    [Congressional Bills 111th Congress]
    [From the U.S. Government Publishing Office]
    [H.R. 4529 Introduced in House (IH)]

    111th CONGRESS
      2d Session
                                    H. R. 4529

     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.

    _______________________________________________________________________

                        IN THE HOUSE OF REPRESENTATIVES

                                January 27, 2010

     Mr. Ryan of Wisconsin (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.

        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 ``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.

    SEC. 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.

                          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.

        (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.

    SEC. 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.

    SEC. 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.

       PART 2--FAIR TAX TREATMENT FOR ALL AMERICANS TO AFFORD HEALTH CARE

    SEC. 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.

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

    SEC. 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:

    ``SEC. 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 \1/12\th
            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 \1/12\th 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:

    ``SEC. 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:

    ``SEC. 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.

    SEC. 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.

    SEC. 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.

                       Subpart B--Health Savings Accounts

    SEC. 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 \1/2\
                    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.

    SEC. 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.

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

    SEC. 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:

    ``PART D--COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    SEC. 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:

               ``PART 8--RULES GOVERNING ASSOCIATION HEALTH PLANS

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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'.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    SEC. 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.

                  Subtitle C--Health Care Services Commission

                    PART I--ESTABLISHMENT AND GENERAL DUTIES

    SEC. 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.

    SEC. 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.

    SEC. 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).

          PART II--FORUM FOR QUALITY AND EFFECTIVENESS IN HEALTH CARE

    SEC. 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.

    SEC. 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.

    SEC. 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).

    SEC. 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.

    SEC. 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.

                          PART III--GENERAL PROVISIONS

    SEC. 161. CERTAIN ADMINISTRATIVE AUTHORITIES.

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

    SEC. 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.

    SEC. 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.

                      PART IV--TERMINATIONS AND TRANSITION

    SEC. 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.

    SEC. 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.

                    PART V--INDEPENDENT HEALTH RECORD TRUST

    SEC. 181. SHORT TITLE OF PART.

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

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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)).

    SEC. 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.

    SEC. 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.

    SEC. 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.

                 TITLE II--FAIRNESS FOR EVERY AMERICAN PATIENT

                       Subtitle A--Medicaid Modernization

    SEC. 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:

         ``TITLE 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.

    ``SEC. 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.

        ``PART A--GRANTS TO STATES FOR ACUTE CARE FOR INDIVIDUALS WITH
                DISABILITIES AND CERTAIN LOW-INCOME INDIVIDUALS

    ``SEC. 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.

    ``SEC. 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).

    ``SEC. 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).

    ``SEC. 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 .

    ``SEC. 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).

    ``SEC. 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).

    ``SEC. 1907. DRUG REBATES.

        ``Old sections 1902(a)(54) and 1927 (relating to payment for
    covered outpatient drugs and rebates) shall apply under this part.

    ``SEC. 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).

    ``SEC. 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).

      ``PART B--GRANTS TO STATES FOR LONG-TERM CARE SERVICES AND SUPPORTS

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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-       The applicable percentage is:
     institutional spending to total long-
     term care spending for fiscal year
     2009 is:
      50 percent or greater................  100
      at least 46, but less than 50 percent  99
      at least 40, but less than 46 percent  98
      at least 36, but less than 40........  97
      at least 30, but less than 36........  96
      less than 30 percent.................  95.

        ``(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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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.

      ``PART C--GRANTS TO STATES FOR SURVEY AND CERTIFICATION OF MEDICAL
                       FACILITIES AND OTHER REQUIREMENTS

    ``SEC. 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.

    ``SEC. 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).

                ``PART D--GRANTS TO STATES FOR PROGRAM INTEGRITY

    ``SEC. 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.

    ``SEC. 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).

                 ``PART E--GRANTS TO STATES FOR ADMINISTRATION

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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).

                           ``PART F--OTHER PROVISIONS

    ``SEC. 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.

    SEC. 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.

    SEC. 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.

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

    SEC. 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:

          ``Subpart XI--Health Care Assistance to Low-income Families

    ``SEC. 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.''.

                           TITLE III--MEDICARE REFORM

                        Subtitle A--New Medicare Program

    SEC. 301. BENEFIT CHANGES.

        Title XVIII of the Social Security Act is amended by inserting
    after section 1808 the following new section:

           ``program for new medicare beneficiaries beginning in 2021

        ``Sec. 1810.  (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.''.

    SEC. 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.''.

    SEC. 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.

                Subtitle B--Changes in Current Medicare Program

    SEC. 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.''.

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

                      Subtitle C--Medical Liability Reform

                 PART 1--ENACTING REAL MEDICAL LIABILITY REFORM

    SEC. 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.

    SEC. 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.

    SEC. 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) 33\1/3\ 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

    SEC. 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.

                          PART 2--ENDING LAWSUIT ABUSE

    SEC. 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:

    ``SEC. 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).''.

                        TITLE IV--SOCIAL SECURITY REFORM

    SEC. 401. SHORT TITLE.

        This title may be cited as the ``Social Security Personal Savings
    Guarantee and Prosperity Act of 2010''.

    SEC. 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:

                        ``PART A--INSURANCE BENEFITS'';

            and
                (2) by adding at the end the following new part:

               ``PART B--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

    ``SEC. 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).

    ``SEC. 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.

    ``SEC. 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.

    ``SEC. 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 participating individual's
    Social Security account number.
        ``(b) Account Balance.--The balance in a participating individual's
    account at any time is the sum of--
                ``(1) the balance in the Tier I Investment Fund of the
            Savings Fund credited to such participating individual prior to
            transfer of the credited amount to the Tier II Investment Fund
            of the Savings Fund; plus
                ``(2) the excess of--
                        ``(A) all deposits in the Tier II Investment Fund
                    of the Savings Fund credited to such participating
                    individual's personal social security savings account,
                    subject to such increases and reductions as may result
                    from allocations made to and reductions made in the
                    account pursuant to subsection (c)(1); over
                        ``(B) amounts paid out of the Tier II Investment
                    Fund in connection with amounts credited to such
                    participating individual's personal social security
                    savings account; plus
                ``(3) the excess of--
                        ``(A) the deposits in the Tier III Investment
                    Options credited to such participating individual's
                    personal social security savings account, subject to
                    such increases and reductions as may result from
                    amounts credited to, and reductions made in, the
                    account pursuant to subsection (c)(2); over
                        ``(B) amounts paid out of the Tier III Investment
                    Options of such participating individual.
    The calculation made under paragraph (3) shall be made separately for
    each Tier III Investment Option of the participating individual. The
    Board shall also hold for the participating individual any benefit
    credit certificate assigned to the participating individual's personal
    social security savings account under section 255.
        ``(c) Allocation of Earnings and Losses.--Pursuant to regulations
    which shall be prescribed by the Board, the Executive Director shall
    allocate to each personal social security savings account an amount
    equal to the net earnings and net losses from each investment of sums--
                ``(1) in the Tier I Investment Fund and the Tier II
            Investment Fund which are attributable to sums credited to such
            account reduced by an appropriate share of the administrative
            expenses paid out of the net earnings, as determined by the
            Executive Director; and
                ``(2) in the Tier III Investment Options which are
            attributable to sums credited to such account reduced by the
            administrative expenses paid out of the net earnings.

    ``SEC. 255. TIER I INVESTMENT FUND.

