[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 121 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 121

To guarantee individuals and families continued choice and control over 
    their doctors and hospitals, to ensure that health coverage is 
 permanent and portable, to provide equal tax treatment for all health 
insurance consumers, to control medical cost inflation through medical 
  savings accounts, to reform medical liability litigation, to reduce 
                   paperwork, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 4, 1995

   Mr. Gramm introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To guarantee individuals and families continued choice and control over 
    their doctors and hospitals, to ensure that health coverage is 
 permanent and portable, to provide equal tax treatment for all health 
insurance consumers, to control medical cost inflation through medical 
  savings accounts, to reform medical liability litigation, to reduce 
                   paperwork, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Family Health Care 
Preservation Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
        TITLE I--PORTABLE AND PERMANENT PRIVATE HEALTH INSURANCE

                        Subtitle A--Portability

Sec. 101. Amendments to COBRA.
Sec. 102. Penalty-free withdrawals from qualified retirement plans for 
                            COBRA coverage.
                         Subtitle B--Permanence

Sec. 111. General renewability requirements.
Sec. 112. Individual health insurance plans.
Sec. 113. Group health plans.
Sec. 114. Failure of health plans to meet portability and permanence 
                            requirements.
Sec. 115. Definitions.
             TITLE II--AFFORDABLE HEALTH INSURANCE COVERAGE

Sec. 200. Amendment of 1986 Code.
Subtitle A--Equitable Tax Treatment of Individuals Providing Own Health 
                                  Care

Sec. 201. Deduction for individuals and self-employed individuals 
                            providing own health insurance.
                  Subtitle B--Medical Savings Accounts

Sec. 211. Medical savings accounts.
       TITLE III--ENHANCED EFFICIENCY THROUGH PAPERWORK REDUCTION

Sec. 301. Federal paperwork reduction and efficiency requirements.
Sec. 302. State paperwork reduction and efficiency requirements.
             TITLE IV--MEANINGFUL MEDICAL LIABILITY REFORM

Sec. 401. Applicability and preemption.
Sec. 402. Statute of limitations.
Sec. 403. Scope of liability.
Sec. 404. Discovery; failure to make or cooperate in discovery.
Sec. 405. Limitation on noneconomic damages.
Sec. 406. Treatment of payments for future economic losses.
Sec. 407. Treatment of costs and attorney's fees.
Sec. 408. Contribution and indemnification.
Sec. 409. Collateral sources.
Sec. 410. Damages relating to medical product liability claims.
Sec. 411. Class actions.
Sec. 412. Definitions.
Sec. 413. Severability.
Sec. 414. Effective date.

        TITLE I--PORTABLE AND PERMANENT PRIVATE HEALTH INSURANCE

                        Subtitle A--Portability

SEC. 101. AMENDMENTS TO COBRA.

    (a) Lower Cost Coverage Options.--Subparagraph (A) of section 
4980B(f)(2) of the Internal Revenue Code of 1986 (relating to 
continuation coverage requirements of group health plans) is amended to 
read as follows:
                    ``(A) Type of benefit coverage.--The coverage must 
                consist of coverage which, as of the time the coverage 
                is being provided--
                            ``(i) is identical to the coverage provided 
                        under the plan to similarly situated 
                        beneficiaries under the plan with respect to 
                        whom a qualifying event has not occurred,
                            ``(ii) is so identical, except such 
                        coverage is offered with an annual $1,000 
                        deductible, and
                            ``(iii) is so identical, except such 
                        coverage is offered with an annual $3,000 
                        deductible.
                If coverage under the plan is modified for any group of 
                similarly situated beneficiaries, the coverage shall 
                also be modified in the same manner for all individuals 
                who are qualified beneficiaries under the plan pursuant 
                to this subsection in connection with such group.''
    (b) Termination of COBRA Coverage After Eligible for Employer-Based 
Coverage for 90 Days.--Clause (iv) of section 4980B(f)(2)(B) of the 
Internal Revenue Code of 1986 (relating to period of coverage) is 
amended--
            (1) by striking ``or'' at the end of subclause (I),
            (2) by redesignating subclause (II) as subclause (III), and
            (3) by inserting after subclause (I) the following new 
        subclause:
                                    ``(II) eligible for such employer-
                                based coverage for more than 90 days, 
                                or''.
    (c) Effective Date.--The amendments made by this section shall 
apply to qualifying events occurring after the date of the enactment of 
this Act.

SEC. 102. PENALTY-FREE WITHDRAWALS FROM QUALIFIED RETIREMENT PLANS FOR 
              COBRA COVERAGE.

    (a) In General.--Subparagraph (A) of section 72(t)(2) of the 
Internal Revenue Code of 1986 (relating to additional tax not to apply 
to certain distributions) is amended--
            (1) by striking ``or'' at the end of clauses (iv) and (v),
            (2) by striking the period at the end of clause (vi) and 
        inserting ``, or'', and
            (3) by adding at the end the following new clause:
                            ``(vii) made to an employee who is a 
                        qualified beneficiary during the period of 
                        continuation coverage under section 4980B(f).''
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to distributions made after the date of the enactment of this 
Act.

                         Subtitle B--Permanence

SEC. 111. GENERAL RENEWABILITY REQUIREMENTS.

    (a) Insurers.--
            (1) In general.--An insurer may not cancel an individual 
        health insurance plan or group health plan or deny renewal of 
        coverage under such a plan other than--
                    (A) for nonpayment of premiums,
                    (B) for fraud or other misrepresentation by the 
                insured,
                    (C) for noncompliance with plan provisions, or
                    (D) because the insurer is ceasing to provide any 
                health insurance plan in a State, or, in the case of a 
                health maintenance organization, in a geographic area.
            (2) Limitation on market reentry.--If an insurer terminates 
        the offering of health insurance plans or group health plans in 
        an area, the insurer may not offer such a plan in the area 
        until 5 years after the date of the termination.
    (b) Employers.--An employer may not cancel a self-insured group 
health plan or deny renewal of coverage under such a plan other than--
            (1) for nonpayment of premiums,
            (2) for fraud or other misrepresentation by the insured,
            (3) for noncompliance with plan provisions, or
            (4) because the plan is ceasing to provide any coverage in 
        a geographic area.
    (c) Effective Date.--The provisions of this section shall apply to 
any plan on or after the date of the enactment of this Act.

