individual

For purposes of this section—

(1)

In general

The term eligible individual means, with respect to any month, an individual who—

(A)

is the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent, and

(B)

is covered under qualified health insurance as of the 1st day of such month.

(2)

Medicare coverage, Medicaid disability coverage, and military coverage

The term eligible individual shall not include any individual who for any month is—

(A)

entitled to benefits under part A of title XVIII of the Social Security Act or enrolled under part B of such title, and the individual is not a participant or beneficiary in a group health plan or large group health plan that is a primary plan (as defined in section 1862(b)(2)(A) of such Act),

(B)

enrolled by reason of disability in the program under title XIX of such Act, or

(C)

entitled to benefits under chapter 55 of title 10, United States Code, including under the TRICARE program (as defined in section 1072(7) of such title).

(3)

Identification requirements

The term eligible individual shall not include any individual for any month unless the policy number associated with the qualified health insurance and the TIN of each eligible individual covered under such health insurance for such month are included on the return of tax for the taxable year in which such month occurs.

(4)

Prisoners

The term eligible individual shall not include any individual for a month if, as of the first day of such month, such individual is imprisoned under Federal, State, or local authority.

(5)

Aliens

The term eligible individual shall not include any alien individual who is not a lawful permanent resident of the United States.

(f)

Health insurance

For purposes of this section—

(1)

Qualified health insurance

The term qualified health insurance means any insurance constituting medical care which (as determined under regulations prescribed by the Secretary)—

(A)

has a reasonable annual and lifetime benefit maximum, and

(B)

provides coverage for inpatient and outpatient care, emergency benefits, and physician care.

Such term does not include any insurance substantially all of the coverage of which is coverage described in section 223(c)(1)(B).
(2)

Qualified refund eligible health insurance

The term qualified refund eligible health insurance means any qualified health insurance which is coverage under a group health plan (as defined in section 5000(b)(1)).

(g)

Designated accounts

(1)

Designated account

For purposes of this section, the term designated account means any specified account established and maintained by the provider of the taxpayer's qualified refund eligible health insurance—

(A)

which is designated by the taxpayer (in such form and manner as the Secretary may provide) on the return of tax for the taxable year,

(B)

which, under the terms of the account, accepts the payment described in subsection (d) on behalf of the taxpayer, and

(C)

which, under such terms, provides for the payment of expenses by the taxpayer or on behalf of such taxpayer by the trustee or custodian of such account, including payment to such provider.

(2)

Specified account

For purposes of this paragraph, the term specified account means—

(A)

any health savings account under section 223 or Archer MSA under section 220, or

(B)

any health insurance reserve account.

(3)

Health insurance reserve account

For purposes of this subsection, the term health insurance reserve account means a trust created or organized in the United States as a health insurance reserve account exclusively for the purpose of paying the qualified medical expenses (within the meaning of section 223(d)(2)) of the account beneficiary (as defined in section 223(d)(3)), but only if the written governing instrument creating the trust meets the requirements described in subparagraphs (B), (C), (D), and (E) of section 223(d)(1). Rules similar to the rules under subsections (g) and (h) of section 408 shall apply for purposes of this subparagraph.

(4)

Treatment of payment

Any payment under subsection (d) to a designated account shall not be taken into account with respect to any dollar limitation which applies with respect to contributions to such account (or to tax benefits with respect to such contributions).

(h)

Other definitions

For purposes of this section—

(1)

Dependent

The term dependent has the meaning given such term by section 152 (determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof). An individual who is a child to whom section 152(e) applies shall be treated as a dependent of the custodial parent for a coverage month unless the custodial and noncustodial parent provide otherwise.

(2)

Adult

The term adult means an individual who is not a child.

(3)

Child

The term child means a qualifying child (as defined in section 152(c)).

(i)

Special rules

(1)

Coordination with medical deduction

Any amount paid by a taxpayer for insurance which is taken into account for purposes of determining the credit allowable to the taxpayer under subsection (a) shall not be taken into account in computing the amount allowable to the taxpayer as a deduction under section 213(a) or 162(l).

(2)

Coordination with health care tax credit

No credit shall be allowed under subsection (a) for any taxable year to any taxpayer and qualifying family members with respect to whom a credit under section 35 is allowed for such taxable year.

(3)

Denial of credit to dependents

No credit shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins.

(4)

Married couples must file joint return

(A)

In general

If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and his spouse file a joint return for the taxable year.

(B)

Marital status; certain married individuals living apart

Rules similar to the rules of paragraphs (3) and (4) of section 21(e) shall apply for purposes of this paragraph.

(5)

Verification of coverage, etc

No credit shall be allowed under this section with respect to any individual unless such individual’s coverage (and such related information as the Secretary may require) is verified in such manner as the Secretary may prescribe.

(6)

Insurance which covers other individuals; treatment of payments

Rules similar to the rules of paragraphs (7) and (8) of section 35(g) shall apply for purposes of this section.

(j)

Coordination with advance payments

(1)

Reduction in credit for advance payments

With respect to any taxable year, the amount which would (but for this subsection) be allowed as a credit to the taxpayer under subsection (a) shall be reduced (but not below zero) by the aggregate amount paid on behalf of such taxpayer under section 7527A for months beginning in such taxable year.

(2)

Recapture of excess advance payments

If the aggregate amount paid on behalf of the taxpayer under section 7527A for months beginning in the taxable year exceeds the sum of the monthly limitations determined under subsection (b) for the taxpayer and the taxpayer’s spouse and dependents for such months, then the tax imposed by this chapter for such taxable year shall be increased by the sum of—

(A)

such excess, plus

(B)

interest on such excess determined at the underpayment rate established under section 6621 for the period from the date of the payment under section 7527A to the date such excess is paid.

For purposes of subparagraph (B), an equal part of the aggregate amount of the excess shall be deemed to be attributable to payments made under section 7527A on the first day of each month beginning in such taxable year, unless the taxpayer establishes the date on which each such payment giving rise to such excess occurred, in which case subparagraph (B) shall be applied with respect to each date so established. The Secretary may rescind or waive all or any portion of any amount imposed by reason of subparagraph (B) if such excess was not the result of the actions of the taxpayer.

.

(b)

Advance payment of credit

Chapter 77 (relating to miscellaneous provisions) is amended by inserting after section 7527 the following new section:

7527A.

Advance payment of credit for qualified refund eligible health insurance

(a)

In general

The Secretary shall establish a program for making payments on behalf of individuals to providers of qualified refund eligible health insurance (as defined in section 25E(f)(2)) for such individuals.

(b)

Limitation

The Secretary may make payments under subsection (a) only to the extent that the Secretary determines that the amount of such payments made on behalf of any taxpayer for any month does not exceed the sum of the monthly limitations determined under section 25E(b) for the taxpayer and taxpayer’s spouse and dependents for such month.

.

(c)

Information reporting

(1)

In general

Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with other persons) is amended by inserting after section 6050W the following new section:

6050X.

Returns relating to credit for qualified refund eligible health insurance

(a)

Requirement of reporting

Every person who is entitled to receive payments for any month of any calendar year under section 7527A (relating to advance payment of credit for qualified refund eligible health insurance) with respect to any individual shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to each such individual.

(b)

Form and manner of returns

A return is described in this subsection if such return—

(1)

is in such form as the Secretary may prescribe, and

(2)

contains, with respect to each individual referred to in subsection (a)—

(A)

the name, address, and TIN of each such individual,

(B)

the months for which amounts payments under section 7527A were received,

(C)

the amount of each such payment,

(D)

the type of insurance coverage provided by such person with respect to such individual and the policy number associated with such coverage,

(E)

the name, address, and TIN of the spouse and each dependent covered under such coverage, and

(F)

such other information as the Secretary may prescribe.

(c)

Statements To be furnished to individuals with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each individual whose name is required to be set forth in such return a written statement showing—

(1)

the contact information of the person required to make such return, and

(2)

the information required to be shown on the return with respect to such individual.

The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.
(d)

Returns which would be required To be made by 2 or more persons

Except to the extent provided in regulations prescribed by the Secretary, in the case of any amount received by any person on behalf of another person, only the person first receiving such amount shall be required to make the return under subsection (a).

.

(2)

Assessable penalties

(A)

Subparagraph (B) of section 6724(d)(1) (relating to definitions) is amended by striking or at the end of clause (xxii), by striking and at the end of clause (xxiii) and inserting or, and by inserting after clause (xxiii) the following new clause:

(xxiv)

section 6050X (relating to returns relating to credit for qualified refund eligible health insurance), and

.

(B)

Paragraph (2) of section 6724(d) is amended by striking or at the end of subparagraph (EE), by striking the period at the end of subparagraph (FF) and inserting , or and by inserting after subparagraph (FF) the following new subparagraph:

(GG)

section 6050X (relating to returns relating to credit for qualified refund eligible health insurance).

.

(d)

Conforming amendments

(1)

Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 25E, before 35,.

(2)
(A)

Section 24(b)(3)(B) is amended by inserting , 25E, after 25D.

(B)

Section 25(e)(1)(C)(ii) is amended by inserting 25E, after 25D,.

(C)

Section 25B(g)(2) is amended by inserting 25E, after 25D,.

(D)

Section 26(a)(1) is amended by inserting 25E, after 25D,.

(E)

Section 30(c)(2)(B)(ii) is amended by inserting 25E, after 25D,.

(F)

Section 30D(c)(2)(B)(ii) is amended by striking and 25D and inserting , 25D, and 25E.

(G)

Section 904(i) is amended by inserting 25E, after 25B,.

(H)

Section 1400C(d)(2) is amended by inserting 25E, after 25D,.

(3)

The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25D the following new item:

Sec. 25E. Qualified health insurance credit.

.

(4)

The table of sections for chapter 77 is amended by inserting after the item relating to section 7527 the following new item:

Sec. 7527A. Advance payment of credit for qualified refund eligible health insurance.

.

(5)

The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new item:

Sec. 6050X. Returns relating to credit for qualified refund eligible health insurance.

.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

113.

Requiring employer transparency about employee benefits

(a)

In general

Section 6051(a) (relating to W–2 requirement) is amended by striking and at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting , and and by inserting after paragraph (13) the following new paragraph:

(14)

the aggregate cost (within the meaning of section 4980B(f)(4)) for coverage of the employee under an accident or health plan which is excludable from the gross income of the employee under section 106(a) (other than coverage under a health flexible spending arrangement).

.

(b)

Effective date

The amendments made by this section shall apply to statements for calendar years beginning after 2010.

114.

Changes to existing tax preferences for medical coverage, etc., for individuals eligible for qualified health insurance credit

(a)

Exclusion for contributions by employer to accident and health plans

(1)

In general

Section 106 (relating to contributions by employer to accident and health plans) is amended by adding at the end the following new subsection:

(f)

No exclusion for individuals eligible for qualified health insurance credit

Subsection (a) shall not apply with respect to any employer-provided coverage under an accident or health plan for any individual for any month unless such individual is described in paragraph (2) or (5) of section 25E(e) for such month. The amount includible in gross income by reason of this subsection shall be determined under rules similar to the rules of section 4980B(f)(4).

.

(2)

Conforming amendments

(A)

Section 106(b)(1) is amended—

(i)

by inserting gross income does not include before amounts contributed, and

(ii)

by striking shall be treated as employer-provided coverage for medical expenses under an accident or health plan.

(B)

Section 106(d)(1) is amended—

(i)

by inserting gross income does not include before amounts contributed, and

(ii)

by striking shall be treated as employer-provided coverage for medical expenses under an accident or health plan.

(b)

Amounts received under accident and health plans

Section 105 (relating to amounts received under accident and health plans) is amended by adding at the end the following new subsection:

(k)

No exclusion for individuals eligible for qualified health insurance credit

Subsection (b) shall not apply with respect to any employer-provided coverage under an accident or health plan for any individual for any month unless such individual is described in paragraph (2) or (5) of section 25E(e) for such month.

.

(c)

Special rules for health insurance costs of self-employed individuals

Subsection (l) of section 162 (relating to special rules for health insurance costs of self-employed individuals) is amended by adding at the end the following new paragraph:

(6)

No deduction to individuals eligible for qualified health insurance

Paragraph (1) shall not apply for any individual for any month unless such individual is described in paragraph (2) or (5) of section 25E(e) for such month.

.

(d)

Earned income credit unaffected by repealed exclusions

Subparagraph (B) of section 32(c)(2) is amended by redesignating clauses (v) and (vi) as clauses (vi) and (vii), respectively, and by inserting after clause (iv) the following new clause:

(v)

the earned income of an individual shall be computed without regard to sections 105(k) and 106(f),

.

(e)

Modification of deduction for medical expenses

Subsection (d) of section 213 is amended by adding at the end the following new paragraph:

(12)

Premiums for qualified health insurance

The term medical care does not include any amount paid as a premium for coverage of an eligible individual (as defined in section 25E(e)) under qualified health insurance (as defined in section 25E(f)) for any month.

.

(f)

Reporting requirement

Subsection (a) of section 6051 is amended by striking and at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting and, and by inserting after paragraph (13) the following new paragraph:

(14)

the total amount of employer-provided coverage under an accident or health plan which is includible in gross income by reason of sections 105(k) and 106(f).

.

(g)

Retired public safety officers

Section 402(l)(4)(D) is amended by adding at the end the following: Such term shall not include any premium for coverage by an accident or health insurance plan for any month unless such individual is described in paragraph (2) or (5) of section 25E(e) for such month..

(h)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

(i)

No intent To encourage State taxation of health benefits

No intent to encourage any State to treat health benefits as taxable income for the purpose of increasing State income taxes may be inferred from the provisions of, and amendments made by, this section.

B

Health Savings Accounts

121.

Improvements to health savings accounts

(a)

Increase in monthly contribution limit

(1)

In general

Paragraph (2) of section 223(b) (relating to limitations) is amended to read as follows:

(2)

Monthly limitation

(A)

In general

In the case of an eligible individual who has coverage under a high deductible health plan, the monthly limitation for any month of such coverage is 1/12 of the sum of—

(i)

the greater of—

(I)

the sum of the annual deductible and the other annual out-of-pocket expenses (other than for premiums) required to be paid under the plan by the eligible individual for covered benefits, or

(II)

in the case of an eligible individual who has—

(aa)

self-only coverage under a high deductible health plan as of the first day of such month, $3,000, or

(bb)

family coverage under a high deductible health plan as of the first day of such month, $5,950, and

(ii)

in the case of an eligible individual who has coverage under a qualified long-term care insurance contract (as defined in section 7702B(b)), the lesser of—

(I)

the annual premium for such coverage, or

(II)

$1,000.

(B)

Special rules relating to out-of-pocket expenses

(i)

Reduction for separate plan

The annual out-of-pocket expenses taken into account under subparagraph (A)(i)(I) with respect to any eligible individual shall be reduced by any out-of-pocket expense payable under a separate plan covering the individual.

(ii)

Secretarial authority

The Secretary may by regulations provide that annual out-of-pocket expenses will not be taken into account under subparagraph (A)(i)(I) to the extent that there is only a remote likelihood that such amounts will be required to be paid.

.

(2)

Application of special rules for married individuals

Paragraph (5) of section 223(b) (relating to limitations) is amended to read as follows:

(5)

Special rules for married individuals

(A)

In general

In the case of individuals who are married to each other and who are both eligible individuals, the limitation under paragraph (1) for each spouse shall be equal to the spouse's applicable share of the combined marital limit.

(B)

Combined marital limit

For purposes of subparagraph (A), the combined marital limit is the excess (if any) of—

(i)

the lesser of—

(I)

subject to subparagraph (C), the sum of the limitations computed separately under paragraph (1) for each spouse (including any additional contribution amount under paragraph (3)), or

(II)

the dollar amount in effect under subsection (c)(2)(A)(ii)(II), over

(ii)

the aggregate amount paid to Archer MSAs of such spouses for the taxable year.

(C)

Special rule where both spouses have family coverage

For purposes of subparagraph (B)(i)(I), if either spouse has family coverage which covers both spouses, both spouses shall be treated as having only such coverage (and if both spouses each have such coverage under different plans, shall be treated as having only family coverage with the plan with respect to which the lowest amount is determined under paragraph (2)(A)(i)(I)).

(D)

Applicable share

For purposes of subparagraph (A), a spouse's applicable share is ½ of the combined marital limit unless both spouses agree on a different division.

(E)

Couples not married entire year

The Secretary shall prescribe rules for the application of this paragraph in the case of any taxable year for which the individuals were not married to each other during all months included in the taxable year, including rules which allow individuals in appropriate cases to take into account coverage prior to marriage in computing the combined marital limit for purposes of this paragraph.

.

(3)

Self-only coverage

Paragraph (4) of section 223(c) (relating to definitions and special rules) is amended to read as follows:

(4)

Coverage

(A)

Family coverage

The term family coverage means any coverage other than self-only coverage.

(B)

Self-only coverage

If more than 1 individual is covered by a high deductible health plan but only 1 of the individuals is an eligible individual, the coverage shall be treated as self-only coverage.

.

(4)

Conforming amendments

(A)

Section 223(b)(3)(A) is amended by striking subparagraphs (A) and (B) of.

(B)

Section 223(c)(2)(A) is amended—

(i)

by striking $1,000 in clause (i)(I) and inserting $1,150, and

(ii)

by striking $5,000 in clause (ii)(I) and inserting $5,800.

(C)

Section 223(d)(1)(A)(ii)(I) is amended by striking subsection (b)(2)(B)(ii) and inserting subsection (c)(2)(A)(ii)(II).

(D)

Clause (ii) of section 223(c)(2)(D) is amended to read as follows:

(ii)

Certain items disregarded in computing monthly limitation

Such plan's annual deductible, and such plan's annual out-of-pocket limitation, for services provided outside of such network shall not be taken into account for purposes of subsection (b)(2).

(E)

Subsection (g) of section 223 is amended to read as follows:

(g)

Cost-of-Living adjustments

(1)

In general

In the case of any taxable year beginning in a calendar year after 2010, each dollar amount contained in subsections (b)(2)(A) and (c)(2)(A) shall be increased by an amount equal to such dollar amount multiplied by the blended cost-of-living adjustment.

(2)

Blended cost-of-living adjustment

For purposes of paragraph (1), the blended cost-of-living adjustment means one-half of the sum of—

(A)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof, plus

(B)

the cost-of-living adjustment determined under section 213(d)(10)(B)(ii) for the calendar year in which the taxable year begins by substituting 2008 for 1996 in subclause (II) thereof.

(3)

Rounding

Any increase determined under paragraph (2) shall be rounded to the nearest multiple of $50.

.

(b)

Use of account for individual high deductible health plan premiums

Section 223(d)(2)(C) (relating to exceptions) is amended by striking or at the end of clause (iii), by striking the period at the end of clause (iv) and inserting , or, and by adding at the end the following new clause:

(v)

a high deductible health plan, but only if—

(I)

the plan is not a group health plan (as defined in section 5000(b)(1) without regard to section 5000(d)), and

(II)

the expenses are for coverage for a month with respect to which the account beneficiary is an eligible individual by reason of the coverage under the plan.

For purposes of clause (v), an arrangement which constitutes individual health insurance shall not be treated as a group health plan, notwithstanding that an employer or employee organization negotiates the cost of benefits of such arrangement.

.

(c)

Safe harbor for absence of maintenance of chronic disease

Section 223(c)(2)(C) (safe harbor for absence of preventive care deductible) is amended—

(1)

by inserting or maintenance of chronic disease, or both after the Secretary), and

(2)

by inserting or maintenance of chronic disease in the heading after preventive care.

(d)

Clarification of treatment of capitated primary care payments as amounts paid for medical care

Section 213(d) (relating to definitions) is amended by adding at the end the following new paragraph:

(12)

Treatment of capitated primary care payments

Capitated primary care payments shall be treated as amounts paid for medical care.

.

(e)

Special rule for individuals eligible for veterans or Indian health benefits

Section 223(c)(1) (defining eligible individual) is amended by adding at the end the following new subparagraph:

(C)

Special rule for individuals eligible for veterans or Indian health benefits

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual receives periodic hospital care or medical services under any law administered by the Secretary of Veterans Affairs or the Bureau of Indian Affairs.

.

(f)

Certain physician fees To be treated as medical care

(1)

In general

Section 213(d), is amended by adding at the end the following new paragraph:

(12)

Pre-paid physician fees

The term medical care shall include amounts paid by patients to their primary physician in advance for the right to receive medical services on an as-needed basis.

.

(2)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

(g)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2010.

(2)

Capitated primary care payments

The amendment made by subsection (d) shall apply to amounts paid before, on, or after the date of the enactment of this Act.

122.

Exception to requirement for employers to make comparable health savings account contributions

(a)

Greater employer-Provided contributions to HSAs for chronically ill employees treated as meeting comparability requirements

Subsection (b) of section 4980G (relating to failure of employer to make comparable health savings account contributions) is amended to read as follows:

(b)

Rules and requirements

(1)

In general

Except as provided in paragraph (2), rules and requirements similar to the rules and requirements of section 4980E shall apply for purposes of this section.

(2)

Treatment of employer-provided contributions to HSAs for chronically ill employees

For purposes of this section—

(A)

In general

Any contribution by an employer to a health savings account of an employee who is (or the spouse or any dependent of the employee who is) a chronically ill individual in an amount which is greater than a contribution to a health savings account of a comparable participating employee who is not a chronically ill individual shall not fail to be considered a comparable contribution.

(B)

Nondiscrimination requirement

Subparagraph (A) shall not apply unless the excess employer contributions described in subparagraph (A) are the same for all chronically ill individuals who are similarly situated.

(C)

Chronically ill individual

For purposes of this paragraph, the term chronically ill individual means any individual whose qualified medical expenses for any taxable year are more than 50 percent greater than the average qualified medical expenses of all employees of the employer for such year.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2010.

B

Health Plan Choice; Small Business Health Fairness; Tax Amendments

131.

Cooperative governing of individual health insurance coverage

(a)

In General

Title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.) is amended by adding at the end the following new part:

D

Cooperative Governing of Individual Health Insurance Coverage

2795.

Definitions

In this part:

(1)

Primary state

The term primary State means, with respect to individual health insurance coverage offered by a health insurance issuer, the State designated by the issuer as the State whose covered laws shall govern the health insurance issuer in the sale of such coverage under this part. An issuer, with respect to a particular policy, may only designate one such State as its primary State with respect to all such coverage it offers. Such an issuer may not change the designated primary State with respect to individual health insurance coverage once the policy is issued, except that such a change may be made upon renewal of the policy. With respect to such designated State, the issuer is deemed to be doing business in that State.

(2)

Secondary state

The term secondary State means, with respect to individual health insurance coverage offered by a health insurance issuer, any State that is not the primary State. In the case of a health insurance issuer that is selling a policy in, or to a resident of, a secondary State, the issuer is deemed to be doing business in that secondary State.

(3)

Health insurance issuer

The term health insurance issuer has the meaning given such term in section 2791(b)(2), except that such an issuer must be licensed in the primary State and be qualified to sell individual health insurance coverage in that State.

(4)

Individual health insurance coverage

The term individual health insurance coverage means health insurance coverage offered in the individual market, as defined in section 2791(e)(1).

(5)

Applicable state authority

The term applicable State authority means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the requirements of this title for the State with respect to the issuer.

(6)

Hazardous financial condition

The term hazardous financial condition means that, based on its present or reasonably anticipated financial condition, a health insurance issuer is unlikely to be able—

(A)

to meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or

(B)

to pay other obligations in the normal course of business.

(7)

Covered laws

(A)

In general

The term covered laws means the laws, rules, regulations, agreements, and orders governing the insurance business pertaining to—

(i)

individual health insurance coverage issued by a health insurance issuer;

(ii)

the offer, sale, rating (including medical underwriting), renewal, and issuance of individual health insurance coverage to an individual;

(iii)

the provision to an individual in relation to individual health insurance coverage of health care and insurance related services;

(iv)

the provision to an individual in relation to individual health insurance coverage of management, operations, and investment activities of a health insurance issuer; and

(v)

the provision to an individual in relation to individual health insurance coverage of loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance.

(B)

Exception

Such term does not include any law, rule, regulation, agreement, or order governing the use of care or cost management techniques, including any requirement related to provider contracting, network access or adequacy, health care data collection, or quality assurance.

(8)

State

The term State means the 50 States and includes the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

(9)

Unfair claims settlement practices

The term unfair claims settlement practices means only the following practices:

(A)

Knowingly misrepresenting to claimants and insured individuals relevant facts or policy provisions relating to coverage at issue.

(B)

Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under policies.

(C)

Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under policies.

(D)

Failing to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear.

(E)

Refusing to pay claims without conducting a reasonable investigation.

(F)

Failing to affirm or deny coverage of claims within a reasonable period of time after having completed an investigation related to those claims.

(G)

A pattern or practice of compelling insured individuals or their beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them.

(H)

A pattern or practice of attempting to settle or settling claims for less than the amount that a reasonable person would believe the insured individual or his or her beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application.

(I)

Attempting to settle or settling claims on the basis of an application that was materially altered without notice to, or knowledge or consent of, the insured.

(J)

Failing to provide forms necessary to present claims within 15 calendar days of a requests with reasonable explanations regarding their use.

(K)

Attempting to cancel a policy in less time than that prescribed in the policy or by the law of the primary State.

(10)

Fraud and abuse

The term fraud and abuse means an act or omission committed by a person who, knowingly and with intent to defraud, commits, or conceals any material information concerning, one or more of the following:

(A)

Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by an insurer, a reinsurer, broker or its agent, false information as part of, in support of or concerning a fact material to one or more of the following:

(i)

An application for the issuance or renewal of an insurance policy or reinsurance contract.

(ii)

The rating of an insurance policy or reinsurance contract.

(iii)

A claim for payment or benefit pursuant to an insurance policy or reinsurance contract.

(iv)

Premiums paid on an insurance policy or reinsurance contract.

(v)

Payments made in accordance with the terms of an insurance policy or reinsurance contract.

(vi)

A document filed with the commissioner or the chief insurance regulatory official of another jurisdiction.

(vii)

The financial condition of an insurer or reinsurer.

(viii)

The formation, acquisition, merger, reconsolidation, dissolution or withdrawal from one or more lines of insurance or reinsurance in all or part of a State by an insurer or reinsurer.

(ix)

The issuance of written evidence of insurance.

(x)

The reinstatement of an insurance policy.

(B)

Solicitation or acceptance of new or renewal insurance risks on behalf of an insurer reinsurer or other person engaged in the business of insurance by a person who knows or should know that the insurer or other person responsible for the risk is insolvent at the time of the transaction.

(C)

Transaction of the business of insurance in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of insurance.

(D)

Attempt to commit, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this paragraph.

2796.

Application of law

(a)

In General

The covered laws of the primary State shall apply to individual health insurance coverage offered by a health insurance issuer in the primary State and in any secondary State, but only if the coverage and issuer comply with the conditions of this section with respect to the offering of coverage in any secondary State.

(b)

Exemptions From Covered Laws in a Secondary State

Except as provided in this section, a health insurance issuer with respect to its offer, sale, rating (including medical underwriting), renewal, and issuance of individual health insurance coverage in any secondary State is exempt from any covered laws of the secondary State (and any rules, regulations, agreements, or orders sought or issued by such State under or related to such covered laws) to the extent that such laws would—

(1)

make unlawful, or regulate, directly or indirectly, the operation of the health insurance issuer operating in the secondary State, except that any secondary State may require such an issuer—

(A)

to pay, on a nondiscriminatory basis, applicable premium and other taxes (including high risk pool assessments) which are levied on insurers and surplus lines insurers, brokers, or policyholders under the laws of the State;

(B)

to register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process;

(C)

to submit to an examination of its financial condition by the State insurance commissioner in any State in which the issuer is doing business to determine the issuer’s financial condition, if—

(i)

the State insurance commissioner of the primary State has not done an examination within the period recommended by the National Association of Insurance Commissioners; and

(ii)

any such examination is conducted in accordance with the examiners’ handbook of the National Association of Insurance Commissioners and is coordinated to avoid unjustified duplication and unjustified repetition;

(D)

to comply with a lawful order issued—

(i)

in a delinquency proceeding commenced by the State insurance commissioner if there has been a finding of financial impairment under subparagraph (C); or

(ii)

in a voluntary dissolution proceeding;

(E)

to comply with an injunction issued by a court of competent jurisdiction, upon a petition by the State insurance commissioner alleging that the issuer is in hazardous financial condition;

(F)

to participate, on a nondiscriminatory basis, in any insurance insolvency guaranty association or similar association to which a health insurance issuer in the State is required to belong;

(G)

to comply with any State law regarding fraud and abuse (as defined in section 2795(10)), except that if the State seeks an injunction regarding the conduct described in this subparagraph, such injunction must be obtained from a court of competent jurisdiction;

(H)

to comply with any State law regarding unfair claims settlement practices (as defined in section 2795(9)); or

(I)

to comply with the applicable requirements for independent review under section 2798 with respect to coverage offered in the State;

(2)

require any individual health insurance coverage issued by the issuer to be countersigned by an insurance agent or broker residing in that Secondary State; or

(3)

otherwise discriminate against the issuer issuing insurance in both the primary State and in any secondary State.

(c)

Clear and Conspicuous Disclosure

A health insurance issuer shall provide the following notice, in 12-point bold type, in any insurance coverage offered in a secondary State under this part by such a health insurance issuer and at renewal of the policy, with the 5 blank spaces therein being appropriately filled with the name of the health insurance issuer, the name of primary State, the name of the secondary State, the name of the secondary State, and the name of the secondary State, respectively, for the coverage concerned:

  • Notice
  • This policy is issued by _____ and is governed by the laws and regulations of the State of _____, and it has met all the laws of that State as determined by that State’s Department of Insurance. This policy may be less expensive than others because it is not subject to all of the insurance laws and regulations of the State of _____, including coverage of some services or benefits mandated by the law of the State of _____. Additionally, this policy is not subject to all of the consumer protection laws or restrictions on rate changes of the State of _____. As with all insurance products, before purchasing this policy, you should carefully review the policy and determine what health care services the policy covers and what benefits it provides, including any exclusions, limitations, or conditions for such services or benefits.

.

(d)

Prohibition on Certain Reclassifications and Premium Increases

(1)

In general

For purposes of this section, a health insurance issuer that provides individual health insurance coverage to an individual under this part in a primary or secondary State may not upon renewal—

(A)

move or reclassify the individual insured under the health insurance coverage from the class such individual is in at the time of issue of the contract based on the health-status related factors of the individual; or

(B)

increase the premiums assessed the individual for such coverage based on a health status-related factor or change of a health status-related factor or the past or prospective claim experience of the insured individual.