        ``(a) Establishment of Tier I Investment Fund.--
                ``(1) In general.--The Savings Fund shall include a
            separate fund to be known as the `Tier I Investment Fund'.
                ``(2) Amounts in fund.--The Tier I Investment Fund consists
            of all amounts derived from payments into the Fund under
            section 252(b) and remaining after investment of such amounts
            under subsection (b), including additional amounts derived as
            income from such investments.
                ``(3) Use of funds.--The amounts held in the Fund are
            appropriated and shall remain available without fiscal year
            limitation--
                        ``(A) to be held for investment on behalf of
                    participating individuals under subsection (b),
                        ``(B) to pay the administrative expenses related to
                    the Fund, and
                        ``(C) to make transfers from the Fund under
                    subsection (c)(2).
        ``(b) Investment of Fund Balance.--For purposes of investment of
    the Tier I Investment Fund, the Board shall contract with appropriate
    professional asset managers, recordkeepers, and custodians selected for
    investment of amounts held in the Fund, so as to provide for investment
    of the balance of the Fund, in a manner providing broad diversification
    in accordance with regulations of the Board, in--
                ``(1) insurance contracts,
                ``(2) certificates of deposit, or
                ``(3) other instruments or obligations selected by such
            asset managers,
    which return the amount invested and pay interest, at a specified rate
    or rates, on that amount during a specified period of time.
        ``(c) Separate Crediting to Personal Social Security Savings
    Accounts and Transfers to the Tier II Investment Fund or to Tier III
    Investment Options.--
                ``(1) Crediting to accounts.--
                        ``(A) In general.--Subject to this paragraph, the
                    Board shall provide for prompt, separate crediting, as
                    soon as practicable, of the amounts deposited in the
                    Tier I Investment Fund to the personal social security
                    savings account of each participating individual with
                    respect to the redirected social security contributions
                    (as defined in section 252(b)(3)) of such participating
                    individual. The Board shall include in such crediting,
                    with respect to each such individual, any increases or
                    decreases in such amounts so as to reflect the net
                    returns and losses from investment of the balance of
                    the Fund prior to such crediting. For purposes of
                    determining such increases and decreases for each
                    calendar year, the amounts deposited into the Fund in
                    connection with such individual during such calendar
                    year shall be deemed to have been deposited on June 30
                    of such year.
                        ``(B) Treatment of married participating
                    individuals.--If the participating individual is
                    married as of the end of the calendar year in which the
                    amounts to be credited were deposited in the Tier I
                    Investment Fund and the spouse is also a participating
                    individual, the personal social security savings
                    account of the participating individual and the
                    personal social security savings account of his or her
                    spouse shall each be credited with 50 percent of such
                    amounts.
                ``(2) Transfers from the tier i investment fund.--In
            accordance with elections filed with the Board by a
            participating individual, any amount credited to the personal
            social security savings account of such participating
            individual under paragraph (1) shall be promptly transferred to
            the Tier II Investment Fund of the Savings Fund for investment
            in accordance with section 256 and, to the extent available
            under section 257, to Tier III Investment Options in accordance
            with section 257.
        ``(d) Treatment of Amounts Held in Tier I Investment Fund.--Subject
    to this part--
                ``(1) until amounts deposited into the Tier I Investment
            Fund during any calendar year are credited to personal social
            security savings accounts, such amounts shall be treated as the
            unallocated property of all participating individuals with
            respect to whom amounts were deposited in the Fund during such
            year, jointly held in trust for such participating individuals
            in the Savings Fund, and
                ``(2) amounts deposited into the Fund which are credited to
            the personal social security savings account of a participating
            individual shall be treated as property of the participating
            individual, held in trust for such participating individual in
            the Savings Fund.

    ``SEC. 256. TIER II INVESTMENT FUND.

        ``(a) Establishment of Tier II Investment Fund.--
                ``(1) In general.--The Savings Fund shall include a
            separate fund to be known as the `Tier II Investment Fund'.
                ``(2) Amounts in fund.--The Tier II Investment Fund
            consists of all amounts derived from payments into the Fund
            under section 255(c)(2) and remaining after investment of such
            amounts under subsection (b), including additional amounts
            derived as income from such investments.
                ``(3) Use of funds.--The amounts held in the Fund are
            appropriated and shall remain available without fiscal year
            limitation--
                        ``(A) to be held for investment under subsection
                    (b),
                        ``(B) to pay the administrative expenses related to
                    the Fund, and
                        ``(C) to make transfers to Tier III Investment
                    Options under section 257 or to make payments under
                    section 258.
        ``(b) Payments Into Tier II Investment Fund.--
                ``(1) In general.--Upon the crediting under section 252 to
            the personal social security savings account of a participating
            individual of any amount held in the Tier I Investment Fund for
            any calendar year, the Board shall transfer from the Tier I
            Investment Fund into the Tier II Investment Fund any amount so
            credited to such participating individual's account which is
            not transferred to a Tier III Investment Option pursuant to an
            election under section 257(a).
                ``(2) Ongoing separate crediting.--Subject to this
            paragraph, the Board shall provide for ongoing separate
            crediting to each participating individual's personal social
            security savings account of the amounts deposited in the Tier
            II Investment Fund with respect to such participating
            individual, together with any increases or decreases therein so
            as to reflect the net returns and losses from investment
            thereof while held in the Fund.
        ``(c) Investment Accounts.--
                ``(1) In general.--For purposes of investment of the Tier
            II Investment Fund, the Board shall divide the Fund into 6
            investment accounts. The Board shall contract with appropriate
            investment managers, recordkeepers, and custodians selected for
            investment of amounts held in each investment account. Such
            accounts shall consist of--
                        ``(A) a Lifecycle Investment Account,
                        ``(B) a Government Securities Investment Account,
                        ``(C) a Fixed Income Investment Account,
                        ``(D) a Common Stock Index Investment Account,
                        ``(E) a Small Capitalization Stock Index Investment
                    Account, and
                        ``(F) an International Stock Index Investment
                    Account.
                ``(2) Election of investment options.--
                        ``(A) Default investment account.--Except as
                    provided in an election in effect under subparagraph
                    (B), amounts held in the Tier II Investment Fund shall
                    be credited to the Lifecycle Investment Account.
                        ``(B) Election of transfers between investment
                    accounts.--In any case in which a participating
                    individual who has an amount in such individual's
                    personal social security savings account credited to
                    any of the investment accounts in the Tier II
                    Investment Fund files with the Secretary of the
                    Treasury a written election under this subparagraph,
                    not more frequently than annually and in accordance
                    with regulations of the Board, the Secretary of the
                    Treasury shall transfer the full amount so credited in