SEC. 112. INDIVIDUAL HEALTH INSURANCE PLANS.

    (a) Existing Plans.--With respect to any individual health 
insurance plan in effect on the date of the enactment of this Act, the 
insurer shall offer the insured the option to purchase a new individual 
health insurance described in subsection (b).
    (b) New Plans.--With respect to any individual health insurance 
plan, the effective date of which with respect to the insured occurs 
after the date of the enactment of this Act, the insurer may not 
increase the premium for such a plan based on the health of the 
insured.

SEC. 113. GROUP HEALTH PLANS.

    (a) Existing Plans.--With respect to any group health plan (other 
than a self-insured group health plan) in effect on the date of the 
enactment of this Act, the insurer shall offer--
            (1) any insured of such plan the option to purchase upon 
        leaving the group a new individual health insurance plan, the 
        premium of which shall be rated based on actuarial data, may be 
        based on any preexisting condition of the insured, and may be 
        increased based on the health of such insured, and
            (2) the employer or group sponsor of such plan the option 
        to purchase a new group health plan described in subsection 
        (b).
    (b) New Plans.--With respect to any group health plan (other than a 
self-insured group health plan), the effective date of which with 
respect to the employer or group sponsor occurs after the date of the 
enactment of this Act, the insurer--
            (1) may not increase the premium for such a plan based on 
        the health of the group's insured, and
            (2) shall offer any insured of such plan the option to 
        purchase upon leaving the group a new individual health 
        insurance plan, the premium of which shall be rated based on 
        actuarial data, may not be based on any preexisting condition 
        of the insured, and may not be increased based on the health of 
        such insured.
    (c) Self-Insured Group Health Plans.--With respect to a self-
insured group health plan--
            (1) in effect on the date of the enactment of this Act--
                    (A) subsection (a)(1) shall apply through 1 or more 
                insurers contracted with by such plan, and
                    (B) subsection (a)(2) shall not apply, and
            (2) the effective date of which with respect to the 
        employer or group sponsor occurs after the date of the 
        enactment of this Act, subsection (b) shall apply through 1 or 
        more insurers contracted with by such plan.

SEC. 114. FAILURE OF HEALTH PLANS TO MEET PORTABILITY AND PERMANENCE 
              REQUIREMENTS.

    (a) Deduction for Individual Health Insurance Plans.--Paragraph (1) 
of section 213(d) of the Internal Revenue Code of 1986 (defining 
medical care) is amended--
            (1) by striking ``or'' at the end of subparagraph (B), and
            (2) by striking subparagraph (C) and inserting the 
        following new subparagraphs:
                    ``(C) for insurance--
                            ``(i) meeting the requirements of section 
                        112 of the Family Health Care Preservation Act, 
                        and
                            ``(ii) covering medical care referred to in 
                        subparagraphs (A) and (B), or
                    ``(D) as premiums under part B of title XVIII of 
                the Social Security Act, relating to supplementary 
                medical insurance for the aged.''
    (b) Tax Exclusions for Employer-Provided Health Insurance.--Section 
106 of the Internal Revenue Code of 1986 (relating to contributions by 
employer to accident and health plans) is amended by striking ``an 
accident or health plan'' and inserting ``an accident or health plan 
meeting the requirements of section 113 of the Family Health Care 
Preservation Act''.
    (c) Business Expense Deduction for Health Insurance.--Section 162 
of the Internal Revenue Code of 1986 (relating to trade or business 
expenses) is amended by redesignating subsection (o) as subsection (p) 
and by inserting after subsection (n) the following new subsection:
    ``(o) Group Health Plans.--The expenses paid or incurred by an 
employer for a group health plan shall not be allowed as a deduction 
under this section unless such plan meets the requirements of section 
113 of the Family Health Care Preservation Act.''
    (d) Payroll Tax Exclusion for Employer-Provided Health Insurance.--
Section 209(a)(2) of the Social Security Act (42 U.S.C. 409(a)(2)) is 
amended by inserting ``or group health insurance'' after ``group-term 
life insurance''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 115. DEFINITIONS.

    For purposes of this subtitle:
            (1) Employer.--The term ``employer'' shall have the meaning 
        applicable under section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(5)).
            (2) Group health plan.--The term ``group health plan'' has 
        the meaning given such term by section 5000(b)(1) of the 
        Internal Revenue Code of 1986, but does not include any type of 
        coverage excluded from the definition of a health insurance 
        plan under paragraph (2).
            (3) Health insurance plan.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance plan'' means any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by an 
                insurer.
                    (B) Exception.--Such term does not include any of 
                the following--
                            (i) coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof,
                            (ii) medicare supplemental health 
                        insurance,
                            (iii) coverage issued as a supplement to 
                        liability insurance,
                            (iv) worker's compensation or similar 
                        insurance, or
                            (v) automobile medical-payment insurance,
                or any combination thereof.
            (4) Health maintenance organization.--The term ``health 
        maintenance organization'' includes a health insurance plan 
        that offers to provide health services on a prepaid, at-risk 
        basis primarily through a defined set of providers.
            (5) Insurer.--The term ``insurer'' means a licensed 
        insurance company, a prepaid hospital or medical service plan, 
        or a health maintenance organization offering such a plan to an 
        employer, and includes a similar organization regulated under 
        State law for solvency.
            (6) State.--The term ``State'' means each of the several 
        States of the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the United States Virgin Islands, 
        Guam, American Samoa, and the Commonwealth of the Northern 
        Mariana Islands.

             TITLE II--AFFORDABLE HEALTH INSURANCE COVERAGE

SEC. 200. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this subtitle 
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.

Subtitle A--Equitable Tax Treatment of Individuals Providing Own Health 
                                  Care

SEC. 201. DEDUCTION FOR INDIVIDUALS AND SELF-EMPLOYED INDIVIDUALS 
              PROVIDING OWN HEALTH INSURANCE.