(2)

Construction

Nothing in paragraph (1) shall be construed to prohibit a health insurance issuer—

(A)

from terminating or discontinuing coverage or a class of coverage in accordance with subsections (b) and (c) of section 2742;

(B)

from raising premium rates for all policy holders within a class based on claims experience;

(C)

from changing premiums or offering discounted premiums to individuals who engage in wellness activities at intervals prescribed by the issuer, if such premium changes or incentives—

(i)

are disclosed to the consumer in the insurance contract;

(ii)

are based on specific wellness activities that are not applicable to all individuals; and

(iii)

are not obtainable by all individuals to whom coverage is offered;

(D)

from reinstating lapsed coverage; or

(E)

from retroactively adjusting the rates charged an insured individual if the initial rates were set based on material misrepresentation by the individual at the time of issue.

(e)

Prior Offering of Policy in Primary State

A health insurance issuer may not offer for sale individual health insurance coverage in a secondary State unless that coverage is currently offered for sale in the primary State.

(f)

Licensing of Agents or Brokers for Health Insurance Issuers

Any State may require that a person acting, or offering to act, as an agent or broker for a health insurance issuer with respect to the offering of individual health insurance coverage obtain a license from that State, with commissions or other compensation subject to the provisions of the laws of that State, except that a State may not impose any qualification or requirement which discriminates against a nonresident agent or broker.

(g)

Documents for Submission to State Insurance Commissioner

Each health insurance issuer issuing individual health insurance coverage in both primary and secondary States shall submit—

(1)

to the insurance commissioner of each State in which it intends to offer such coverage, before it may offer individual health insurance coverage in such State—

(A)

a copy of the plan of operation or feasibility study or any similar statement of the policy being offered and its coverage (which shall include the name of its primary State and its principal place of business);

(B)

written notice of any change in its designation of its primary State; and

(C)

written notice from the issuer of the issuer’s compliance with all the laws of the primary State; and

(2)

to the insurance commissioner of each secondary State in which it offers individual health insurance coverage, a copy of the issuer’s quarterly financial statement submitted to the primary State, which statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by—

(A)

a member of the American Academy of Actuaries; or

(B)

a qualified loss reserve specialist.

(h)

Power of Courts To Enjoin Conduct

Nothing in this section shall be construed to affect the authority of any Federal or State court to enjoin—

(1)

the solicitation or sale of individual health insurance coverage by a health insurance issuer to any person or group who is not eligible for such insurance; or

(2)

the solicitation or sale of individual health insurance coverage that violates the requirements of the law of a secondary State which are described in subparagraphs (A) through (H) of section 2796(b)(1).

(i)

Power of Secondary States To Take Administrative Action

Nothing in this section shall be construed to affect the authority of any State to enjoin conduct in violation of that State’s laws described in section 2796(b)(1).

(j)

State Powers To Enforce State Laws

(1)

In general

Subject to the provisions of subsection (b)(1)(G) (relating to injunctions) and paragraph (2), nothing in this section shall be construed to affect the authority of any State to make use of any of its powers to enforce the laws of such State with respect to which a health insurance issuer is not exempt under subsection (b).

(2)

Courts of competent jurisdiction

If a State seeks an injunction regarding the conduct described in paragraphs (1) and (2) of subsection (h), such injunction must be obtained from a Federal or State court of competent jurisdiction.

(k)

States’ Authority To Sue

Nothing in this section shall affect the authority of any State to bring action in any Federal or State court.

(l)

Generally Applicable Laws

Nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.

(m)

Guaranteed Availability of Coverage to HIPAA Eligible Individuals

To the extent that a health insurance issuer is offering coverage in a primary State that does not accommodate residents of secondary States or does not provide a working mechanism for residents of a secondary State, and the issuer is offering coverage under this part in such secondary State which has not adopted a qualified high risk pool as its acceptable alternative mechanism (as defined in section 2744(c)(2)), the issuer shall, with respect to any individual health insurance coverage offered in a secondary State under this part, comply with the guaranteed availability requirements for eligible individuals in section 2741.

2797.

Primary State must meet Federal floor before issuer may sell into secondary States

A health insurance issuer may not offer, sell, or issue individual health insurance coverage in a secondary State if the State insurance commissioner does not use a risk-based capital formula for the determination of capital and surplus requirements for all health insurance issuers.

2798.

Independent external appeals procedures

(a)

Right to External Appeal

A health insurance issuer may not offer, sell, or issue individual health insurance coverage in a secondary State under the provisions of this title unless—

(1)

both the secondary State and the primary State have legislation or regulations in place establishing an independent review process for individuals who are covered by individual health insurance coverage, or

(2)

in any case in which the requirements of subparagraph (A) are not met with respect to the either of such States, the issuer provides an independent review mechanism substantially identical (as determined by the applicable State authority of such State) to that prescribed in the Health Carrier External Review Model Act of the National Association of Insurance Commissioners for all individuals who purchase insurance coverage under the terms of this part, except that, under such mechanism, the review is conducted by an independent medical reviewer, or a panel of such reviewers, with respect to whom the requirements of subsection (b) are met.

(b)

Qualifications of Independent Medical Reviewers

In the case of any independent review mechanism referred to in subsection (a)(2)—

(1)

In general

In referring a denial of a claim to an independent medical reviewer, or to any panel of such reviewers, to conduct independent medical review, the issuer shall ensure that—

(A)

each independent medical reviewer meets the qualifications described in paragraphs (2) and (3);

(B)

with respect to each review, each reviewer meets the requirements of paragraph (4) and the reviewer, or at least 1 reviewer on the panel, meets the requirements described in paragraph (5); and

(C)

compensation provided by the issuer to each reviewer is consistent with paragraph (6).

(2)

Licensure and expertise

Each independent medical reviewer shall be a physician (allopathic or osteopathic) or health care professional who—

(A)

is appropriately credentialed or licensed in 1 or more States to deliver health care services; and

(B)

typically treats the condition, makes the diagnosis, or provides the type of treatment under review.

(3)

Independence

(A)

In general

Subject to subparagraph (B), each independent medical reviewer in a case shall—

(i)

not be a related party (as defined in paragraph (7));

(ii)

not have a material familial, financial, or professional relationship with such a party; and

(iii)

not otherwise have a conflict of interest with such a party (as determined under regulations).

(B)

Exception

Nothing in subparagraph (A) shall be construed to—

(i)

prohibit an individual, solely on the basis of affiliation with the issuer, from serving as an independent medical reviewer if—

(I)

a non-affiliated individual is not reasonably available;

(II)

the affiliated individual is not involved in the provision of items or services in the case under review;

(III)

the fact of such an affiliation is disclosed to the issuer and the enrollee (or authorized representative) and neither party objects; and

(IV)

the affiliated individual is not an employee of the issuer and does not provide services exclusively or primarily to or on behalf of the issuer;

(ii)

prohibit an individual who has staff privileges at the institution where the treatment involved takes place from serving as an independent medical reviewer merely on the basis of such affiliation if the affiliation is disclosed to the issuer and the enrollee (or authorized representative), and neither party objects; or

(iii)

prohibit receipt of compensation by an independent medical reviewer from an entity if the compensation is provided consistent with paragraph (6).

(4)

Practicing health care professional in same field

(A)

In general

In a case involving treatment, or the provision of items or services—

(i)

by a physician, a reviewer shall be a practicing physician (allopathic or osteopathic) of the same or similar specialty, as a physician who, acting within the appropriate scope of practice within the State in which the service is provided or rendered, typically treats the condition, makes the diagnosis, or provides the type of treatment under review; or

(ii)

by a non-physician health care professional, the reviewer, or at least 1 member of the review panel, shall be a practicing non-physician health care professional of the same or similar specialty as the non-physician health care professional who, acting within the appropriate scope of practice within the State in which the service is provided or rendered, typically treats the condition, makes the diagnosis, or provides the type of treatment under review.

(B)

Practicing defined

For purposes of this paragraph, the term practicing means, with respect to an individual who is a physician or other health care professional, that the individual provides health care services to individual patients on average at least 2 days per week.

(5)

Pediatric expertise

In the case of an external review relating to a child, a reviewer shall have expertise under paragraph (2) in pediatrics.

(6)

Limitations on reviewer compensation

Compensation provided by the issuer to an independent medical reviewer in connection with a review under this section shall—

(A)

not exceed a reasonable level; and

(B)

not be contingent on the decision rendered by the reviewer.

(7)

Related party defined

For purposes of this section, the term related party means, with respect to a denial of a claim under a coverage relating to an enrollee, any of the following:

(A)

The issuer involved, or any fiduciary, officer, director, or employee of the issuer.

(B)

The enrollee (or authorized representative).

(C)

The health care professional that provides the items or services involved in the denial.

(D)

The institution at which the items or services (or treatment) involved in the denial are provided.

(E)

The manufacturer of any drug or other item that is included in the items or services involved in the denial.

(F)

Any other party determined under any regulations to have a substantial interest in the denial involved.

(8)

Definitions

For purposes of this subsection:

(A)

Enrollee

The term enrollee means, with respect to health insurance coverage offered by a health insurance issuer, an individual enrolled with the issuer to receive such coverage.

(B)

Health care professional

The term health care professional means an individual who is licensed, accredited, or certified under State law to provide specified health care services and who is operating within the scope of such licensure, accreditation, or certification.

2799.

Enforcement

(a)

In General

Subject to subsection (b), with respect to specific individual health insurance coverage the primary State for such coverage has sole jurisdiction to enforce the primary State’s covered laws in the primary State and any secondary State.

(b)

Secondary State’s Authority

Nothing in subsection (a) shall be construed to affect the authority of a secondary State to enforce its laws as set forth in the exception specified in section 2796(b)(1).

(c)

Court Interpretation

In reviewing action initiated by the applicable secondary State authority, the court of competent jurisdiction shall apply the covered laws of the primary State.

(d)

Notice of Compliance Failure

In the case of individual health insurance coverage offered in a secondary State that fails to comply with the covered laws of the primary State, the applicable State authority of the secondary State may notify the applicable State authority of the primary State.

.

(b)

Effective Date

The amendment made by subsection (a) shall apply to individual health insurance coverage offered, issued, or sold after the date that is one year after the date of the enactment of this Act.

(c)

GAO Ongoing Study and Reports

(1)

Study

The Comptroller General of the United States shall conduct an ongoing study concerning the effect of the amendment made by subsection (a) on—

(A)

the number of uninsured and under-insured;

(B)

the availability and cost of health insurance policies for individuals with pre-existing medical conditions;

(C)

the availability and cost of health insurance policies generally;

(D)

the elimination or reduction of different types of benefits under health insurance policies offered in different States; and

(E)

cases of fraud or abuse relating to health insurance coverage offered under such amendment and the resolution of such cases.

(2)

Annual reports

The Comptroller General shall submit to Congress an annual report, after the end of each of the 5 years following the effective date of the amendment made by subsection (a), on the ongoing study conducted under paragraph (1).

(d)

Severability

If any provision of this subtitle or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this subtitle and the application of the provisions of such to any other person or circumstance shall not be affected.

132.

Small business health fairness

(a)

Rules governing association health plans

(1)

In General

Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding after part 7 the following new part:

8

RULES GOVERNING ASSOCIATION HEALTH PLANS

801.

Association health plans

(a)

In General

For purposes of this part, the term association health plan means a group health plan whose sponsor is (or is deemed under this part to be) described in subsection (b).

(b)

Sponsorship

The sponsor of a group health plan is described in this subsection if such sponsor—

(1)

is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona fide business association, including a corporation or similar organization that operates on a cooperative basis (within the meaning of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes other than that of obtaining or providing medical care;

(2)

is established as a permanent entity which receives the active support of its members and requires for membership payment on a periodic basis of dues or payments necessary to maintain eligibility for membership in the sponsor; and

(3)

does not condition membership, such dues or payments, or coverage under the plan on the basis of health status-related factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group health plan participation.

Any sponsor consisting of an association of entities which meet the requirements of paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this subsection.
802.

Certification of association health plans

(a)

In General

The applicable authority shall prescribe by regulation a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply for certification as meeting the requirements of this part.

(b)

Standards

Under the procedure prescribed pursuant to subsection (a), in the case of an association health plan that provides at least one benefit option which does not consist of health insurance coverage, the applicable authority shall certify such plan as meeting the requirements of this part only if the applicable authority is satisfied that the applicable requirements of this part are met (or, upon the date on which the plan is to commence operations, will be met) with respect to the plan.

(c)

Requirements Applicable to Certified Plans

An association health plan with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on the date on which the plan is to commence operations).

(d)

Requirements for Continued Certification

The applicable authority may provide by regulation for continued certification of association health plans under this part.

(e)

Class Certification for Fully Insured Plans

The applicable authority shall establish a class certification procedure for association health plans under which all benefits consist of health insurance coverage. Under such procedure, the applicable authority shall provide for the granting of certification under this part to the plans in each class of such association health plans upon appropriate filing under such procedure in connection with plans in such class and payment of the prescribed fee under section 807(a).

(f)

Certification of Self-Insured Association Health Plans

An association health plan which offers one or more benefit options which do not consist of health insurance coverage may be certified under this part only if such plan consists of any of the following:

(1)

a plan which offered such coverage on the date of the enactment of this part,

(2)

a plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries, or

(3)

a plan whose eligible participating employers represent one or more trades or businesses, or one or more industries, consisting of any of the following: agriculture; equipment and automobile dealerships; barbering and cosmetology; certified public accounting practices; child care; construction; dance, theatrical and orchestra productions; disinfecting and pest control; financial services; fishing; food service establishments; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; professional consulting services; sanitary services; transportation (local and freight); warehousing; wholesaling/distributing; or any other trade or business or industry which has been indicated as having average or above-average risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, or other means demonstrated by such plan in accordance with regulations.

803.

Requirements relating to sponsors and boards of trustees

(a)

Sponsor

The requirements of this subsection are met with respect to an association health plan if the sponsor has met (or is deemed under this part to have met) the requirements of section 801(b) for a continuous period of not less than 3 years ending with the date of the application for certification under this part.

(b)

Board of Trustees

The requirements of this subsection are met with respect to an association health plan if the following requirements are met:

(1)

Fiscal control

The plan is operated, pursuant to a trust agreement, by a board of trustees which has complete fiscal control over the plan and which is responsible for all operations of the plan.

(2)

Rules of operation and financial controls

The board of trustees has in effect rules of operation and financial controls, based on a 3-year plan of operation, adequate to carry out the terms of the plan and to meet all requirements of this title applicable to the plan.

(3)

Rules governing relationship to participating employers and to contractors

(A)

Board membership

(i)

In general

Except as provided in clauses (ii) and (iii), the members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business.

(ii)

Limitation

(I)

General rule

Except as provided in subclauses (II) and (III), no such member is an owner, officer, director, or employee of, or partner in, a contract administrator or other service provider to the plan.

(II)

Limited exception for providers of services solely on behalf of the sponsor

Officers or employees of a sponsor which is a service provider (other than a contract administrator) to the plan may be members of the board if they constitute not more than 25 percent of the membership of the board and they do not provide services to the plan other than on behalf of the sponsor.

(III)

Treatment of providers of medical care

In the case of a sponsor which is an association whose membership consists primarily of providers of medical care, subclause (I) shall not apply in the case of any service provider described in subclause (I) who is a provider of medical care under the plan.

(iii)

Certain plans excluded

Clause (i) shall not apply to an association health plan which is in existence on the date of the enactment of this part.

(B)

Sole authority

The board has sole authority under the plan to approve applications for participation in the plan and to contract with a service provider to administer the day-to-day affairs of the plan.

(c)

Treatment of Franchise Networks

In the case of a group health plan which is established and maintained by a franchiser for a franchise network consisting of its franchisees—

(1)

the requirements of subsection (a) and section 801(a) shall be deemed met if such requirements would otherwise be met if the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to be a member (of the association and the sponsor) referred to in section 801(b); and

(2)

the requirements of section 804(a)(1) shall be deemed met.

The Secretary may by regulation define for purposes of this subsection the terms franchiser, franchise network, and franchisee.
804.

Participation and coverage requirements

(a)

Covered Employers and Individuals

The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan—

(1)

each participating employer must be—

(A)

a member of the sponsor,

(B)

the sponsor, or

(C)

an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met,

except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and
(2)

all individuals commencing coverage under the plan after certification under this part must be—

(A)

active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or

(B)

the beneficiaries of individuals described in subparagraph (A).

(b)

Coverage of Previously Uninsured Employees

In the case of an association health plan in existence on the date of the enactment of this part, an affiliated member of the sponsor of the plan may be offered coverage under the plan as a participating employer only if—

(1)

the affiliated member was an affiliated member on the date of certification under this part; or

(2)

during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any of its employees who would otherwise be eligible to participate in such association health plan.

(c)

Individual Market Unaffected

The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan, no participating employer may provide health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if such exclusion of the employee from coverage under the plan is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such basis, be eligible for coverage under the plan.

(d)

Prohibition of Discrimination Against Employers and Employees Eligible To Participate

The requirements of this subsection are met with respect to an association health plan if—

(1)

under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met;

(2)

upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and

(3)

the applicable requirements of sections 701, 702, and 703 are met with respect to the plan.

805.

Other requirements relating to plan documents, contribution rates, and benefit options

(a)

In General

The requirements of this section are met with respect to an association health plan if the following requirements are met:

(1)

Contents of governing instruments

The instruments governing the plan include a written instrument, meeting the requirements of an instrument required under section 402(a)(1), which—

(A)

provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A));

(B)

provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and

(C)

incorporates the requirements of section 806.

(2)

Contribution rates must be nondiscriminatory

(A)

The contribution rates for any participating small employer do not vary on the basis of any health status-related factor in relation to employees of such employer or their beneficiaries and do not vary on the basis of the type of business or industry in which such employer is engaged.

(B)

Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from—

(i)

setting contribution rates based on the claims experience of the plan; or

(ii)

varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act),

subject to the requirements of section 702(b) relating to contribution rates.
(3)

Floor for number of covered individuals with respect to certain plans

If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 1,000 participants and beneficiaries.

(4)

Marketing requirements

(A)

In general

If a benefit option which consists of health insurance coverage is offered under the plan, State-licensed insurance agents shall be used to distribute to small employers coverage which does not consist of health insurance coverage in a manner comparable to the manner in which such agents are used to distribute health insurance coverage.

(B)

State-licensed insurance agents

For purposes of subparagraph (A), the term State-licensed insurance agents means one or more agents who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State.

(5)

Regulatory requirements

Such other requirements as the applicable authority determines are necessary to carry out the purposes of this part, which shall be prescribed by the applicable authority by regulation.

(b)

Ability of Association Health Plans To Design Benefit Options

Subject to section 514(d), nothing in this part or any provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to section 514) in the case of (1) any law to the extent that it is not preempted under section 731(a)(1) with respect to matters governed by section 711, 712, or 713, or (2) any law of the State with which filing and approval of a policy type offered by the plan was initially obtained to the extent that such law prohibits an exclusion of a specific disease from such coverage.

806.

Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage

(a)

In General

The requirements of this section are met with respect to an association health plan if—

(1)

the benefits under the plan consist solely of health insurance coverage; or

(2)

if the plan provides any additional benefit options which do not consist of health insurance coverage, the plan—

(A)

establishes and maintains reserves with respect to such additional benefit options, in amounts recommended by the qualified actuary, consisting of—

(i)

a reserve sufficient for unearned contributions;

(ii)

a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has not yet been transferred, and for expected administrative costs with respect to such benefit liabilities;

(iii)

a reserve sufficient for any other obligations of the plan; and

(iv)

a reserve sufficient for a margin of error and other fluctuations, taking into account the specific circumstances of the plan; and

(B)

establishes and maintains aggregate and specific excess/stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows:

(i)

The plan shall secure aggregate excess/stop loss insurance for the plan with an attachment point which is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A).

(ii)

The plan shall secure specific excess/stop loss insurance for the plan with an attachment point which is at least equal to an amount recommended by the plan’s qualified actuary. The applicable authority may by regulation provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A).

(iii)

The plan shall secure indemnification insurance for any claims which the plan is unable to satisfy by reason of a plan termination.

Any person issuing to a plan insurance described in clause (i), (ii), or (iii) of subparagraph (B) shall notify the Secretary of any failure of premium payment meriting cancellation of the policy prior to undertaking such a cancellation. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess/stop loss insurance as the qualified actuary may recommend, taking into account the specific circumstances of the plan.
(b)

Minimum Surplus in Addition to Claims Reserves

In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to—

(1)

$500,000, or

(2)

such greater amount (but not greater than $2,000,000) as may be set forth in regulations prescribed by the applicable authority, considering the level of aggregate and specific excess/stop loss insurance provided with respect to such plan and other factors related to solvency risk, such as the plan’s projected levels of participation or claims, the nature of the plan’s liabilities, and the types of assets available to assure that such liabilities are met.

(c)

Additional Requirements

In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves, excess/stop loss insurance, and indemnification insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation with respect to any such plan or any class of such plans.

(d)

Adjustments for Excess/Stop Loss Insurance

The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account excess/stop loss insurance provided with respect to such plan or plans.

(e)

Alternative Means of Compliance

The applicable authority may permit an association health plan described in subsection (a)(2) to substitute, for all or part of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement.

(f)

Measures To Ensure Continued Payment of Benefits by Certain Plans in Distress

(1)

Payments by certain plans to association health plan fund

(A)

In general

In the case of an association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, and, in addition to such annual payments, such supplemental payments as the Secretary may determine to be necessary under paragraph (2). Payments under this paragraph are payable to the Fund at the time determined by the Secretary. Initial payments are due in advance of certification under this part. Payments shall continue to accrue until a plan’s assets are distributed pursuant to a termination procedure.

(B)

Penalties for failure to make payments

If any payment is not made by a plan when it is due, a late payment charge of not more than 100 percent of the payment which was not timely paid shall be payable by the plan to the Fund.

(C)

Continued duty of the secretary

The Secretary shall not cease to carry out the provisions of paragraph (2) on account of the failure of a plan to pay any payment when due.

(2)

Payments by secretary to continue excess/stop loss insurance coverage and indemnification insurance coverage for certain plans

In any case in which the applicable authority determines that there is, or that there is reason to believe that there will be: (A) a failure to take necessary corrective actions under section 809(a) with respect to an association health plan described in subsection (a)(2); or (B) a termination of such a plan under section 809(b) or 810(b)(8) (and, if the applicable authority is not the Secretary, certifies such determination to the Secretary), the Secretary shall determine the amounts necessary to make payments to an insurer (designated by the Secretary) to maintain in force excess/stop loss insurance coverage or indemnification insurance coverage for such plan, if the Secretary determines that there is a reasonable expectation that, without such payments, claims would not be satisfied by reason of termination of such coverage. The Secretary shall, to the extent provided in advance in appropriation Acts, pay such amounts so determined to the insurer designated by the Secretary.

(3)

Association health plan fund

(A)

In general

There is established on the books of the Treasury a fund to be known as the Association Health Plan Fund. The Fund shall be available for making payments pursuant to paragraph (2). The Fund shall be credited with payments received pursuant to paragraph (1)(A), penalties received pursuant to paragraph (1)(B); and earnings on investments of amounts of the Fund under subparagraph (B).

(B)

Investment

Whenever the Secretary determines that the moneys of the fund are in excess of current needs, the Secretary may request the investment of such amounts as the Secretary determines advisable by the Secretary of the Treasury in obligations issued or guaranteed by the United States.

(g)

Excess/Stop Loss Insurance

For purposes of this section—

(1)

Aggregate excess/stop loss insurance

The term aggregate excess/stop loss insurance means, in connection with an association health plan, a contract—

(A)

under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to aggregate claims under the plan in excess of an amount or amounts specified in such contract;

(B)

which is guaranteed renewable; and

(C)

which allows for payment of premiums by any third party on behalf of the insured plan.

(2)

Specific excess/stop loss insurance

The term specific excess/stop loss insurance means, in connection with an association health plan, a contract—

(A)

under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to claims under the plan in connection with a covered individual in excess of an amount or amounts specified in such contract in connection with such covered individual;

(B)

which is guaranteed renewable; and

(C)

which allows for payment of premiums by any third party on behalf of the insured plan.

(h)

Indemnification Insurance

For purposes of this section, the term indemnification insurance means, in connection with an association health plan, a contract—

(1)

under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to claims under the plan which the plan is unable to satisfy by reason of a termination pursuant to section 809(b) (relating to mandatory termination);

(2)

which is guaranteed renewable and noncancellable for any reason (except as the applicable authority may prescribe by regulation); and

(3)

which allows for payment of premiums by any third party on behalf of the insured plan.

(i)

Reserves

For purposes of this section, the term reserves means, in connection with an association health plan, plan assets which meet the fiduciary standards under part 4 and such additional requirements regarding liquidity as the applicable authority may prescribe by regulation.

(j)

Solvency Standards Working Group

(1)

In general

Within 90 days after the date of the enactment of this part, the applicable authority shall establish a Solvency Standards Working Group. In prescribing the initial regulations under this section, the applicable authority shall take into account the recommendations of such Working Group.

(2)

Membership

The Working Group shall consist of not more than 15 members appointed by the applicable authority. The applicable authority shall include among persons invited to membership on the Working Group at least one of each of the following:

(A)

a representative of the National Association of Insurance Commissioners;

(B)

a representative of the American Academy of Actuaries;

(C)

a representative of the State governments, or their interests;

(D)

a representative of existing self-insured arrangements, or their interests;

(E)

a representative of associations of the type referred to in section 801(b)(1), or their interests; and

(F)

a representative of multiemployer plans that are group health plans, or their interests.

807.

Requirements for application and related requirements

(a)

Filing Fee

Under the procedure prescribed pursuant to section 802(a), an association health plan shall pay to the applicable authority at the time of filing an application for certification under this part a filing fee in the amount of $5,000, which shall be available in the case of the Secretary, to the extent provided in appropriation Acts, for the sole purpose of administering the certification procedures applicable with respect to association health plans.

(b)

Information To Be Included in Application for Certification

An application for certification under this part meets the requirements of this section only if it includes, in a manner and form which shall be prescribed by the applicable authority by regulation, at least the following information:

(1)

Identifying information

The names and addresses of—

(A)

the sponsor; and

(B)

the members of the board of trustees of the plan.

(2)

States in which plan intends to do business

The States in which participants and beneficiaries under the plan are to be located and the number of them expected to be located in each such State.

(3)

Bonding requirements

Evidence provided by the board of trustees that the bonding requirements of section 412 will be met as of the date of the application or (if later) commencement of operations.

(4)

Plan documents

A copy of the documents governing the plan (including any bylaws and trust agreements), the summary plan description, and other material describing the benefits that will be provided to participants and beneficiaries under the plan.

(5)

Agreements with service providers

A copy of any agreements between the plan and contract administrators and other service providers.

(6)

Funding report

In the case of association health plans providing benefits options in addition to health insurance coverage, a report setting forth information with respect to such additional benefit options determined as of a date within the 120-day period ending with the date of the application, including the following:

(A)

Reserves

A statement, certified by the board of trustees of the plan, and a statement of actuarial opinion, signed by a qualified actuary, that all applicable requirements of section 806 are or will be met in accordance with regulations which the applicable authority shall prescribe.

(B)

Adequacy of contribution rates

A statement of actuarial opinion, signed by a qualified actuary, which sets forth a description of the extent to which contribution rates are adequate to provide for the payment of all obligations and the maintenance of required reserves under the plan for the 12-month period beginning with such date within such 120-day period, taking into account the expected coverage and experience of the plan. If the contribution rates are not fully adequate, the statement of actuarial opinion shall indicate the extent to which the rates are inadequate and the changes needed to ensure adequacy.

(C)

Current and projected value of assets and liabilities

A statement of actuarial opinion signed by a qualified actuary, which sets forth the current value of the assets and liabilities accumulated under the plan and a projection of the assets, liabilities, income, and expenses of the plan for the 12-month period referred to in subparagraph (B). The income statement shall identify separately the plan’s administrative expenses and claims.

(D)

Costs of coverage to be charged and other expenses

A statement of the costs of coverage to be charged, including an itemization of amounts for administration, reserves, and other expenses associated with the operation of the plan.

(E)

Other information

Any other information as may be determined by the applicable authority, by regulation, as necessary to carry out the purposes of this part.

(c)

Filing Notice of Certification With States

A certification granted under this part to an association health plan shall not be effective unless written notice of such certification is filed with the applicable State authority of each State in which at least 25 percent of the participants and beneficiaries under the plan are located. For purposes of this subsection, an individual shall be considered to be located in the State in which a known address of such individual is located or in which such individual is employed.

(d)

Notice of Material Changes

In the case of any association health plan certified under this part, descriptions of material changes in any information which was required to be submitted with the application for the certification under this part shall be filed in such form and manner as shall be prescribed by the applicable authority by regulation. The applicable authority may require by regulation prior notice of material changes with respect to specified matters which might serve as the basis for suspension or revocation of the certification.

(e)

Reporting Requirements for Certain Association Health Plans

An association health plan certified under this part which provides benefit options in addition to health insurance coverage for such plan year shall meet the requirements of section 103 by filing an annual report under such section which shall include information described in subsection (b)(6) with respect to the plan year and, notwithstanding section 104(a)(1)(A), shall be filed with the applicable authority not later than 90 days after the close of the plan year (or on such later date as may be prescribed by the applicable authority). The applicable authority may require by regulation such interim reports as it considers appropriate.

(f)

Engagement of Qualified Actuary

The board of trustees of each association health plan which provides benefits options in addition to health insurance coverage and which is applying for certification under this part or is certified under this part shall engage, on behalf of all participants and beneficiaries, a qualified actuary who shall be responsible for the preparation of the materials comprising information necessary to be submitted by a qualified actuary under this part. The qualified actuary shall utilize such assumptions and techniques as are necessary to enable such actuary to form an opinion as to whether the contents of the matters reported under this part—

(1)

are in the aggregate reasonably related to the experience of the plan and to reasonable expectations; and

(2)

represent such actuary’s best estimate of anticipated experience under the plan.

The opinion by the qualified actuary shall be made with respect to, and shall be made a part of, the annual report.
808.

Notice requirements for voluntary termination

Except as provided in section 809(b), an association health plan which is or has been certified under this part may terminate (upon or at any time after cessation of accruals in benefit liabilities) only if the board of trustees, not less than 60 days before the proposed termination date—

(1)

provides to the participants and beneficiaries a written notice of intent to terminate stating that such termination is intended and the proposed termination date;

(2)

develops a plan for winding up the affairs of the plan in connection with such termination in a manner which will result in timely payment of all benefits for which the plan is obligated; and

(3)

submits such plan in writing to the applicable authority.