                    such investment account from such investment account to
                    any one of the other investment accounts in the Tier II
                    Investment Fund (whichever is designated in such
                    election).
        ``(d) Lifecyle Investment Account.--
                ``(1) In general.--The investment manager, recordkeeper,
            and custodian selected for investment of amounts held in the
            Lifecyle Investment Account shall invest such amounts under
            regulations which shall be prescribed by the Board in a mix of
            equities and fixed income instruments so as to ensure, to the
            maximum extent practicable, that, of the total balance in the
            Fund credited to such account and available for investment
            (after allowing for administrative expenses), the percentage
            invested in fixed income instruments by individuals in
            designated cohorts, ranging in age up to those of at least
            retirement age, will increase in a linear progression from 0
            percent to 100 percent as the cohort approaches retirement age.
                ``(2) Investment in equities.--In accordance with
            regulations which shall be prescribed by the Board, the Board
            shall establish standards which must be met by equities
            selected for investment in the Lifecycle Investment Account. In
            conformity with such standards, the Board shall select, for
            purposes of such investment, indices which are comprised of
            equities the aggregate market value of which is, in each case,
            a reasonably broad representation of companies whose shares are
            traded on the equity markets. Amounts invested in equities
            under an investment option shall be held in a portfolio
            designed to replicate the performance of one or more of such
            indices.
                ``(3) Investment in fixed income instruments.--In
            accordance with regulations which shall be prescribed by the
            Board, the Board shall establish standards which must be met by
            fixed income instruments selected for investment in the
            Lifecycle Investment Account. Such standards shall take into
            account the competing considerations of risk and return.
            Amounts invested in fixed income instruments in an investment
            option shall be held in a portfolio which shall consist of a
            diverse range of fixed income instruments, taking into full
            account the opposing considerations of risk and maximization of
            return.
        ``(e) Government Securities Investment Account.--
                ``(1) In general.--Amounts in the Government Securities
            Investment Account shall be invested in securities of the
            United States Government as provided in this subsection
                ``(2) Issuance of special obligations.--The Secretary of
            the Treasury is authorized to issue special interest-bearing
            obligations of the United States for purchase by the Tier II
            Investment Fund for purposes of investment of amounts in the
            Government Securities Investment Account. Such obligations
            shall have maturities fixed with due regard to the needs of the
            Fund as determined by the Board, and shall bear interest at a
            rate equal to the average market yield (computed by the
            Secretary of the treasury on the basis of market quotations as
            of the end of the calendar month next preceding the date of
            issue of such obligations) on all marketable interest-bearing
            obligations of the United States then forming a part of the
            public debt which are not due or callable earlier than 4 years
            after the end of such calendar month. Any average market yield
            computed under this paragraph which is not a multiple of one-
            eighth of 1 percent shall be rounded to the nearest multiple of
            one-eighth of 1 percent.
        ``(f) Fixed Income Investment Account.--Amounts in the Fixed Income
    Investment Account shall be invested in instruments or obligations
    which return the amount invested and pay interest, at a specified rate
    or rates, on that amount during a specified period of time, consisting
    of instruments or obligations in one or more of the following
    categories:
                ``(1) insurance contracts;
                ``(2) certificates of deposit; or
                ``(3) other instruments or obligations selected by
            qualified professional asset managers.
        ``(g) Common Stock Index Investment Account.--
                ``(1) Portfolio design.--Amounts held in the Common Stock
            Investment Account shall be invested in a portfolio of common
            stock designed to replicate the performance of the index
            selected under paragraph (2). The portfolio shall be designed
            such that, to the extent practicable, the percentage of the
            balance in the Common Stock Index Investment Account that is
            invested in each stock is the same as the percentage determined
            by dividing the aggregate market value of all shares of that
            stock by the aggregate market value of all shares of all stocks
            included in such index.
                ``(2) Selection of index.--The Board shall select, for
            purposes of investment of amounts held in the Common Stock
            Investment Account, an index which is a commonly recognized
            index comprised of common stock the aggregate market value of
            which is a reasonably complete representation of the United
            States equity markets.
        ``(h) Small Capitalization Stock Index Investment Account.--
                ``(1) Portfolio design.--Amounts held in the Small
            Capitalization Stock Index Investment Account shall be invested
            in a portfolio of common stock designed to replicate the
            performance of the index selected under paragraph (2). The
            portfolio shall be designed such that, to the extent
            practicable, the percentage of the balance in the Small
            Capitalization Stock Index Investment Account that is invested
            in each stock is the same as the percentage determined by
            dividing the aggregate market value of all shares of that stock
            by the aggregate market value of all shares of all stocks
            included in such index.
                ``(2) Selection of index.--The Board shall select, for
            purposes of investment of amounts held in the Small
            Capitalization Stock Index Investment Account, an index which
            is a commonly recognized index comprised of common stock the
            aggregate market value of which represents the United States
            equity markets excluding the common stocks included in the
            Common Stock Index Investment Account.
        ``(i) International Stock Index Investment Account.--
                ``(1) Portfolio design.--Amounts held in the International
            Stock Index Investment Account shall be invested in a portfolio
            of stock designed to replicate the performance of the index
            selected under paragraph (2). The portfolio shall be designed
            such that, to the extent practicable, the percentage of the
            balance in the International Stock Index Investment Account
            that is invested in each stock is the same as the percentage
            determined by dividing the aggregate market value of all shares
            of that stock by the aggregate market value of all shares of
            all stocks included in such index.
                ``(2) Selection of index.--The Board shall select, for
            purposes of investment of amounts held in the International
            Stock Index Investment Account, an index which is a commonly
            recognized index comprised of common stock the aggregate market
            value of which is a reasonably complete representation of the
            international equity markets excluding the United States equity
            markets.
        ``(j) Additional Investment Options.--The Board may from time to
    time, as determined by regulation as appropriate to further the
    purposes of this section, shall--
                ``(1) establish investment accounts in the Tier II
            Investment Fund meeting the requirements of this section in
            addition to those established by this section, and
                ``(2) terminate investment accounts in the Tier II
            Investment Fund established pursuant to paragraph (1).
        ``(k) Disclosure of Administrative Costs.--The Board shall provide
    to each participating individual an annual disclosure of the rate of
    administrative costs chargeable with respect to investment in each
    investment account in the Tier II Investment Fund. Such disclosure
    shall be written in a manner calculated to be understood by the average
    participating individual.
        ``(l) Treatment of Amounts Held in Tier II Investment Fund.--
    Subject to this part, amounts deposited into, and held and accounted
    for in, the Tier II Investment Fund with respect to any participating
    individual shall continue to be treated as property of such
    participating individual, held in trust for such participating
    individual in the Fund.