    (a) General Rule.--Section 213 (relating to medical, dental, etc. 
expenses) is amended by adding at the end the following new subsection:
    ``(f) Health Insurance Costs of Individuals.--
            ``(1) In general.--The adjusted gross income limitation 
        under subsection (a) shall not apply to amounts paid by an 
        individual during the taxable year for qualified health 
        insurance costs (and such amounts shall not be taken into 
        account in determining whether such limitation applies to other 
        amounts).
            ``(2) Qualified health insurance costs.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `qualified health 
                insurance costs' means amounts paid for insurance 
                described in subparagraphs (C) and (D) of subsection 
                (d)(1) for the taxpayer, the taxpayer's spouse, or any 
                dependent (as defined in section 152).
                    ``(B) Limitations.--For purposes of subparagraph 
                (A)--
                            ``(i) No deduction for employer-subsidized 
                        health costs.--Qualified health insurance costs 
                        shall not include any amount paid for insurance 
                        coverage of an individual for any month if the 
                        individual is eligible to participate for such 
                        month in an employer-subsidized health plan 
                        maintained by any employer of the taxpayer, the 
                        taxpayer's spouse, or any dependent.
                            ``(ii) Phase-in.--In the case of taxable 
                        years beginning after 1993 and before 2001, 
                        only the following percentages of the qualified 
                        health insurance costs shall be taken into 
                        account:

                         ``If the taxable year
                                                         The applicable
                           begins in:
                                                         percentage is:
                               1994, 1995 or 1996....        25 percent
                               1997 or 1998..........        50 percent
                               1999 or 2000..........       75 percent.
            ``(3) Deduction not allowed for self-employment tax 
        purposes.--The deduction allowable by reason of this subsection 
        shall not be taken into account in determining an individual's 
        net earnings from self-employment (within the meaning of 
        section 1402(a)) for purposes of chapter 2.''
    (b) Deduction Allowed Against Gross Income.--Section 62(a) 
(defining adjusted gross income) is amended by inserting after 
paragraph (15) the following new paragraph:
            ``(16) Deduction for health insurance premiums.--The 
        deduction allowed under section 213(a) for amounts described in 
        section 213(f).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

                  Subtitle B--Medical Savings Accounts

SEC. 211. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 220 as 
section 221 and by inserting after section 219 the following new 
section:

``SEC. 220. MEDICAL SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an eligible individual, 
there shall be allowed as a deduction the amounts paid in cash during 
the taxable year by or on behalf of such individual to a medical 
savings account for the benefit of such individual and (if any) such 
individual's spouse and dependents if such spouse and dependents are 
eligible individuals.
    ``(b) Limitations.--
            ``(1) Only one account per family.--Except as provided in 
        regulations prescribed by the Secretary, no deduction shall be 
        allowed under subsection (a) for amounts paid to any medical 
        savings account for the benefit of an individual, such 
        individual's spouse, or any dependent of such individual or 
        spouse if such individual, spouse, or dependent is a 
        beneficiary of any other medical savings account.
            ``(2) Dollar limitation.--The amount allowable as a 
        deduction under subsection (a) for the taxable year shall not 
        exceed $3,000, or such higher amounts as may be specified in 
        subparagraph (c)(2)(C).
    ``(c) Definitions.--For purposes of this section:
            ``(1) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means any individual who is covered under a 
                catastrophic health insurance plan throughout the 
                calendar year in which or with which the taxable year 
                ends.
                    ``(B) Limitations.--Such term does not include an 
                individual who is 65 years of age or older, unless the 
                individual is covered under a catastrophic health 
                insurance plan that is a primary plan (within the 
                meaning of section 1862(b)(2)(A) of the Social Security 
                Act).
            ``(2) Catastrophic health insurance plan.--
                    ``(A) In general.--The term `catastrophic health 
                insurance plan' means a health plan covering specified 
                expenses incurred by an individual for medical care (as 
                defined in subparagraph (B)) for such individual and 
                the spouse and dependents (as defined in section 152) 
                of such individual only to the extent such expenses 
                covered by the plan for any calendar year exceed $3,000 
                or such higher amounts as may be specified by the plan.
                    ``(B) Medical care.--The term `medical care' means 
                medical care as defined in section 213(d) (without 
                regard to non-emergency transportation under paragraph 
                (1)(B) and amounts described in paragraph (2)).
                    ``(C) Cost-of-living adjustment.--In the case of 
                any calendar year after 1995, the dollar amount in 
                subparagraph (A) and paragraph (b)(2) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year.
                If any increase under the preceding sentence is not a 
                multiple of $50, such increase shall be rounded to the 
                nearest multiple of $50.
    ``(d) Medical Savings Account.--For purposes of this section:
            ``(1) Medical savings account defined.--
                    ``(A) In general.--The term `medical savings 
                account' means a trust created or organized in the 
                United States exclusively for the purpose of paying the 
                medical expenses of the beneficiaries of such trust, 
                but only if the written governing instrument creating 
                the trust meets the following requirements:
                            ``(i) Except in the case of a rollover 
                        contribution described in subsection (e)(5), no 
                        contribution will be accepted unless it is in 
                        cash, and contributions will not be accepted in 
                        excess of the amount allowed as a deduction 
                        under this section for the taxable year.
                            ``(ii) The trustee is a bank (as defined in 
                        section 408(n)) or another person who 
                        demonstrates to the satisfaction of the 
                        Secretary that the manner in which such person 
                        will administer the trust will be consistent 
                        with the requirements of this section.
                            ``(iii) No part of the trust assets will be 
                        invested in life insurance contracts.
                            ``(iv) The assets of the trust will not be 
                        commingled with other property except in a 
                        common trust fund or common investment fund.
                            ``(v) The interest of an individual in the 
                        balance in his account is nonforfeitable.
                            ``(vi) Under regulations prescribed by the 
                        Secretary, rules similar to the rules of 
                        section 401(a)(9) shall apply to the 
                        distribution of the entire interest of 
                        beneficiaries of such trust.
                    ``(B) Treatment of comparable accounts held by 
                insurance companies.--For purposes of this section, an 
                account held by an insurance company in the United 
                States shall be treated as a medical savings account 
                (and such company shall be treated as a bank) if--
                            ``(i) such account is part of a health 
                        insurance plan that includes a catastrophic 
                        health insurance plan (as defined in subsection 
                        (c)(2)),
                            ``(ii) such account is exclusively for the 
                        purpose of paying the medical expenses of the 
                        beneficiaries of such account who are covered 
                        under such catastrophic health insurance plan, 
                        and
                            ``(iii) the written instrument governing 
                        the account meets the requirements of clauses 
                        (i), (v), and (vi) of subparagraph (A).
            ``(2) Medical expenses.--
                    ``(A) In general.--The term `medical expenses' 
                means, with respect to an individual, amounts paid or 
                incurred by such individual for medical care for such 
                individual, the spouse of such individual, and any 
                dependent (as defined in section 152) of such 
                individual, but only to the extent such amounts--
                            ``(i) are not compensated for by insurance 
                        or otherwise, and
                            ``(ii) are counted towards a deductible 
                        under the terms of such individual's 
                        catastrophic health insurance plan.
                    ``(B) Health plan coverage may not be purchased 
                from account.--Such term shall not include any amount 
                paid for coverage under a health plan.
            ``(3) Time when contributions deemed made.--A contribution 
        shall be deemed to be made on the last day of the preceding 
        taxable year if the contribution is made on account of such 
        taxable year and is made not later than the time prescribed by 
        law for filing the return for such taxable year (not including 
        extensions thereof).
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Except as provided in paragraphs (2), 
        (3), and (5), any amount paid or distributed out of a medical 
        savings account shall be included in the gross income of the 
        individual for whose benefit such account was established.
            ``(2) Exception for medical and long-term care expenses.--
                    ``(A) In general.--Paragraph (1) shall not apply if 
                such amount paid or distributed is used exclusively to 
                pay--
                            ``(i) the medical expenses of such 
                        individual, or
                            ``(ii) except as provided in subparagraph 
                        (B), the expenses for long-term care services 
                        of the type identified in section 1931(e)(3) of 
                        the Social Security Act for the individual.
                    ``(B) Nonqualified payments or distributions for 
                long-term expenses.--Paragraph (1) shall apply to any 
                portion of a payment or distribution for expenses for 
                long-term care services equal to the amount by which, 
                after such payment or distribution--
                            ``(i) the amount of the deductible under 
                        the catastrophic health insurance plan covering 
                        the individual, exceeds
                            ``(ii) the aggregate balance of all medical 
                        savings accounts established for the benefit of 
                        the individual.
        For purposes of this paragraph, any payment or distribution for 
        medical expenses shall be considered to have been made before 
        any other payment or distribution.
            ``(3) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount allowable as a deduction under subsection (a) if--
                    ``(A) such distribution is received by the 
                individual on or before the last day prescribed by law 
                (including extensions of time) for filing such 
                individual's return for such taxable year, and
                    ``(B) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (B) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(4) Penalty for distributions not used for medical 
        expenses which leave an amount less than the catastrophic 
        deductible in the account.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a medical savings account which is 
                includible in gross income under paragraph (1) shall be 
                increased by 10 percent with respect to the penalty 
                portion of such payment or distribution.
                    ``(B) Penalty portion.--For purposes of 
                subparagraph (A), the penalty portion of any payment or 
                distribution is equal to the amount by which, after 
                such payment or distribution--
                            ``(i) the amount of the deductible under 
                        the catastrophic health insurance plan covering 
                        the individual, exceeds
                            ``(ii) the aggregate balance of all medical 
                        savings accounts established for the benefit of 
                        the individual.
        For purposes of this paragraph, any payment or distribution for 
        medical expenses shall be considered to have been made before 
        any other payment or distribution.
            ``(5) Rollovers.--Paragraph (1) shall not apply to any 
        amount paid or distributed out of a medical savings account to 
        the individual for whose benefit the account is maintained if 
        the entire amount received (including money and any other 
        property) is paid into another medical savings account for the 
        benefit of such individual not later than the 60th day after 
        the day on which he received the payment or distribution.
    ``(f) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--Any medical savings account is 
        exempt from taxation under this subtitle unless such account 
        has ceased to be a medical savings account by reason of 
        paragraph (2) or (3).
        Notwithstanding the preceding sentence, any such account shall 
        be subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        et cetera organizations).
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the individual for whose benefit the medical savings 
                account was established, such individual engages in any 
                transaction prohibited by section 4975 with respect to 
                the account, the account ceases to be a medical savings 
                account as of the first day of that taxable year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                of the first day of any taxable year, paragraph (1) of 
                subsection (e) shall be applied as if there were a 
                distribution of such first day in an amount equal to 
                the fair market value (on such first day) of all assets 
                in the account (on such first day) and no portion of 
                such distribution were used to pay medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit a medical 
        savings account was established uses the account or any portion 
        thereof as security for a loan, the portion so used is treated 
        as distributed to that individual and not used to pay medical 
        expenses.
    ``(g) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)) or another person who demonstrates 
        to the satisfaction of the Secretary that the manner in which 
        he will administer the account will be consistent with the 
        requirements of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (d).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(h) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the 
individual for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of the Internal Revenue Code 
of 1986 (defining adjusted gross income), as amended by section 211, is 
amended by inserting after paragraph (16) the following new paragraph:
            ``(17) Medical savings accounts.--The deduction allowed by 
        section 220.''
    (c) Distributions From Medical Savings Accounts Not Allowed as 
Medical Expense Deduction.--Section 213 of the Internal Revenue Code of 
1986 (relating to medical, dental, et cetera, expenses) is amended by 
adding at the end the following new subsection:
    ``(g) Coordination With Medical Savings Accounts.--The amount 
otherwise taken into account under subsection (a) as expenses paid for 
medical care shall be reduced by the amount (if any) of the 
distributions from any medical savings account of the taxpayer during 
the taxable year which is not includible in gross income by reason of 
being used for medical care.''
    (d) Exclusion of Employer Contributions To Medical Savings Accounts 
From Employment Taxes.--
            (1) Social security taxes.--
                    (A) Subsection (a) of section 3121 of the Internal 
                Revenue Code of 1986 (defining wages) is amended by 
                striking ``or'' at the end of paragraph (20), by 
                striking the period at the end of paragraph (21) and 
                inserting ``; or'', and by inserting after paragraph 
                (21) the following new paragraph:
            ``(22) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220.''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by striking ``or'' at the end 
                of paragraph (17), by striking the period at the end of 
                paragraph (18) and inserting ``; or'', and by inserting 
                after paragraph (18) the following new paragraph:
            ``(19) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220 of the Internal 
        Revenue Code of 1986.''
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 of such Code (defining compensation) is amended by adding 
        at the end the following new paragraph:
            ``(10) Employer contributions to medical savings 
        accounts.--The term `compensation' shall not include any 
        payment made to or on behalf of an employee if (and to the 
        extent that) at the time of payment of such remuneration it is 
        reasonable to believe that a corresponding deduction is 
        allowable under section 220.''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code (defining wages) is amended by striking ``or'' at the 
        end of paragraph (15), by striking the period at the end of 
        paragraph (16) and inserting ``; or'', and by inserting after 
        paragraph (16) the following new paragraph:
            ``(17) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220.''
            (4) Withholding tax.--Subsection (a) of section 3401 of 
        such Code (defining wages) is amended by striking ``or'' at the 
        end of paragraph (19), by striking the period at the end of 
        paragraph (20) and inserting ``; or'', and by inserting after 
        paragraph (20) the following new paragraph:
            ``(21) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220.''
    (e) Tax on Excess Contributions.--Section 4973 of the Internal 
Revenue Code of 1986 (relating to tax on excess contributions to 
individual retirement accounts, certain section 403(b) contracts, and 
certain individual retirement annuities) is amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 220(d)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end the following new subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 220(d)), the term `excess contributions' 
means the amount by which the amount contributed for the taxable year 
to the account exceeds the amount excludable from gross income under 
section 220 for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the medical savings account in 
a distribution to which section 220(e)(3) applies shall be treated as 
an amount not contributed.''
    (f) Tax on Prohibited Transactions.--Section 4975 of the Internal 
Revenue Code of 1986 (relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 220(d)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 220(f)(2)(A) to such 
        account.'', and
            (2) by inserting ``or a medical savings account described 
        in section 220(d)'' in subsection (e)(1) after ``described in 
        section 408(a)''.
    (g) Failure To Provide Reports on Medical Savings Accounts.--
Section 6693 of the Internal Revenue Code of 1986 (relating to failure 
to provide reports on individual retirement account or annuities) is 
amended--
            (1) by inserting ``or on medical savings accounts'' after 
        ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 220(h) to file a report 
        regarding a medical savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (h) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        striking the last item and inserting the following:

                              ``Sec. 220. Medical savings accounts.
                              ``Sec. 221. Cross reference.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, medical savings 
                                        accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.
    (i) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

       TITLE III--ENHANCED EFFICIENCY THROUGH PAPERWORK REDUCTION

SEC. 301. FEDERAL PAPERWORK REDUCTION AND EFFICIENCY REQUIREMENTS.

    (a) In General.--The Secretary of Health and Human Services 
(hereafter referred to in this title as the ``Secretary'') shall, in 
consultation with the Director of the Office of Management and Budget, 
the Secretary of Veterans Affairs, the Secretary of Defense, the 
Director of Personnel Management, and other appropriate Federal 
officials, adopt standards to reduce the administrative and paperwork 
burdens of all Federal health care programs by--
            (1) 50 percent within the 2-year period following the date 
        of the enactment of this Act, and
            (2) an additional 50 percent reduction from the balance 
        specified in (1) over a subsequent 3-year period,
for a total reduction of 75 percent over the 5-year period following 
the date of the enactment of this Act.
    (b) Initial Reduction.--In order to achieve a paperwork reduction 
described in subsection (a)(1), the Secretary shall adopt standards for 
Federal health care programs relating to each of the following:
            (1) Data elements for use in paper and electronic claims 
        processing under health insurance plans (as defined in section 
        115(3)), as well as for use in utilization review and 
        management of care (including data fields, formats, and medical 
        nomenclature, and including plan benefit and insurance 
        information).
            (2) Uniform claims forms (including uniform procedure and 
        bill codes for use with such forms and including information on 
        other health insurance plans that may be liable for benefits).
            (3) Uniform electronic transmission of the data elements 
        (for purposes of billing and utilization review).
Standards under paragraph (3) relating to electronic transmission of 
data elements for claims for services shall supersede (to the extent 
specified in such standards) the standards adopted under paragraph (2) 
relating to the submission of paper claims for such services. Standards 
under paragraph (3) shall include protections to assure the 
confidentiality of patient-specific information and to protect against 
the unauthorized use and disclosure of information.
    (c) Subsequent Reduction.--In order to achieve a further paperwork 
reduction described in subsection (a)(2), the Secretary shall modify by 
regulation the standards adopted under subsection (b). The modification 
of the standards may include any other provisions necessary to meet the 
goals for reduction in the paperwork burden of Federal health care 
programs.
    (d) Definition.--For purposes of this section, the term ``Federal 
health care program'' means all Federal programs related to health 
care, including programs described in--
            (1) title XVIII or XIX of the Social Security Act,
            (2) the Public Health Service Act,
            (3) chapter 55 of title 10, United States Code,
            (4) chapter 17 of title 38, United States Code,
            (5) chapter 89 of title 5, United States Code, or
            (6) the Indian Health Care Improvement Act.

SEC. 302. STATE PAPERWORK REDUCTION AND EFFICIENCY REQUIREMENTS.

    (a) In General.--In order to be eligible for Federal funds in 
connection with any State-administered health care program, each State 
shall standardize the processing of paper and electronic claims to 
reduce the administrative and paperwork burdens on such programs by 75 
percent during the 5-year period following the date of the enactment of 
this Act.
    (b) Enforcement.--
            (1) Interim evaluation.--If at the end of the 4-year period 
        following the date of the enactment of this Act the Secretary 
        determines that a State has not achieved substantial progress 
        toward the reductions required under subsection (a), the 
        Secretary shall notify such State regarding the proportion of 
        required reductions achieved and the further reduction 
        necessary to achieve compliance with subsection (a).
            (2) Final compliance.--If at the end of the 5-year period 
        following the date of the enactment of this Act the Secretary 
        determines that a State has not achieved the reductions 
        required under subsection (a), the Secretary shall reduce 
        Federal payments for health care programs administered by such 
        State by 10 percent. For each year that such State fails to 
        comply with the requirements of subsection (a), Federal 
        payments for health care programs administered by the State 
        shall be reduced by an additional 10 percent.
            (3) Waivers of payment reductions.--Any State subject to a 
        reduction in Federal payments under paragraph (2) may appeal to 
        the Secretary for a 1-year waiver of such reduction. In 
        granting such a waiver, the Secretary shall make a 
        determination of the good faith effort of such State to comply 
        with the requirements of subsection (a), taking into account 
        the technical, practical, and financial capabilities of the 
        State in meeting such requirements.
    (c) State.--For purposes of this section, the term ``State'' means 
each of the several States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the United States Virgin 
Islands, Guam, American Samoa, and the Commonwealth of the Northern 
Mariana Islands.