Actions required under this section shall be taken in such form and manner as may be prescribed by the applicable authority by regulation.
809.

Corrective actions and mandatory termination

(a)

Actions To Avoid Depletion of Reserves

An association health plan which is certified under this part and which provides benefits other than health insurance coverage shall continue to meet the requirements of section 806, irrespective of whether such certification continues in effect. The board of trustees of such plan shall determine quarterly whether the requirements of section 806 are met. In any case in which the board determines that there is reason to believe that there is or will be a failure to meet such requirements, or the applicable authority makes such a determination and so notifies the board, the board shall immediately notify the qualified actuary engaged by the plan, and such actuary shall, not later than the end of the next following month, make such recommendations to the board for corrective action as the actuary determines necessary to ensure compliance with section 806. Not later than 30 days after receiving from the actuary recommendations for corrective actions, the board shall notify the applicable authority (in such form and manner as the applicable authority may prescribe by regulation) of such recommendations of the actuary for corrective action, together with a description of the actions (if any) that the board has taken or plans to take in response to such recommendations. The board shall thereafter report to the applicable authority, in such form and frequency as the applicable authority may specify to the board, regarding corrective action taken by the board until the requirements of section 806 are met.

(b)

Mandatory Termination

In any case in which—

(1)

the applicable authority has been notified under subsection (a) (or by an issuer of excess/stop loss insurance or indemnity insurance pursuant to section 806(a)) of a failure of an association health plan which is or has been certified under this part and is described in section 806(a)(2) to meet the requirements of section 806 and has not been notified by the board of trustees of the plan that corrective action has restored compliance with such requirements; and

(2)

the applicable authority determines that there is a reasonable expectation that the plan will continue to fail to meet the requirements of section 806,

the board of trustees of the plan shall, at the direction of the applicable authority, terminate the plan and, in the course of the termination, take such actions as the applicable authority may require, including satisfying any claims referred to in section 806(a)(2)(B)(iii) and recovering for the plan any liability under subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure that the affairs of the plan will be, to the maximum extent possible, wound up in a manner which will result in timely provision of all benefits for which the plan is obligated.
810.

Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage

(a)

Appointment of Secretary as Trustee for Insolvent Plans

Whenever the Secretary determines that an association health plan which is or has been certified under this part and which is described in section 806(a)(2) will be unable to provide benefits when due or is otherwise in a financially hazardous condition, as shall be defined by the Secretary by regulation, the Secretary shall, upon notice to the plan, apply to the appropriate United States district court for appointment of the Secretary as trustee to administer the plan for the duration of the insolvency. The plan may appear as a party and other interested persons may intervene in the proceedings at the discretion of the court. The court shall appoint such Secretary trustee if the court determines that the trusteeship is necessary to protect the interests of the participants and beneficiaries or providers of medical care or to avoid any unreasonable deterioration of the financial condition of the plan. The trusteeship of such Secretary shall continue until the conditions described in the first sentence of this subsection are remedied or the plan is terminated.

(b)

Powers as Trustee

The Secretary, upon appointment as trustee under subsection (a), shall have the power—

(1)

to do any act authorized by the plan, this title, or other applicable provisions of law to be done by the plan administrator or any trustee of the plan;

(2)

to require the transfer of all (or any part) of the assets and records of the plan to the Secretary as trustee;

(3)

to invest any assets of the plan which the Secretary holds in accordance with the provisions of the plan, regulations prescribed by the Secretary, and applicable provisions of law;

(4)

to require the sponsor, the plan administrator, any participating employer, and any employee organization representing plan participants to furnish any information with respect to the plan which the Secretary as trustee may reasonably need in order to administer the plan;

(5)

to collect for the plan any amounts due the plan and to recover reasonable expenses of the trusteeship;

(6)

to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan;

(7)

to issue, publish, or file such notices, statements, and reports as may be required by the Secretary by regulation or required by any order of the court;

(8)

to terminate the plan (or provide for its termination in accordance with section 809(b)) and liquidate the plan assets, to restore the plan to the responsibility of the sponsor, or to continue the trusteeship;

(9)

to provide for the enrollment of plan participants and beneficiaries under appropriate coverage options; and

(10)

to do such other acts as may be necessary to comply with this title or any order of the court and to protect the interests of plan participants and beneficiaries and providers of medical care.

(c)

Notice of Appointment

As soon as practicable after the Secretary’s appointment as trustee, the Secretary shall give notice of such appointment to—

(1)

the sponsor and plan administrator;

(2)

each participant;

(3)

each participating employer; and

(4)

if applicable, each employee organization which, for purposes of collective bargaining, represents plan participants.

(d)

Additional Duties

Except to the extent inconsistent with the provisions of this title, or as may be otherwise ordered by the court, the Secretary, upon appointment as trustee under this section, shall be subject to the same duties as those of a trustee under section 704 of title 11, United States Code, and shall have the duties of a fiduciary for purposes of this title.

(e)

Other Proceedings

An application by the Secretary under this subsection may be filed notwithstanding the pendency in the same or any other court of any bankruptcy, mortgage foreclosure, or equity receivership proceeding, or any proceeding to reorganize, conserve, or liquidate such plan or its property, or any proceeding to enforce a lien against property of the plan.

(f)

Jurisdiction of Court

(1)

In general

Upon the filing of an application for the appointment as trustee or the issuance of a decree under this section, the court to which the application is made shall have exclusive jurisdiction of the plan involved and its property wherever located with the powers, to the extent consistent with the purposes of this section, of a court of the United States having jurisdiction over cases under chapter 11 of title 11, United States Code. Pending an adjudication under this section such court shall stay, and upon appointment by it of the Secretary as trustee, such court shall continue the stay of, any pending mortgage foreclosure, equity receivership, or other proceeding to reorganize, conserve, or liquidate the plan, the sponsor, or property of such plan or sponsor, and any other suit against any receiver, conservator, or trustee of the plan, the sponsor, or property of the plan or sponsor. Pending such adjudication and upon the appointment by it of the Secretary as trustee, the court may stay any proceeding to enforce a lien against property of the plan or the sponsor or any other suit against the plan or the sponsor.

(2)

Venue

An action under this section may be brought in the judicial district where the sponsor or the plan administrator resides or does business or where any asset of the plan is situated. A district court in which such action is brought may issue process with respect to such action in any other judicial district.

(g)

Personnel

In accordance with regulations which shall be prescribed by the Secretary, the Secretary shall appoint, retain, and compensate accountants, actuaries, and other professional service personnel as may be necessary in connection with the Secretary’s service as trustee under this section.

811.

State assessment authority

(a)

In General

Notwithstanding section 514, a State may impose by law a contribution tax on an association health plan described in section 806(a)(2), if the plan commenced operations in such State after the date of the enactment of this part.

(b)

Contribution Tax

For purposes of this section, the term contribution tax imposed by a State on an association health plan means any tax imposed by such State if—

(1)

such tax is computed by applying a rate to the amount of premiums or contributions, with respect to individuals covered under the plan who are residents of such State, which are received by the plan from participating employers located in such State or from such individuals;

(2)

the rate of such tax does not exceed the rate of any tax imposed by such State on premiums or contributions received by insurers or health maintenance organizations for health insurance coverage offered in such State in connection with a group health plan;

(3)

such tax is otherwise nondiscriminatory; and

(4)

the amount of any such tax assessed on the plan is reduced by the amount of any tax or assessment otherwise imposed by the State on premiums, contributions, or both received by insurers or health maintenance organizations for health insurance coverage, aggregate excess/stop loss insurance (as defined in section 806(g)(1)), specific excess/stop loss insurance (as defined in section 806(g)(2)), other insurance related to the provision of medical care under the plan, or any combination thereof provided by such insurers or health maintenance organizations in such State in connection with such plan.

812.

Definitions and rules of construction

(a)

Definitions

For purposes of this part—

(1)

Group health plan

The term group health plan has the meaning provided in section 733(a)(1) (after applying subsection (b) of this section).

(2)

Medical care

The term medical care has the meaning provided in section 733(a)(2).

(3)

Health insurance coverage

The term health insurance coverage has the meaning provided in section 733(b)(1).

(4)

Health insurance issuer

The term health insurance issuer has the meaning provided in section 733(b)(2).

(5)

Applicable authority

The term applicable authority means the Secretary, except that, in connection with any exercise of the Secretary’s authority regarding which the Secretary is required under section 506(d) to consult with a State, such term means the Secretary, in consultation with such State.

(6)

Health status-related factor

The term health status-related factor has the meaning provided in section 733(d)(2).

(7)

Individual market

(A)

In general

The term individual market means the market for health insurance coverage offered to individuals other than in connection with a group health plan.

(B)

Treatment of very small groups

(i)

In general

Subject to clause (ii), such term includes coverage offered in connection with a group health plan that has fewer than 2 participants as current employees or participants described in section 732(d)(3) on the first day of the plan year.

(ii)

State exception

Clause (i) shall not apply in the case of health insurance coverage offered in a State if such State regulates the coverage described in such clause in the same manner and to the same extent as coverage in the small group market (as defined in section 2791(e)(5) of the Public Health Service Act) is regulated by such State.

(8)

Participating employer

The term participating employer means, in connection with an association health plan, any employer, if any individual who is an employee of such employer, a partner in such employer, or a self-employed individual who is such employer (or any dependent, as defined under the terms of the plan, of such individual) is or was covered under such plan in connection with the status of such individual as such an employee, partner, or self-employed individual in relation to the plan.

(9)

Applicable state authority

The term applicable State authority means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the requirements of title XXVII of the Public Health Service Act for the State involved with respect to such issuer.

(10)

Qualified actuary

The term qualified actuary means an individual who is a member of the American Academy of Actuaries.

(11)

Affiliated member

The term affiliated member means, in connection with a sponsor—

(A)

a person who is otherwise eligible to be a member of the sponsor but who elects an affiliated status with the sponsor,

(B)

in the case of a sponsor with members which consist of associations, a person who is a member of any such association and elects an affiliated status with the sponsor, or

(C)

in the case of an association health plan in existence on the date of the enactment of this part, a person eligible to be a member of the sponsor or one of its member associations.

(12)

Large employer

The term large employer means, in connection with a group health plan with respect to a plan year, an employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 2 employees on the first day of the plan year.

(13)

Small employer

The term small employer means, in connection with a group health plan with respect to a plan year, an employer who is not a large employer.

(b)

Rules of Construction

(1)

Employers and employees

For purposes of determining whether a plan, fund, or program is an employee welfare benefit plan which is an association health plan, and for purposes of applying this title in connection with such plan, fund, or program so determined to be such an employee welfare benefit plan—

(A)

in the case of a partnership, the term employer (as defined in section 3(5)) includes the partnership in relation to the partners, and the term employee (as defined in section 3(6)) includes any partner in relation to the partnership; and

(B)

in the case of a self-employed individual, the term employer (as defined in section 3(5)) and the term employee (as defined in section 3(6)) shall include such individual.

(2)

Plans, funds, and programs treated as employee welfare benefit plans

In the case of any plan, fund, or program which was established or is maintained for the purpose of providing medical care (through the purchase of insurance or otherwise) for employees (or their dependents) covered thereunder and which demonstrates to the Secretary that all requirements for certification under this part would be met with respect to such plan, fund, or program if such plan, fund, or program were a group health plan, such plan, fund, or program shall be treated for purposes of this title as an employee welfare benefit plan on and after the date of such demonstration.

.

(2)

Conforming Amendments to Preemption Rules

(A)

Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is amended by adding at the end the following new subparagraph:

(E)

The preceding subparagraphs of this paragraph do not apply with respect to any State law in the case of an association health plan which is certified under part 8.

.

(B)

Section 514 of such Act (29 U.S.C. 1144) is amended—

(i)

in subsection (b)(4), by striking Subsection (a) and inserting Subsections (a) and (d);

(ii)

in subsection (b)(5), by striking subsection (a) in subparagraph (A) and inserting subsection (a) of this section and subsections (a)(2)(B) and (b) of section 805, and by striking subsection (a) in subparagraph (B) and inserting subsection (a) of this section or subsection (a)(2)(B) or (b) of section 805;

(iii)

by redesignating subsection (d) as subsection (e); and

(iv)

by inserting after subsection (c) the following new subsection:

(d)
(1)

Except as provided in subsection (b)(4), the provisions of this title shall supersede any and all State laws insofar as they may now or hereafter preclude, or have the effect of precluding, a health insurance issuer from offering health insurance coverage in connection with an association health plan which is certified under part 8.

(2)

Except as provided in paragraphs (4) and (5) of subsection (b) of this section—

(A)

In any case in which health insurance coverage of any policy type is offered under an association health plan certified under part 8 to a participating employer operating in such State, the provisions of this title shall supersede any and all laws of such State insofar as they may preclude a health insurance issuer from offering health insurance coverage of the same policy type to other employers operating in the State which are eligible for coverage under such association health plan, whether or not such other employers are participating employers in such plan.

(B)

In any case in which health insurance coverage of any policy type is offered in a State under an association health plan certified under part 8 and the filing, with the applicable State authority (as defined in section 812(a)(9)), of the policy form in connection with such policy type is approved by such State authority, the provisions of this title shall supersede any and all laws of any other State in which health insurance coverage of such type is offered, insofar as they may preclude, upon the filing in the same form and manner of such policy form with the applicable State authority in such other State, the approval of the filing in such other State.

(3)

Nothing in subsection (b)(6)(E) or the preceding provisions of this subsection shall be construed, with respect to health insurance issuers or health insurance coverage, to supersede or impair the law of any State—

(A)

providing solvency standards or similar standards regarding the adequacy of insurer capital, surplus, reserves, or contributions, or

(B)

relating to prompt payment of claims.

(4)

For additional provisions relating to association health plans, see subsections (a)(2)(B) and (b) of section 805.

(5)

For purposes of this subsection, the term association health plan has the meaning provided in section 801(a), and the terms health insurance coverage, participating employer, and health insurance issuer have the meanings provided such terms in section 812, respectively.

.

(C)

Section 514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) is amended—

(i)

in clause (i)(II), by striking and at the end;

(ii)

in clause (ii), by inserting and which does not provide medical care (within the meaning of section 733(a)(2)), after arrangement,, and by striking title. and inserting title, and; and

(iii)

by adding at the end the following new clause:

(iii)

subject to subparagraph (E), in the case of any other employee welfare benefit plan which is a multiple employer welfare arrangement and which provides medical care (within the meaning of section 733(a)(2)), any law of any State which regulates insurance may apply.

.

(D)

Section 514(e) of such Act (as redesignated by subparagraph (B)(iii)) is amended—

(i)

by striking Nothing and inserting (1) Except as provided in paragraph (2), nothing; and

(ii)

by adding at the end the following new paragraph:

(2)

Nothing in any other provision of law enacted on or after the date of the enactment of part 8 shall be construed to alter, amend, modify, invalidate, impair, or supersede any provision of this title, except by specific cross-reference to the affected section.

.

(3)

Plan Sponsor

Section 3(16)(B) of such Act (29 U.S.C. 102(16)(B)) is amended by adding at the end the following new sentence: Such term also includes a person serving as the sponsor of an association health plan under part 8..

(4)

Disclosure of Solvency Protections Related to Self-Insured and Fully Insured Options Under Association Health Plans

Section 102(b) of such Act (29 U.S.C. 102(b)) is amended by adding at the end the following: An association health plan shall include in its summary plan description, in connection with each benefit option, a description of the form of solvency or guarantee fund protection secured pursuant to this Act or applicable State law, if any..

(5)

Savings Clause

Section 731(c) of such Act is amended by inserting or part 8 after this part.

(6)

Report to the Congress Regarding Certification of Self-Insured Association Health Plans

Not later than January 1, 2012, the Secretary of Labor shall report to the Committee on Education and the Workforce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate the effect association health plans have had, if any, on reducing the number of uninsured individuals.

(7)

Clerical Amendment

The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 734 the following new items:

Part 8—Rules Governing Association Health Plans

801. Association health plans.

802. Certification of association health plans.

803. Requirements relating to sponsors and boards of trustees.

804. Participation and coverage requirements.

805. Other requirements relating to plan documents, contribution rates, and benefit options.

806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage.

807. Requirements for application and related requirements.

808. Notice requirements for voluntary termination.

809. Corrective actions and mandatory termination.

810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage.

811. State assessment authority.

812. Definitions and rules of construction.

.

(b)

Clarification of treatment of single employer arrangements

Section 3(40)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amended—

(1)

in clause (i), by inserting after control group, the following: except that, in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), two or more trades or businesses, whether or not incorporated, shall be deemed a single employer for any plan year of such plan, or any fiscal year of such other arrangement, if such trades or businesses are within the same control group during such year or at any time during the preceding 1-year period,;

(2)

in clause (iii), by striking (iii) the determination and inserting the following:

(iii)
(I)

in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), the determination of whether a trade or business is under common control with another trade or business shall be determined under regulations of the Secretary applying principles consistent and coextensive with the principles applied in determining whether employees of two or more trades or businesses are treated as employed by a single employer under section 4001(b), except that, for purposes of this paragraph, an interest of greater than 25 percent may not be required as the minimum interest necessary for common control, or

(II)

in any other case, the determination

;

(3)

by redesignating clauses (iv) and (v) as clauses (v) and (vi), respectively; and

(4)

by inserting after clause (iii) the following new clause:

(iv)

in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), in determining, after the application of clause (i), whether benefits are provided to employees of two or more employers, the arrangement shall be treated as having only one participating employer if, after the application of clause (i), the number of individuals who are employees and former employees of any one participating employer and who are covered under the arrangement is greater than 75 percent of the aggregate number of all individuals who are employees or former employees of participating employers and who are covered under the arrangement,

.

(c)

Enforcement provisions relating to association health plans

(1)

Criminal Penalties for Certain Willful Misrepresentations

Section 501 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1131) is amended—

(A)

by inserting (a) after Sec. 501.; and

(B)

by adding at the end the following new subsection:

(b)

Any person who willfully falsely represents, to any employee, any employee’s beneficiary, any employer, the Secretary, or any State, a plan or other arrangement established or maintained for the purpose of offering or providing any benefit described in section 3(1) to employees or their beneficiaries as—

(1)

being an association health plan which has been certified under part 8;

(2)

having been established or maintained under or pursuant to one or more collective bargaining agreements which are reached pursuant to collective bargaining described in section 8(d) of the National Labor Relations Act (29 U.S.C. 158(d)) or paragraph Fourth of section 2 of the Railway Labor Act (45 U.S.C. 152, paragraph Fourth) or which are reached pursuant to labor-management negotiations under similar provisions of State public employee relations laws; or

(3)

being a plan or arrangement described in section 3(40)(A)(i),

shall, upon conviction, be imprisoned not more than 5 years, be fined under title 18, United States Code, or both.

.

(2)

Cease Activities Orders

Section 502 of such Act (29 U.S.C. 1132) is amended by adding at the end the following new subsection:

(n)

Association Health Plan Cease and Desist Orders

(1)

In general

Subject to paragraph (2), upon application by the Secretary showing the operation, promotion, or marketing of an association health plan (or similar arrangement providing benefits consisting of medical care (as defined in section 733(a)(2))) that—

(A)

is not certified under part 8, is subject under section 514(b)(6) to the insurance laws of any State in which the plan or arrangement offers or provides benefits, and is not licensed, registered, or otherwise approved under the insurance laws of such State; or

(B)

is an association health plan certified under part 8 and is not operating in accordance with the requirements under part 8 for such certification,

a district court of the United States shall enter an order requiring that the plan or arrangement cease activities.
(2)

Exception

Paragraph (1) shall not apply in the case of an association health plan or other arrangement if the plan or arrangement shows that—

(A)

all benefits under it referred to in paragraph (1) consist of health insurance coverage; and

(B)

with respect to each State in which the plan or arrangement offers or provides benefits, the plan or arrangement is operating in accordance with applicable State laws that are not superseded under section 514.

(3)

Additional equitable relief

The court may grant such additional equitable relief, including any relief available under this title, as it deems necessary to protect the interests of the public and of persons having claims for benefits against the plan.

.

(3)

Responsibility for Claims Procedure

Section 503 of such Act (29 U.S.C. 1133) is amended by inserting (a) In general.— before In accordance, and by adding at the end the following new subsection:

(b)

Association Health Plans

The terms of each association health plan which is or has been certified under part 8 shall require the board of trustees or the named fiduciary (as applicable) to ensure that the requirements of this section are met in connection with claims filed under the plan.

.

(d)

Cooperation between Federal and State authorities

Section 506 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1136) is amended by adding at the end the following new subsection:

(d)

Consultation With States With Respect to Association Health Plans

(1)

Agreements with states

The Secretary shall consult with the State recognized under paragraph (2) with respect to an association health plan regarding the exercise of—

(A)

the Secretary’s authority under sections 502 and 504 to enforce the requirements for certification under part 8; and

(B)

the Secretary’s authority to certify association health plans under part 8 in accordance with regulations of the Secretary applicable to certification under part 8.

(2)

Recognition of primary domicile state

In carrying out paragraph (1), the Secretary shall ensure that only one State will be recognized, with respect to any particular association health plan, as the State with which consultation is required. In carrying out this paragraph—

(A)

in the case of a plan which provides health insurance coverage (as defined in section 812(a)(3)), such State shall be the State with which filing and approval of a policy type offered by the plan was initially obtained, and

(B)

in any other case, the Secretary shall take into account the places of residence of the participants and beneficiaries under the plan and the State in which the trust is maintained.

.

(e)

Effective date and transitional and other rules

(1)

Effective Date

The amendments made by this section shall take effect 1 year after the date of the enactment of this Act. The Secretary of Labor shall first issue all regulations necessary to carry out such amendments within 1 year after the date of the enactment of this Act.

(2)

Treatment of Certain Existing Health Benefits Programs

(A)

In general

In any case in which, as of the date of the enactment of this Act, an arrangement is maintained in a State for the purpose of providing benefits consisting of medical care for the employees and beneficiaries of its participating employers, at least 200 participating employers make contributions to such arrangement, such arrangement has been in existence for at least 10 years, and such arrangement is licensed under the laws of one or more States to provide such benefits to its participating employers, upon the filing with the applicable authority (as defined in section 812(a)(5) of the Employee Retirement Income Security Act of 1974 (as amended by this subtitle)) by the arrangement of an application for certification of the arrangement under part 8 of subtitle B of title I of such Act—

(i)

such arrangement shall be deemed to be a group health plan for purposes of title I of such Act;

(ii)

the requirements of sections 801(a) and 803(a) of the Employee Retirement Income Security Act of 1974 shall be deemed met with respect to such arrangement;

(iii)

the requirements of section 803(b) of such Act shall be deemed met, if the arrangement is operated by a board of directors which—

(I)

is elected by the participating employers, with each employer having one vote; and

(II)

has complete fiscal control over the arrangement and which is responsible for all operations of the arrangement;

(iv)

the requirements of section 804(a) of such Act shall be deemed met with respect to such arrangement; and

(v)

the arrangement may be certified by any applicable authority with respect to its operations in any State only if it operates in such State on the date of certification.

The provisions of this subparagraph shall cease to apply with respect to any such arrangement at such time after the date of the enactment of this Act as the applicable requirements of this subparagraph are not met with respect to such arrangement.
(B)

Definitions

For purposes of this paragraph, the terms group health plan, medical care, and participating employer shall have the meanings provided in section 812 of the Employee Retirement Income Security Act of 1974, except that the reference in paragraph (7) of such section to an association health plan shall be deemed a reference to an arrangement referred to in this paragraph.

133.

Repeal of certain tax exemptions for health insurance payments

(a)

FICA definition of wages

Paragraphs (2) and (4) of sections 3121(a)of the Internal Revenue Code of 1986 (relating to tax on employers and employees) are hereby repealed.

(b)

Conforming amendments

Section 3401 of the Internal Revenue Code of 1986 (relating to the collection of wages at source) is amended by striking paragraph (20) and redesignating paragraphs (21), (22), and (23)as paragraphs (20), (21), and (22), respectively.

(c)

Applicable date

The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

C

Health Care Services Commission

I

Establishment and General Duties

141.

Establishment

(a)

In general

There is hereby established a Health Care Services Commission (in this subtitle referred to as the Commission) to be composed of five commissioners (in this subtitle referred to as the Commissioners) to be appointed by the President by and with the advice and consent of the Senate. Not more than three of such commissioners shall be members of the same political party, and in making appointments members of different political parties shall be appointed alternately as nearly as may be practicable. No commissioner shall engage in any other business, vocation, or employment than that of serving as commissioner. Each commissioner shall hold office for a term of five years and until his successor is appointed and has qualified, except that he shall not so continue to serve beyond the expiration of the next session of Congress subsequent to the expiration of said fixed term of office, and except (1) any commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and (2) the terms of office of the commissioners first taking office after the enactment of this subtitle shall expire as designated by the President at the time of nomination, one at the end of one year, one at the end of two years, one at the end of three years, one at the end of four years, and one at the end of five years, after the date of the enactment of this Act.

(b)

Purpose

The purpose of the Commission is to enhance the quality, appropriateness, and effectiveness of health care services, and access to such services, through the establishment of a broad base of scientific research and through the promotion of improvements in clinical practice and in the organization, financing, and delivery of health care services.

(c)

Appointment of chairman

The President shall, from among the Commissioners appointed under subsection (a), designate an individual to serve as the Chairman of the Commission.

142.

General authorities and duties

(a)

In general

In carrying out section 141(b), the Commissioners shall conduct and support research, demonstration projects, evaluations, training, guideline development, and the dissemination of information, on health care services and on systems for the delivery of such services, including activities with respect to—

(1)

the effectiveness, efficiency, and quality of health care services;

(2)

subject to subsection (b), the outcomes of health care services and procedures;

(3)

clinical practice, including primary care and practice-oriented research;

(4)

health care technologies, facilities, and equipment;

(5)

health care costs, productivity, and market forces;

(6)

health promotion and disease prevention;

(7)

health statistics and epidemiology; and

(8)

medical liability.

(b)

Requirements with respect to rural areas and underserved populations

In carrying out subsection (a), the Commissioners shall undertake and support research, demonstration projects, and evaluations with respect to—

(1)

the delivery of health care services in rural areas (including frontier areas); and

(2)

the health of low-income groups, minority groups, and the elderly.

143.

Dissemination

(a)

In general

The Commissioners shall—

(1)

promptly publish, make available, and otherwise disseminate, in a form understandable and on as broad a basis as practicable so as to maximize its use, the results of research, demonstration projects, and evaluations conducted or supported under this subtitle and the guidelines, standards, and review criteria developed under this subtitle;

(2)

promptly make available to the public data developed in such research, demonstration projects, and evaluations; and

(3)

as appropriate, provide technical assistance to State and local government and health agencies and conduct liaison activities to such agencies to foster dissemination.

(b)

Prohibition against restrictions

Except as provided in subsection (c), the Commissioners may not restrict the publication or dissemination of data from, or the results of, projects conducted or supported under this subtitle.

(c)

Limitation on use of certain information

No information, if an establishment or person supplying the information or described in it is identifiable, obtained in the course of activities undertaken or supported under this subtitle may be used for any purpose other than the purpose for which it was supplied unless such establishment or person has consented (as determined under regulations of the Secretary) to its use for such other purpose. Such information may not be published or released in other form if the person who supplied the information or who is described in it is identifiable unless such person has consented (as determined under regulations of the Secretary) to its publication or release in other form.

(d)

Certain interagency agreement

The Commissioners and the Director of the National Library of Medicine shall enter into an agreement providing for the implementation of subsection (a)(1).

II

Forum for Quality and Effectiveness in Health Care

151.

Establishment of office

There is established within the Commission an office to be known as the Office of the Forum for Quality and Effectiveness in Health Care. The office shall be headed by a director (referred to in this subtitle as the Director), who shall be appointed by the Commissioners.

152.

Membership

(a)

In general

The Office of the Forum for Quality and Effectiveness in Health Care shall be composed of 15 individuals nominated by private sector health care organizations and appointed by the Commission and shall include representation from at least the following:

(1)

Health insurance industry.

(2)

Health care provider groups.

(3)

Non-profit organizations.

(4)

Rural health organizations.

(b)

Terms

(1)

In general

Except as provided in subparagraph (B), members of the Office of the Forum for Quality and Effectiveness in Health Care shall serve for a term of 5 years.

(2)

Staggered rotation

Of the members first appointed to the Office of the Forum for Quality and Effectiveness in Health Care, the Commission shall appoint 5 members to serve for a term of 2 years, 5 members to serve for a term of 3 years, and 5 members to serve for a term of 4 years.

(c)

Treatment of other employment

Each member of the Office of the Forum for Quality and Effectiveness in Health Care shall serve the Office independently from any other position of employment.

153.

Duties

(a)

Establishment of forum program

The Commissioners, acting through the Director, shall establish a program to be known as the Forum for Quality and Effectiveness in Health Care. For the purpose of promoting transparency in price, quality, appropriateness, and effectiveness of health care, the Director, using the process set forth in section 154, shall arrange for the development and periodic review and updating of standards of quality, performance measures, and medical review criteria through which health care providers and other appropriate entities may assess or review the provision of health care and assure the quality of such care.

(b)

Certain requirements

Guidelines, standards, performance measures, and review criteria under subsection (a) shall—

(1)

be based on the best available research and professional judgment regarding the effectiveness and appropriateness of health care services and procedures; and

(2)

be presented in formats appropriate for use by physicians, health care practitioners, providers, medical educators, and medical review organizations and in formats appropriate for use by consumers of health care.

(c)

Authority for contracts

In carrying out this part, the Director may enter into contracts with public or nonprofit private entities.

(d)

Public disclosure of recommendations

For each fiscal year beginning with 2010, the Director shall make publicly available the following:

(1)

quarterly reports for public comment that include proposed recommendations for guidelines, standards, performance measures, and review criteria under subsection (a) and any updates to such guidelines, standards, performance measures, and review criteria; and

(2)

after consideration of such comments, a final report that contains final recommendations for such guidelines, standards, performance measures, review criteria, and updates.

(e)

Date certain for initial guidelines and standards

The Commissioners, by not later than January 1, 2012, shall assure the development of an initial set of guidelines, standards, performance measures, and review criteria under subsection (a).

154.

Adoption and enforcement of guidelines and standards

(a)

Adoption of recommendations of Forum for Quality and Effectiveness in Health Care

For each fiscal year, the Commissioners shall adopt the recommendations made for such year in the final report under subsection (d)(2) of section 153 for guidelines, standards, performance measures, and review criteria described in subsection (a) of such section.