    ``SEC. 257. TIER III INVESTMENT OPTIONS.

        ``(a) Election of Tier III Investment Options.--
                ``(1) In general.--A participating individual may elect to
            direct transfers from amounts in the Savings Fund credited to
            the personal social security savings account of such individual
            into 1 or more Tier III Investment Options in accordance with
            paragraph (2).
                ``(2) Commencement of tier iii investment options upon
            attainment of election threshold.--In any case in which, as of
            the end of any calendar year, the total balance in the Savings
            Fund credited to a participating individual's personal social
            security savings account exceeds for the first time the
            election threshold, the Board shall, by regulation, provide for
            an opportunity for such participating individual to make, at
            any time thereafter, such individual's first election of one or
            more of the Tier III Investment Options for investment of an
            amount in the Savings Fund credited to such account. Such
            election may be in lieu of or in addition to investment in the
            options available with respect to the Tier II Investment Fund
            of the Savings Fund.
                ``(3) Allocation of funds.--In the case of an election
            under paragraph (1), funds credited to the personal social
            security savings account of the participating individual and
            elected for transfer to one or more Tier III Investment Options
            shall be transferred to the Tier III Investment Options so
            elected for such calendar year, in percentages specified in the
            election by the participating individual for each applicable
            portfolio.
                ``(4) Election threshold.--
                        ``(A) In general.--Subject to subparagraph (B), for
                    purposes of this subsection the term `election
                    threshold' means an amount equal to $25,000.
                        ``(B) Adjustments.--The Board shall adjust annually
                    (effective for annual reporting months occurring after
                    December 2011) the dollar amount set forth in
                    subparagraph (A) under procedures providing for
                    adjustments in the same manner and to the same extent
                    as adjustments are provided for under the procedures
                    used to adjust benefit amounts under section
                    215(i)(2)(A), except that any amount so adjusted that
                    is not a multiple of $1.00 shall be rounded to the
                    nearest multiple of $1.00.
                ``(5) Subsequent investment of amounts held in tier iii
            investment options.--Any amounts held in one or more Tier III
            Investment Options may be--
                        ``(A) transferred at any time to one or more other
                    Tier III Investment Options, subject to applicable
                    regulations of the Board and the terms governing the
                    affected Tier III Investment Options, and
                        ``(B) transferred, not more frequently than
                    annually, to the Tier II Investment Fund, for deposit
                    in the applicable investment account then selected by
                    the participating individual under section 256.
        ``(b) Certification of Eligible Entities.--
                ``(1) In general.--The Board shall certify eligible
            entities to offer Tier III Investment Options under this part.
                ``(2) Application.--Any eligible entity that desires to be
            certified by the Board to offer a Tier III Investment Option
            shall submit an application to the Board at such time, in such
            manner, and containing such information as the Board may
            require.
                ``(3) Requirements for approval.--The Board shall not
            certify an eligible entity unless such eligible entity agrees
            to the following requirements:
                        ``(A) Separate accounting.--Each eligible entity
                    shall, with respect to each Tier III Investment Option
                    offered by such eligible entity to participating
                    individuals--
                                ``(i) establish separate accounts for the
                            contributions of each participating individual,
                            and any earnings properly allocable to the
                            contributions, and
                                ``(ii) maintain separate recordkeeping with
                            respect to each account.
                        ``(B) Treatment of amounts held in fund.--Amounts
                    deposited into, and held and accounted for in, a Tier
                    III Investment Option with respect to any participating
                    individual shall be treated as property of such
                    participating individual, held in trust for such
                    participating individual.
                        ``(C) Trust requirements.--Amounts held and
                    accounted for with respect to a participating
                    individual shall be held in a trust created or
                    organized in the United States for the exclusive
                    benefit of such individual or his beneficiaries.
                        ``(D) Exemption from third party claims.--Each Tier
                    III Investment Option shall be exempt from any and all
                    third party claims against the eligible entity.
                        ``(E) Disclosure of administrative costs.--Each
                    eligible entity offering a Tier III Investment Option
                    under this section shall provide to each participating
                    individual an annual disclosure of the rate of
                    administrative costs chargeable with respect to
                    investment in such Option. Such disclosure shall be
                    written in a manner calculated to be understood by the
                    average participating individual. The Board shall
                    provide for coordination of disclosures with respect to
                    Tier III Investment Options under this subparagraph so
                    as to assist participating individuals in comparing
                    alternative Options based on administrative costs.
                        ``(F) Reporting to the executive director and the
                    board.--Each eligible entity shall provide reports to
                    the Executive Director and the Board at such time, in
                    such manner, and containing such information as the
                    Board may require.
                ``(4) Eligible entity defined.--For purposes of this
            section, the term `eligible entity' means any investment
            company (as defined in section 3 of the Investment Company Act
            of 1940) or other person that the Board determines appropriate
            to offer Tier III Investment Options under this part.
        ``(c) Approval of Tier III Investment Options.--
                ``(1) In general.--No funds may be transferred into a Tier
            III Investment Option unless the Board has approved an
            application submitted under paragraph (2) with respect to the
            option.
                ``(2) Application.--With respect to each Tier III
            Investment Option that an eligible entity certified under
            subsection (b)(1) seeks to offer, such entity shall submit an
            application to the Board at such time, in such manner, and
            containing such information as the Board may require.
                ``(3) Qualifications for approval.--The Board may not
            approve an application submitted under paragraph (2) in
            connection with a Tier III Investment Option unless the
            following requirements are met:
                        ``(A) Option must be offered by certified eligible
                    entity.--The Tier III Investment Option is offered by
                    an eligible entity certified under subsection (b).
                        ``(B) Option must meet quality factors.--
                                ``(i) In general.--The Tier III Investment
                            Option meets qualifications which shall be
                            prescribed by the Board relating to the quality
                            factors described in clause (ii).
                                ``(ii) Quality factors.--The quality
                            factors described in this clause are--
                                        ``(I) the safety and soundness of
                                    the Tier III Investment Option's
                                    proposed investment policy;
                                        ``(II) the experience and record of
                                    performance of the proposed investment
                                    option, if any;
                                        ``(III) the experience and record
                                    of performance of the entity issuing or
                                    offering such option; and
                                        ``(IV) such other factors as the
                                    Board may determine appropriate.
        ``(d) Considerations for Certification and Approval.--In
    determining whether to certify an eligible entity under subsection (b)
    or to approve a Tier III Investment Option under subsection (c), the
    Board shall--
                ``(1) act in the best interests of the participating
            individuals;
                ``(2) base its determination solely on considerations of
            balancing safety and soundness of the Tier III Investment
            Option with the maximization of returns of such option; and
                ``(3) not base any determination related to the entity or
            option on political or other extraneous considerations.
        ``(e) Sponsorship of Tier III Investment Options by Membership and
    Labor Organizations.--
                ``(1) In general.--A membership or labor organization (as
            defined by the Board) may sponsor Tier III Investment Options
            under contracts with eligible entities certified under
            subsection (b) who shall administer the investment option if
            such investment option is approved by the Board under
            subsection (c).
                ``(2) Limitation to membership.--A membership or labor
            organization (as so defined) may limit to the members of such
            organization participation in a Tier III Investment Option
            sponsored by such organization.
        ``(f) Distributions in Case of Death.--Upon the death of a
    participating individual, the amount of any assets held under a Tier
    III Investment Option credited to the personal social security savings
    account of such individual shall be distributed in accordance with
    section 258(e).

    ``SEC. 258. PERSONAL SOCIAL SECURITY SAVINGS ANNUITY AND OTHER
                  DISTRIBUTIONS.