             TITLE IV--MEANINGFUL MEDICAL LIABILITY REFORM

SEC. 401. APPLICABILITY AND PREEMPTION.

    (a) Applicability.--This title shall apply with respect to any 
medical malpractice liability claim and to any medical malpractice 
liability action brought in any State or Federal court, except that 
this title shall not apply to a claim or action for damages arising 
from a vaccine-related injury or death to the extent that title XXI of 
the Public Health Service Act applies to the claim or action.
    (b) Preemption.--
            (1) In general.--The provisions of this title shall preempt 
        any State or local law to the extent such law is inconsistent 
        with the limitations contained in such provisions. The 
        provisions of this title shall not preempt any State law that 
        provides for defenses or places limitations on a person's 
        liability in addition to those contained in this title, places 
        greater limitations on the amount of attorneys' fees and 
        expenses that can be collected, or otherwise imposes greater 
        restrictions than those provided in this title.
            (2) Negotiated liability.--The provisions of this title 
        shall preempt any Federal, State or local law to the extent 
        that such law prohibits a health care provider and a purchaser 
        of health care from voluntarily entering into a contractual 
        agreement in which the provider offers reduced fees for medical 
        services in exchange for a prearranged limit on the amount of 
        any award in a medical malpractice liability action resulting 
        from the provision of such services or a limit on the cause of 
        action that may be maintained with respect to such services.
    (c) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in subsection (b) shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum.
    (d) Federal Court Jurisdiction Not Established on Federal Question 
Grounds.--Nothing in this title shall be construed to establish any 
jurisdiction in the district courts of the United States over medical 
malpractice liability actions on the basis of section 1331 or 1337 of 
title 28, United States Code.

SEC. 402. STATUTE OF LIMITATIONS.

    (a) In General.--Except as provided in subsection (b), no medical 
malpractice liability action shall be initiated after the expiration of 
the 2-year period that begins on the later of the date that the alleged 
injury that is the subject of the claim was discovered, or the date on 
which such injury should reasonably have been discovered. In no event 
shall any such action be initiated after the expiration of the 4-year 
period that begins on the date on which the alleged injury occurred.
    (b) Exception for Certain Minors.--In the case of an alleged injury 
suffered by a minor who has not attained 6 years of age, no medical 
malpractice liability action shall be initiated after the expiration of 
the 2-year period that begins on the date on which the alleged injury 
was discovered, or the date on which such injury should reasonably have 
been discovered. In no event shall any such action be initiated after 
the expiration of the 4-year period that begins on the date on which 
the alleged injury occurred, or the date on which the minor attains 8 
years of age, whichever is later.

SEC. 403. SCOPE OF LIABILITY.

    (a) In General.--With respect to economic and noneconomic damages, 
the liability of each defendant in a medical malpractice liability 
action shall be several only and may not be joint. Such a defendant 
shall be liable only for the amount of economic or noneconomic damages 
allocated to the defendant in direct proportion to such defendant's 
percentage of fault or responsibility for the injury suffered by the 
claimant.
    (b) Determination of Percentage of Liability.--The trier of fact in 
a medical malpractice liability action shall determine the extent of 
each defendant's fault or responsibility for the economic or 
noneconomic damages suffered by the claimant, and shall assign a 
percentage of responsibility for such injury to each such defendant.

SEC. 404. DISCOVERY; FAILURE TO MAKE OR COOPERATE IN DISCOVERY.

    (a) In General.--All requests for discovery pursuant to a medical 
malpractice liability action shall identify the relevant portion of the 
complaint, answer or other pleading to which responses to the discovery 
requests are expected to relate.
    (b) Fees and Expenses.--With respect to any motion for an order 
compelling discovery that is made pursuant to a medical malpractice 
liability action, the court shall award the prevailing party reasonable 
fees and other expenses incurred by that party in bringing or defending 
against the motion, including reasonable attorney fees, unless the 
court finds that the position of the unsuccessful party was 
substantially justified or that special circumstances make such an 
award unjust.

SEC. 405. LIMITATION ON NONECONOMIC DAMAGES.

    The total amount of noneconomic damages that may be awarded to a 
claimant and the members of the claimant's family for losses resulting 
from the injury which is the subject of a medical malpractice liability 
action may not exceed $250,000, regardless of the number of parties 
against whom the action is brought or the number of actions brought 
with respect to such injury.

SEC. 406. TREATMENT OF PAYMENTS FOR FUTURE ECONOMIC LOSSES.

    (a) Prohibiting Single Lump-Sum Payment.--In any medical 
malpractice liability action in which the damages awarded for any 
economic losses to be incurred after the date on which the judgment is 
entered exceeds $100,000, a defendant may not be required to pay such 
damages in a single, lump-sum payment, but shall be permitted to make 
such payments periodically based on projections of the amount of 
damages expected to be incurred by the claimant at appropriate 
intervals, as determined by the court.
    (b) Use of Annuities or Trusts.--The court may require that a 
defendant in a medical malpractice liability action purchase an annuity 
or fund a reversionary trust to make periodic payments under subsection 
as provided for in subsection (a) if the court determines that a 
reasonable basis exists for concluding that the defendant may be unable 
or otherwise fail to make the required periodic payments.
    (c) Requirement of Periodic Payment as Final Order.--A judgment of 
a court awarding periodic payments under this section may not be 
reopened at any time to contest, amend, or modify the schedule or 
amount of the payments in the absence of fraud or any other basis under 
which a party may obtain relief from a final judgment.

SEC. 407. TREATMENT OF COSTS AND ATTORNEY'S FEES.