(b)

Enforcement authority

The Commissioners , in consultation with the Secretary of Health and Human Services, have the authority to make recommendations to the Secretary to enforce compliance of health care providers with the guidelines, standards, performance measures, and review criteria adopted under subsection (a). Such recommendations may include the following, with respect to a health care provider who is not in compliance with such guidelines, standards, measures, and criteria:

(1)

Exclusion from participation in Federal health care programs (as defined in section 1128B(f) of the Social Security Act).

(2)

Imposition of a civil money penalty on such provider.

155.

Additional requirements

(a)

Program agenda

The Commissioners shall provide for an agenda for the development of the guidelines, standards, performance measures, and review criteria described in section 153(a), including with respect to the standards, performance measures, and review criteria, identifying specific aspects of health care for which the standards, performance measures, and review criteria are to be developed and those that are to be given priority in the development of the standards, performance measures, and review criteria.

III

General Provisions

161.

Certain administrative authorities

The Commissioners, in carrying out this subtitle, may accept voluntary and uncompensated services.

162.

Funding

For the purpose of carrying out this subtitle, there are authorized to be appropriated such sums as may be necessary for fiscal years 2011 through 2015.

163.

Definitions

For purposes of this subtitle:

(1)

The term Commissioners means the Commissioners of the Health Care Services Commission.

(2)

The term Commission means the Health Care Services Commission.

(3)

The term Director means the Director of the Office of the Forum for Quality and Effectiveness in Health Care.

(4)

The term Secretary means the Secretary of Health and Human Services.

IV

Terminations and Transition

171.

Termination of Agency for Healthcare Research and Quality

As of the date of the enactment of this Act, the Agency for Healthcare Research and Quality is terminated, and title IX of the Public Health Service Act is repealed.

172.

Transition

All orders, grants, contracts, privileges, and other determinations or actions of the Agency for Healthcare Research and Quality that are effective as of the date before the date of the enactment of this Act, shall be transferred to the Secretary and shall continue in effect according to their terms unless changed pursuant to law.

V

Independent Health Record Trust

181.

Short title of part

This part may be cited as the Independent Health Record Trust Act of 2008.

182.

Purpose

It is the purpose of this part to provide for the establishment of a nationwide health information technology network that—

(1)

improves health care quality, reduces medical errors, increases the efficiency of care, and advances the delivery of appropriate, evidence-based health care services;

(2)

promotes wellness, disease prevention, and the management of chronic illnesses by increasing the availability and transparency of information related to the health care needs of an individual;

(3)

ensures that appropriate information necessary to make medical decisions is available in a usable form at the time and in the location that the medical service involved is provided;

(4)

produces greater value for health care expenditures by reducing health care costs that result from inefficiency, medical errors, inappropriate care, and incomplete information;

(5)

promotes a more effective marketplace, greater competition, greater systems analysis, increased choice, enhanced quality, and improved outcomes in health care services;

(6)

improves the coordination of information and the provision of such services through an effective infrastructure for the secure and authorized exchange and use of health information; and

(7)

ensures that the health information privacy, security, and confidentiality of individually identifiable health information is protected.

183.

Definitions

In this part:

(1)

Access

The term access means, with respect to an electronic health record, entering information into such account as well as retrieving information from such account.

(2)

Account

The term account means an electronic health record of an individual contained in an independent health record trust.

(3)

Affirmative consent

The term affirmative consent means, with respect to an electronic health record of an individual contained in an IHRT, express consent given by the individual for the use of such record in response to a clear and conspicuous request for such consent or at the individual’s own initiative.

(4)

Authorized EHR data user

The term authorized EHR data user means, with respect to an electronic health record of an IHRT participant contained as part of an IHRT, any entity (other than the participant) authorized (in the form of affirmative consent) by the participant to access the electronic health record.

(5)

Confidentiality

The term confidentiality means, with respect to individually identifiable health information of an individual, the obligation of those who receive such information to respect the health information privacy of the individual.

(6)

Electronic health record

The term electronic health record means a longitudinal collection of information concerning a single individual, including medical records and personal health information, that is stored electronically.

(7)

Health information privacy

The term health information privacy means, with respect to individually identifiable health information of an individual, the right of such individual to control the acquisition, uses, or disclosures of such information.

(8)

Health plan

The term health plan means a group health plan (as defined in section 2208(1) of the Public Health Service Act (42 U.S.C. 300bb–8(1))) as well as a plan that offers health insurance coverage in the individual market.

(9)

HIPAA privacy regulations

The term HIPAA privacy regulations means the regulations promulgated under section 264(c) of the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 1320d–2 note).

(10)

Independent health record trust; IHRT

The terms independent health record trust and IHRT mean a legal arrangement under the administration of an IHRT operator that meets the requirements of this part with respect to electronic health records of individuals participating in the trust or IHRT.

(11)

IHRT operator

The term IHRT operator means, with respect to an IHRT, the organization that is responsible for the administration and operation of the IHRT in accordance with this part.

(12)

IHRT participant

The term IHRT participant means, with respect to an IHRT, an individual who has a participation agreement in effect with respect to the maintenance of the individual’s electronic health record by the IHRT.

(13)

Individually identifiable health information

The term individually identifiable health information has the meaning given such term in section 1171(6) of the Social Security Act (42 U.S.C. 1320d(6)).

(14)

Security

The term security means, with respect to individually identifiable health information of an individual, the physical, technological, or administrative safeguards or tools used to protect such information from unwarranted access or disclosure.

184.

Establishment, certification, and membership of independent health record trusts

(a)

Establishment

Not later than one year after the date of the enactment of this Act, the Federal Trade Commission, in consultation with the National Committee on Vital and Health Statistics, shall prescribe standards for the establishment, certification, operation, and interoperability of IHRTs to carry out the purposes described in section 182 in accordance with the provisions of this part.

(b)

Certification

(1)

Certification by FTC

The Federal Trade Commission shall provide for the certification of IHRTs. No IHRT may be certified unless the IHRT is determined to meet the standards for certification established under subsection (a).

(2)

Decertification

The Federal Trade Commission shall establish a process for the revocation of certification of an IHRT under this section in the case that the IHRT violates the standards established under subsection (a).

(c)

Membership

(1)

In general

To be eligible to be a participant in an IHRT, an individual shall—

(A)

submit to the IHRT information as required by the IHRT to establish an electronic health record with the IHRT; and

(B)

enter into a privacy protection agreement described in section 186(b)(1) with the IHRT.

The process to determine eligibility of an individual under this subsection shall allow for the establishment by such individual of an electronic health record as expeditiously as possible if such individual is determined so eligible.
(2)

No limitation on membership

Nothing in this subsection shall be construed to permit an IHRT to restrict membership, including on the basis of health condition.

185.

Duties of IHRT to IHRT participants

(a)

Fiduciary duty of IHRT; penalties for violations of fiduciary duty

(1)

Fiduciary duty

With respect to the electronic health record of an IHRT participant maintained by an IHRT, the IHRT shall have a fiduciary duty to act for the benefit and in the interests of such participant and of the IHRT as a whole. Such duty shall include obtaining the affirmative consent of such participant prior to the release of information in such participant’s electronic health record in accordance with the requirements of this part.

(2)

Penalties

If the IHRT knowingly or recklessly breaches the fiduciary duty described in paragraph (1), the IHRT shall be subject to the following penalties:

(A)

Loss of certification of the IHRT.

(B)

A fine that is not in excess of $50,000.

(C)

A term of imprisonment for the individuals involved of not more than 5 years.

(b)

Electronic health record deemed To be held in trust by IHRT

With respect to an individual, an electronic health record maintained by an IHRT shall be deemed to be held in trust by the IHRT for the benefit of the individual and the IHRT shall have no legal or equitable interest in such electronic health record.

186.

Availability and use of information from records in IHRT consistent with privacy protections and agreements

(a)

Protected electronic health records use and access

(1)

General rights regarding uses of information

(A)

In general

With respect to the electronic health record of an IHRT participant maintained by an IHRT, subject to paragraph (2)(C), primary uses and secondary uses (described in subparagraphs (B) and (C), respectively) of information within such record (other than by such participant) shall be permitted only upon the authorization of such use, prior to such use, by such participant.

(B)

Primary uses

For purposes of subparagraph (A) and with respect to an electronic health record of an individual, a primary use is a use for purposes of the individual’s self-care or care by health care professionals.

(C)

Secondary uses

For purposes of subparagraph (B) and with respect to an electronic health record of an individual, a secondary use is any use not described in subparagraph (B) and includes a use for purposes of public health research or other related activities. Additional authorization is required for a secondary use extending beyond the original purpose of the secondary use authorized by the IHRT participant involved. Nothing in this paragraph shall be construed as requiring authorization for every secondary use that is within the authorized original purpose.

(2)

Rules for primary use of records for health care purposes

With respect to the electronic health record of an IHRT participant (or specified parts of such electronic health record) maintained by an IHRT standards for access to such record shall provide for the following:

(A)

Access by IHRT participants to their electronic health records

(i)

Ownership

The participant maintains ownership over the entire electronic health record (and all portions of such record) and shall have the right to electronically access and review the contents of the entire record (and any portion of such record) at any time, in accordance with this subparagraph.

(ii)

Addition of personal information

The participant may add personal health information to the health record of that participant, except that such participant shall not alter information that is entered into the electronic health record by any authorized EHR data user. Such participant shall have the right to propose an amendment to information that is entered by an authorized EHR data user pursuant to standards prescribed by the Federal Trade Commission for purposes of amending such information.

(iii)

Identification of information entered by participant

Any additions or amendments made by the participant to the health record shall be identified and disclosed within such record as being made by such participant.

(B)

Access by entities other than IHRT participant

(i)

Authorized access only

Except as provided under subparagraph (C) and paragraph (4), access to the electronic health record (or any portion of the record)—

(I)

may be made only by authorized EHR data users and only to such portions of the record as specified by the participant; and

(II)

may be limited by the participant for purposes of entering information into such record, retrieving information from such record, or both.

(ii)

Identification of entity that enters information

Any information that is added by an authorized EHR data user to the health record shall be identified and disclosed within such record as being made by such user.

(iii)

Satisfaction of HIPAA privacy regulations

In the case of a record of a covered entity (as defined for purposes of HIPAA privacy regulations), with respect to an individual, if such individual is an IHRT participant with an independent health record trust and such covered entity is an authorized EHR data user, the requirement under the HIPAA privacy regulations for such entity to provide the record to the participant shall be deemed met if such entity, without charge to the IHRT or the participant—

(I)

forwards to the trust an appropriately formatted electronic copy of the record (and updates to such records) for inclusion in the electronic health record of the participant maintained by the trust;

(II)

enters such record into the electronic health record of the participant so maintained; or

(III)

otherwise makes such record available for electronic access by the IHRT or the individual in a manner that permits such record to be included in the account of the individual contained in the IHRT.

(iv)

Notification of sensitive information

Any information, with respect to the participant, that is sensitive information, as specified by the Federal Trade Commission, shall not be forwarded or entered by an authorized EHR data user into the electronic health record of the participant maintained by the trust unless the user certifies that the participant has been notified of such information.

(C)

Deemed authorization for access for emergency health care

(i)

Findings

Congress finds that—

(I)

given the size and nature of visits to emergency departments in the United States, readily available health information could make the difference between life and death; and

(II)

because of the case mix and volume of patients treated, emergency departments are well positioned to provide information for public health surveillance, community risk assessment, research, education, training, quality improvement, and other uses.

(ii)

Use of information

With respect to the electronic health record of an IHRT participant (or specified parts of such electronic health record) maintained by an IHRT, the participant shall be deemed as providing authorization (in the form of affirmative consent) for health care providers to access, in connection with providing emergency care services to the participant, a limited, authenticated information set concerning the participant for emergency response purposes, unless the participant specifies that such information set (or any portion of such information set) may not be so accessed. Such limited information set may include information—

(I)

patient identification data, as determined appropriate by the participant;

(II)

provider identification that includes the use of unique provider identifiers;

(III)

payment information;

(IV)

information related to the individual’s vitals, allergies, and medication history;

(V)

information related to existing chronic problems and active clinical conditions of the participant; and

(VI)

information concerning physical examinations, procedures, results, and diagnosis data.

(3)

Rules for secondary uses of records for research and other purposes

(A)

In general

With respect to the electronic health record of an IHRT participant (or specified parts of such electronic health record) maintained by an IHRT, the IHRT may sell such record (or specified parts of such record) only if—

(i)

the transfer is authorized by the participant pursuant to an agreement between the participant and the IHRT and is in accordance with the privacy protection agreement described in subsection (b)(1) entered into between such participant and such IHRT;

(ii)

such agreement includes parameters with respect to the disclosure of information involved and a process for the authorization of the further disclosure of information in such record;

(iii)

the information involved is to be used for research or other activities only as provided for in the agreement;

(iv)

the recipient of the information provides assurances that the information will not be further transferred or reused in violation of such agreement; and

(v)

the transfer otherwise meets the requirements and standards prescribed by the Federal Trade Commission.

(B)

Treatment of public health reporting

Nothing in this paragraph shall be construed as prohibiting or limiting the use of health care information of an individual, including an individual who is an IHRT participant, for public health reporting (or other research) purposes prior to the inclusion of such information in an electronic health record maintained by an IHRT.

(4)

Law enforcement clarification

Nothing in this part shall prevent an IHRT from disclosing information contained in an electronic health record maintained by the IHRT when required for purposes of a lawful investigation or official proceeding inquiring into a violation of, or failure to comply with, any criminal or civil statute or any regulation, rule, or order issued pursuant to such a statute.

(5)

Rule of construction

Nothing in this section shall be construed to require a health care provider that does not utilize electronic methods or appropriate levels of health information technology on the date of the enactment of this Act to adopt such electronic methods or technology as a requirement for participation or compliance under this part.

(b)

Privacy protection agreement; treatment of State privacy and security laws

(1)

Privacy protection agreement

A privacy protection agreement described in this subsection is an agreement, with respect to an electronic health record of an IHRT participant to be maintained by an independent health record trust, between the participant and the trust—

(A)

that is consistent with the standards described in subsection (a)(2);

(B)

under which the participant specifies the portions of the record that may be accessed, under what circumstances such portions may be accessed, any authorizations for indicated authorized EHR data users to access information contained in the record, and the purposes for which the information (or portions of the information) in the record may be used;

(C)

which provides a process for the authorization of the transfer of information contained in the record to a third party, including for the sale of such information for purposes of research, by an authorized EHR data user and reuse of such information by such third party, including a provision requiring that such transfer and reuse is not in violation of any privacy or transfer restrictions placed by the participant on the independent health record of such participant; and

(D)

under which the trust provides assurances that the trust will not transfer, disclose, or provide access to the record (or any portion of the record) in violation of the parameters established in the agreement or to any person or entity who has not agreed to use and transfer such record (or portion of such record) in accordance with such agreement.

(2)

Treatment of State laws

(A)

In general

Except as provided under subparagraph (B), the provisions of a privacy protection agreement entered into between an IHRT and an IHRT participant shall preempt any provision of State law (or any State regulation) relating to the privacy and confidentiality of individually identifiable health information or to the security of such health information.

(B)

Exception for privileged information

The provisions of a privacy protection agreement shall not preempt any provision of State law (or any State regulation) that recognizes privileged communications between physicians, health care practitioners, and patients of such physicians or health care practitioners, respectively.

(C)

State defined

For purposes of this section, the term State has the meaning given such term when used in title XI of the Social Security Act, as provided under section 1101(a) of such Act (42 U.S.C. 1301(a)).

187.

Voluntary nature of trust participation and information sharing

(a)

In general

Participation in an independent health record trust, or authorizing access to information from such a trust, is voluntary. No employer, health insurance issuer, group health plan, health care provider, or other person may require, as a condition of employment, issuance of a health insurance policy, coverage under a group health plan, the provision of health care services, payment for such services, or otherwise, that an individual participate in, or authorize access to information from, an independent health record trust.

(b)

Enforcement

The penalties provided for in subsection (a) of section 1177 of the Social Security Act (42 U.S.C. 1320d–6) shall apply to a violation of subsection (a) in the same manner as such penalties apply to a person in violation of subsection (a) of such section.

188.

Financing of activities

(a)

In general

Except as provided in subsection (b), an IHRT may generate revenue to pay for the operations of the IHRT through—

(1)

charging IHRT participants account fees for use of the trust;

(2)

charging authorized EHR data users for accessing electronic health records maintained in the trust;

(3)

the sale of information contained in the trust (as provided for in section 186(a)(3)(A)); and

(4)

any other activity determined appropriate by the Federal Trade Commission.

(b)

Prohibition against access fees for health care providers

For purposes of providing incentives to health care providers to access information maintained in an IHRT, as authorized by the IHRT participants involved, the IHRT may not charge a fee for services specified by the IHRT. Such services shall include the transmittal of information from a health care provider to be included in an independent electronic health record maintained by the IHRT (or permitting such provider to input such information into the record), including the transmission of or access to information described in section 186(a)(2)(C)(ii) by appropriate emergency responders.

(c)

Required disclosures

The sources and amounts of revenue derived under subsection (a) for the operations of an IHRT shall be fully disclosed to each IHRT participant of such IHRT and to the public.

(d)

Treatment of income

For purposes of the Internal Revenue Code of 1986, any revenue described in subsection (a) shall not be included in gross income of any IHRT, IHRT participant, or authorized EHR data user.

189.

Regulatory oversight

(a)

In general

In carrying out this part, the Federal Trade Commission shall promulgate regulations for independent health record trusts.

(b)

Establishment of Interagency Steering Committee

(1)

In general

The Secretary of Health and Human Services shall establish an Interagency Steering Committee in accordance with this subsection.

(2)

Chairperson

The Secretary of Health and Human Services shall serve as the chairperson of the Interagency Steering Committee.

(3)

Membership

The members of the Interagency Steering Committee shall consist of the Attorney General, the Chairperson of the Federal Trade Commission, the Chairperson for the National Committee for Vital and Health Statistics, a representative of the Federal Reserve, and other Federal officials determined appropriate by the Secretary of Health and Human Services.

(4)

Duties

The Interagency Steering Committee shall coordinate the implementation of this part, including the implementation of policies described in subsection (d) based upon the recommendations provided under such subsection, and regulations promulgated under this part.

(c)

Federal advisory committee

(1)

In general

The National Committee for Vital and Health Statistics shall serve as an advisory committee for the IHRTs. The membership of such advisory committee shall include a representative from the Federal Trade Commission and the chairperson of the Interagency Steering Committee. Not less than 60 percent of such membership shall consist of representatives of nongovernment entities, at least one of whom shall be a representative from an organization representing health care consumers.

(2)

Duties

The National Committee for Vital and Health Statistics shall issue periodic reports and review policies concerning IHRTs based on each of the following factors:

(A)

Privacy and security policies.

(B)

Economic progress.

(C)

Interoperability standards.

(d)

Policies recommended by Federal Trade Commission

The Federal Trade Commission, in consultation with the National Committee for Vital and Health Statistics, shall recommend policies to—

(1)

provide assistance to encourage the growth of independent health record trusts;

(2)

track economic progress as it pertains to operators of independent health records trusts and individuals receiving nontaxable income with respect to accounts;

(3)

conduct public education activities regarding the creation and usage of the independent health records trusts;

(4)

establish standards for the interoperability of health information technology to ensure that information contained in such record may be shared between the trust involved, the participant, and authorized EHR data users, including for the standardized collection and transmission of individual health records (or portions of such records) to authorized EHR data users through a common interface and for the portability of such records among independent health record trusts; and

(5)

carry out any other activities determined appropriate by the Federal Trade Commission.

(e)

Regulations promulgated by Federal Trade Commission

The Federal Trade Commission shall promulgate regulations based on, at a minimum, the following factors:

(1)

Requiring that an IHRT participant, who has an electronic health record that is maintained by an IHRT, be notified of a security breech with respect to such record, and any corrective action taken on behalf of the participant.

(2)

Requiring that information sent to, or received from, an IHRT that has been designated as high-risk should be authenticated through the use of methods such as the periodic changing of passwords, the use of biometrics, the use of tokens or other technology as determined appropriate by the council.

(3)

Requiring a delay in releasing sensitive health care test results and other similar information to patients directly in order to give physicians time to contact the patient.

(4)

Recommendations for entities operating IHRTs, including requiring analysis of the potential risk of health transaction security breeches based on set criteria.

(5)

The conduct of audits of IHRTs to ensure that they are in compliance with the requirements and standards established under this part.

(6)

Disclosure to IHRT participants of the means by which such trusts are financed, including revenue from the sale of patient data.

(7)

Prevention of certification of an entity seeking independent heath record trust certification based on—

(A)

the potential for conflicts between the interests of such entity and the security of the health information involved; and

(B)

the involvement of the entity in any activity that is contrary to the best interests of a patient.

(8)

Prevention of the use of revenue sources that are contrary to a patient’s interests.

(9)

Public disclosure of audits in a manner similar to financial audits required for publicly traded stock companies.

(10)

Requiring notification to a participating entity that the information contained in such record may not be representative of the complete or accurate electronic health record of such account holder.

(f)

Compliance report

Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Commission shall submit to the Committee on Health, Education, Labor, and Pensions and the Committee on Finance of the Senate and the Committee on Energy and Commerce and the Committee on Ways and Means of the House of Representatives, a report on compliance by and progress of independent health record trusts with this part. Such report shall describe the following:

(1)

The number of complaints submitted about independent health record trusts, which shall be divided by complaints related to security breaches, and complaints not related to security breaches, and may include other categories as the Interagency Steering Committee established under subsection (b) determines appropriate.

(2)

The number of enforcement actions undertaken by the Commission against independent health record trusts in response to complaints under paragraph (1), which shall be divided by enforcement actions related to security breaches and enforcement actions not related to security breaches and may include other categories as the Interagency Steering Committee established under subsection (b) determines appropriate.

(3)

The economic progress of the individual owner or institution operator as achieved through independent health record trust usage and existing barriers to such usage.

(4)

The progress in security auditing as provided for by the Interagency Steering Committee council under subsection (b).

(5)

The other core responsibilities of the Commission as described in subsection (a).

(g)

Interagency memorandum of understanding

The Interagency Steering Committee shall ensure, through the execution of an interagency memorandum of understanding, that—

(1)

regulations, rulings, and interpretations issued by Federal officials relating to the same matter over which 2 or more such officials have responsibility under this part are administered so as to have the same effect at all times; and

(2)

the memorandum provides for the coordination of policies related to enforcing the same requirements through such officials in order to have coordinated enforcement strategy that avoids duplication of enforcement efforts and assigns priorities in enforcement.

II

Fairness for Every American Patient

A

Medicaid Modernization

201.

Medicaid modernization

(a)

In general

Effective January 1, 2011, title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is amended to read as follows:

XIX

Grants to States for Medical Assistance Programs

TABLE OF CONTENTS OF TITLE

Sec. 1900. References to pre-modernized Medicaid provisions; continuity for commonwealths and territories.

Part A—Grants to States for Acute Care for Individuals with Disabilities and Certain Low-Income Individuals

Sec. 1901. Purpose; appropriation.

Sec. 1902. Payments to States for acute care medical assistance.

Sec. 1903. Definitions of eligible individuals and acute care medical assistance.

Sec. 1904. State plan requirements for acute care medical assistance.

Sec. 1905. Definitions.

Sec. 1906. Enrollment of individuals under group health plans and other arrangements.

Sec. 1907. Drug rebates.

Sec. 1908. Managed care.

Sec. 1909. Annual reports.

Part B—Grants to States for Long-Term Care Services and Supports

Sec. 1911. Purpose.

Sec. 1912. State plan.

Sec. 1913. State allotments.

Sec. 1914. Use of grants.

Sec. 1915. Administrative provisions.

Sec. 1916. Definition of long-term care services and supports.

Sec. 1917. Provision requirements for long-term care services and supports, including option for self-directed services and supports.

Sec. 1918. Treatment of income and resources for certain institutionalized spouses.

Sec. 1919. Annual reports.

Part C—Grants to States for Survey and Certification of Medical Facilities and Other Requirements

Sec. 1931. Authorization of appropriations.

Sec. 1932. Application of certain requirements under pre-modernized Medicaid.

Part D—Grants to States for Program Integrity

Sec. 1941. Authorization of appropriations.

Sec. 1942. Application of certain requirements under pre-modernized Medicaid.

Part E—Grants to States for Administration

Sec. 1951. Authorization of appropriations; payments to states.

Sec. 1952. Cost-sharing protections.

Sec. 1953. Application of certain requirements under pre-modernized Medicaid.

Part F—Other Provisions

Sec. 1961. Application of certain requirements under pre-modernized Medicaid.

1900.

References to pre-modernized Medicaid provisions; continuity for commonwealths and territories

(a)

In general

In this title, if a reference to this title or to a provision of this title is prefaced by the term old, such reference is to this title or a provision of this title as in effect on December 31, 2010.

(b)

Regulations

The Secretary shall promulgate regulations to bring requirements imposed under an old provision of this title that applies under this title after December 31, 2010, into conformity with the policies embodied in this title as in effect on and after January 1, 2011.

(c)

Continuity for commonwealths and territories

In the case of Puerto Rico, the United States Virgin Islands, Guam, the Northen Mariana Islands, and American Samoa, this title as in effect on and after January 1, 2011, shall not apply to such commonwealths and territories, and old title XIX shall apply to a Medicaid program operated by such commonwealths or territories on and after that date.

A

Grants to States for Acute Care for Individuals with Disabilities and Certain Low-Income Individuals

1901.

Purpose; appropriation

(a)

Purpose

It is the purpose of this part to enable each State, as far as practicable under the conditions in the State, to provide acute care medical assistance to eligible individuals described in section 1903 whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such individuals attain or retain capability for independence or self-care.

(b)

Appropriation

For the purpose of making payments to States under this part, there is appropriated out of any money in the Treasury not otherwise appropriated, such sums as are necessary for fiscal year 2011 and each fiscal year thereafter.

1902.

Payments to States for acute care medical assistance

(a)

In general

From the amounts appropriated under section 1901 for a fiscal year, the Secretary shall pay to each State which has a plan approved under this part, for each quarter, beginning with the quarter commencing January 1, 2011, an amount equal to the Federal medical assistance percentage (as defined in section 1905(b)) of the total amount expended during such quarter as acute care medical assistance under the State plan under this part.

(b)

Administrative expenses

Each State with a plan approved under this part shall receive a payment determined in accordance with part E for administrative expenses incurred in carrying out the plan under this part and part B (if the State has a plan approved under that part).

1903.

Definitions of eligible individuals and acute care medical assistance

(a)

Eligible individuals

(1)

In general

In this part, the term eligible individual means an individual—

(A)

who is—

(i)

a blind or disabled individual; or

(ii)

an individual described in paragraph (2); and

(B)

who the State determines satisfies—

(i)

the income and resources eligibility requirements established by the State under the State plan under this part; and

(ii)

such other requirements for assistance as are imposed under this title, including documentation of citizenship or status as a qualified alien under title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

(2)

Individuals described

For purposes of paragraph (1)(A)(ii), the following individuals are described in this paragraph:

(A)

A child in foster care under the responsibility of the State.

(B)

A low-income woman with breast or cervical cancer described in old section 1902(aa).

(C)

Certain TB-infected individuals described in old section 1902(z)(1).

(3)

Grandfathered individuals

An individual shall be an eligible individual under the State plan under this part if—

(A)

the individual is described in paragraph (1)(A);

(B)

the individual satisfies the documentation requirements referred to in paragraph (1)(B)(ii); and

(C)

the State would have provided medical assistance under the State plan under old title XIX to the individual, but only so long as the individual continues to satisfy such old eligibility requirements.

(4)

Concurrent eligibility for part B

An eligible individual under this part may be eligible under part B, but only if the individual satisfies the eligibility requirements of part B in addition to satisfying the requirements for eligibility under this part.

(5)

Presumptive eligibility for certain breast or cervical cancer patients

Old section 1920B (relating to presumptive eligibility for certain breast or cervical cancer patients) shall apply under this part.

(b)

Benefits

Subject to paragraph (3), in this part, the term acute care medical assistance means the following:

(1)

Mandatory benefits

The care and services listed in paragraphs (1) through (5), (17), and (21) of old section 1905(a) (but, in the case of paragraph (4)(A) of such section, without regard to any limitation based on age or services in an institution for mental diseases).

(2)

Optional benefits

Any care or services listed in a paragraph of old section 1905(a) (other than paragraph (16)).

(3)

Exceptions

(A)

Certain services limited to part B

Services described in paragraphs (15), (22), (23), (24), and (26) of old section 1905(a) shall only be provided under the State plan under part B.

(B)

Limit on provision of long-term care services and supports

A care or service that the Secretary determines is a long-term care service and support (including nursing facility services described in old section 1905(a)(4)(A)) shall not be provided to an individual under the State plan under this part for more than 30 days within any 12-month period.

(C)

Exclusions

Such term shall not include any payments with respect to care or services for any individual who is an inmate of a public institution or a patient in an institution for mental diseases (regardless of age).

1904.

State plan requirements for acute care medical assistance

(a)

In general

In order to receive payments under this part, a State shall have an approved State plan for acute care medical assistance. For purposes of this part, such assistance includes payments for preventive care, primary care, diagnosis and treatment of acute and chronic health conditions, emergency care, diagnosis and treatment of mental illnesses and related conditions, and rehabilitation and other services to help eligible individuals attain or retain capability for independence or self-care. A State medical assistance plan shall include a description, consistent with the requirements of this part of—

(1)

eligibility standards, including income and asset standards;

(2)

benefits, including the amount, duration, and scope of covered items and services;

(3)

strategies for improving access and quality of care; and

(4)

methods of service delivery.

(b)

Public availability of state plan

The State shall make available to the public the State plan under this part and any amendments submitted by the State to the plan.

(c)

Amount, duration, and scope

The State plan shall provide that the acute care medical assistance made available to any eligible individual shall not be less in amount, duration, or scope than the acute care medical assistance made available to any other eligible individual.

(d)

Application of certain pre-Modernized Medicaid requirements

(1)

Old state plan requirements

The following provisions of old section 1902 shall apply to the State plans under this part:

(A)

Old section 1902(a)(10)(C) (relating to certain eligibility and other requirements).

(B)

Old section 1902(a)(10)(D) (relating to home health services).

(C)

Old section 1902(a)(10)(G) (relating to nonapplication of certain supplemental security income eligibility criteria).

(D)

The subclauses in the flush matter following old section 1902(a)(10)(G) (relating to the provision of certain services) other than subclauses (V), (VII), (VIII), and (IX).