        ``(a) Date of Initial Distribution.--Except as provided in
    subsection (e), distributions may be made to a participating individual
    from amounts credited to the personal social security savings account
    of such individual only on or after the earliest of--
                ``(1) the date the participating individual attains
            retirement age (as defined in section 216(l)(1)) or, if elected
            by the individual, early retirement age (as defined in section
            216(l)(2)); or
                ``(2) the date on which the amount credited to the
            participating individual's personal social security savings
            account is sufficient to purchase a personal social security
            savings annuity with a monthly benefit that is at least equal
            to the minimum annuity payment amount (as defined in subsection
            (b)(4)(C)(iii)).
        ``(b) Personal Social Security Savings Annuities.--
                ``(1) Notice of available annuities.--Not later than the
            date determined under subsection (a), the Board shall notify
            each participating individual of--
                        ``(A) the most recent listing of personal social
                    security savings annuities offered by the Annuity
                    Issuance Authority under paragraph (2); and
                        ``(B) the entitlement of the participating
                    individual to purchase such an annuity.
                ``(2) Annuity issuance authority.--There is established in
            the office of the Board an agency which shall be known as the
            `Annuity Issuance Authority'. The Authority shall provide, in
            accordance with regulations of the Board, for the issuance of
            personal social security savings annuities for purchase from
            the Authority under this section and to otherwise administer
            the issuance of such annuities in accordance with such
            regulations.
                ``(3) Annuity reserves account.--There is established in
            the Savings Fund an Annuity Reserves Account. The Account shall
            consist of all amounts received by the Authority from the
            purchase of personal social security savings annuities under
            this section (plus such amounts as may be transferred to the
            Account under paragraph (5)(B)), increased by the total net
            earnings from investments of such reserves under subparagraph
            (A) of paragraph (5) and reduced by the total net losses from
            investments of such reserves under such subparagraph.
                ``(4) Purchase of annuities.--
                        ``(A) Selection of annuity.--On a date elected by
                    the participating individual, but no earlier than the
                    date determined under subsection (a), a participating
                    individual may purchase a personal social security
                    savings annuity selected from among the annuities
                    offered by the Authority under paragraph (2).
                        ``(B) Transfer of assets.--Upon the selection of an
                    annuity by a participating individual under
                    subparagraph (A), the Board shall provide for the
                    transfer of assets, credited to the personal social
                    security savings account of the participating
                    individual and held in the Tier II Investment Fund or
                    under 1 or more Tier III Investment Options (or any
                    combination thereof), in a total amount sufficient to
                    purchase the annuity selected by the participating
                    individual from annuities offered by the Authority.
                        ``(C) Minimum annuity payment amount.--
                                ``(i) In general.--Subject to subparagraph
                            (D), if, at the time a personal social security
                            savings annuity is purchased under subparagraph
                            (A), the assets credited to the personal social
                            security savings account of the participating
                            individual are sufficient to purchase a
                            personal social security savings annuity
                            offered by the Authority under paragraph (2)
                            with a monthly annuity payment that is at least
                            equal to the minimum annuity payment amount,
                            the amount of the monthly annuity payment
                            provided by such annuity may not be less then
                            the minimum annuity payment amount.
                                ``(ii) Construction.--Nothing in this
                            subparagraph shall be construed to prohibit a
                            participating individual from using personal
                            social security savings account assets to
                            purchase a personal social security savings
                            annuity offered by the Authority under
                            paragraph (2) which provides for a monthly
                            payment in excess of the minimum amount
                            required under clause (i).
                                ``(iii) Minimum annuity payment amount
                            defined.--For purposes of this part, the term
                            `minimum annuity payment amount' means, as of
                            any date, an amount equal to the monthly
                            equivalent of 150 percent of the poverty line
                            for an individual (as in effect on such date),
                            determined under the poverty guidelines of the
                            Department of Health and Human Services issued
                            under sections 652 and 673(2) of the Omnibus
                            Budget Reconciliation Act of 1981.
                        ``(D) Purchase of annuities in the event of
                    insufficient assets.--If a participating individual
                    desires, or is required under subsection (f), to
                    purchase a personal social security savings annuity
                    under subsection (b) on or after the date determined
                    under subsection (a)(1) and the assets of the personal
                    social security savings account of such individual are
                    insufficient to purchase a personal social security
                    savings annuity that provides for a monthly payment
                    that is at least equal to the minimum annuity payment
                    amount (as defined in paragraph (4)(C)(iii)), the
                    participating individual shall purchase a personal
                    social security savings annuity with a monthly payment
                    equal to the maximum amount that the participating
                    individual's personal social security savings account
                    can fund, as determined in accordance with regulations
                    which shall be prescribed by the Authority, and that
                    otherwise meets the requirements of this subsection
                    (including the cost-of-living protection requirement of
                    subsection (c)(1)(C)), and the Authority shall provide
                    for appropriate certification to the Secretary of the
                    Treasury with respect to the participating individual's
                    eligibility for guarantee payments under section 259.
                ``(5) Maintenance of reserves for payment of annuities.--
                        ``(A) Investment of reserves.--For purposes of
                    investment of reserves held in the Annuity Reserves
                    Account, the Authority shall contract with appropriate
                    investment managers, recordkeepers, and custodians
                    selected by the Authority for investment of such
                    reserves. Such reserves shall be invested under
                    regulations which shall be prescribed by the Authority
                    so as to ensure, to the maximum extent practicable,
                    that, of the total balance of the reserves (after
                    payment of administrative expenses to such managers,
                    recordkeepers, and custodians)--
                                ``(i) 65 percent is invested in equities in
                            the same manner and under the same standards as
                            are provided in section 256(c)(4), and
                                ``(ii) 35 percent is invested in fixed
                            income instruments in the same manner and under
                            the same standards as are provided in section
                            256(c)(5).
                        ``(B) Provision for full payment of annuities.--
                    Payment of personal social security savings annuities
                    in accordance with the terms of such annuities shall be
                    made, irrespective of the sufficiency of reserves in
                    the Annuity Reserves Fund attributable to funds
                    obtained from the purchase of such annuities. In the
                    event of any impending insufficiency in the Annuity
                    Reserves Account for the next fiscal year, the
                    Authority shall certify to the Secretary of the
                    Treasury the amount of such insufficiency, and the
                    Secretary of the Treasury shall transfer from the
                    Federal Old-Age and Survivors Insurance Trust Fund to
                    the Annuity Reserves Account the amount of the
                    insufficiency, as so certified, in such installments,
                    made prior to or during such fiscal year, as are
                    necessary to eliminate in advance such insufficiency.
        ``(c) Personal Social Security Savings Annuity.--
                ``(1) In general.--For purposes of this part, the term
            `personal social security savings annuity' means an annuity
            that meets the following requirements:
                        ``(A) The annuity starting date (as defined in
                    section 72(c)(4) of the Internal Revenue Code of 1986)
                    commences on the first day of the month beginning after
                    the date of the purchase of the annuity.
                        ``(B) The terms of the annuity provide--
                                ``(i) for a monthly payment to the
                            participating individual during the life of the
                            participating individual equal to at least the
                            minimum annuity payment amount (as defined in
                            subsection (b)(4)(C)(iii)), or
                                ``(ii) in the case of an annuity purchased
                            under subparagraph (D) of subsection (b)(4),
                            the maximum monthly payment determined under
                            regulations prescribed under such subparagraph.
                        ``(C) The terms of the annuity include procedures
                    providing for adjustments in the amount of the monthly
                    payments in the same manner and to the same extent as
                    adjustments are provided for under the procedures used
                    to adjust benefit amounts under section 215(i)(2)(A).
                    Nothing in this subparagraph shall be construed to
                    preclude the terms governing such an annuity from
                    providing for adjustments in the amount of monthly
                    payments resulting in a payment for any month greater
                    than the payment for that month that would result from
                    adjustments required under the preceding sentence
                    (b)(4)(D).
                        ``(D) The terms of the annuity include such other
                    terms and conditions as the Board requires for the
                    protection of the annuitant.
                ``(2) Exemption from third party claims.--Each personal
            social security savings annuity shall be exempt from any and
            all third party claims against the issuer.
        ``(d) Right To Use Excess Personal Social Security Savings Account
    Assets.--To the extent assets credited to a participating individual's
    personal social security savings account remain after the purchase of
    an annuity under subsection (b), the remaining assets shall be payable
    to the participating individual at such time, in such manner, and in
    such amounts as the participating individual may specify, subject to
    subsection (f).
        ``(e) Distributions in Case of Death.--If the participating
    individual dies before all amounts which are held in the Tier I
    Investment Fund or the Tier II Investment Fund of the Savings Fund or
    held under a Tier III Investment Option and which are credited to the
    personal social security savings account of the individual are
    otherwise distributed in accordance with this section, such amounts
    shall be distributed, under regulations which shall be prescribed by
    the Board--
                ``(1) in any case in which one or more beneficiaries have
            been designated in advance, to such beneficiaries in accordance
            with such designation as provided in such regulations, and
                ``(2) in the case of any amount not distributed as
            described in paragraph (1), to such individual's estate.
        ``(f) Date of Final Distribution.--All amounts credited to the
    personal social security savings account of an individual shall be
    distributed, by means of the purchase of annuities or otherwise in a
    manner consistent with the requirements of this section, not later than
    5 years after the date the individual attains retirement age (as
    defined in section 216(l)). The Board shall provide by regulation for
    means of distribution necessary to ensure compliance with the
    requirements of this subsection.

    ``SEC. 259. GUARANTEE OF ACCOUNT SAVINGS.

        ``(a) In General.--If, as of immediately before the month for which
    the first monthly payment under a participating individual's personal
    social security savings annuity is paid, the amount credited to such
    individual's personal social security savings account is less that the
    sum of all deposits made to the account under section 252(b), adjusted
    as provided in subsection (b), the Annuity Issuance Authority shall so
    certify to the Secretary of the Treasury and, upon receipt of such
    certification, such Secretary shall transfer to such individual's Tier
    I Investment Fund, from amounts in the Federal Old-Age and Survivors
    Insurance Trust Fund, an amount equal to the excess of such sum of such
    deposits, as so adjusted, over such amount credited to such account.
        ``(b) Adjustments.--
                ``(1) In general.--For purposes of subsection (a), deposits
            described in subsection (a) which are made in any calendar year
            shall be deemed to be equal to the product of--
                        ``(A) the deposits made in such year (as determined
                    without regard to this subsection); and
                        ``(B) the quotient obtained by dividing--
                                ``(i) the Consumer Price Index for the
                            calendar quarter beginning on July 1 and ending
                            on September 30 preceding the year in which the
                            month referred to in subsection (a) occurs; by
                                ``(ii) the Consumer Price Index for the
                            calendar quarter beginning on July 1 and ending
                            on September 30 preceding the calendar year in
                            which such deposits were made.
                ``(2) Consumer price index.--For purposes of paragraph (1),
            the Consumer Price Index for a calendar quarter shall be the
            arithmetical mean of the Consumer Price Index for Urban Wage
            Earners and Clerical Workers (CPI-W) for the 3 months in such
            quarter.

    ``SEC. 260. PERSONAL SOCIAL SECURITY SAVINGS BOARD.