    (a) Costs and Fees, Generally.--
            (1) Court discretion.--A court in a medical malpractice 
        liability action may, as a condition of the initiation of such 
        an action, require an undertaking for the payment of the costs 
        associated with such action, including reasonable attorneys' 
        fees.
            (2) Payment of costs.--If a judgment in a medical 
        malpractice liability action is rendered against a party to 
        such action, upon a motion by the prevailing party to such 
        action, the court shall require the party against whom the 
        judgment was rendered to pay to such prevailing party the costs 
        and fees incurred by such prevailing party under the action, 
        including reasonable attorneys' fees and other expenses. The 
        court may waive the application of this paragraph if the court 
        finds that the position maintained by the party against whom 
        such judgment was rendered under such action was substantially 
        justified or that special circumstances make such an award 
        unjust.
            (3) Application for recovery of costs.--A party to a 
        medical malpractice liability action who is seeking an award of 
        costs and fees as provided for in paragraph (2) shall, not 
        later than 30 days after the date on which the final, 
        nonappealable judgment in entered with respect to such action, 
        submit to the appropriate court an application for the recovery 
        of costs and fees. Such application shall contain--
                    (A) a certification that the submitting party is a 
                prevailing party and is eligible to receive costs and 
                fees under paragraph (2);
                    (B) a description of the amount of costs and fees 
                sought, including an itemized statement from any 
                attorney or expert witness representing or appearing on 
                behalf of such party stating the actual time expended 
                and the rate at which fees and other expenses were 
                computed; and
                    (C) a description of the reasons why the position 
                of the party against whom the judgment was rendered was 
                not substantially justified.
        In determining whether or not the position of the nonprevailing 
        party was substantially justified the court shall consider only 
        the record presented in the action maintained for the costs and 
        fees.
            (4) Amount of award.--In making a decision on an 
        application submitted under paragraph (3), the court may--
                    (A) assess the amount to be awarded under this 
                subsection against the party against whom the judgment 
                was rendered or against the attorney (or attorneys) of 
                such party; and
                    (B) reduce the amount to be awarded pursuant to 
                this subsection, or deny an award, to the extent that 
                the prevailing party, during the course of the 
                proceedings, engaged in conduct which unnecessarily and 
                unreasonably lengthened the time for, or increased the 
                costs of, the final resolution of the matter in 
                controversy.
    (b) Attorney's Fees.--
            (1) Contingency fees.--An attorney who represents, on a 
        contingency fee basis, a claimant in a medical malpractice 
        liability claim may not charge, demand, receive, or collect for 
        services rendered in connection with such claim in excess of 
        the following amount recovered by judgment or settlement under 
        such claim:
                    (A) 25 percent of the first $150,000 (or portion 
                thereof) recovered; plus
                    (B) 15 percent of any amount in excess of $150,000 
                recovered.
            (2) Records.--
                    (A) In general.--With respect to a medical 
                malpractice liability action, in order to receive an 
                award of attorneys' fees as provided for in this title, 
                the attorney of record of a party to such action shall 
                have maintained accurate, complete records of hours 
                worked on the action regardless of the fee arrangement 
                entered into by the attorney with such party, including 
                records of other attorneys, legal staff, expert 
                witnesses and others who worked on the action on behalf 
                of such attorney.
                    (B) Calculation.--The court shall determine the 
                amount of reasonable attorneys' fees and expenses that 
                shall be awarded in a medical malpractice liability 
                action under this title on the basis of an hourly rate 
                or as a percentage of the total damages awarded under 
                such action for economic and noneconomic losses. Such 
                amount shall be indexed to account for inflation. The 
                amount of attorneys' fees and expenses as determined by 
                the court may not exceed an amount that would be 
                considered reasonable based on the following:
                            (i) The time, labor, and skill necessary to 
                        properly perform the legal services required by 
                        the action.
                            (ii) The novelty and difficulty of the 
                        questions involved in the action.
                            (iii) The likelihood, if apparent to the 
                        client, that the acceptance of employment with 
                        respect to the client's action will preclude 
                        other employment by the attorney.
                            (iv) The fee customarily charged in the 
                        locality for similar legal services.
                            (v) The amount involved in the action and 
                        the results obtained.
                            (vi) The time limitations imposed by the 
                        client or by the circumstances of the action.
                            (vii) The nature and length of the 
                        professional relationship between the attorney 
                        and the client.
                            (viii) The experience, reputation, and 
                        ability of the attorney performing the services 
                        in connection with the action.

SEC. 408. CONTRIBUTION AND INDEMNIFICATION.

    (a) Recovery.--With respect to a medical malpractice liability 
action, each nonsettling party may recover contribution and 
indemnification from any other such nonsettling party who, if joined in 
the original action, would have been liable for such damages.
    (b) Release, Dismissal, Settlement.--A party who is released or 
dismissed (with or without prejudice) from, or who, in good faith prior 
to a verdict or judgment, settles a medical malpractice liability 
action shall, upon the execution of the release, dismissal or 
settlement agreement, be discharged from all claims for contribution or 
indemnification brought by nonsettling or other settling parties to 
such action. Any party to such action who asserts a lack of good faith 
shall have the burden of proof concerning such good faith issue.

SEC. 409. COLLATERAL SOURCES.

    (a) In General.--The total amount of damages received by a claimant 
in a medical malpractice liability action shall be reduced, in 
accordance with subsection (b), by any other payment that has been 
made, or that will be made, to such claimant to compensate such 
claimant for an injury that was part of such action, including 
payments--
            (1) under Federal or State disability or sickness programs;
            (2) under Federal, State, or private health insurance 
        programs;
            (3) under private disability insurance programs;
            (4) under employer wage continuation programs; and
            (5) from any other source that are intended to compensate 
        such claimant for such injury.
    (b) Amount of Reduction.--The amount by which an award of damages 
to a claimant for an injury shall be reduced under subsection (a) shall 
be--
            (1) the total amount of any payments (other than such 
        award) that have been made, or that will be made, to such 
        claimant to compensate such claimant for such injury; and
            (2) the amount paid by such claimant (or by the spouse, 
        parent, or legal guardian of such claimant) to secure the 
        payments described in paragraph (1).

SEC. 410. DAMAGES RELATING TO MEDICAL PRODUCT LIABILITY CLAIMS.