(E)

Old section 1902(a)(17) (relating to reasonable standards for determining eligibility).

(F)

Old section 1902(a)(19) (relating to eligibility safeguards).

(G)

Old section 1902(a)(34) (relating to eligibility beginning with the third month prior to the month of application).

(H)

Subparagraphs (A), (B), and (C) of old section 1902(a)(43) (relating to early and periodic screening, diagnostic, and treatment services).

(I)

Old section 1902(a)(46)(A) (relating to compliance with section 1137 requirements).

(J)

The fourth and sixth sentences of old section 1902(a) (relating to eligibility for certain individuals).

(2)

Other old title XIX requirements

(A)

Old section 1902(e)(3) (relating to optional eligibility for certain disabled individuals).

(B)

Old section 1902(e)(9) (relating to optional respiratory care services).

(C)

Old section 1902(f) (relating to eligibility of certain aged, blind, or disabled individuals).

(D)

Old section 1902(m) (relating to eligibility of certain aged or disabled individuals), other than paragraph (4).

(E)

Old section 1902(o) (relating to disregard of certain supplemental security income benefits).

(F)

Old section 1902(v) (relating to eligibility determinations of blind or disabled individuals).

(e)

Other requirements

The State plan under this part shall—

(1)

comply with the requirements of the other parts of this title; and

(2)

provide that the State will make the contributions specified under section 340A–1(e) of the Public Health Service Act .

1905.

Definitions

(a)

In general

The definitions specified in this section shall apply for purposes of this part and, to the extent applicable and consistent with the policy embodied in such part, parts B, C, D, E, and F.

(b)

Federal medical assistance percentage

The term Federal medical assistance percentage for any State shall be 100 percent less the State percentage; and the State percentage shall be that percentage which bears the same ratio to 45 percent as the square of the per capita income of such State bears to the square of the per capita income of the continental United States (including Alaska) and Hawaii, except that the Federal medical assistance percentage shall in no case be less than 50 percent or more than 83 percent. The Federal medical assistance percentage for any State shall be determined and promulgated in accordance with the provisions of section 1101(a)(8)(B).

(c)

Application of certain pre-Modernized Medicaid provisions

The following old provisions shall apply under this part:

(1)

Old section 1905 provisions

The following provisions of old section 1905:

(A)

Old section 1905(d) (relating to the definition of an intermediate care facility for the mentally retarded).

(B)

Old section 1905(e) (relating to the definition of physicians services).

(C)

Old section 1905(f) (relating to the definition of nursing facility services).

(D)

Old section 1905(g) (relating to the provision of chiropractors' services).

(E)

Old section 1905(j) (relating to State supplementary payments).

(F)

Old section 1905(k) (relating to supplemental security income benefits payable pursuant to section 211 of Public Law 93–66).

(G)

Old section 1905(l)(1) (relating to rural health clinic services).

(H)

Old section 1905(o) (relating to hospice care).

(I)

Old section 1905(q) (relating to the definition of a qualified severely impaired individual).

(J)

Old section 1905(r) (relating to the definition of early and periodic screening, diagnostic, and treatment services).

(K)

Old section 1905(s) (relating to the definition of a qualified disabled and working individual).

(L)

Old section 1905(t) (relating to the definition of primary care case management services).

(M)

Old section 1905(v) (relating to the definition of an employed individual with a medically improved disability).

(N)

Paragraphs (1) and (3) of old section 1905(w) (relating to the definition of an independent foster care adolescent).

(O)

Old section 1905(x) (relating to strategies, treatment, and services for individuals with Sickle Cell Disease).

(2)

Other old provisions

(A)

Old section 1903(m) (relating to the definition of a medicaid managed care organization).

1906.

Enrollment of individuals under group health plans and other arrangements

The following old provisions shall apply under this part:

(1)

Old section 1906 (relating to enrollment of individuals under group health plans).

(2)

Old section 1902(a)(70) (relating to State option to establish a non-emergency medical transportation brokerage program).

(3)

Paragraphs (2) and (11) of old section 1902(e) (relating to eligibility for individuals enrolled with a group health plan or under a managed care arrangement during a minimum enrollment period).

1907.

Drug rebates

Old sections 1902(a)(54) and 1927 (relating to payment for covered outpatient drugs and rebates) shall apply under this part.

1908.

Managed care

The following old provisions shall apply under this part:

(1)

Old section 1932 (relating to managed care), other than subsection (a)(2) of such section.

(2)

Old section 1903(k) (relating to technical and actuarial assistance for States).

1909.

Annual reports

(a)

In general

Each State that receives payments under this part shall submit an annual report to the Secretary, in such form and manner as the Secretary shall specify.

(b)

Application of old EPSDT reporting requirements

Each annual report shall include the information required to be reported under old section 1902(a)(43)(D)(iv).

B

Grants to States for Long-Term Care Services and Supports

1911.

Purpose

(a)

In general

The purpose of this part is to increase the flexibility of States in operating a system of long-term care services and supports designed to—

(1)

provide assistance to needy families so that individuals with disabilities and low-income senior citizens may be served and supported in their own homes and communities;

(2)

emphasize the independence and dignity of the person served by public programs;

(3)

end the institutional bias that existed under the Medicaid program prior to January 1, 2011;

(4)

provide stable and predictable funding for States as they rebalance their long-term care systems from institutions to communities;

(5)

provide flexibility to States to adopt new and innovative service delivery methods; and

(6)

promote independence and support activities that will enable individuals to return or maintain ties to the community, including through employment.

(b)

No individual entitlement

No individual determined eligible for long-term care services and supports under this part shall be entitled to a specific service or type of delivery of service.

1912.

State plan

(a)

In general

In order to receive payments under this part, a State must have an approved State plan for long-term care services and supports. A State long term care services and supports plan shall include a description, consistent with the requirements of this part, of—

(1)

income and assets eligibility standards and spousal impoverishment protections consistent with subsection (b);

(2)

the standardized assessments tools used to determine eligibility for specific long-term care services and supports;

(3)

the person-centered plans used to provide such services and supports;

(4)

the proposed uses of funding, if applicable, to provide targeted methods to meet individual level of support needs including tiering (preventive, emergency, low, medium, high); and

(5)

the long-term care services and supports to be available under the plan based on individual assessment of need in accordance with sections 1916 and 1917.

(b)

Minimum eligibility standards

(1)

Populations covered

The State plan shall specify the disabled and elderly populations who are eligible for long-term care services and supports.

(2)

Needs-based criteria

The plan shall include a description of the needs-based criteria the State will use to assess an individual's need for specific services and supports available under the State plan.

(3)

Other eligibility requirements

(A)

Income and assets

A State may use different income and asset standards and methodologies for determining eligibility than those used for determining eligibility for acute care medical assistance under part A. A State may not make eligibility standards related to income, asset, and spousal impoverishment protection more restrictive than the Federal minimum requirements of December 31, 2008.

(B)

Application of spousal impoverishment protections

The State plan shall provide that the State shall comply with the requirements of section 1918 (relating to spousal impoverishment protections).

(C)

Statewideness

The State plan shall provide that, except with respect to methods used for determining homestead exemptions, the income and asset standards and methodologies shall be in effect in all political subdivisions of the State.

(4)

Transition assistance

The State plan shall specify how the State will provide transition assistance for individuals who, on December 31, 2010, are enrolled under the State plan under old title XIX (or under a waiver of that plan) and receiving long-term care services or supports on that date. The State shall provide such assistance to individuals who are and are not likely to be determined eligible for long-term care services and supports under the State plan under this part, as in effect on January 1, 2011 (or the first day on which the State plan is in effect under this part).

(c)

Payment methodologies to providers

(1)

In general

The State plan shall describe the methodologies used to determine payments to providers. Such methodologies—

(A)

may be varied to assist in transitioning from facilities-based to community-based care; and

(B)

shall not be subject to Secretarial approval.

(2)

Transparency

The State plan shall provide that the State shall make publicly available—

(A)

the payment methodologies applicable under the plan; and

(B)

the name of any provider that receives $1,000,000 or more in any 12-month period and the actual amount paid to the provider during that period.

(d)

Coordination of effort with other related public and private programs

The plan shall include a description of the State's efforts to coordinate the delivery of services and supports under the plan with other related public and private programs that serve individuals with disabilities or aged populations that need or may be at risk of needing long term care.

(e)

Public availability of state plan

The State shall make available to the public the State plan under this part and any amendments submitted by the State to the plan.

(f)

Application of old title XIX requirements

The following old title XIX provisions shall apply to a State plan under this part:

(1)

Subsections (a)(50) and (q) of old section 1902 (relating to a monthly personal needs allowance for certain institutionalized individuals and couples).

(2)

Old section 1902(a)(67) (relating to payment for certain services furnished to a PACE program eligible individual).

(3)

Paragraph (1) of old section 1902(r) (relating to the post-eligibility treatment of income for certain individuals) and paragraph (2) of such section (relating to methodologies for determining income and resource eligibility for individuals, but only with respect to individuals who are eligible under this part on or after January 1, 2011).

(4)

Old section 1905(i) (relating to the definition of an institution for mental diseases).

(g)

Other requirements of other parts

The State plan under this part shall—

(1)

comply with the requirements of the other parts of this title; and

(2)

provide that the State will make the contributions specified under section 340A–1(e) of the Public Health Service Act.

1913.

State allotments

(a)

Appropriation

For the purpose of providing allotments to States under this section, there is appropriated out of any money in the Treasury not otherwise appropriated—

(1)

for fiscal year 2011, $65,274,560,000;

(2)

for fiscal year 2012, $67,885,540,000;

(3)

for fiscal year 2013, $70,600,964,100;

(4)

for fiscal year 2014, $73,425,000,000;

(5)

for fiscal year 2015, $76,362,000,000;

(6)

for fiscal year 2016, $79,416,480,000;

(7)

for fiscal year 2017, $82,593,140,000;

(8)

for fiscal year 2018, $85,896,870,000; and

(9)

for fiscal year 2019, $89,332,743,000.

(b)

Allotments to 50 States and the District of Columbia

(1)

Fiscal year 2011 allotments

Subject to subsection (e), the Secretary shall allot to each State with a long term care plan approved under this title an amount in fiscal year 2011 equal to the Federal expenditures made by the State for long-term care as defined in section 1916 in fiscal year 2008, increased by 8 percent.

(2)

Subsequent fiscal year allotments

For fiscal year 2012 and each subsequent fiscal year through fiscal year 2019, the allotment for a State under this section is equal to the allotment for the State determined for the preceding fiscal year, increased by 4 percent.

(c)

Limitation

(1)

In general

Except as provided in paragraph (2), no other Federal funds are available under this title for expenditures incurred for long-term care services and supports after December 31, 2010, except as provided under a State plan approved under this part.

(2)

Exception

(A)

In general

If a State does not have an approved State plan by October 1, 2010, the Secretary may make payments equal to 85 percent of the State’s estimated quarterly allotment until June 30, 2011.

(B)

Full funding

A State shall receive 100 percent of its allotment for fiscal year 2011 if the State has a plan approved under this part by June 30, 2011.

(d)

Maintenance of effort

In order to qualify for the grant payable under this section, the State must demonstrate in each fiscal year that it made long-term care service and supports expenditures (including funding from local government sources) equal to the amount of not less than 95 percent of the nonfederal share amount spent in fiscal year 2009 under the State plan under old title XIX on long term care services and supports (as defined in section 1916). Expenditures not made under this part shall not be recognized by the Secretary for purposes of this requirement.

(e)

Grants reduced if insufficient appropriations

(1)

In general

If the amount appropriated for fiscal year 2011 under subsection (a)(1) is less than the amount necessary to fund each State’s allotment for that fiscal year, the Secretary shall reduce the allotment for each State for that fiscal year based on the applicable percentage determined for the State under paragraph (2) provide a reduced percentage basis as follows: Each state shall receive a percentage of its allotment based on the ratio of non-institutional spending to total long term care spending in FY 2009.

(2)

Applicable percentage

For purposes of paragraph (1), the applicable percentage determined with respect to a State is as follows:

If the ratio of the State's non-institutional spending to total long-term care spending for fiscal year 2009 is:The applicable percentage is:
50 percent or greater100
at least 46, but less than 50 percent99
at least 40, but less than 46 percent98
at least 36, but less than 4097
at least 30, but less than 3696
less than 30 percent95.
(f)

Administrative expenses

(1)

In general

Each State with a plan approved under this part shall receive a payment determined in accordance with amounts appropriated for part E for administrative expenses incurred in carrying out the plan under this part and part A.

(2)

Assessment-related costs

Costs attributable to providing an individualized needs-based assessment for purposes of identifying the long-term care services and supports to be provided under the State plan to an individual shall be considered a long-term care service and support and shall not be treated as an administrative expense.

1914.

Use of grants

(a)

In general

A State shall use funds for long-term care services and supports as defined in section 1916.

(b)

Self-Direction

A State shall offer individuals the opportunity to self-direct their long-term care services and supports.

1915.

Administrative provisions

(a)

Funding on a quarterly basis

The Secretary shall make payments to States in equal amounts of a State’s annual allotment on a quarterly basis. Each quarterly payment shall remain available for use by the State for twelve succeeding fiscal year quarters.

(b)

Publication

The Secretary shall public each State’s applicable allotment.

1916.

Definition of long-term care services and supports

(a)

Definition

(1)

In general

Subject to subsection (e), in this part, the term long-term care services and supports means any of the services or supports specified in paragraphs (2) or (3) that may be provided in a nursing facility, an institution, a home, or other setting.

(2)

Services and supports described

For purposes of paragraph (1), the services and supports described in this paragraph include assistive technology, adaptive equipment, remote monitoring equipment, case management for the aged, case management for individuals with disabilities, nursing home services, long-term rehabilitative services necessary to restore functional abilities, services provided in intermediate care facilities for people with disabilities, habilitation services (including adult day care programs), community treatment teams for individuals with mental illness, home health services, services provided in an institution for mental disease, a Program of All-Inclusive Care for the Elderly (PACE), personal care (including personal assistance services), recovery support including peer counseling, supportive employment, training skills necessary to assist the individual in achieving or maintaining independence, training of family members including foster parents in supportive and behavioral modification skills, ongoing and periodic training to maintain life skills, transitional care including room and board not to exceed 60 days within a 12-month period.

(3)

Inclusion of certain benefits under old title XIX

Such services and supports may include any of the following services:

(A)

Old section 1905(a)(15) (relating to services in an intermediate care facility for the mentally retarded).

(B)

Services described in subsections (a)(16) and (h) of old section 1905, but without regard to any restriction on such services on the basis of age (relating to inpatient psychiatric hospital services).

(C)

Old section 1905(a)(22) (relating to home and community care (to the extent allowed and as defined in old section 1929) for functionally disabled elderly individuals).

(D)

Old section 1905(a)(23) (relating to community supported living arrangements services (to the extent allowed and as defined in old section 1930)).

(E)

Subject to subsection (e), old section 1905(a)(24) but without regard to any restriction on furnishing services to patients or residents of facilities or institutions (relating to personal care services).

(F)

Old sections 1905(a)(26) and 1934 (relating to services furnished under a PACE program under old section 1934 to PACE program eligible individuals enrolled under the program under such old section).

(G)

Old section 1915(c)(5) (relating to the definition of habilitation services).

(4)

Limitation

Long-term care services and supports cannot be used for services and administrative costs provided through the foster care (with the exception of training of foster care parents), child welfare, adult protective services, juvenile justice, public guardianship, or correctional systems.

(b)

Rehabilitative care

For purposes of rehabilitation due to acute care medical needs, a State may claim rehabilitative services provided in an institutional setting, nursing home, or as part of home health expenditures as acute care benefits under the State plan under part A rather than under the State plan under this part for a cumulative period of 30 days within a 12-month period if such care is directly related to the onset of an acute care need. A State shall demonstrate the services were provided as a direct result of an acute care need.

(c)

Managed care

If a State provides long-term care services and supports through managed care, the State shall submit a methodology for determining the level of expenditures attributed to long term care for approval by the Secretary.

(d)

Application of part A definitions

A definition specified in section 1905 shall apply to the same term used in this part, unless the Secretary determines that the application of such definition would be inconsistent with the purpose of this part.

(e)

Exclusion

No payments shall be made under the State plan under this part with respect to long-term care supports and services provided for any individual who is an inmate of a public institution. Nothing in the preceding sentence shall be construed as precluding the provision of long-term care services and supports under the State plan under this part to an individual who is a patient in an institution for mental diseases.

1917.

Provision requirements for long-term care services and support, including option for self-directed services and supports

(a)

Requirements for the provision of long-term care services and supports

(1)

In general

Subject to the succeeding provisions of this subsection, a State may provide through a State plan amendment for the provision of long-term care services and supports for individuals eligible under the State plan under this part, subject to the following requirements:

(A)

Needs-based criteria for eligibility for, and receipt of, long-term care services and supports

The State establishes needs-based criteria for determining an individual's eligibility under the State plan for medical assistance for such long-term care services and supports, and if the individual is eligible for such services and supports, the specific services and supports that will be available under the State plan to the individual.

(B)

Criteria for institutionalized versus non-institutionalized services

In establishing needs-based criteria, the State may establish criteria for determining eligibility for, and receipt of, services and supports provided in a facility or institution that are more stringent that the criteria established for eligibility and receipt of services and supports in a non-facility or non-institutionalized setting.

(C)

Authority to limit number of eligible individuals

A State may limit the number of individuals who are eligible for such services and supports and may establish waiting lists for the receipt of such services and supports.

(D)

Criteria based on individual assessment

(i)

In general

The criteria established by the State shall require an assessment of an individual's support needs and capabilities, and may take into account the inability of the individual to perform 2 or more activities of daily living (as defined in section 7702B(c)(2)(B) of the Internal Revenue Code of 1986) or the need for significant assistance to perform such activities, and such other risk factors as the State determines to be appropriate.

(ii)

Adjustment authority

The State plan amendment provides the State with the option to modify the criteria established under subparagraph (A) (without having to obtain prior approval from the Secretary) in the event that the enrollment of individuals eligible for services exceeds the projected enrollment, but only if—

(I)

the State provides at least 60 days notice to the Secretary and the public of the proposed modification;

(II)

the State deems an individual receiving long-term care services and supports on the basis of the most recent version of the criteria in effect prior to the effective date of the modification to be eligible for such services and supports for a period of at least 12 months beginning on the date the individual first received medical assistance for such services and supports; and

(III)

after the effective date of such modification, the State, at a minimum, applies the criteria for determining whether an individual requires the level of care provided in a facility or institutionalized setting which applied under the State plan immediately prior to the application of the modified criteria.

(E)

Independent evaluation and assessment

(i)

Eligibility determination

The State uses an independent evaluation for making the determinations described in subparagraph (A).

(ii)

Assessment

In the case of an individual who is determined to be eligible for long-term care services and supports, the State uses an independent assessment, based on the needs of the individual to—

(I)

determine a necessary level of services and supports to be provided, consistent with an individual's physical and mental capacity;

(II)

prevent the provision of unnecessary or inappropriate care; and

(III)

establish an individualized care plan for the individual in accordance with subparagraph (G).

(F)

Assessment

The independent assessment required under subparagraph (E)(ii) shall include the following:

(i)

An objective evaluation of an individual's inability to perform 2 or more activities of daily living (as defined in section 7702B(c)(2)(B) of the Internal Revenue Code of 1986) or the need for significant assistance to perform such activities.

(ii)

A face-to-face evaluation of the individual by an individual trained in the assessment and evaluation of individuals whose physical or mental conditions trigger a potential need for long-term care services and supports.

(iii)

Where appropriate, consultation with the individual's family, spouse, guardian, or other responsible individual.

(iv)

Consultation with appropriate treating and consulting health and support professionals caring for the individual.

(v)

An examination of the individual's relevant history, medical records, and care and support needs, guided by best practices and research on effective strategies that result in improved health and quality of life outcomes.

(vi)

An evaluation of the ability of the individual or the individual's representative to self-direct the purchase of, or control the receipt of, such services and supports if the individual so elects.

(G)

Individualized care plan

(i)

In general

In the case of an individual who is determined to be eligible for long-term care services and supports, the State uses the independent assessment required under subparagraph (E)(ii) to establish a written individualized care plan for the individual.

(ii)

Plan requirements

The State ensures that the individualized care plan for an individual—

(I)

is developed—

(aa)

in consultation with the individual, the individual's treating physician, health care or support professional, or other appropriate individuals, as defined by the State, and, where appropriate the individual's family, caregiver, or representative; and

(bb)

taking into account the extent of, and need for, any family or other supports for the individual;

(II)

identifies the long-term care services and supports to be furnished to the individual (or, if the individual elects to self-direct the purchase of, or control the receipt of, such services and supports, funded for the individual); and

(III)

is reviewed at least annually and as needed when there is a significant change in the individual's circumstances.

(iii)

State requirement to offer election for self-directed services and supports

(I)

Individual choice

The State shall allow an individual or the individual's representative the opportunity to elect to receive self-directed long-term care services and supports in a manner which gives them the most control over such services and supports consistent with the individual's abilities and the requirements of subclauses (II) and (III).

(II)

Self-directed

The term self-directed means, with respect to the long-term care services and supports offered under the State plan amendment, such services and supports for the individual which are planned and purchased under the direction and control of such individual or the individual's authorized representative, including the amount, duration, scope, provider, and location of such services and supports, under the State plan consistent with the following requirements:

(aa)

Assessment

There is an assessment of the needs, capabilities, and preferences of the individual with respect to such services and supports.

(bb)

Service plan

Based on such assessment, there is developed jointly with such individual or the individual's authorized representative a plan for such services and supports for such individual that is approved by the State and that satisfies the requirements of subclause (III).

(III)

Plan requirements

For purposes of subclause (II)(bb), the requirements of this subclause are that the plan—

(aa)

specifies those services and supports which the individual or the individual's authorized representative would be responsible for directing;

(bb)

identifies the methods by which the individual or the individual's authorized representative will select, manage, and dismiss providers of such services and supports;

(cc)

specifies the role of family members and others whose participation is sought by the individual or the individual's authorized representative with respect to such services and supports;

(dd)

is developed through a person-centered process that is directed by the individual or the individual's authorized representative, builds upon the individual's capacity to engage in activities that promote community life and that respects the individual's preferences, choices, and abilities, and involves families, friends, and professionals as desired or required by the individual or the individual's authorized representative;

(ee)

includes appropriate risk management techniques that recognize the roles and sharing of responsibilities in obtaining services and supports in a self-directed manner and assure the appropriateness of such plan based upon the resources and capabilities of the individual or the individual's authorized representative; and

(ff)

may include an individualized budget which identifies the dollar value of the services and supports under the control and direction of the individual or the individual's authorized representative.

(IV)

Budget process

With respect to individualized budgets described in subclause (III)(ff), the State plan amendment—

(aa)

describes the method for calculating the dollar values in such budgets based on reliable costs and service utilization;

(bb)

defines a process for making adjustments in such dollar values to reflect changes in individual assessments and service plans; and

(cc)

provides a procedure to evaluate expenditures under such budgets.

(H)

Quality assurance; conflict of interest standards

(i)

Quality assurance

The State ensures that the provision of long-term care services and supports meets Federal and State guidelines for quality assurance.

(ii)

Conflict of interest standards

The State establishes standards for the conduct of the independent evaluation and the independent assessment to safeguard against conflicts of interest.

(I)

Redeterminations and appeals

The State allows for at least annual redeterminations of eligibility, and appeals in accordance with the frequency of, and manner in which, redeterminations and appeals of eligibility are made under the State plan.

(J)

Presumptive eligibility for assessment

The State, at its option, elects to provide for a period of presumptive eligibility (not to exceed a period of 60 days) only for those individuals that the State has reason to believe may be eligible for long-term care services and supports. Such presumptive eligibility shall be limited to medical assistance for carrying out the independent evaluation and assessment under subparagraph (E) to determine an individual's eligibility for such services and if the individual is so eligible, the specific long-term care services and supports that the individual will receive.

(2)

Definition of individual's representative

In this section, the term individual's representative means, with respect to an individual, a parent, a family member, or a guardian of the individual, an advocate for the individual, or any other individual who is authorized to represent the individual.

(b)

Self-Directed personal assistance services

If a State includes personal care or personal assistance services in the long-term care services and supports available under the State plan, the State shall comply with the requirements of old section 1915(j) in the case of an individual who elects to self-direct the receipt of such care or services.

1918.

Treatment of income and resources for certain institutionalized spouses

Old section 1924 (relating to treatment of income and resources for certain institutionalized spouses), other than paragraphs (2) and (4)(A) of subsection (a) of such section, shall apply under this part.

1919.

Annual reports

(a)

In general

Each State that receives payments under this part shall submit an annual report to the Secretary, in such form and manner as the Secretary shall specify.

(b)

Requirements

The report shall include the following with respect to the most recent fiscal year ended:

(1)

The number of individuals served under the plan.

(2)

The number of individuals served by tier (preventive, emergency, low, medium, and high needs).

(3)

The number of individuals known to the State on waiting list for services (if any) and type of disability (physical, developmental, mental health) or aged.

(4)

Expenditures by service category.

C

Grants to States for Survey and Certification of Medical Facilities and Other Requirements

1931.

Authorization of appropriations

For the purpose of carrying our Federal activities and providing grants to States for expenses necessary to carry out this part, there is authorized to be appropriated—

(1)

for fiscal year 2011, $300,000,000; and

(2)

for each succeeding fiscal year, the amount authorized under this section for the preceding fiscal year, increased by 5 percent.

1932.

Application of certain requirements under pre-modernized Medicaid

The following old provisions shall apply under this part:

(1)

Old section 1902(a)(9) (relating to health standards and applicable requirements for laboratory services).

(2)

Old section 1902(a)(28) (relating to nursing facilities and nursing facility services).

(3)

Old sections 1902(a)(29) and 1908 (relating to a State program for the licensing of administrators of nursing homes).

(4)

Old section 1902(a)(33)(B) (relating to licensing health institutions).

(5)

Old section 1902(d) (relating to medical or utilization review functions).

(6)

Old section 1902(i) (relating to intermediate care facilities for the mentally retarded).

(7)

Old section 1902(y) (relating to psychiatric hospitals).

(8)

Paragraphs (2) and (6) of old section 1903(g) (relating to the Secretarial requirement to conduct sample onsite surveys of private and public institutions and recertifications for the need for certain services).

(9)

Old section 1903(q)(4)(B) (relating to the definition of a board and care facility).

(10)

Old section 1910 (relating to certification and approval of rural health clinics and intermediate care facilities for the mentally retarded).

(11)

Old section 1911 (relating to Indian Health Service facilities).

(12)

Old section 1913 (relating to hospital providers of nursing facility services).

(13)

Old section 1919 (relating to requirements for nursing facilities).

D

Grants to States for Program Integrity

1941.

Authorization of appropriations

(a)

In general

For the purpose of carrying out Federal activities under this part and providing grants to States for expenses necessary to carry out this part, there is authorized to be appropriated—

(1)

for fiscal year 2011, $100,000,000; and

(2)

for each succeeding fiscal year, the amount authorized under this section for the preceding fiscal year, increased by 5 percent.

(b)

Availability; authority for use of funds

(1)

Availability

Amounts appropriated pursuant to subsection (a) shall remain available until expended.

(2)

Authority for use of funds for transportation and travel expenses for attendees at education, training, or consultative activities

(A)

In general

The Secretary may use amounts appropriated pursuant to subsection (a) to pay for transportation and the travel expenses, including per diem in lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business, of individuals described in subsection (b)(4) who attend education, training, or consultative activities conducted under the authority of that subsection.

(B)

Public disclosure

The Secretary shall make available on a website of the Centers for Medicare & Medicaid Services that is accessible to the public—

(i)

the total amount of funds expended for each conference conducted under the authority of subsection (b)(4); and

(ii)

the amount of funds expended for each such conference that were for transportation and for travel expenses.

(c)

Annual report

Not later than 180 days after the end of each fiscal year, the Secretary shall submit a report to Congress which identifies—

(1)

the use of funds appropriated pursuant to subsection (a); and

(2)

the effectiveness of the use of such funds.

1942.

Application of certain requirements under pre-modernized Medicaid

The following old provisions shall apply under this part:

(1)

Old subsections (a)(25) (other than subparagraph (E)) and (g) of section 1902 and section 1903(o) (relating to third party liability).

(2)

Old section 1902(a)(30)(B) (relating to hospital, intermediate care facility for the mentally retarded, or hospital for mental diseases admission screening and review requirements).

(3)

Old section 1902(a)(32) (relating to certain payment requirements).

(4)

Old section 1902(a)(35) (relating to disclosing entities under section 1124).

(5)

Old section 1902(a)(37) and the fifth sentence (relating to claims payment procedures).

(6)

Old section 1902(a)(44) (relating to payment for inpatient hospital services, services in an intermediate care facility for the mentally retarded, or inpatient mental hospital services).

(7)

Old sections 1902(a)(45) and 1912 (relating to assignment of rights of payment).

(8)

Old sections 1902(a)(49) and 1921 (relating to information and access to information concerning sanctions taken by State licensing authorities against health care practitioners and providers).

(9)

Old sections 1902(a)(61) and 1903(q) (relating to requirements for a medicaid fraud and abuse control unit).

(10)

Old section 1902(a)(64) (relating to reports from beneficiaries and others and data compilation requirements concerning alleged instances of waste, fraud, and abuse).

(11)

Old section 1902(a)(65) (relating to provider number and surety bond requirement for suppliers of durable medical equipment).

(12)

Old section 1902(a)(68) (relating to requirements for certain entities).

(13)

Old sections 1902(a)(69) and 1936 (relating to the Medicaid Integrity Program) other than paragraphs (1), (2)(A), and (3) of old section 1936(e).

(14)

Old section 1902(a)(70)(B)(iv) (relating to prohibitions on referrals and conflict of interest for certain brokers of non-emergency medical transportation).

(15)

Old sections 1902(a)(71) and 1940 (relating to a required asset verification program).

(16)

Old section 1902(p) (relating to exclusion of certain individuals or entities).

(17)

Old section 1902(x) (relating to unique identifiers for physicians).

(18)

Old section 1903(p) (relating to interstate collection of rights of support).

(19)

Old section 1903(r)(2) (relating to requirements for mechanized claims processing and information retrieval systems).

(20)

Old section 1903(u) (relating to erroneous excess payments), other than clause (v) of paragraph (1)(D).

(21)

Old section 1903(v) and the seventh sentence of old section 1902(a) (relating to limitations on payments for services furnished to aliens), other than subparagraphs (A) and (B) of paragraph (4).