        ``(a) Establishment.--There is established in the executive branch
    of the Government a Personal Social Security Savings Board.
        ``(b) Composition.--The Board shall be composed of--
                ``(1) 3 members appointed by the President, of whom 1 shall
            be designated by the President as Chairman; and
                ``(2) 2 members appointed by the President, of whom--
                        ``(A) 1 shall be appointed by the President after
                    taking into consideration the recommendation made by
                    the Speaker of the House of Representatives in
                    consultation with the minority leader of the House of
                    Representatives; and
                        ``(B) 1 shall be appointed by the President after
                    taking into consideration the recommendation made by
                    the majority leader of the Senate in consultation with
                    the minority leader of the Senate.
        ``(c) Advice and Consent.--Appointments under subsection (b) shall
    be made by and with the advice and consent of the Senate.
        ``(d) Membership Requirements.--Members of the Board shall have
    substantial experience, training, and expertise in the management of
    financial investments and pension benefit plans.
        ``(e) Length of Appointments.--
                ``(1) Terms.--A member of the Board shall be appointed for
            a term of 4 years, except that of the members first appointed
            under subsection (b)--
                        ``(A) the Chairman shall be appointed for a term of
                    4 years;
                        ``(B) the members appointed under subsection (b)(2)
                    shall be appointed for terms of 3 years; and
                        ``(C) the remaining members shall be appointed for
                    terms of 2 years.
                ``(2) Vacancies.--
                        ``(A) In general.--A vacancy on the Board shall be
                    filled in the manner in which the original appointment
                    was made and shall be subject to any conditions that
                    applied with respect to the original appointment.
                        ``(B) Completion of term.--An individual chosen to
                    fill a vacancy shall be appointed for the unexpired
                    term of the member replaced.
                ``(3) Expiration.--The term of any member shall not expire
            before the date on which the member's successor takes office.
        ``(f) Duties.--The Board shall--
                ``(1) administer the program established under this part;
                ``(2) establish policies for the investment and management
            of the Savings Fund, including the Tier I Investment Fund and
            the Tier II Investment Fund, and amounts held under Tier III
            Investment Options, including policies applicable to the asset
            managers, recordkeepers, and custodians with responsibility for
            managing the investment of amounts credited to personal social
            security investment accounts, and for the management and
            operation of personal social security savings annuities, which
            shall provide for--
                        ``(A) prudent investments suitable for accumulating
                    funds for payment of retirement income;
                        ``(B) sound management practices; and
                        ``(C) low administrative costs;
                ``(3) review the performance of investments made for the
            Tier I Investment Fund and the Tier II Investment Fund;
                ``(4) review the performance of investments made under Tier
            III Investment Options;
                ``(5) review the management and operation of personal
            social security savings annuities;
                ``(6) review and approve the budget of the Board; and
                ``(7) comply with the fiduciary requirements of part 4 of
            subtitle B of title I of the Employee Retirement Income
            Security Act of 1974 (relating to fiduciary responsibility) in
            connection with any exercise of discretion in connection with
            the assets of the Savings Fund.
        ``(g) Administrative Provisions.--
                ``(1) In general.--The Board may--
                        ``(A) adopt, alter, and use a seal;
                        ``(B) except as provided in paragraph (4), direct
                    the Executive Director to take such action as the Board
                    considers appropriate to carry out the provisions of
                    this part and the policies of the Board in accordance
                    with delegations under this part;
                        ``(C) upon the concurring votes of 4 members,
                    remove the Executive Director from office for good
                    cause shown;
                        ``(D) provide to the Executive Director such
                    resources as are necessary to carry out the duties of
                    the Executive Director; and
                        ``(E) take such other actions as may be necessary
                    to carry out the functions of the Board.
                ``(2) Meetings.--The Board shall meet--
                        ``(A) not less than once during each month; and
                        ``(B) at additional times at the call of the
                    Chairman.
                ``(3) Exercise of powers.--
                        ``(A) In general.--Except as provided in paragraph
                    (1)(C), the Board shall perform the functions and
                    exercise the powers of the Board on a majority vote of
                    a quorum of the Board. Three members of the Board shall
                    constitute a quorum for the transaction of business.
                        ``(B) Vacancies.--A vacancy on the Board shall not
                    impair the authority of a quorum of the Board to
                    perform the functions and exercise the powers of the
                    Board.
                ``(4) Limitations on investments.--The Board may not direct
            any person to invest or to cause to be invested any sums in the
            Tier II Investment Fund or any personal social security
            investment account in a specific asset or to dispose of or
            cause to be disposed of any specific asset of such Fund or any
            such account.
        ``(h) Compensation.--
                ``(1) In general.--Each member of the Board who is not an
            officer or employee of the Federal Government shall be
            compensated at the daily rate of basic pay for level IV of the
            Executive Schedule for each day during which such member is
            engaged in performing a function of the Board.
                ``(2) Expenses.--A member of the Board shall be paid
            travel, per diem, and other necessary expenses under subchapter
            I of chapter 57 of title 5, United States Code, while traveling
            away from such member's home or regular place of business in
            the performance of the duties of the Board.
                ``(3) Source of funds.--Payments authorized under this
            subsection shall be paid from the Tier I Investment Fund or the
            Tier II Investment Fund, as determined appropriate by the
            Board.
        ``(i) Discharge of Responsibilities.--The members of the Board
    shall discharge their responsibilities solely in the interest of the
    participating individuals and their beneficiaries under this part.
        ``(j) Annual Independent Audit.--The Board shall annually engage an
    independent qualified public accountant to audit the activities of the
    Board.
        ``(k) Submission of Budget to Congress.--The Board shall prepare
    and submit to the President, and, at the same time, to the appropriate
    committees of Congress, an annual budget of the expenses and other
    items relating to the Board which shall be included as a separate item
    in the budget required to be transmitted to Congress under section 1105
    of title 31, United States Code.
        ``(l) Submission of Legislative Recommendations.--The Board may
    submit to the President, and, at the same time, shall submit to each
    House of Congress, any legislative recommendations of the Board
    relating to any of its functions under this part or any other provision
    of law.

    ``SEC. 261. EXECUTIVE DIRECTOR.

        ``(a) Appointment of Executive Director.--The Board shall appoint,
    without regard to the provisions of law governing appointments in the
    competitive service, an Executive Director by action agreed to by a
    majority of the members of the Board.
        ``(b) Duties.--The Executive Director shall, as determined
    appropriate by the Board--
                ``(1) carry out the policies established by the Board;
                ``(2) invest and manage the Tier I Investment Fund and the
            Tier II Investment Fund in accordance with the investment
            policies and other policies established by the Board;
                ``(3) administer the provisions of this part relating to
            the Tier I Investment Fund and the Tier II Investment Fund; and
                ``(4) prescribe such regulations (other than regulations
            relating to fiduciary responsibilities) as may be necessary for
            the administration of this part relating to the Tier I
            Investment Fund and the Tier II Investment Fund.
        ``(c) Administrative Authority.--The Executive Director may, within
    the scope of the duties of the Executive Director as determined by the
    Board--
                ``(1) appoint such personnel as may be necessary to carry
            out the provisions of this part relating to the Tier I
            Investment Fund and the Tier II Investment Fund;
                ``(2) subject to approval by the Board, procure the
            services of experts and consultants under section 3109 of title
            5, United States Code;
                ``(3) secure directly from an Executive agency, the United
            States Postal Service, or the Postal Rate Commission any
            information necessary to carry out the provisions of this part
            and the policies of the Board relating to the Tier I Investment
            Fund and the Tier II Investment Fund;
                ``(4) make such payments out of sums in the Tier I
            Investment Fund and the Tier II Investment Fund as the
            Executive Director determines, in accordance with regulations
            of the Board, are necessary to carry out the provisions of this
            part and the policies of the Board;
                ``(5) pay the compensation, per diem, and travel expenses
            of individuals appointed under paragraphs (1), (2), and (6)
            from the Tier I Investment Fund or the Tier II Investment Fund,
            in accordance with regulations of the Board;
                ``(6) accept and use the services of individuals employed
            intermittently in the Government service and reimburse such
            individuals for travel expenses, authorized by section 5703 of
            title 5, United States Code, including per diem as authorized
            by section 5702 of such title;
                ``(7) except as otherwise expressly prohibited by law or
            the policies of the Board, delegate any of the Executive
            Director's functions to such employees under the Board as the
            Executive Director may designate and authorize such successive
            redelegations of such functions to such employees under the
            Board as the Executive Director may consider to be necessary or
            appropriate; and
                ``(8) take such other actions as are appropriate to carry
            out the functions of the Executive Director.''.
        (b) Effective Date.--The amendments made by this section shall
    apply with respect to wages paid after December 31, 2011, for pay
    periods ending after such date and self-employment income for taxable
    years beginning after such date.

    SEC. 403. MONTHLY INSURANCE BENEFITS FOR PARTICIPATING INDIVIDUALS.