    (a) In General.--Noneconomic damages may not be awarded with 
respect to any medical product liability claim alleged against a 
medical product producer if--
            (1) the drug or device that is the subject of such claim--
                    (A) was subject to approval under section 505, or 
                premarket approval under section 515, of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 355 and 360e) 
                by the Food and Drug Administration with respect to--
                            (i) the safety of the formulation or 
                        performance of the aspect of the drug or 
                        device; or
                            (ii) the adequacy of the packaging or 
                        labeling of the drug or device, and
                    (B) was approved by the Food and Drug 
                Administration; or
            (2) the drug or device is generally recognized as safe and 
        effective pursuant to conditions established by the Food and 
        Drug Administration and applicable regulations, including 
        packaging and labeling regulations.
    (b) Exception in Case of Withheld Information, Misrepresentation, 
or Illegal Payment.--The provisions of subsection (a) shall not apply 
if it is determined on the basis of clear and convincing evidence that 
the medical product producer--
            (1) withheld from or misrepresented to the Food and Drug 
        Administration information concerning such drug or device that 
        is required to be submitted under the Federal Food, Drug, and 
        Cosmetic Act or section 352 of the Public Health Service Act 
        (42 U.S.C. 263) and that is material and relevant to the action 
        involved; or
            (2) made an illegal payment to an official of the Food and 
        Drug Administration for the purpose of securing approval of the 
        drug or device.
    (c) Definition.--As used in this section, the term ``clear and 
convincing evidence'' is that measure or degree of proof that will 
produce in the mind of the trier of fact a firm belief or conviction as 
to the truth of the allegations sought to be established, except that 
such measure or degree of proof is more than that required under 
preponderance of the evidence, but less than that required for proof 
beyond a reasonable doubt.

SEC. 411. CLASS ACTIONS.

    (a) Recovery by Named Claimants in Class Actions.--In any medical 
malpractice liability action that is certified as a class action 
pursuant to Rule 23 of the Federal Rules of Civil Procedure, the share 
of damages under any final judgment or any settlement that is awarded 
to any party serving as a representative claimant shall be calculated 
in the same manner as the shares of the final judgment or settlement 
awarded to all other members of the claimant class. The preceding 
sentence may not be construed to limit the award to a representative 
claimant of reasonable compensation, costs, and expenses relating to 
the representation of the class.
    (b) Prohibition of Conflicts of Interest.--In any medical 
malpractice liability action that is certified as a class action 
pursuant to Rule 23 of the Federal Rules of Civil Procedure, if a party 
is represented by any attorney who has a beneficial interest in the 
subject of the litigation, the court shall make a determination of 
whether such interest constitutes a conflict of interest sufficient to 
disqualify the attorney from representing the party.
    (c) Receipt of Referral Fees.--In any medical liability action that 
is certified as a class action pursuant to Rule 23 of the Federal Rules 
of Civil Procedure, an attorney may not represent the class if the 
attorney has paid or is obligated to pay a fee to a third party who 
assisted the attorney in obtaining the representation of any party to 
the action. An attorney who knowingly violates this subsection shall be 
barred from representing the party in such action or any action to 
which this title applies.

SEC. 412. DEFINITIONS.

    For purposes of this title:
            (1) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice liability claim, and any person 
        on whose behalf such a claim is alleged, including the decedent 
        in the case of an action brought through or on behalf of an 
        estate.
            (2) Commercial loss.--The term ``commercial loss'' means 
        loss, including damage to the product itself, which is not harm 
        described in subparagraph (A) or (B) of paragraph (5), and 
        which is of a kind for which there is a remedy under applicable 
        contract or commercial law.
            (3) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for hospital and other 
        medical expenses, lost wages, lost employment, and other 
        pecuniary losses.
            (4) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (5) Harm.--The term ``harm'' means--
                    (A) the personal physical illness, injury, or death 
                of a claimant;
                    (B) the mental anguish or emotional harm of a 
                claimant that is caused by or causing the claimant 
                personal physical illness or injury; or
                    (C) the physical damage caused by a medical product 
                to property other than the medical product itself.
        Such term does not include commercial loss or loss or damage to 
        a medical product.
            (6) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (7) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice liability 
        claim.
            (8) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a civil action 
        brought in a State or Federal court against a health care 
        provider or health care professional in which the plaintiff 
        alleges a medical malpractice liability claim, but does not 
        include any action in which the plaintiff's sole allegation is 
        an allegation of an intentional tort.
            (9) Medical malpractice liability claim.--The term 
        ``medical malpractice liability claim'' means a claim in which 
        the claimant alleges that injury was caused by the provision of 
        (or the failure to provide) health care services or the use of 
        a medical product.
            (10) Medical product.--
                    (A) In general.--The term ``medical product'' 
                means, with respect to the allegation of a claimant, a 
                drug (as defined in section 201(g)(1) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a 
                medical device (as defined in section 201(h) of the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
                if--
                            (i) such drug or device was subject to 
                        premarket approval under section 505, 507, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (21 U.S.C. 355, 357, or 360e) or section 351 of 
                        the Public Health Service Act (42 U.S.C. 262) 
                        with respect to the safety of the formulation 
                        or performance of the aspect of such drug or 
                        device which is the subject of the claimant's 
                        allegation or the adequacy of the packaging or 
                        labeling of such drug or device, and such drug 
                        or device is approved by the Food and Drug 
                        Administration; or
                            (ii) the drug or device is generally 
                        recognized as safe and effective under 
                        regulations issued by the Secretary of Health 
                        and Human Services under section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                        321(p)).
                    (B) Exception in case of misrepresentation or 
                fraud.--Notwithstanding subparagraph (A), the term 
                ``medical product'' shall not include any product 
                described in such subparagraph if the claimant shows 
                that the product is approved by the Food and Drug 
                Administration for marketing as a result of withheld 
                information, misrepresentation, or an illegal payment 
                by manufacturer of the product.
            (11) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for losses for 
        physical and emotional pain, suffering, inconvenience, physical 
        impairment, mental anguish, emotional distress, disfigurement, 
        loss of enjoyment of life, loss of society and companionship, 
        loss of consortium, injury to reputation, humiliation, and 
        other noneconomic injury.
            (12) Person.--The term ``person'' means any individual, 
        corporation, company, association, firm, partnership, society, 
        joint stock company, or any other entity, including any 
        governmental entity.
            (13) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (14) State.--The term ``State'' means each of the several 
        States of the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the United States Virgin Islands, 
        Guam, American Samoa, and the Commonwealth of the Northern 
        Mariana Islands.

SEC. 413. SEVERABILITY.

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

SEC. 414. EFFECTIVE DATE.

    This title shall apply to all medical malpractice liability actions 
commenced on or after the date of enactment of this Act.
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