(22)

Old section 1903(x) (relating to citizenship documentation).

(23)

Old section 1909 (relating to State false claims act requirements for increased State share of recoveries).

(24)

Old section 1914 (relating to withholding of Federal share of payments for certain Medicare providers).

(25)

Old section 1917 (relating to liens, adjustments and recoveries, and transfers of assets).

(26)

Old section 1922 (relating to correction and reduction plans for intermediate care facilities for the mentally retarded).

E

Grants to States for Administration

1951.

Authorization of appropriations; payments to states

(a)

In general

For the purpose of providing grants to States for administrative expenses necessary to carry out parts A and B, there is authorized to be appropriated—

(1)

for fiscal year 2011, $7,000,000,000; and

(2)

for each succeeding fiscal year, the amount authorized under this subsection for the preceding fiscal year, increased by 3 percent.

(b)

Payments to States

(1)

In general

From the amount appropriated pursuant to subsection (a) for a fiscal year, the Secretary shall pay each State with approved plans under parts A and B for the fiscal year an amount equal to the product of the amount appropriated for the fiscal year and the ratio of the total amount of payments made to the State under paragraphs (2) through (7) of section 1903(a) for fiscal year 2008 (as such section was in effect for that fiscal year) to the total amount of such payments made to all States for such fiscal year.

(2)

Pro rata adjustment

The Secretary shall make pro rata adjustments to the amounts determined under paragraph (1) for a fiscal year as necessary so as to not exceed the amount appropriated pursuant to subsection (a) for the fiscal year.

1952.

Cost-sharing protections

(a)

In general

A State may impose cost-sharing for individuals provided acute care medical assistance under a State plan under part A or long-term care services and supports under a State plan under part B consistent with the following:

(1)

The State may (in a uniform manner) require payment of monthly premiums or other cost-sharing set on a sliding scale based on family income.

(2)

A premium or other cost-sharing requirement imposed under paragraph (1) may only apply to the extent that, in the case of an individual whose family income—

(A)

exceeds 150 percent of the poverty line, the aggregate annual amount of such premium and other cost-sharing charges imposed under the plan does not exceed 5 percent of the individual's annual income; and

(B)

exceeds 250 percent of the poverty line, the aggregate annual amount of such premium and other cost-sharing charges do not exceed 7.5 percent of the individual's annual income.

(3)

A State shall not require prepayment of any premium or cost-sharing imposed pursuant to paragraph (1) and shall not terminate eligibility of an individual under the State plan on the basis of failure to pay any such premium or cost-sharing until such failure continues for a period of at least 60 days from the date on which the premium or cost-sharing became past due. The State may waive payment of any such premium or cost-sharing in any case where the State determines that requiring such payment would create an undue hardship.

(b)

Application to institutionalized individuals

A State may impose cost-sharing consistent with subsection (a) to individuals who are patients in, or residents of, a medical institution or nursing facility except that rules relating to the post-eligibility treatment of income (including a minium monthly personal needs allowance) applicable to institutionalized individuals under old title XIX shall apply in the same manner to individuals eligible for long-term care services and supports under a State plan under part B.

(c)

Poverty line defined

In this section, the term poverty line has the meaning given such term in section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2)), including any revision required by such section.

1953.

Application of certain requirements under pre-modernized Medicaid

The following old provisions shall apply to the State plans under this title:

(1)

Old State plan requirements

(A)

Old section 1902(a)(1) (relating to the requirement for plans to be in effect in all political subdivisions of the State).

(B)

Old section 1902(a)(2) (relating to State financial participation).

(C)

Old section 1902(a)(3) (relating to opportunity for a fair hearing).

(D)

Old section 1902(a)(4) (relating to administration).

(E)

Old section 1902(a)(5) (relating to designation of a single State agency).

(F)

Old section 1902(a)(6) (relating to reporting requirements).

(G)

Old section 1902(a)(7) (relating to restrictions on the use or disclosure of information).

(H)

Old section 1902(a)(8) (relating to applications for assistance).

(I)

Old section 1902(a)(11) (relating to cooperative agreements with other State agencies).

(J)

Old section 1902(a)(12) (relating to determinations of blindness).

(K)

Old section 1902(a)(13) (relating to determination of rates of payment for certain services), other than clause (iv) of subparagraph (A).

(L)

Subsections (a)(15) and (bb) of old section 1902(a) (relating to payment for services provided by rural health clinics and federally qualified health centers).

(M)

Old section 1902(a)(16) (relating to furnishing services to individuals when absent from the State).

(N)

Old section 1902(a)(22) (relating to certain administrative provisions).

(O)

Paragraphs (23) and (25)(D) of old section 1902(a) (relating to any willing provider requirements).

(P)

Old section 1902(a)(24) (relating to consultative services by other agencies).

(Q)

Old section 1902(a)(26) (relating to review of need for inpatient mental hospital services and written plan of care requirements).

(R)

Old section 1902(a)(27) (relating to provider record keeping requirements).

(S)

Old section 1902(a)(30)(A) (relating to utilization review).

(T)

Old section 1902(a)(31) (relating to written plan of care for services and review for intermediate care facility for the mentally retarded services).

(U)

Old section 1902(a)(33)(A) (relating to quality review requirements).

(V)

Old section 1902(a)(36) (relating to public availability of facility surveys).

(W)

Old section 1902(a)(38) (relating to the provision of information described in section 1128(b)(9) by certain entities).

(X)

Old section 1902(a)(39) (relating to the exclusion of certain entities).

(Y)

Old section 1902(a)(40) (relating to requirement for uniform reporting systems).

(Z)

Old section 1902(a)(41) (relating to notice to State medical licensing boards).

(AA)

Old section 1902(a)(42) (relating to certain audit requirements).

(BB)

Old section 1902(a)(48) (relating to eligibility cards).

(CC)

Old section 1902(a)(55) (relating to the receipt and initial processing of applications, but only to the extent such section is consistent with the policy embodied in the State plans under parts A and B).

(DD)

Subsections (a)(56) and (s) of old section 1902 (relating to adjusted payments for certain inpatient hospital services).

(EE)

Old section 1902(a)(59) (relating to maintenance of list of participating physicians).

(FF)

The second sentence of old section 1902 (relating to designation of certain State agencies).

(GG)

Old section 1902(b) (relating to limitations on approval of plans).

(HH)

Old section 1902(j) (relating to application of requirements to American Samoa and the Northern Mariana Islands).

(2)

Other old title XIX requirements

(A)

Old section 1903(b)(4) (relating to limitations on payments to enrollment brokers).

(B)

Old section 1903(c) (relating to furnishing of services included in a program or plan under part B or C of the Individuals with Disabilities Education Act).

(C)

Old section 1903(d) (relating to payments).

(D)

Old section 1903(e) (relating to costs with respect to certain hospital services).

(E)

Old section 1903(i) (relating to limitations on payments).

(F)

Old section 1903(r) (relating to requirements for mechanized claims processing and information retrieval systems).

(G)

Subsections (b)(5) and (w) of old section 1903 (relating to limitations on payments related to provider taxes).

(H)

Old section 1904 (relating to operation of State plans).

(I)

Old sections 1902(a)(60) and 1908A (relating to medical child support).

(J)

Paragraphs (32)(D) and (62) of old section 1902(a) and section 1928 (relating to program for distribution of pediatric vaccines).

F

Other Provisions

1961.

Application of certain requirements under pre-modernized Medicaid

The following old provisions shall apply under this part:

(1)

The third sentence of old section 1902 (relating to nonapplication of certain old provisions to a religious nonmedical health care institution).

(2)

Old section 1918 (relating to application of provisions of title II relating to subpoenas).

(3)

Old section 1939 (relating to references to laws directly affecting the Medicaid program.

.

(b)

Repeal of Title XXI

Effective January 1, 2011, title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.) is repealed.

202.

Outreach

(a)

Authorization of appropriations

The following amounts are authorized to be appropriated to the Secretary of Health and Human Services:

(1)

For fiscal year 2010, $100,000,000 for the design and implementation of a public outreach campaign to inform the public about the changes to the programs under such titles that take effect on January 1, 2011, as a result of the amendment made by section 201.

(2)

For each of fiscal years 2011and 2012, $200,000,000 to carry out such public outreach campaign.

(3)

For fiscal year 2013, $50,000,000 to carry out such public outreach campaign.

(b)

Availability

Funds appropriated under subsection (a) shall remain available for expenditure through September 30, 2012.

(c)

Authority for use of funds

The Secretary may use funds made available under paragraphs (2) and (3) of subsection (a) to award grants to, or enter into contracts with, public or private entities, including States, local governments, schools, churches, and community groups.

203.

Transition rules; miscellaneous provisions

(a)

In general

(1)

Not later than June 30, 2011, a State that is one of the 50 States or the District of Columbia shall inform all individuals enrolled in a State plan under title XIX or XXI of the Social Security Act on such date (and any new enrollees after such date) of the changes to the programs under such titles that take effect on January 1, 2012, as a result of the amendment made by section 201.

(2)

No State that is one of the 50 States or the District of Columbia shall approve any applications for medical assistance or child health assistance under a State plan under title XIX or XXI (as in effect for fiscal year 2011) after December 31, 2011.

(b)

Submission of legislative proposal for technical and conforming amendments

Not later than 6 months after the date of enactment of this Act, the Secretary of Health and Human Services shall submit to Congress a legislative proposal for such technical and conforming amendments as are necessary to carry out the amendments made by this Act.

B

Supplemental Health Care Assistance for Low-Income Families

211.

Supplemental health care assistance for low-income families

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 the following:

XI

Health care assistance to low-income families

340A–1.

Financial assistance to low-income families

(a)

In general

The Secretary shall supplement the costs of private health insurance for eligible low-income families through the distribution of supplemental debit cards to eligible families, which may be used to pay for costs associated with health care for the members of such eligible families and provide direct support to such families in accessing health care.

(b)

Eligibility

(1)

Eligible families

To be eligible for financial assistance under this section—

(A)

a family shall—

(i)

consist of 2 or more individuals living together who are related by marriage, birth, adoption, or guardianship;

(ii)

have a gross income that does not exceed 200 percent of the poverty line, as applicable to a family of the size involved; and

(iii)

include at least 1 individual who is a dependent under the age of 19; and

(B)

no member of the family shall be covered by private health insurance.

(2)

Determination of gross income

The gross income of a family shall be determined by taking the sum of the income of each family member who is at least age 21 but not older than age 65, except that the income of any member of the family who qualifies for coverage under Medicaid Part A or B shall not be counted.

(3)

Limitation on individual eligibility; assistance

(A)

In general

No individual who is a member of an eligible family under paragraph (1) is eligible to qualify separately for financial assistance under this section.

(B)

Aliens

The Secretary shall ensure that financial assistance under this section is not provided for costs associated with health care for any member of an eligible family who is an alien individual who is not a lawful permanent resident of the United States.

(c)

Supplemental debit card for health care expenditures

(1)

In general

The Secretary shall issue to each eligible family that enrolls in the program in accordance with subsection (f) a supplemental debit card with a dollar-amount value, in accordance with subsection (d), that may be used to pay for qualifying health care expenses.

(2)

Use of the debit card

(A)

Qualifying health care expenses

A supplemental debit card issued under this section may be used by members of the eligible family to pay for—

(i)

the purchase of health care insurance for any member of the family;

(ii)

cost sharing expenses related to health care, including deductibles, copayments, and coinsurance, for any member of the family; and

(iii)

the direct purchase of health care services and supplies for any member of the family.

(B)

Geographic range

Each supplemental debit card may be used to pay for qualifying health care expenses incurred anywhere in the 50 States or the District of Columbia.

(C)

Limitations

No supplemental debit card shall be used to make a payment for any cost—

(i)

incurred prior to the determination of the family's eligibility for assistance under this section; or

(ii)

that is not a health-related expense.

(3)

Rollover of unused amounts

Not more than one-quarter of the annual dollar amount of a supplemental debit card that is unexpended at the end of each 12-month period may rollover—

(A)

to the family's supplemental debit card for expenditure during the subsequent 12-month period, provided that the family to which the supplemental debit card was issued in the previous 12-month period is eligible to receive a supplemental debit card in the subsequent 12-month period; or

(B)

to the family's health savings account (as defined in section 223(g)(2) of the Internal Revenue Code of 1986).

(4)

Monthly statements

The Secretary shall issue a monthly statement to each family to which a supplemental debit card has been issued under this section, which shall state each payment made with the family's supplemental debit card during the month covered by the statement, the dollar amount of each such payment, and the provider to which each such payment was made.

(d)

Amount of financial assistance

(1)

Amounts for calendar year 2011

Subject to paragraph (5), the amount of financial assistance available to each eligible family during the calendar year 2011 shall be determined as follows:

(A)

Each family whose annual income does not exceed 100 percent of the poverty level, as applicable to a family of the size involved, shall receive $5,000.

(B)

Each family whose annual income exceeds 100 percent, but does not exceed 200 percent, of the poverty level, as applicable to a family of the size involved, shall receive an amount as follows:

(i)

For families whose annual income exceeds 100 percent but does not exceed 120 percent, of the poverty level, $4,000.

(ii)

For families whose annual income exceeds 120 percent but does not exceed 140 percent, of the poverty level, $3,500.

(iii)

For families whose annual income exceeds 140 percent but does not exceed 160 percent, of the poverty level, $3,000.

(iv)

For families whose annual income exceeds 160 percent but does not exceed 180 percent, of the poverty level, $2,500.

(v)

For families whose annual income exceeds 180 percent but does not exceed 200 percent, of the poverty level, $2,000.

(2)

Additional amounts

In addition to the amounts under paragraph (1), subject to paragraph (5), the following amounts shall be added to the supplemental debit cards of qualifying families:

(A)

For each pregnancy during which a pregnant woman's family is eligible for assistance under this section, an additional amount of $1,000 shall be added to the family's supplemental debit card, except that no family shall receive such additional $1,000 for any pregnancy for which the family received such amount in the previous 12-month period.

(B)

For each member of an eligible family who is less than 1 year old on any day within the calendar year in which the family is eligible for assistance, an additional amount of $500 shall be added to the family's supplemental debit card.

(3)

Cost of living adjustments

In the case of any taxable year beginning in a calendar year after 2011, each dollar amount contained in paragraphs (1) and (2) shall be increased in the same manner as the dollar amounts specified in section 25E(b)(3) of the Internal Revenue Code of 1986 are increased by the blended cost-of-living adjustment determined under subsection (k)(2) of section 25E of the Internal Revenue Code for the taxable year involved.

(4)

State option to increase amounts

At the option of each State, amounts in excess of the annual dollar amounts under paragraphs (1) and (2) may be provided through the supplemental debit card to eligible families in that State, but no Federal funds shall be paid to any State for any amount provided in excess of such annual dollar amount.

(5)

Risk adjustment

The Secretary may adjust the amount of financial assistance available to an eligible family for a calendar year under this section based on age, health indicators, and other factors that represent distinct patterns of health care services utilization and costs.

(e)

Contributions of States

(1)

In general

As a condition for receiving Federal funds under Part A or Part B of Medicaid, each State shall contribute 50 percent of the total amount expended under the supplemental debit card program by the participating families that reside within the State during the time that the family resides in that State. For purposes of this section, the residency of a family is determined by the residency the legally responsible head of the household.

(2)

Payments from States

(A)

Billing notification

(i)

Timing

On June 30th and December 31st of each year, the Secretary shall send written notification to each State of that State's 50 percent share of expenses, as described in paragraph (1), for the 6-month period ending on the last day of the month previous to such notification.

(ii)

Contents

Each such notification to a State shall clearly state—

(I)

the payment amount due from the State;

(II)

the name of each individual for whom payment was made through the supplemental debit card program;

(III)

the health care provider to whom each payment was made;

(IV)

the amount of each payment; and

(V)

any other information, as the Secretary requires.

(B)

Payments

Each State shall make a payment to the Secretary, in the amount billed, not later than 30 days after the billing notification date, in accordance with subparagraph (A)(i).

(C)

Penalties

If a State fails to pay to the Secretary an amount required under subparagraph (B), interest shall accrue on such amount at the rate provided under old section 1903(d)(5) of the Social Security Act. The amount so owed and applicable interest shall be immediately offset against amounts otherwise payable to the State under this section, in accordance with the Federal Claims Collection Act of 1996 and applicable regulations.

(f)

Enrollment

(1)

In general

The Secretary shall establish procedures and times for enrollment in the supplemental debit card program. Open enrollment shall be available not less than 4 times per calendar year.

(2)

Transition of individuals enrolled in Medicaid or the State Children's Health Insurance Program

(A)

Information from the States

Each State shall—

(i)

not later than June 30, 2011, inform all individuals then enrolled in Medicaid or the State Children's Health Insurance Program (SCHIP), of the changes in effect beginning on January 1, 2012; and

(ii)

not later than October 31, 2011, redetermine the eligibility of each individual enrolled in Medicaid or SCHIP, other than those individuals who qualify for Medicaid or SCHIP as disabled, elderly, or a special population, for the supplemental debit card program, according to the eligibility criteria under subsection (b).

(B)

Automatic enrollment

The Secretary shall provide for the automatic enrollment in the supplemental debit card program of all individuals who are enrolled in Medicaid or SCHIP and who have been redetermined by a State under subparagraph (A) to be eligible for Medicaid or SCHIP. Any individual who is determined by a State not to qualify for the supplemental debit card program may retain coverage under Medicaid or SCHIP until June 30, 2012.

(3)

Assistance with qualified health insurance credit

Each State shall, to the extent practicable, provide individuals residing within the State with information regarding the qualified health insurance credit described in section 25E of the Internal Revenue Code of 1986, including information regarding eligibility for, and how to claim, such credit.

(g)

Administration

(1)

National system

The Secretary may enter into contracts or agreements with a State, a consortium of States, or a private entity, including a bank, enrollment broker, or similar entity, to establish and maintain a unified national system to support the processes and transactions necessary to administer this section.

(2)

Automated system

The Secretary shall establish an automated means, such as an electronic benefit transfer system, by which the benefits under this section shall be transferred to eligible families.

(3)

Verification of applicant information

The Secretary may verify information provided by applicants with the appropriate Federal, State, and local agencies, including the Internal Revenue Service, the Social Security Administration, the Department of Labor, and child support enforcement agencies.

(4)

Choice counseling

The Secretary may enter into contracts or agreements with a State, a consortium of a State, or a private entity, including an enrollment broker or community organization or other organization, to educate eligible families about their options and to assist in their enrollment in the supplemental debit card plan.

(5)

Appeals

The Secretary shall establish an independent appeals process, to be administered by an entity separate from the entity that makes initial eligibility determinations, which shall be available to individuals who are denied benefits under the supplemental debit card program.

(6)

Resolution of errors

The Secretary shall provide for a reconciliation process with the States to resolve any errors and adjudicate disputes due to incomplete or false information in a family's application or in the billing process described in subsection (e).

(7)

Penalties for false information

Any person who provides false information to qualify for the supplemental debit card program shall pay a penalty in the amount of 110 percent of the amount of assistance paid on behalf of such person and all members of such person's family.

(h)

Implementation plan

Not later than 6 months after the date of enactment of this section, the Secretary shall submit to Congress a plan for implementing this program.

(i)

Authorization of appropriations

(1)

Administration of the supplemental debit card program

To administer the program under this section, there are authorized to be appropriated—

(A)

for fiscal year 2009, $300,000,000, for the design of a unified, national system of conducting the supplemental debit card program;

(B)

for fiscal year 2010, $1,000,000,000 for start-up costs, including, contracting, hiring and training employees, and testing the program; and

(C)

for fiscal year 2011 and each subsequent fiscal year, $3,000,000,000.

(2)

Authorization of benefits under the supplemental debit card program

To provide the supplemental debit card benefits described in this section, there are authorized to be appropriated—

(A)

for fiscal year 2011, $24,020,000,000;

(B)

for fiscal year 2012, $25,220,000,000;

(C)

for fiscal year 2013, $26,480,000,000;

(D)

for fiscal year 2014, $27,810,000,000; and

(E)

for fiscal year 2015, $29,200,000,000.

.

III

Medicare Reform

A

New Medicare Program

301.

Benefit changes

Title XVIII of the Social Security Act is amended by inserting after section 1808 the following new section:

1810.

Program for new Medicare beneficiaries beginning in 2021

(a)

Application

(1)

In general

Notwithstanding any other provision of law (including sections 226 and 226A), the provisions of this section shall apply to individuals (other than individuals entitled to benefits only because of the application of section 1881(d)) who first become entitled to benefits under part A, or whose coverage period under part B begins, on or after January 1, 2021.

(2)

No impact on FICA/SECA tax revenues

Nothing in this section shall be construed as affecting revenues through the payment of hospital insurance taxes under sections 1401(b), 3101(b), and 3111(b) of the Internal Revenue Code of 1986.

(3)

No impact on other beneficiaries

(A)

In general

This section shall not apply to individuals not described in paragraph (1).

(B)

No impact on computation of medicare premiums for older Medicare beneficiaries

Premiums under parts A, B, and D shall be computed for individuals not described in paragraph (1) based on the average costs that the Secretary estimates would have been applicable if this section did not apply.

(b)

Alternative benefits

(1)

In general

An individual described in subsection (a)(1) is only entitled to benefits under this title in accordance with this section. In the case of such an individual who has qualified health insurance coverage, the individual is entitled under this section—

(A)

to an income-related payment under subsection (c); and

(B)

in the case of a low-income individual (as defined in paragraph (3) of subsection (d)), to a contribution to a medical savings account of the individual in the amount specified in such subsection.

(2)

Alternative premium obligations

An individual described in subsection (a)(1)—

(A)

is not responsible for payment of any premium otherwise applicable under part B or D; but

(B)

is responsible for payment of the premium for qualified health insurance coverage referred to in paragraph (1) and may apply the income-related payment under subsection (c) toward such premium.

(3)

Qualified health insurance coverage

(A)

Publication of list

The Secretary of Health and Human Services shall publish an annual list of health insurance plans that meet the definition of qualified health insurance coverage, as described in subparagraph (B) below, at least one of such plans must address the special needs of Medicare’s highest-cost seniors, as determined by the Secretary.

(B)

Qualified health insurance coverage defined

In this subsection, the term qualified health insurance coverage means health benefits coverage, whether under a group health plan, health insurance coverage or otherwise, but does not include coverage under a health plan if substantially all of its coverage is coverage described in section 223(c)(1)(B) of the Internal Revenue Code of 1986.

(c)

Income-Related payment

(1)

In general

The amount of the income-related payment under this subsection for an individual for a year is equal to—

(A)

the annual amount specified for the year in paragraph (2);

(B)

subject to reduction under paragraph (3) (relating to higher income individuals);

(C)

further subject to adjustment under paragraph (4); and

(D)

subject to pro-ration under paragraph (5).

(2)

Annual amount

(A)

In general

The annual amount specified in this paragraph—

(i)

for 2011 is the average nominal dollar value of the Medicare benefit; and

(ii)

for any subsequent year is the annual amount specified in this paragraph for the preceding year increased by the annual inflation adjustment described in subparagraph (B) for such subsequent year.

Any amount computed under clause (ii) that is not a multiple of $12 shall be rounded to the nearest multiple of $12.
(B)

Annual inflation adjustment

The annual inflation adjustment under this subparagraph for a year is equal to the average of—

(i)

the annual rate of increase in the consumer price index for urban consumers (all items; U.S. city average) for the year, as projected by the Secretary in consultation with the Bureau of Labor Statistics before the beginning of the year; and

(ii)

the annual rate of increase in the medical care component of the consumer price index for all urban consumers (U.S. city average) for the year, as projected by the Secretary in consultation with the Bureau of Labor Statistics before the beginning of the year.

(3)

Reduction for higher-income individuals

(A)

In general

In the case of an individual whose modified adjusted gross income exceeds the threshold amount specified in paragraph (2) of section 1839(i), as adjusted under paragraph (5) of such section, the annual amount under paragraph (2) shall be reduced by the adjustment percentage specified in subparagraph (B).

(B)

Adjustment percentage

In the case of an individual for whom the applicable percentage specified in section 1839(i)(3)(C)—

(i)

is less than 80 percent, the adjustment percentage under this subparagraph shall be 50 percent; or

(ii)

is equal to 80 percent, the adjustment percentage under this subparagraph shall be 70 percent.

(C)

Application of certain provisions

The provisions of paragraphs (4) through (6) of section 1839(i) shall apply under this paragraph in the same manner as they apply for purposes of such section.

(4)

Risk, geographic area, and other adjustments

(A)

Risk adjustment

The payment amount under this subsection for an individual shall be adjusted, using a methodology specified by the Secretary, in a manner that takes into account the relative risk factors (such as those described in section 1853(a)(1)(C)(i)) associated with such individual. Such adjustment shall be made in such a manner as not to change the total amount of payments made under this subsection as a result of such adjustment.

(B)

Partial geographic area adjustment

Such payment amount for an individual also shall be adjusted, using a methodology specified by the Secretary, in a manner that takes into account the relative differences in area health care costs for the area in which the individual resides compared to other areas. Such adjustment shall be made in such a manner as not to change the total amount of payments made under this subsection as a result of such adjustment. The Secretary shall provide for a decrease over time in the adjustment made under this subparagraph.

(C)

Certain part A buy-in individuals

Such payment amount for an individual who is not eligible for benefits under part A pursuant to section 226 or 226A shall be adjusted by such proportion or amount as the Secretary determines appropriate to take into account premiums that would otherwise be payable under section 1818 or 1818A for benefits under part A.

(5)

Pro-ratio for partial year of eligibility

In the case of an individual whose entitlement under this section is for less than an entire year, the payment amount under this subsection shall be pro-rated to reflect the portion of the year included in such entitlement.

(6)

Payment on periodic basis

The Secretary shall provide for the payment under this subsection on an appropriate monthly or other periodic basis.

(d)

Contribution to a medical savings account (MSA) for low-Income individuals

(1)

In general

The amount of the contribution under subsection (b)(1)(B) to a medical savings account of a low-income individual is equal—

(A)

in the case of an individual described in clause (i) or (ii) of paragraph (4)(A), to the full MSA contribution amount (as defined in paragraph (2)); or

(B)

in the case of any other individual, to 75 percent of the full MSA contribution amount.

(2)

Full MSA contribution amount

For purposes of this subsection, the term full MSA contribution amount means, for a year for an individual, an amount to be equivalent to the full amount of the average deductible of a high-deductible health plan (as defined in section 223(c)(2) of the Internal Revenue Code of 1986) as determined by the Secretary.

(3)

No Medicaid coverage for medicare-covered services

(A)

In general

In the case of an individual who is eligible to be provided a contribution to a medical savings account under this subsection, the individual is not entitled to any payment under a State plan under title XIX with respect to any benefits relating to items and services for which coverage is provided under this title.

(B)

Construction

Subparagraph (A) shall not affect the continued provision of medical assistance under title XIX for items and services, such as dental, vision, or long-term care facility services, for which benefits are not provided under this title regardless of medical necessity.

(4)

Periodic payment

The Secretary shall provide for the contribution into medical savings accounts of amounts under this subsection on an appropriate monthly or other periodic basis.

(5)

Low-income individual defined

(A)

In general

For purposes of this section, the term low-income individual means an individual described in subsection (a)(1)—

(i)

who meets the requirement of section 1936(c)(6)(A)(ii) (relating to a full-benefit dual eligible individual);

(ii)

whose income (as determined under section 1612 for purposes of the supplemental security income program, except as provided in subparagraph (B)) does not exceed 100 percent of the official income poverty line (referred to in section 1905(p)(1)) applicable to a family of the size involved; or

(iii)

whose income (as so determined) exceeds 100 percent, but does not exceed 150 percent, of such official income poverty line applicable to a family of the size involved.

(B)

Application of special rule regarding application of Social Security increases

The provisions of subparagraph (D) of section 1905(p)(2) shall apply to determinations of income under subparagraph (A) in the same manner they apply under such section.

(C)

Determination process

The Secretary shall specify a process for the determination of whether individuals are low-income individuals.

.

302.

Increase in Medicare eligibility age

Section 226 of the Social Security Act (42 U.S.C. 426) is amended by adding at the end the following new subsection:

(k)

Increasing medicare qualifying age

(1)

In general

Notwithstanding any other provision of law, any reference in this section or title XVIII (or title XIX insofar as it refers to title XVIII) to age 65 shall be deemed a reference to the medicare qualifying age specified in paragraph (2).

(2)

Medicare qualifying age specified

The medicare qualifying age specified in this paragraph is determined as follows:

(A)

In the case of an individual who attains 65 years of age before January 1, 2021, the medicare qualifying age is 65 years of age.

(B)

In the case of an individual who attains 65 years of age in a year after 2018 and before 2027, the medicare qualifying age is the medicare qualifying age specified in this paragraph for the previous year increased by 2 months.

(C)

In the case of an individual who attains 65 years of age—

(i)

in the 2-year period beginning on January 1, 2027, the medicare qualifying age is 67 years and 1 month; or

(ii)

in a subsequent 2-year period beginning before 2087, the medicare qualifying age is the medicare qualifying age specified in this paragraph for the previous 2-year period (or, in the case of the first 2-year period, specified for 2026) increased by 1 month.

(D)

In the case of an individual who attains 65 years of age on or after January 1, 2086, the medicare qualifying age is the medicare qualifying age specified in this paragraph is 69 years and 6 months.

.

303.

Unified Medicare Trust Fund

(a)

In general

The Federal Hospital Insurance Trust Fund (established under section 1817 of the Social Security Act) and the Federal Supplementary Medical Insurance Trust Fund (established under section 1841 of such Act) are hereby consolidated into a unified Medicare trust fund. Such trust fund shall have separate accounts for parts A, B, and D of such title and shall be administered by the same board of trustees that administers the current Trust Funds.

(b)

Construction

Nothing in this section shall be construed as affecting the actual transfer of funds or computations of amounts of premiums under any part of the Medicare program.

(c)

Solvency

The Medicare trustee shall establish a measure of program solvency for the Medicare program of total outlays as a measure of gross domestic product.

B

Changes in Current Medicare Program

311.

Income-related reduction in part D premium subsidy

(a)

Income-Related reduction in part D premium subsidy

(1)

In general

Section 1860D–13(a) of the Social Security Act (42 U.S.C. 1395w–113(a)) is amended by adding at the end the following new paragraph:

(7)

Reduction in premium subsidy based on income

(A)

In general

In the case of an individual whose modified adjusted gross income exceeds the threshold amount applicable under paragraph (2) of section 1839(i) (including application of paragraph (5) of such section) for the calendar year, the monthly amount of the premium subsidy applicable to the premium under this section for a month after December 2010 shall be reduced (and the monthly beneficiary premium shall be increased) by the monthly adjustment amount specified in subparagraph (B).