        Section 202 of the Social Security Act (42 U.S.C. 402) is amended
    by adding at the end the following new subsection:

                    ``Benefits for Participants Under Part B

        ``(z)(1) Notwithstanding the preceding provisions of this section--
                ``(A) a participating individual under the Personal Social
            Security Savings Program under part B shall not be entitled to
            old-age insurance benefits under subsection (a); and
                ``(B) except as provided in paragraph (2), no individual
            shall be entitled to benefits under this section on the basis
            of the wages and self-employment income of such a participating
            individual.
        ``(2) In the case of any such participating individual who dies
    before such individual purchases a personal social security savings
    annuity under section 258, paragraph (1)(B) shall not apply with
    respect to child's insurance benefits under subsection (d), widow's
    insurance benefits under subsection (e), widower's insurance benefits
    under subsection (f), mother's and father's insurance benefits under
    subsection (g), and parent's insurance benefits under subsection
    (h).''.

    SEC. 404. TAX TREATMENT OF ACCOUNTS.

        (a) In General.--
                (1) In general.--Subchapter F of chapter 1 of the Internal
            Revenue Code of 1986 (relating to exempt organizations) is
            amended by adding at the end the following new part:

              ``PART IX--PERSONAL SOCIAL SECURITY SAVINGS PROGRAM

    ``Sec. 530A. Personal social security savings program.

    ``SEC. 530A. PERSONAL SOCIAL SECURITY SAVINGS PROGRAM.

        ``(a) General Rule.--The Social Security Personal Savings Fund and
    each Tier III Investment Option are exempt from taxation under this
    subtitle. Notwithstanding the preceding sentence, sums in a personal
    social security savings account which are attributable to a Tier III
    Option shall be subject to the taxes imposed by section 511 (relating
    to imposition of tax on unrelated business income of charitable, etc.
    organizations).
        ``(b) Distributions.--
                ``(1) In general.--Any qualified distribution from--
                        ``(A) amounts credited to a personal social
                    security savings account from the Social Security
                    Personal Savings Fund or attributable to a Tier III
                    Investment Option, or
                        ``(B) a personal social security savings annuity,
            shall not be included in the gross income of the distributee.
                ``(2) Qualified distribution.--For purposes of paragraph
            (1), the term `qualified distribution' means a distribution
            which meets the requirements of section 258 of the Social
            Security Act and which is not a guaranty payment (as defined by
            section 259 of such Act).
        ``(c) Definitions.--For purposes of this section--
                ``(1) Personal social security savings account.--The term
            `personal social security savings account' means an account
            established under section 254(a) of the Social Security Act.
                ``(2) Personal social security savings annuity.--The term
            `personal social security savings annuity' means an annuity
            approved by the Personal Social Security Savings Board under
            section 258(b)(3) of the Social Security Act.
                ``(3) Social security personal savings fund.--The term
            `Social Security Personal Savings Fund' means the Savings Fund
            established under section 252 of the Social Security Act.
                ``(4) Tier iii investment option.--The term `Tier III
            Investment Option' has the meaning given such term by section
            251(9) of the Social Security Act.
        ``(d) Estate Tax Treatment.--No amount shall be includible in the
    gross estate of any individual for purposes of chapter 11 by reason of
    an interest in the Tier I Investment Fund or the Tier II Investment
    Fund of the Savings Fund or held under a Tier III Investment Option and
    which is credited to the personal social security savings account of
    the individual.''.
                (2) Conforming amendment.--Section 86(d)(1)(A) of such Code
            is amended by inserting ``part A of'' after ``under''.
                (3) Clerical amendment.--The table of parts for subchapter
            F of chapter 1 of such Code is amended by adding after the item
            relating to part VIII the following new item:

            ``Part IX. Personal Social Security Savings Program.''.

        (b) Guaranty Payments.--Paragraph (1) of section 86(d) of the
    Internal Revenue Act of 1986, as amended by subsection (a)(2), is
    amended by striking ``or'' at the end of subparagraph (A), by striking
    the period and inserting ``, or'' at the end of subparagraph (B), and
    by adding at the end the following new subparagraph:
                        ``(C) a guaranty payment under section 259(a), and
                    a payment of an additional amount under section 259(c),
                    of the Social Security Act.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2011.

    SEC. 405. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

        Part B of title II of the Social Security Act (as added by section
    101 of this Act) is amended by adding at the end the following new
    section:

    ``SEC. 262. SELF-LIQUIDATING SOCIAL SECURITY TRANSITION FUND.

        ``(a) Establishment.--There is hereby created on the books of the
    Treasury of the United States a trust fund to be known as the Self-
    Liquidating Social Security Transition Fund (in this section referred
    to as the `Transition Fund').
        ``(b) Board of Trustees.--
                ``(1) Establishment.--With respect to the Transition Fund,
            there is hereby created a body to be known as the Board of
            Trustees of the Transition Fund (in this section referred to as
            the `Board of Trustees') composed of the Commissioner of Social
            Security, the Secretary of the Treasury, and the members of the
            Personal Social Security Savings Board.
                ``(2) Duties.--The Board of Trustees shall--
                        ``(A) provide for the issuance of obligations by
                    the Transition Fund pursuant to subsection (c),
                        ``(B) provide for the receipt and management of
                    amounts paid into the Transition Fund pursuant to
                    subsection (d),
                        ``(C) use all funds paid into the Transition Fund
                    to redeem obligations issued under subsection (c) as
                    soon as practicable,
                        ``(D) report to Congress not later than the first
                    day of April of each year on the operation and status
                    of the Transition Fund during the preceding fiscal year
                    and on its expected operation and status during the
                    current fiscal year and the next 2 fiscal years, and
                        ``(E) review the general policies followed in
                    managing the Transition Fund, and recommend changes in
                    such policies, including necessary changes in the
                    provisions of law which govern the way in which the
                    Transition Fund is to be managed.
                ``(3) Meetings.--The Board of Trustees shall meet not less
            frequently than once each calendar year.
        ``(c) Issuance of Transition Fund Bonds.--
                ``(1) Issuance.--
                        ``(A) In general.--The purposes for which
                    obligations of the United States may be issued under
                    chapter 31 of title 31, United States Code, are hereby
                    extended to authorize the issuance at par of public-
                    debt obligations by the Transition Fund.
                        ``(B) Required issuance.--Beginning on January 1,
                    2012, whenever any obligation held in the Federal Old-
                    Age and Survivors Insurance Trust Fund or the Federal
                    Disability Insurance Trust Fund is repaid from the
                    general fund of the Treasury to either of such Trust
                    Funds, the Transition Fund shall issue an obligation
                    under this subsection in an amount equal to the amount
                    of interest and principal so repaid.
                        ``(C) Transfer of proceeds to general fund of the
                    treasury.--Proceeds from the issuance of any obligation
                    issued under this section shall be transferred to the
                    general fund of the Treasury.
                        ``(D) Accounting.--The debt owed on any obligation
                    issued under this section shall be considered to be
                    debt of the Transition Fund and shall be accounted for
                    in such manner.
                ``(2) Maturities and interest rate.--Such obligations
            issued by the Transition Fund for purchase by the public shall
            have maturities fixed with due regard for the needs of the
            Transition Fund and shall bear interest at a rate equal to the
            average market yield (computed by the Secretary of the Treasury
            on the basis of market quotations as of the end of the calendar
            month next preceding the date of such issue) on all marketable
            interest-bearing obligations of the United States then forming
            a part of the public debt which are not due or callable until
            after the expiration of 4 years from the end of such calendar
            month, except that where such average market yield is not a
            multiple of one-eighth of 1 per centum, the rate of interest on
            such obligations shall be the multiple of one-eighth of 1 per
            centum nearest such market yield.
                ``(3) Repayment of obligations.--Obligations issued under
            this subsection may be redeemed only by funds in the Transition
            Fund.
        ``(d) Deposit of OASDI Trust Fund Surplus.--
                ``(1) In general.--In advance of the initial repayment from
            the general fund of the Treasury described in subsection
            (c)(1)(B), the Chief Actuary of the Social Security
            Administration shall certify to the Secretary of the Treasury
            the date of such repayment. There are appropriated to the
            Transition Fund for the fiscal year during which such date
            occurs, and for each fiscal year thereafter, out of any moneys
            in the Federal Old-Age and Survivors Insurance Trust Fund,
            amounts equivalent to the OASDI trust fund surplus (as defined
            in paragraph (2)) for the preceding fiscal year.
                ``(2) Transfers based on estimates.--The amounts
            appropriated by paragraph (1) shall be transferred from time to
            time from the Federal Old-Age and Survivors Insurance Trust
            Fund to the Transition Fund, such amounts to be determined on
            the basis of estimates by the Commissioner of Social Security.
            Proper adjustments shall be made in amounts subsequently
            transferred to the extent prior estimates were in excess of or
            were less than such surplus.
                ``(3) OASDI trust fund surplus defined.--In this section,
            the term `OASDI trust fund surplus' for a fiscal year means the
            dollar amount by which the Federal Old-Age and Survivors
            Insurance Trust Fund could be reduced as of the end of such
            fiscal year so as to result in an OASDI trust fund ratio (as
            defined in section 201(p)(4)) for such fiscal year equal to 125
            percent.
                ``(4) Rule of construction.--This section shall not be
            construed to require redemption of obligations of the Trust
            Fund for the purpose of making transfers to the Transition Fund
            under this section or for any other purpose other than to
            provide for payment of benefits under part A of title II of the
            Social Security Act.
        ``(e) Redemption of Obligations Upon Deposit of Funds.--Obligations
    issued under subsection (c) may be redeemed only by funds in the
    Transition Fund. The Board of Trustees shall provide for the redemption
    of such obligations as soon as possible with funds deposited into the
    Transition Fund pursuant to subsection (d).
        ``(f) Sunset.--On the first date as of which all of the obligations
    issued under subsection (c) have been redeemed, any balance remaining
    in the Transition Fund as of such date shall be deposited in the
    Federal Old-Age and Survivors Insurance Trust Fund, the terms of the
    Board of Trustees shall end, the Transition Fund shall cease to exist,
    and this section shall be repealed.''.