(B)

Monthly adjustment amount

The monthly adjustment amount specified in this subparagraph for an individual for a month in a year is equal to the product of—

(i)

the quotient obtained by dividing—

(I)

the applicable percentage determined under paragraph (3)(C) of section 1839(i) (including application of paragraph (5) of such section) for the individual for the calendar year reduced by 25.5 percent; by

(II)

25.5 percent; and

(ii)

the base beneficiary premium (as computed under paragraph (2)).

(C)

Modified adjusted gross income

For purposes of this paragraph, the term modified adjusted gross income has the meaning given such term in subparagraph (A) of section 1839(i)(4), determined for the taxable year applicable under subparagraphs (B) and (C) of such section.

(D)

Determination by commissioner of Social Security

The Commissioner of Social Security shall make any determination necessary to carry out the income-related reduction in premium subsidy under this paragraph.

(E)

Procedures to assure correct income-related reduction in premium subsidy

(i)

Disclosure of base beneficiary premium

Not later than September 15 of each year beginning with 2011, the Secretary shall disclose to the Commissioner of Social Security the amount of the base beneficiary premium (as computed under paragraph (2)) for the purpose of carrying out the income-related reduction in premium subsidy under this paragraph with respect to the following year.

(ii)

Additional disclosure

Not later than October 15 of each year beginning with 2010, the Secretary shall disclose to the Commissioner of Social Security the following information for the purpose of carrying out the income-related reduction in premium subsidy under this paragraph with respect to the following year:

(I)

The modified adjusted gross income threshold applicable under paragraph (2) of section 1839(i) (including application of paragraph (5) of such section).

(II)

The applicable percentage determined under paragraph (3)(C) of section 1839(i) (including application of paragraph (5) of such section).

(III)

The monthly adjustment amount specified in subparagraph (B).

(IV)

Any other information the Commissioner of Social Security determines necessary to carry out the income-related reduction in premium subsidy under this paragraph.

(F)

Rule of construction

The formula used to determine the monthly adjustment amount specified under subparagraph (B) shall only be used for the purpose of determining such monthly adjustment amount under such subparagraph.

.

(2)

Collection of monthly adjustment amount

Section 1860D–13(c) of the Social Security Act (42 U.S.C. 1395w–113(c)) is amended—

(A)

in paragraph (1), by striking (2) and (3) and inserting (2), (3), and (4); and

(B)

by adding at the end the following new paragraph:

(4)

Collection of monthly adjustment amount

(A)

In general

Notwithstanding any other provision of this subsection or section 1854(d)(2), subject to subparagraph (B), the amount of the income-related reduction in premium subsidy for an individual for a month (as determined under subsection (a)(7)) shall be paid through withholding from benefit payments in the manner provided under section 1840.

(B)

Agreements

In the case where the monthly benefit payments of an individual that are withheld under subparagraph (A) are insufficient to pay the amount described in such subparagraph, the Commissioner of Social Security shall enter into agreements with the Secretary, the Director of the Office of Personnel Management, and the Railroad Retirement Board as necessary in order to allow other agencies to collect the amount described in subparagraph (A) that was not withheld under such subparagraph.

.

(b)

Conforming amendments

(1)

Medicare

Part D of title XVIII of the Social Security Act (42 U.S.C. 1395w–101 et seq.) is amended—

(A)

in section 1860D–13(a)(1)—

(i)

by redesignating subparagraph (F) as subparagraph (G);

(ii)

in subparagraph (G), as redesignated by clause (i), by striking (D) and (E) and inserting (D), (E), and (F); and

(iii)

by inserting after subparagraph (E) the following new subparagraph:

(F)

Increase based on income

The monthly beneficiary premium shall be increased pursuant to paragraph (7).

; and

(B)

in section 1860D–15(a)(1)(B), by striking paragraph (1)(B) and inserting paragraphs (1)(B) and (1)(F).

(2)

Internal Revenue Code

Section 6103(l)(20) of the Internal Revenue Code of 1986 (relating to disclosure of return information to carry out Medicare part B premium subsidy adjustment) is amended—

(A)

in the heading, by striking part B premium subsidy adjustment and inserting parts B and D premium subsidy adjustments;

(B)

in subparagraph (A)—

(i)

in the matter preceding clause (i), by inserting or 1860D–13(a)(7) after 1839(i); and

(ii)

in clause (vii), by inserting after subsection (i) of such section the following: or under section 1860D–13(a)(7) of such Act; and

(C)

in subparagraph (B)—

(i)

by inserting or such section 1860D–13(a)(7) before the period at the end;

(ii)

as amended by clause (i), by inserting or for the purpose of resolving tax payer appeals with respect to any such premium adjustment before the period at the end; and

(iii)

by adding at the end the following new sentence: Officers, employees, and contractors of the Social Security Administration may disclose such return information to officers, employees, and contractors of the Department of Health and Human Services, the Office of Personnel Management, the Railroad Retirement Board, the Department of Justice, and the courts of the United States to the extent necessary to carry out the purposes described in the preceding sentence.; and

(D)

by adding at the end the following new subparagraph:

(C)

Timing of disclosure

Return information shall be disclosed to officers, employees, and contractors of the Social Security Administration under subparagraph (A) not later than the date that is 90 days prior to the date on which the taxpayer first becomes entitled to benefits under part A of title XVIII of the Social Security Act or eligible to enroll for benefits under part B of such title.

.

312.

Reduction in hospital marketbasket increases

Notwithstanding any other provision of law:

(1)

Outpatient hospital services

For 2010 and each succeeding year, the OPD fee schedule increase factor otherwise computed under section 1833(t)(3)(C)(iv) of the Social Security Act (42 U.S.C. 1395l(t)(3)(C)(iv)) shall be reduced by .4 percentage points.

(2)

Inpatient hospital services

For fiscal year 2010 and each succeeding fiscal year, the applicable percentage increase otherwise computed under clauses (i) and (ii) of section 1886(b)(3)(B) of such Act (42 U.S.C. 1395ww(b)(3)(B)) shall be reduced by .4 percentage points.

313.

Elimination of indexing of income thresholds for part B income-related premiums

(a)

In general

Section 1839(i) of the Social Security Act (42 U.S.C. 1395r(i)) is amended by striking paragraph (5).

(b)

Effective date

The amendment made by subsection (a) shall apply to premiums for years beginning with 2010.

314.

Reinstatement of the Medicare trigger

(a)

Reinstatement of the Medicare trigger

(1)

Determinations of excess general revenue Medicare funding

(A)

In general

The Board of Trustees of each medicare trust fund shall include in the annual reports submitted under subsection (b)(2) of sections 1817 and 1841 of the Social Security Act (42 U.S.C. 1395i and 1395t)—

(i)

the information described in paragraph (2); and

(ii)

a determination as to whether there is projected to be excess general revenue medicare funding (as defined in paragraph (3)) for the fiscal year in which the report is submitted or for the previous fiscal year.

(B)

Medicare funding warning

For purposes of section 1105(h) of title 31, United States Code, and this subsection, an affirmative determination under subparagraph (A)(i) in 2 consecutive annual reports shall be treated as a medicare funding warning in the year in which the second such report is made.

(2)

Information

The information described in this subsection for an annual report in a year is as follows:

(A)

Projections of growth of general revenue spending

A statement of the general revenue medicare funding as a percentage of the total medicare outlays for each of the following:

(i)

The previous fiscal year.

(ii)

Previous fiscal years and as of 10, 50, and 75 years after such year.

(B)

Comparison with other growth trends

A comparison of the trend of such percentages with the annual growth rate in the following:

(i)

The gross domestic product.

(ii)

Private health costs.

(iii)

National health expenditures.

(iv)

Other appropriate measures.

(C)

Part d spending

Expenditures, including trends in expenditures, under part D of title XVIII of the Social Security Act, as added by section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173).

(D)

Combined medicare trust fund analysis

A financial analysis of the combined medicare trust funds if general revenue medicare funding were limited to the percentage specified in paragraph (3)(A)(ii) of total medicare outlays.

(3)

Definitions

For purposes of this section:

(A)

Excess general revenue medicare funding

The term excess general revenue medicare funding means, with respect to a fiscal year, that—

(i)

general revenue medicare funding (as defined in subparagraph (B)), expressed as a percentage of total medicare outlays (as defined in subparagraph (D)) for the fiscal year; exceeds

(ii)

45 percent.

(B)

General revenue medicare funding

The term general revenue medicare funding means for a year—

(i)

the total medicare outlays (as defined in subparagraph (D)) for the year; minus

(ii)

the dedicated medicare financing sources (as defined in subparagraph (C)) for the year.

(C)

Dedicated medicare financing sources

The term dedicated medicare financing sources means the following:

(i)

Hospital insurance tax

Amounts appropriated to the Hospital Insurance Trust Fund under the third sentence of section 1817(a) of the Social Security Act (42 U.S.C. 1395i(a)) and amounts transferred to such Trust Fund under section 7(c)(2) of the Railroad Retirement Act of 1974 (45 U.S.C. 231f(c)(2)).

(ii)

Taxation of certain oasdi benefits

Amounts appropriated to the Hospital Insurance Trust Fund under section 121(e)(1)(B) of the Social Security Amendments of 1983 (Public Law 98–21), as inserted by section 13215(c) of the Omnibus Budget Reconciliation Act of 1993 (Public Law 103–66).

(iii)

State transfers

The State share of amounts paid to the Federal Government by a State under section 1843 of the Social Security Act (42 U.S.C. 1395v) or pursuant to section 1935(c) of such Act.

(iv)

Premiums

The following premiums:

(I)

Part a

Premiums paid by non-Federal sources under sections 1818 and section 1818A (42 U.S.C. 1395i–2 and 1395i–2a) of such Act.

(II)

Part b

Premiums paid by non-Federal sources under section 1839 of such Act (42 U.S.C. 1395r), including any adjustments in premiums under such section.

(III)

Part d

Monthly beneficiary premiums paid under part D of title XVIII of such Act, as added by section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173), and MA monthly prescription drug beneficiary premiums paid under part C of such title insofar as they are attributable to basic prescription drug coverage.

(IV)

Description

Premiums under subclauses (II) and (III) shall be determined without regard to any reduction in such premiums attributable to a beneficiary rebate under section 1854(b)(1)(C) of such title, as amended by section 222(b)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173), and premiums under clause (iii) are deemed to include any amounts paid under section 1860D–13(b) of such title, as added by section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173).

(v)

Gifts

Amounts received by the medicare trust funds under section 201(i) of the Social Security Act (42 U.S.C. 401(i)).

(D)

Total Medicare outlays

The term total medicare outlays means total outlays from the medicare trust funds and shall—

(i)

include payments made to plans under part C of title XVIII of the Social Security Act that are attributable to any rebates under section 1854(b)(1)(C) of such Act (42 U.S.C. 1395w–24(b)(1)(C)), as amended by section 222(b)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173);

(ii)

include administrative expenditures made in carrying out title XVIII of the Social Security Act and Federal outlays under section 1935(b) of such Act, as added by section 103(a)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108–173); and

(iii)

offset outlays by the amount of fraud and abuse collections insofar as they are applied or deposited into a medicare trust fund.

(E)

Medicare trust fund

The term medicare trust fund means—

(i)

the Federal Hospital Insurance Trust Fund established under section 1817 of the Social Security Act (42 U.S.C. 1395i); and

(ii)

the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of such Act (42 U.S.C. 1395t), including the Medicare Prescription Drug Account under such Trust Fund.

(4)

Conforming amendments

(A)

Federal hospital insurance trust fund

The last sentence of section 1817(b)(2) (42 U.S.C. 1395i(b)(2)) is amended to read as follows: Each report provided under paragraph (2) beginning with the report in 2010 shall include the information specified in section 314 of the Roadmap for America’s Future Act of 2010..

(B)

Federal supplementary medical insurance trust fund

The last sentence of section 1841(b)(2) (42 U.S.C. 1395t(b)(2)) is amended to read as follows: Each report provided under paragraph (2) beginning with the report in 2010 shall include the information specified in section 314 of the Roadmap for America’s Future Act of 2010..

(5)

Notice of Medicare Funding Warning

Whenever any report described in subsection (a) contains a determination that for the previous fiscal year reporting period there will be excess general revenue medicare funding, Congress and the President should address the matter under existing rules and procedures.

(b)

Presidential Submission of Legislation

(1)

In general

Section 1105(h) of title 31, United States Code, is amended to read as follows:

(h)
(1)

If there is a medicare funding warning under section 314 of the Roadmap for America’s Future Act of 2010 made in a year, the President shall submit to Congress, within the 15-day period beginning on the date of the budget submission to Congress under subsection (a) for the succeeding year, proposed legislation to respond to such warning.

(2)

Paragraph (1) does not apply if, during the year in which the warning is made, legislation is enacted which eliminates excess general revenue medicare funding (as defined in section 314 of the Roadmap for America’s Future Act of 2010) for the previous fiscal year, as certified by the Board of Trustees of each medicare trust fund (as defined in section 314 of such Act) not later than 30 days after the date of the enactment of such legislation.

.

(2)

Sense of Congress

It is the sense of Congress that legislation submitted pursuant to section 1105(h) of title 31, United States Code, in a year should be designed to reduce payments by 1 percent for services furnished in Medicare’s fee-for-service sector for the fiscal year that begins in such year.

(c)

Procedures in the House of Representatives

(1)

Introduction and referral of President's legislative proposal

(A)

Introduction

In the case of a legislative proposal submitted by the President pursuant to section 1105(h) of title 31, United States Code, within the 15-day period specified in paragraph (1) of such section, the majority leader of the House of Representatives (or his designee) and the minority leader of the House of Representatives (or his designee) shall introduce such proposal (by request), the title of which is as follows: A bill to respond to a medicare funding warning.. Such bill shall be introduced within 3 legislative days after Congress receives such proposal.

(B)

Referral

Any legislation introduced pursuant to paragraph (1) shall be referred to the appropriate committees of the House of Representatives.

(2)

Direction to the appropriate House Committees

(A)

In general

In the House, in any year during which the President is required to submit proposed legislation to Congress under section 1105(h) of title 31, United States Code, the appropriate committees shall report medicare funding legislation by not later than June 30 of such year.

(B)

Medicare funding legislation

For purposes of this section, the term medicare funding legislation means—

(i)

legislation introduced pursuant to subsection (c)(1), but only if the legislative proposal upon which the legislation is based was submitted within the 15-day period referred to in such subsection; or

(ii)

any bill the title of which is as follows: A bill to respond to a medicare funding warning..

(C)

Certification

With respect to any medicare funding legislation or any amendment to such legislation to respond to a medicare funding warning, the chairman of the Committee on the Budget of the House shall certify—

(i)

whether or not such legislation eliminates excess general revenue medicare funding (as defined in subsection (a)(3)) for the previous fiscal year; and

(ii)

with respect to such an amendment, whether the legislation, as amended, would reduce payments by 1 percent for services furnished in Medicare’s fee-for-service sector for the fiscal year that begins in such year.

(3)

Fallback procedure for floor consideration if the House fails to vote on final passage by July 30

(A)

After July 30 of any year during which the President is required to submit proposed legislation to Congress under section 1105(h) of title 31, United States Code, unless the House of Representatives has voted on final passage of any medicare funding legislation for which there is an affirmative certification under paragraph (2)(C)(i), then, after the expiration of not less than 30 calendar days (and concurrently 5 legislative days), it is in order to move to discharge any committee to which medicare funding legislation which has such a certification and which has been referred to such committee for 30 calendar days from further consideration of the legislation.

(B)

A motion to discharge may be made only by an individual favoring the legislation, may be made only if supported by one-fifth of the total membership of the House (a quorum being present), and is highly privileged in the House. Debate thereon shall be limited to not more than one hour, the time to be divided in the House equally between those favoring and those opposing the motion. An amendment to the motion is not in order, and it is not in order to move to reconsider the vote by which the motion is agreed to or disagreed to.

(C)

Only one motion to discharge a particular committee may be adopted under this subsection in any session of a Congress.

(D)

Notwithstanding subparagraph (A), it shall not be in order to move to discharge a committee from further consideration of medicare funding legislation pursuant to this subsection during a session of a Congress if, during the previous session of the Congress, the House passed medicare funding legislation for which there is an affirmative certification under paragraph (2)(C)(i).

(4)

Floor Consideration in the House of Discharged Legislation

(A)

In the House, not later than 3 legislative days after any committee has been discharged from further consideration of legislation under paragraph (3), the Speaker shall resolve the House into the Committee of the Whole for consideration of the legislation.

(B)

The first reading of the legislation shall be dispensed with. All points of order against consideration of the legislation are waived. General debate shall be confined to the legislation and shall not exceed five hours, which shall be divided equally between those favoring and those opposing the legislation. After general debate the legislation shall be considered for amendment under the five-minute rule. During consideration of the legislation, no amendments shall be in order in the House or in the Committee of the Whole except those for which there has been an affirmative certification under paragraph (2)(C)(ii). All points of order against consideration of any such amendment in the Committee of the Whole are waived. The legislation, together with any amendments which shall be in order, shall be considered as read. During the consideration of the bill for amendment, the Chairman of the Committee of the Whole may accord priority in recognition on the basis of whether the Member offering an amendment has caused it to be printed in the portion of the Congressional Record designated for that purpose in clause 8 of Rule XVIII of the Rules of the House of Representatives. Debate on any amendment shall not exceed one hour, which shall be divided equally between those favoring and those opposing the amendment, and no pro forma amendments shall be offered during the debate. The total time for debate on all amendments shall not exceed 10 hours. At the conclusion of consideration of the legislation for amendment, the Committee shall rise and report the legislation to the House with such amendments as may have been adopted. The previous question shall be considered as ordered on the legislation and amendments thereto to final passage without intervening motion except one motion to recommit with or without instructions. If the Committee of the Whole rises and reports that it has come to no resolution on the bill, then on the next legislative day the House shall, immediately after the third daily order of business under clause 1 of Rule XIV of the Rules of the House of Representatives, resolve into the Committee of the Whole for further consideration of the bill.

(C)

All appeals from the decisions of the Chair relating to the application of the Rules of the House of Representatives to the procedure relating to any such legislation shall be decided without debate.

(D)

Except to the extent specifically provided in the preceding provisions of this subsection, consideration of any such legislation and amendments thereto (or any conference report thereon) shall be governed by the Rules of the House of Representatives applicable to other bills and resolutions, amendments, and conference reports in similar circumstances.

(5)

Legislative day defined

As used in this section, the term legislative day means a day on which the House of Representatives is in session.

(6)

Restriction on Waiver

In the House, the provisions of this section may be waived only by a rule or order proposing only to waive such provisions.

(7)

Rulemaking power

The provisions of this section are enacted by the Congress—

(A)

as an exercise of the rulemaking power of the House of Representatives and, as such, shall be considered as part of the rules of that House and shall supersede other rules only to the extent that they are inconsistent therewith; and

(B)

with full recognition of the constitutional right of that House to change the rules (so far as they relate to the procedures of that House) at any time, in the same manner, and to the same extent as in the case of any other rule of that House.

(d)

Procedures in the Senate

(1)

Introduction and referral of President's legislative proposal

(A)

Introduction

In the case of a legislative proposal submitted by the President pursuant to section 1105(h) of title 31, United States Code, within the 15-day period specified in paragraph (1) of such section, the majority leader and minority leader of the Senate (or their designees) shall introduce such proposal (by request), the title of which is as follows: A bill to respond to a medicare funding warning.. Such bill shall be introduced within 3 days of session after Congress receives such proposal.

(B)

Referral

Any legislation introduced pursuant to paragraph (1) shall be referred to the Committee on Finance.

(2)

Medicare funding legislation

For purposes of this section, the term medicare funding legislation means—

(A)

legislation introduced pursuant to subsection (d)(1), but only if the legislative proposal upon which the legislation is based was submitted within the 15-day period referred to in such subsection; or

(B)

any bill the title of which is as follows: A bill to respond to a medicare funding warning..

(3)

Qualification for special procedures

(A)

In general

The special procedures set forth in paragraphs (4) and (5) shall apply to medicare funding legislation, as described in paragraph (2), only if the legislation—

(i)

is medicare funding legislation that is passed by the House of Representatives; or

(ii)

contains matter within the jurisdiction of the Committee on Finance in the Senate.

(B)

Failure to qualify for special procedures

If the medicare funding legislation does not satisfy subparagraph (A), then the legislation shall be considered under the ordinary procedures of the Standing Rules of the Senate.

(4)

Discharge

(A)

In general

If the Committee on Finance has not reported medicare funding legislation described in subparagraph (3)(A) by June 30 of a year in which the President is required to submit medicare funding legislation to Congress under section 1105(h) of title 31, United States Code, then any Senator may move to discharge the Committee of any single medicare funding legislation measure. Only one such motion shall be in order in any session of Congress.

(B)

Debate limits

Debate in the Senate on any such motion to discharge, and all appeals in connection therewith, shall be limited to not more than 2 hours. The time shall be equally divided between, and controlled by, the maker of the motion and the majority leader, or their designees, except that in the event the majority leader is in favor of such motion, the time in opposition thereto shall be controlled by the minority leader or the minority leader's designee. A point of order under this subsection may be made at any time. It is not in order to move to proceed to another measure or matter while such motion (or the motion to reconsider such motion) is pending.

(C)

Amendments

No amendment to the motion to discharge shall be in order.

(D)

Exception if certified legislation enacted

Notwithstanding subparagraph (A), it shall not be in order to discharge the Committee from further consideration of medicare funding legislation pursuant to this subsection during a session of a Congress if the chairman of the Committee on the Budget of the Senate certifies that medicare funding legislation has been enacted that reduce payments by 1 percent for services furnished in Medicare’s fee-for-service sector for the next fiscal year.

(5)

Consideration

After the date on which the Committee on Finance has reported medicare funding legislation described in paragraph (3)(A), or has been discharged (under paragraph (4)) from further consideration of, such legislation, it is in order (even though a previous motion to the same effect has been disagreed to) for any Member of the Senate to move to proceed to the consideration of such legislation.

(6)

Rules of the Senate

This section is enacted by the Senate—

(A)

as an exercise of the rulemaking power of the Senate and as such it is deemed a part of the rules of the Senate, but applicable only with respect to the procedure to be followed in the Senate in the case of a bill described in this paragraph, and it supersedes other rules only to the extent that it is inconsistent with such rules; and

(B)

with full recognition of the constitutional right of the Senate to change the rules (so far as relating to the procedure of the Senate) at any time, in the same manner, and to the same extent as in the case of any other rule of the Senate.

315.

Eliminating inefficiencies and increasing choice in Medicare Advantage

(a)

Reimbursement benchmarks

In implementing section 1853 of the Social Security Act (42 U.S.C. 1395w–23)—

(1)

in calculating the benchmark amounts under subsection (k), the Secretary shall use the average amount of local plan bids; and

(2)

in addition to the amounts under subsection (k), the Secretary may provide bonus payments to local plans that implement care coordination programs, as defined by the Secretary.

C

Medical Liability Reform

1

Enacting Real Medical Liability Reform

321.

Encouraging speedy resolution of claims

(a)

Timing of lawsuit

The time for the commencement of a health care lawsuit shall be 3 years after the date of manifestation of injury or 1 year after the claimant discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first. In no event shall the time for commencement of a health care lawsuit exceed 3 years after the date of manifestation of injury unless tolled for any of the following:

(1)

Upon proof of fraud.

(2)

Intentional concealment.

(3)

The presence of a foreign body, which has no therapeutic or diagnostic purpose or effect, in the person of the injured person.

(b)

Actions by minors

Actions by a minor shall be commenced within 3 years from the date of the alleged manifestation of injury except that actions by a minor under the full age of 6 years shall be commenced within 3 years of manifestation of injury or prior to the minor's 8th birthday, whichever provides a longer period. Such time limitation shall be tolled for minors for any period during which a parent or guardian and a health care provider or health care organization have committed fraud or collusion in the failure to bring an action on behalf of the injured minor.

322.

Compensating patient injury

(a)

Unlimited amount of damages for actual economic losses in health care lawsuits

In any health care lawsuit, nothing in this part shall limit a claimant's recovery of the full amount of the available economic damages, notwithstanding the limitation in subsection (b).

(b)

Additional noneconomic damages

In any health care lawsuit, the amount of noneconomic damages, if available, may be as much as $250,000, regardless of the number of parties against whom the action is brought or the number of separate claims or actions brought with respect to the same injury.

(c)

No discount of award for noneconomic damages

For purposes of applying the limitation in subsection (b), future noneconomic damages shall not be discounted to present value. The jury shall not be informed about the maximum award for noneconomic damages. An award for noneconomic damages in excess of $250,000 shall be reduced either before the entry of judgment, or by amendment of the judgment after entry of judgment, and such reduction shall be made before accounting for any other reduction in damages required by law. If separate awards are rendered for past and future noneconomic damages and the combined awards exceed $250,000, the future noneconomic damages shall be reduced first.

(d)

Fair share rule

In any health care lawsuit, each party shall be liable for that party's several share of any damages only and not for the share of any other person. Each party shall be liable only for the amount of damages allocated to such party in direct proportion to such party's percentage of responsibility. Whenever a judgment of liability is rendered as to any party, a separate judgment shall be rendered against each such party for the amount allocated to such party. For purposes of this section, the trier of fact shall determine the proportion of responsibility of each party for the claimant's harm.

323.

Maximizing patient recovery

(a)

Court supervision of share of damages actually paid to claimants

In any health care lawsuit, the court shall supervise the arrangements for payment of damages to protect against conflicts of interest that may have the effect of reducing the amount of damages awarded that are actually paid to claimants. In particular, in any health care lawsuit in which the attorney for a party claims a financial stake in the outcome by virtue of a contingent fee, the court shall have the power to restrict the payment of a claimant's damage recovery to such attorney, and to redirect such damages to the claimant based upon the interests of justice and principles of equity. In no event shall the total of all contingent fees for representing all claimants in a health care lawsuit exceed the following limits:

(1)

40 percent of the first $50,000 recovered by the claimant(s).

(2)

331/3 percent of the next $50,000 recovered by the claimant(s).

(3)

25 percent of the next $500,000 recovered by the claimant(s).

(4)

15 percent of any amount by which the recovery by the claimant(s) is in excess of $600,000.

(b)

Applicability

The limitations in this section shall apply whether the recovery is by judgment, settlement, mediation, arbitration, or any other form of alternative dispute resolution. In a health care lawsuit involving a minor or incompetent person, a court retains the authority to authorize or approve a fee that is less than the maximum permitted under this section. The requirement for court supervision in the first two sentences of subsection (a) applies only in civil actions.

324.

Additional health benefits

In any health care lawsuit involving injury or wrongful death, any party may introduce evidence of collateral source benefits. If a party elects to introduce such evidence, any opposing party may introduce evidence of any amount paid or contributed or reasonably likely to be paid or contributed in the future by or on behalf of the opposing party to secure the right to such collateral source benefits. No provider of collateral source benefits shall recover any amount against the claimant or receive any lien or credit against the claimant's recovery or be equitably or legally subrogated to the right of the claimant in a health care lawsuit involving injury or wrongful death. This section shall apply to any health care lawsuit that is settled as well as a health care lawsuit that is resolved by a fact finder. This section shall not apply to section 1862(b) (42 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 1396a(a)(25)) of the Social Security Act.

325.

Punitive damages

(a)

In general

Punitive damages may, if otherwise permitted by applicable State or Federal law, be awarded against any person in a health care lawsuit only if it is proven by clear and convincing evidence that such person acted with malicious intent to injure the claimant, or that such person deliberately failed to avoid unnecessary injury that such person knew the claimant was substantially certain to suffer. In any health care lawsuit where no judgment for compensatory damages is rendered against such person, no punitive damages may be awarded with respect to the claim in such lawsuit. No demand for punitive damages shall be included in a health care lawsuit as initially filed. A court may allow a claimant to file an amended pleading for punitive damages only upon a motion by the claimant and after a finding by the court, upon review of supporting and opposing affidavits or after a hearing, after weighing the evidence, that the claimant has established by a substantial probability that the claimant will prevail on the claim for punitive damages. At the request of any party in a health care lawsuit, the trier of fact shall consider in a separate proceeding—

(1)

whether punitive damages are to be awarded and the amount of such award; and

(2)

the amount of punitive damages following a determination of punitive liability.

(b)

Separate proceeding

If a separate proceeding is requested, evidence relevant only to the claim for punitive damages, as determined by applicable State law, shall be inadmissible in any proceeding to determine whether compensatory damages are to be awarded.

(c)

Determining amount of punitive damages

(1)

Factors considered

In determining the amount of punitive damages, if awarded, in a health care lawsuit, the trier of fact shall consider only the following—

(A)

the severity of the harm caused by the conduct of such party;

(B)

the duration of the conduct or any concealment of it by such party;

(C)

the profitability of the conduct to such party;

(D)

the number of products sold or medical procedures rendered for compensation, as the case may be, by such party, of the kind causing the harm complained of by the claimant;

(E)

any criminal penalties imposed on such party, as a result of the conduct complained of by the claimant; and

(F)

the amount of any civil fines assessed against such party as a result of the conduct complained of by the claimant.

(2)

Maximum award

The amount of punitive damages, if awarded, in a health care lawsuit may be as much as $250,000 or as much as two times the amount of economic damages awarded, whichever is greater. The jury shall not be informed of this limitation.

326.

Authorization of payment of future damages to claimants in health care lawsuits

(a)

In general

In any health care lawsuit, if an award of future damages, without reduction to present value, equaling or exceeding $50,000 is made against a party with sufficient insurance or other assets to fund a periodic payment of such a judgment, the court shall, at the request of any party, enter a judgment ordering that the future damages be paid by periodic payments. In any health care lawsuit, the court may be guided by the Uniform Periodic Payment of Judgments Act promulgated by the National Conference of Commissioners on Uniform State Laws.

(b)

Applicability

This section applies to all actions which have not been first set for trial or retrial before the effective date of this part.

327.

Definitions

In this part:

(1)

Alternative dispute resolution; ADR

The term alternative dispute resolution system or ADR means a system that provides for the resolution of health care lawsuits in a manner other than through a civil action brought in a State or Federal court.

(2)

Claimant

The term claimant means any person who brings a health care lawsuit, including a person who asserts or claims a right to legal or equitable contribution, indemnity, or subrogation, arising out of a health care liability claim or action, and any person on whose behalf such a claim is asserted or such an action is brought, whether deceased, incompetent, or a minor.

(3)

Collateral source benefits

The term collateral source benefits means any amount paid or reasonably likely to be paid in the future to or on behalf of the claimant, or any service, product, or other benefit provided or reasonably likely to be provided in the future to or on behalf of the claimant, as a result of the injury or wrongful death, pursuant to—

(A)

any State or Federal health, sickness, income-disability, accident, or workers' compensation law;

(B)

any health, sickness, income-disability, or accident insurance that provides health benefits or income-disability coverage;

(C)

any contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the cost of medical, hospital, dental, or income-disability benefits; and

(D)

any other publicly or privately funded program.

(4)

Compensatory damages

The term compensatory damages means objectively verifiable monetary losses incurred as a result of the provision of, use of, or payment for (or failure to provide, use, or pay for) health care services or medical products, such as past and future medical expenses, loss of past and future earnings, cost of obtaining domestic services, loss of employment, and loss of business or employment opportunities, damages for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature. The term compensatory damages includes economic damages and noneconomic damages, as such terms are defined in this section.

(5)

Contingent fee

The term contingent fee includes all compensation to any person or persons which is payable only if a recovery is effected on behalf of one or more claimants.

(6)

Economic damages

The term economic damages means objectively verifiable monetary losses incurred as a result of the provision of, use of, or payment for (or failure to provide, use, or pay for) health care services or medical products, such as past and future medical expenses, loss of past and future earnings, cost of obtaining domestic services, loss of employment, and loss of business or employment opportunities.

(7)

Health care lawsuit

The term health care lawsuit means any health care liability claim concerning the provision of health care goods or services or any medical product affecting interstate commerce, or any health care liability action concerning the provision of health care goods or services or any medical product affecting interstate commerce, brought in a State or Federal court or pursuant to an alternative dispute resolution system, against a health care provider, a health care organization, or the manufacturer, distributor, supplier, marketer, promoter, or seller of a medical product, regardless of the theory of liability on which the claim is based, or the number of claimants, plaintiffs, defendants, or other parties, or the number of claims or causes of action, in which the claimant alleges a health care liability claim. Such term does not include a claim or action which is based on criminal liability; which seeks civil fines or penalties paid to Federal, State, or local government; or which is grounded in antitrust.

(8)

Health care liability action

The term health care liability action means a civil action brought in a State or Federal court or pursuant to an alternative dispute resolution system, against a health care provider, a health care organization, or the manufacturer, distributor, supplier, marketer, promoter, or seller of a medical product, regardless of the theory of liability on which the claim is based, or the number of plaintiffs, defendants, or other parties, or the number of causes of action, in which the claimant alleges a health care liability claim.

(9)

Health care liability claim

The term health care liability claim means a demand by any person, whether or not pursuant to ADR, against a health care provider, health care organization, or the manufacturer, distributor, supplier, marketer, promoter, or seller of a medical product, including, but not limited to, third-party claims, cross-claims, counter-claims, or contribution claims, which are based upon the provision of, use of, or payment for (or the failure to provide, use, or pay for) health care services or medical products, regardless of the theory of liability on which the claim is based, or the number of plaintiffs, defendants, or other parties, or the number of causes of action.

(10)

Health care organization

The term health care organization means any person or entity which is obligated to provide or pay for health benefits under any health plan, including any person or entity acting under a contract or arrangement with a health care organization to provide or administer any health benefit.

(11)

Health care provider

The term health care provider means any person or entity required by State or Federal laws or regulations to be licensed, registered, or certified to provide health care services, and being either so licensed, registered, or certified, or exempted from such requirement by other statute or regulation.

(12)

Health care goods or services

The term health care goods or services means any goods or services provided by a health care organization, provider, or by any individual working under the supervision of a health care provider, that relates to the diagnosis, prevention, or treatment of any human disease or impairment, or the assessment or care of the health of human beings.

(13)

Malicious intent to injure

The term malicious intent to injure means intentionally causing or attempting to cause physical injury other than providing health care goods or services.

(14)

Medical product

The term medical product means a drug, device, or biological product intended for humans, and the terms drug, device, and biological product have the meanings given such terms in sections 201(g)(1) and 201(h) of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321(g)(1) and (h)) and section 351(a) of the Public Health Service Act (42 U.S.C. 262(a)), respectively, including any component or raw material used therein, but excluding health care services.

(15)

Noneconomic damages

The term noneconomic damages means damages for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature.

(16)

Punitive damages

The term punitive damages means damages awarded, for the purpose of punishment or deterrence, and not solely for compensatory purposes, against a health care provider, health care organization, or a manufacturer, distributor, or supplier of a medical product. Punitive damages are neither economic nor noneconomic damages.

(17)

Recovery

The term recovery means the net sum recovered after deducting any disbursements or costs incurred in connection with prosecution or settlement of the claim, including all costs paid or advanced by any person. Costs of health care incurred by the plaintiff and the attorneys' office overhead costs or charges for legal services are not deductible disbursements or costs for such purpose.

(18)

State

The term State means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and any other territory or possession of the United States, or any political subdivision thereof.

328.

Effect on other laws

(a)

Vaccine injury

(1)

In general

To the extent that title XXI of the Public Health Service Act establishes a Federal rule of law applicable to a civil action brought for a vaccine-related injury or death—

(A)

this part does not affect the application of the rule of law to such an action; and

(B)

any rule of law prescribed by this part in conflict with a rule of law of such title XXI shall not apply to such action.

(2)

Application

If there is an aspect of a civil action brought for a vaccine-related injury or death to which a Federal rule of law under title XXI of the Public Health Service Act does not apply, then this part or otherwise applicable law (as determined under this part) will apply to such aspect of such action.

(b)

Other Federal law

Except as provided in this section, nothing in this part shall be deemed to affect any defense available to a defendant in a health care lawsuit or action under any other provision of Federal law.

329.

State flexibility and protection of States’ rights

(a)

Health care lawsuits

The provisions governing health care lawsuits set forth in this part preempt, subject to subsections (b) and (c), State law to the extent that State law prevents the application of any provisions of law established by or under this part. The provisions governing health care lawsuits set forth in this part supersede chapter 171 of title 28, United States Code, to the extent that such chapter—

(1)

provides for a greater amount of damages or contingent fees, a longer period in which a health care lawsuit may be commenced, or a reduced applicability or scope of periodic payment of future damages, than provided in this part; or

(2)

prohibits the introduction of evidence regarding collateral source benefits, or mandates or permits subrogation or a lien on collateral source benefits.

(b)

Protection of States’ rights and other laws

(1)

In general

Any issue that is not governed by any provision of law established by or under this part (including State standards of negligence) shall be governed by otherwise applicable State or Federal law.

(2)

Preemption

This part shall not preempt or supersede any State or Federal law that imposes greater procedural or substantive protections for health care providers and health care organizations from liability, loss, or damages than those provided by this part or create a cause of action.

(c)

State flexibility

No provision of this part shall be construed to preempt—

(1)

any State law (whether effective before, on, or after the date of the enactment of this Act) that specifies a particular monetary amount of compensatory or punitive damages (or the total amount of damages) that may be awarded in a health care lawsuit, regardless of whether such monetary amount is greater or lesser than is provided for under this part, notwithstanding section 323(a); or

(2)

any defense available to a party in a health care lawsuit under any other provision of State or Federal law.

330.

Applicability; effective date

This part shall apply to any health care lawsuit brought in a Federal or State court, or subject to an alternative dispute resolution system, that is initiated on or after the date of the enactment of this Act, except that any health care lawsuit arising from an injury occurring prior to the date of the enactment of this Act shall be governed by the applicable statute of limitations provisions in effect at the time the injury occurred.

2

Ending Lawsuit Abuse

331.

State grants to create health court solutions

Part P of title III of the Public Health Service Act (42 U.S.C. 280g et seq.) is amended by adding at the end the following:

399R.

State grants to create health court solutions

(a)

In general

The Secretary may award grants to States for the development, implementation, and evaluation of alternatives to current tort litigation that comply with this section, for the resolution of disputes concerning injuries allegedly caused by health care providers or health care organizations.

(b)

Conditions for demonstration grants

(1)

Application

To be eligible to receive a grant under this section, a State shall submit to the Secretary an application at such time, in such manner, and containing such information as may be required by the Secretary. A grant shall be awarded under this section on such terms and conditions as the Secretary determines appropriate.

(2)

State requirements

To be eligible to receive a grant under this section, a State shall—

(A)

develop and implement an alternative to current tort litigation for resolving disputes over injuries allegedly caused by health care providers or health care organizations based on one or more of the models described in subsection (d); and

(B)

implement policies that provide for a reduction in health care errors through the collection and analysis by organizations that engage in voluntary efforts to improve patient safety and the quality of health care delivery, of patient safety data related to disputes resolved under the alternatives under subparagraph (A).

(3)

Demonstration of effectiveness

To be eligible to receive a grant under subsection (a), a State shall demonstrate how the proposed alternative to be implemented under paragraph (2)(A) will—

(A)

make the medical liability system of the State more reliable through the prompt and fair resolution of disputes;

(B)

encourage the early disclosure of health care errors;

(C)

enhance patient safety; and

(D)

maintain access to medical liability insurance.

(4)

Sources of compensation

To be eligible to receive a grant under subsection (a), a State shall identify the sources from, and methods by which, compensation would be paid for medical liability claims resolved under the proposed alternative to current tort litigation implemented under paragraph (2)(A). Funding methods shall, to the extent practicable, provide financial incentives for activities that improve patient safety.

(5)

Scope

(A)

In general

To be eligible to receive a grant under subsection (a), a State shall utilize the proposed alternative identified under paragraph (2)(A) for the resolution of all types of disputes concerning injuries allegedly caused by health care providers or health care organizations.

(B)

Current state efforts to establish alternative to tort litigation

(i)

In general

Nothing in this section shall be construed to limit the efforts that any State has made prior to the date of enactment of this section to establish any alternative to tort litigation.

(ii)

Alternative for practice areas or injuries

In the case of a State that has established an alternative to tort litigation for a certain area of health care practice or a category of injuries, the alternative selected as provided for in this section shall supplement not replace or invalidate such established alternative unless the State intends otherwise.

(6)

Notification of patients

To be eligible to receive a grant under subsection (a), the State shall demonstrate how patients will be notified when they are receiving health care services that fall within the scope of the alternative selected under this section by the State to current tort litigation.

(c)

Representation by counsel

A State that receives a grant under this section may not preclude any party to a dispute that falls within the jurisdiction of the alternative to current tort litigation that is implemented under the grant from obtaining legal representation at any point during the consideration of the claim under such alternative.

(d)

Models

(1)

In general

The models in this section are the following:

(2)

Expert panel review and early offer guidelines

(A)

In general

A State may use amounts received under a grant under this section to develop and implement an expert panel and early offer review system that meets the requirements of this paragraph.

(B)

Establishment of panel

Under the system under this paragraph, the State shall establish an expert panel to review any disputes concerning injuries allegedly caused by health care providers or health care organizations according to the guidelines described in this paragraph.

(C)

Composition

(i)

In general

An expert panel under this paragraph shall be composed of 3 medical experts (either physicians or health care professionals) and 3 attorneys to be appointed by the head of the State agency responsible for health.

(ii)

Licensure and expertise

Each physician or health care professional appointed to an expert panel under clause (i) shall—

(I)

be appropriately credentialed or licensed in the State in which the dispute takes place to deliver health care services; and

(II)

typically treat the condition, make the diagnosis, or provide the type of treatment that is under review.

(iii)

Independence

(I)

In general

Subject to subclause (II), each individual appointed to an expert panel under this paragraph shall—

(aa)

not have a material familial, financial, or professional relationship with a party involved in the dispute reviewed by the panel; and

(bb)

not otherwise have a conflict of interest with such a party.

(II)

Exception

Nothing in subclause (I) shall be construed to prohibit an individual who has staff privileges at an institution where the treatment involved in the dispute was provided from serving as a member of an expert panel merely on the basis of such affiliation, if the affiliation is disclosed to the parties and neither party objects.

(iv)

Practicing health care professional in same field

(I)

In general

In a dispute before an expert panel that involves treatment, or the provision of items or services—

(aa)

by a physician, the medical experts on the expert panel shall be practicing physicians (allopathic or osteopathic) of the same or similar specialty as a physician who typically treats the condition, makes the diagnosis, or provides the type of treatment under review; or

(bb)

by a health care professional other than a physician, at least two medical experts on the expert panel shall be practicing physicians (allopathic or osteopathic) of the same or similar specialty as the health care professional who typically treats the condition, makes the diagnosis, or provides the type of treatment under review, and, if determined appropriate by the State agency, the third medical expert shall be a practicing health care professional (other than such a physician) of such a same or similar specialty.

(II)

Practicing defined

In this paragraph, the term practicing means, with respect to an individual who is a physician or other health care professional, that the individual provides health care services to individual patients on average at least 2 days a week.

(v)

Pediatric expertise

In the case of dispute relating to a child, at least 1 medical expert on the expert panel shall have expertise described in clause (iv)(I) in pediatrics.

(D)

Determination

After a review, an expert panel shall make a determination as to the liability of the parties involved and compensation based on a schedule of compensation that is developed by the panel. Such a schedule shall at least include—

(i)

payment for the net economic loss incurred by the patient, on a periodic basis, reduced by any payments received by the patient under—

(I)

any health or accident insurance;

(II)

any wage or salary continuation plan; or

(III)

any disability income insurance;

(ii)

payment for the non-economic damages incurred by the patient, if appropriate for the injury, based on a defined payment schedule developed by the State, in consultation with relevant experts and with the Secretary;

(iii)

reasonable attorney’s fees; and

(iv)

regular updates of the schedule under clause (ii) as necessary.

(E)

Acceptance

If the parties to a dispute who come before an expert panel under this paragraph accept the determination of the expert panel concerning liability and compensation, such compensation shall be paid to the claimant and the claimant shall agree to forgo any further action against the health care providers or health care organizations involved.

(F)

Failure to accept

If any party decides not to accept the expert panel’s determination under this paragraph, the State may choose whether to allow the panel to review the determination de novo, with deference, or to provide an opportunity for parties to reject the determination of the panel.

(G)

Review by State court after exhaustion of administrative remedies

(i)

Right to file

If the State elects not to permit the expert panel under this paragraph to conduct its own reviews of determinations, or if the State elects to permit such reviews but a party is not satisfied with the final decision of the panel after such a review, the party shall have the right to file a claim relating to the injury involved in a State court of competent jurisdiction.

(ii)

Forfeit of awards

Any party filing an action in a State court under clause (i) shall forfeit any compensation award made under subparagraph (C).

(iii)

Admissibility

The determinations of the expert panel pursuant to a review under subparagraph (C) shall be admissible into evidence in any State court proceeding under this subparagraph.

(3)

Administrative health care tribunals

(A)

In general

A State may use amounts received under a grant under this section to develop and implement an administrative health care tribunal system under which the parties involved shall have the right to request a hearing to review any dispute concerning injuries allegedly caused by health care providers or health care organizations before an administrative health care tribunal established by the State involved.

(B)

Requirements

In establishing an administrative health care tribunal under this paragraph, a State shall—

(i)

ensure that such tribunals are presided over by special judges with health care expertise who meet applicable State standards for judges and who agree to preside over such court voluntarily;

(ii)

provide authority to such judges to make binding rulings, rendered in written decisions, on standards of care, causation, compensation, and related issues with reliance on independent expert witnesses commissioned by the tribunal;

(iii)

establish a legal standard for the tribunal that shall be the same as the standard that would apply in the State court of competent jurisdiction which would otherwise handle the claim; and

(iv)

provide for an appeals process to allow for review of decisions by State courts.

(C)

Determination

After a tribunal conducts a review under this paragraph, the tribunal shall make a determination as to the liability of the parties involved and the amount of compensation that should be paid based on a schedule of compensation developed by the tribunal. Such a schedule shall at a minimum include—

(i)

payment for the net economic loss incurred by the patient, on a periodic basis, reduced by any payments received by the patient under—

(I)

any health or accident insurance;

(II)

any wage or salary continuation plan; or

(III)

any disability income insurance;

(ii)

payment for the non-economic damages incurred by the patient, if appropriate for the injury, based on a defined payment schedule developed by the State in consultation with relevant experts and with the Secretary;

(iii)

reasonable attorney’s fees; and

(iv)

regular updates of the schedule under clause (ii) as necessary.

(D)

Review by State court after exhaustion of administrative remedies

(i)

Right to file

Nothing in this paragraph shall be construed to prohibit any individual who is not satisfied with the determinations of a tribunal under this paragraph, from filing a claim for the injury involved in a State court of competent jurisdiction.

(ii)

Forfeit of award

Any party filing an action in a State court under clause (i) shall forfeit any compensation award made under subparagraph (C).

(iii)

Admissibility

The determinations of the tribunal under subparagraph (C) shall be admissible into evidence in any State court proceeding under this subparagraph.

(4)

Expert Panel Review and Administrative Health Care Tribunal Combination Model

(A)

In general

A State may use amounts received under a grant under this section to develop and implement an expert panel review and administrative health care tribunal combination system to review any dispute concerning injuries allegedly caused by health care providers or health care organizations. Under such system, a dispute concerning injuries allegedly caused by health care providers or health care organizations shall proceed through the procedures described in this subparagraph prior to the submission of such dispute to a State court.

(B)

General procedure

(i)

Establishment of expert panel

Prior to submitting any dispute described in subparagraph (A) to an administrative health care tribunal under the system established under this paragraph, the State shall establish an expert panel (in accordance with subparagraph (C)) to review the allegations involved in such dispute.

(ii)

Referral to tribunal

If either party to a dispute described in clause (i) fails to accept the determination of the expert panel, the dispute shall then be referred to an administrative health care tribunal (in accordance with subparagraph (D).

(C)

Expert review panel

(i)

In general

The provisions of paragraph (2) shall apply with respect to the establishment and operation of an expert review panel under this subparagraph, except that the subparagraphs (F) and (G) of such paragraph shall not apply.

(ii)

Failure to accept determination of panel

If any party to a dispute before an expert panel under this subparagraph refuses to accept the panel's determination, the dispute shall be referred to an administrative health care tribunal under subparagraph (D).

(D)

Administrative health care tribunals

(i)

In general

Upon the failure of any party to accept the determination of an expert panel under subparagraph (C), the parties shall request a hearing concerning the liability or compensation involved by an administrative health care tribunal established by the State involved under this subparagraph.

(ii)

Requirements

The provisions of paragraph (3) shall apply with respect to the establishment and operation of an administrative health care tribunal under this subparagraph.

(iii)

Forfeit of awards

Any party proceeding to the second step-administrative health care tribunal-under this model shall forfeit any compensation awarded by the expert panel.

(iv)

Admissibility

The determinations of the expert panel under subparagraph (C) shall be admissible into evidence in any administrative health care tribunal proceeding under this subparagraph.

(E)

Right to file

Nothing in this paragraph shall be construed to prohibit any individual who is not satisfied with the determination of the tribunal (after having proceeded through both the expert panel under subparagraph (C) and the tribunal under subparagraph (D)) from filing a claim for the injury involved in a State court of competent jurisdiction.

(F)

Admissibility

The determinations of both the expert panel and the tribunal under this paragraph shall be admissible into evidence in any State court proceeding under this paragraph.

(G)

Forfeit of awards

Any party filing an action in State court under subparagraph (E) shall forfeit any compensation award made by both the expert panel and the administrative health care tribunal under this paragraph.

(e)

Definitions

In this section:

(1)

Current tort litigation

The term current tort litigation means the tort litigation system existing in the State on the date on which the State submits an application under subsection (b)(1), for the resolution of disputes concerning injuries allegedly caused by health care providers or health care organizations.

(2)

Health care organization

The term health care organization means any individual or entity that is obligated to provide, pay for, or administer health benefits under any health plan.

(3)

Net economic loss

The term net economic loss means—

(A)

reasonable expenses incurred for products, services and accommodations needed for health care, training and other remedial treatment and care of an injured individual;

(B)

reasonable and appropriate expenses for rehabilitation treatment and occupational training;

(C)

100 percent of the loss of income from work that an injured individual would have performed if not injured, reduced by any income from substitute work actually performed; and

(D)

reasonable expenses incurred in obtaining ordinary and necessary services to replace services an injured individual would have performed for the benefit of the individual or the family of such individual if the individual had not been injured.

(4)

Non-economic damages

The term non-economic damages means losses for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), injury to reputation, and all other non-pecuniary losses of any kind or nature, to the extent permitted under State law.

(f)

Funding

(1)

One-time increase in Medicaid payment

In the case of a State awarded a grant to carry out this section, the total amount of the Federal payment determined for the State under section 1913 of the Social Security Act (as amended by section 401) for fiscal year 2011 (in addition to the any increase applicable for that fiscal year under section 203(b) but determined without regard to any such increase) shall be increased by an amount equal to 1 percent of the total amount of payments made to the State for fiscal year 2010 under section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) for purposes of carrying out a grant awarded under this section. Amounts paid to a State pursuant to this subsection shall remain available until expended.

(2)

Authorization of appropriations

There are authorized to be appropriated for any fiscal year such sums as may be necessary for purposes of making payments to States pursuant to paragraph (1).

.

IV

Social Security reform

401.

Short title

This title may be cited as the Social Security Personal Savings Guarantee and Prosperity Act of 2010.

402.

Establishment of Personal Social Security Savings Program

(a)

In general

Title II of the Social Security Act is amended—

(1)

by inserting before section 201 the following:

A

Insurance benefits

;

and
(2)

by adding at the end the following new part:

B

Personal Social Security Savings Program

251.

Definitions

For purposes of this part—

(1)

Participating individual

The term participating individual has the meaning provided in section 253(a).

(2)

Board

The term Board means the Personal Social Security Savings Board established under section 260.

(3)

Executive Director

The term Executive Director means the Executive Director appointed under section 261.

(4)

Personal social security savings account

The term personal social security savings account means an account established under section 254(a).

(5)

Personal social security savings annuity

The term personal social security savings annuity means an annuity approved by the Board under section 258(b)(3).

(6)

Savings Fund

The term Savings Fund means the Social Security Personal Savings Fund established under section 252.

(7)

Tier I Investment Fund

The term Tier I Investment Fund means the trust fund created under section 255.

(8)

Tier II Investment Fund

The term Tier II Investment Fund means the trust fund created under section 256.

(9)

Tier III Investment Option

The term Tier III Investment Option means an investment option which is—

(A)

offered by an eligible entity certified by the Board under section 257(b); and

(B)

approved by the Board under section 257(c).

252.

Social Security Personal Savings Fund

(a)

Establishment of Savings Fund

(1)

Establishment

There is established in the Treasury of the United States a trust fund to be known as the Social Security Personal Savings Fund.

(2)

Amounts in Fund

The Savings Fund shall consist of—

(A)

all amounts transferred to or deposited into the Savings Fund under subsection (b), increased by the total net earnings from investments of sums in the Savings Fund attributable to such transferred or deposited amounts, and reduced by the total net losses from investments of such sums, and

(B)

the reserves held in the Annuity Reserves Account established under section 258(b)(3), increased by the total net earnings from investments of such reserves, and reduced by the total net losses from investments of such reserves.

(3)

Trustees

The Board shall serve as trustees of the Savings Fund.

(4)

Budget authority; appropriation

This part constitutes budget authority in advance of appropriations Acts and represents the obligation of the Board to provide for the payment of amounts provided under this part. The amounts held in the Savings Fund are appropriated and shall remain available without fiscal year limitation.

(b)

Deposits into Fund

(1)

In general

During each calendar year, the Secretary of the Treasury shall deposit into the Savings Fund, from amounts held in the Federal Old-Age and Survivors Insurance Trust Fund, a total amount equal, in the aggregate, to 100 percent of the redirected Social Security contribution for such calendar year of each individual who is a participating individual for such calendar year.

(2)

Transfers based on estimates

(A)

In general

The amounts deposited pursuant to paragraph (1) shall be transferred in at least weekly payments from the Federal Old-Age and Survivors Insurance Trust Fund to the Savings Fund.

(B)

Determination of amounts

The amounts transferred under subparagraph (A) shall be determined on the basis of estimates, made by the Commissioner of Social Security and certified to the Secretary of the Treasury, of the wages paid to, and self-employment income derived by, participating individuals. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than actual amounts transferred.

(3)

Redirected Social Security contributions

For purposes of paragraph (1)—

(A)

In general

The term redirected social security contributions means, with respect to an individual for a calendar year, the sum of—

(i)

the product derived by multiplying—

(I)

the sum of the total wages paid to, and self-employment income derived by, such individual during such calendar year, to the extent such total wages and self-employment income do not exceed the base amount for such calendar year; by

(II)

the applicable base percentage for the calendar year; and

(ii)

the product derived by multiplying—

(I)

the sum of the total wages paid to, and self-employment income derived by, such individual during such calendar year, to the extent such total wages and self-employment income exceed the base amount (taking into account the limits imposed by the contribution and benefit base under section 230); by

(II)

the applicable supplemental percentage for the calendar year.

(B)

Base amount

For purposes of subparagraph (A)—

(i)

Initial base amount

The base amount for calendar year 2012 is $10,000.

(ii)

Adjustments to base amount

The base amount for any calendar year after 2011 is the product derived by multiplying $10,000 by a fraction—

(I)

the numerator of which is the national average wage index (as defined in section 209(k)) for the first of the 2 preceding calendar years; and

(II)

the denominator of which is the national average wage index (as so defined) for 2010.

(C)

Applicable base percentage

For purposes of subparagraph (A), the applicable base percentage for a calendar year is—

(i)

for calendar years after 2011 and before 2022, 2 percent;

(ii)

for calendar years after 2021 and before 2032, 4 percent;

(iii)

for calendar years after 2031 and before 2042, 6 percent; and

(iv)

for calendar years after 2041, 8 percent.

(D)

Applicable supplemental percentage

For purposes of subparagraph (A), the applicable supplemental percentage for a calendar year is—

(i)

for calendar years after 2011 and before 2022, 1 percent;

(ii)

for calendar years after 2021 and before 2032, 2 percent;

(iii)

for calendar years after 2031 and before 2042, 3 percent; and

(iv)

for calendar years after 2041, 4 percent.

(c)

Availability

The sums in the Savings Fund are appropriated and shall remain available without fiscal year limitation—

(1)

to invest funds in the Tier I Investment Fund of the Savings Fund and the Tier II Investment Fund of the Savings Fund under sections 255 and 256, respectively;

(2)

to transfer into Tier III Investment Options under section 257;

(3)

to make distributions in accordance with section 258; and

(4)

to pay the administrative expenses of the Board in accordance with subsection (e).

(d)

Limitations on use of funds

(1)

In general

Sums in the Savings Fund credited to a participating individual’s personal social security savings account may not be used for, or diverted to, purposes other than for the exclusive benefit of the participating individual or the participating individual’s beneficiaries under this part.

(2)

Assignments

Sums in the Savings Fund may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process.

(e)

Payment of administrative expenses

Administrative expenses incurred to carry out this part shall be paid out of net earnings in the Savings Fund in conjunction with the allocation of investment earnings and losses under section 254(c).

(f)

Limitation

The sums in the Savings Fund shall not be appropriated for any purpose other than the purposes specified in this part and may not be used for any other purpose.

253.

Participation in Program

(a)

Participating individual

For purposes of this part, the term participating individual means any individual—

(1)
(A)

who receives wages in any calendar year after December 31, 2011, on which there is imposed a tax under section 3101(a) of the Internal Revenue Code of 1986, or

(B)

who derives self-employment income for a taxable year beginning after December 31, 2011, on which there is imposed a tax under section 1401(a) of the Internal Revenue Code of 1986,

(2)

who is born on or after January 1, 1956, and

(3)

who has filed an election to be treated as a participating individual under subsection (b) and has not subsequently filed an election to renounce such individual’s status as a participating individual under subsection (c).

(b)

Election of participation

(1)

In general

An individual who has not become entitled to old-age insurance benefits under section 202(a) may elect, subject to paragraph (2) and in such form and manner as shall be prescribed in regulations of the Board, to be treated as a participating individual for purposes of this part. Such regulations shall provide for regular, periodic opportunities for the filing of such an election. The Board shall provide for immediate notification to the Commissioner of Social Security, the Secretary of the Treasury, and the Executive Director of such election.

(2)

Deadline for election

An election under paragraph (1) may be made by an individual not later than the later of—

(A)

the date on which such individual attains age 25, or

(B)

December 31, 2012.

(3)

Effectiveness of election

An election under this subsection shall be effective with respect to wages earned, and self-employment income derived, on the earliest date on which the Board determines is practicable to make such election effective following the date of the filing of the election.

(c)

Revocation of election

(1)

In general

An individual may, in such form and manner as shall be prescribed in regulations of the Board, revoke an election made by such individual under subsection (b) within 1 year after the date of a qualifying event described in paragraph (2). Upon completion of the procedures provided for under paragraph (3), any such individual who has made such an election shall not be treated as a participating individual under this part, effective as if such individual had never been a participating individual. The Board shall provide for immediate notification of such election to the Commissioner of Social Security, the Secretary of the Treasury, and the Executive Director.

(2)

Qualifying events

For purposes of paragraph (1), the term qualifying event means, in connection with an individual, any of the following events:

(A)

The death of the individual’s spouse.

(B)

The entry into marriage by the individual.

(C)

The divorce or legal separation of the individual from the individual’s spouse.

(D)

A dependent child of the individual ceasing to be a dependent child of the individual under section 202(d)(3).

(3)

Procedure

The Board shall prescribe by regulation procedures governing the termination of an individual's status as participating individual pursuant to a revocation under this subsection. Such procedures shall include—

(A)

prompt closing of the individual’s personal social security savings account established under section 254, and

(B)

prompt transfer to the Federal Old-Age and Survivors Insurance Trust Fund as general receipts of any amount held in the Tier II Investment Fund of the Savings Fund or under a Tier III Investment Option pursuant to section 256 or 257 and credited to such individual’s personal social security savings account.

254.

Personal Social Security savings accounts

(a)

Establishment of publicly administered system of personal security savings accounts

As soon as practicable after the later of January 1, 2011, or the date on which an individual becomes a participating individual under this part, the Executive Director shall establish a personal social security savings account for such individual. Such account shall be the means by which amounts held in the Tier I Investment Fund and the Tier II Investment Fund of the Savings Fund under sections 255 and 256 and amounts held under Tier III Investment Options under section 257 are credited to such individual, under procedures which shall be established by the Board by regulation. Each account of a participating individual shall be identified to such participating individual by means of the par