    SEC. 406. BUDGETARY TREATMENT OF SOCIAL SECURITY.

        (a) In General.--Section 710 of the Social Security Act (42 U.S.C.
    911) is amended to read as follows:

                    ``budgetary treatment of social security

        ``Sec. 710.
        ``Notwithstanding any other provision of law and except as provided
    in subsection (b), the receipts and disbursements shall be treated in
    the same manner as section 13301 of the Budget Enforcement Act of
    1990.''.
        (b) Effective Date.--The amendments made by this section shall
    apply with respect to fiscal years beginning on or after October 1,
    2011.

    SEC. 407. ACCOUNTING FOR THE OLD-AGE, SURVIVORS, AND DISABILITY
                  INSURANCE PROGRAM AND THE PERSONAL SOCIAL SECURITY
                  SAVINGS PROGRAM.

        Title VII of the Social Security Act is amended by inserting after
    section 705 (42 U.S.C. 906) the following new section:

       ``accounting for the old-age, survivors, and disability insurance
            program and the personal social security savings program

                        ``Social Security Lockbox Budget

        ``Sec. 706. (a) At the time of the transmittal to the Congress by
    the President of the budget of the United States Government, the
    President shall transmit to each House of the Congress a separate
    report (to be known as the `Social Security Lockbox Budget') detailing
    the performance during the preceding fiscal year of each of the
    accounts established under subsection (b). Such report shall set forth,
    as determined as of the end of the year--
                ``(1) the amount of the balance of each account,
                ``(2) the amount of the total charges and the amount of the
            total credits to each account for the year, and
                ``(3) the amount of the total for the year of each category
            of charges and credits itemized in subsection (b).

                          ``Establishment of Accounts

        ``(b) For purposes of accounting for certain receipts and
    disbursement of the Treasury of the United States in connection with
    the Old-Age, Survivors, and Disability Insurance Program under part A
    of title II of the Social Security Act and the Personal Security
    Savings Program under part B of such title, the Secretary of the
    Treasury shall establish and maintain a Social Security Part A Account,
    a Social Security Part B Account, and a Self-Liquidating Social
    Security Transition Fund Account.

          ``Credits and Charges to the Social Security Part A Account

        ``(c)(1) For each fiscal year, the Social Security Part A Account
    shall be credited with the sum of--
                ``(A) all receipts during the year by the Federal Old-Age
            and Survivors Insurance Trust Fund and the Federal Disability
            Insurance Trust Fund under section 201 (including amounts
            received as interest on notes and obligations purchased by the
            Trust Funds under section 201(d) of such Act, and excluding
            amounts received in redemption of such notes and obligations
            and amounts received by either such Trust Fund as transfers
            from the other such Trust Fund), and
                ``(B) all receipts during the year by the Federal Old-Age
            and Survivors Insurance Trust Fund and the Federal Disability
            Insurance Trust Fund under section 121(e) of the Social
            Security Amendments of 1983 (relating to appropriation of
            amounts equivalent to taxes on social security benefits) (42
            U.S.C. 401 note).
        ``(2) For each fiscal year, the Social Security Part A Account
    shall be charged with the sum of--
                ``(A) all benefits paid during the year from the Federal
            Old-Age and Survivors Insurance Trust Fund and the Federal
            Disability Insurance Trust Fund under part A of title II of the
            Social Security Act,
                ``(B) all redirected social security contributions
            transferred during the year to the Social Security Personal
            Savings Fund under section 252(b),
                ``(C) all other expenditures during the year from the Trust
            Funds under part A of title II (excluding amounts expended as
            transfers by either such Trust Fund to the other such Trust
            Fund and amounts paid for the purchase of notes and obligations
            under section 201(d)), and
                ``(D) all transfers from the Federal Old-Age and Survivors
            Insurance Trust Fund to the Self-Liquidating Social Security
            Transition Fund under section 262(d).

          ``Charges and Credits to the Social Security Part B Account

        ``(d)(1) For each fiscal year, the Social Security Part B Account
    shall be credited with--
                ``(A) all redirected social security contributions
            transferred during the year to the Personal Social Security
            Savings Fund under section 252(b) of the Social Security Act,
            and
                ``(B) any net increase in the Tier I Investment Fund
            attributable to investment for the fiscal year, any net
            increase in the Tier II Investment Fund attributable to
            investment for the fiscal year, and the total amount of any net
            increases in Tier III Investment Options attributable to
            investment for the fiscal year.
        ``(2) For each fiscal year, the Social Security Part B Account
    shall be charged with--
                ``(A) all administrative costs incurred for the fiscal year
            with respect to the Tier I Investment Fund, the Tier II
            Investment Fund, and the Tier III Investment Options,
                ``(B) any net decrease in the Tier I Investment Fund
            attributable to investment for the fiscal year, any net
            decrease in the Tier II Investment Fund attributable to
            investment for the fiscal year, and the total amount of any net
            decreases in Tier III Investment Options attributable to
            investment for the fiscal year, and
                ``(C) annuity payments made during the year under section
            258 from the Annuity Reserve Account in the Savings Fund.

         ``Charges and Credits to the Self-Liquidating Social Security
                            Transition Fund Account

        ``(e)(1) For each fiscal year, the Self-Liquidating Social Security
    Transition Account shall be credited with--
                ``(A) all transfers to the Transition Fund from the Federal
            Old-Age and Survivors Insurance Trust Fund under section
            262(b), and
                ``(B) all amounts expended during the fiscal year from the
            Trust Funds in the redemption under section 262(e) of
            obligations issued by the Transition fund under section 262(c).
        ``(2) For each fiscal year, the Self-Liquidating Social Security
    Transition Fund Account shall be charged with the total amount of
    obligations issued during the fiscal year by the Transition Fund under
    section 262(c)''.

    SEC. 408. PROGRESSIVE INDEXING OF BENEFITS FOR OLD-AGE, WIFE'S, AND
                  HUSBAND'S INSURANCE BENEFITS.

        (a) In General.--Section 215(a) of the Social Security Act (42
    U.S.C. 415(a)) is amended--
                (1) by striking ``The'' in paragraph (1)(A) and inserting
            ``In the case of any benefit other than an applicable benefit
            to which paragraph (2) applies, the'', and
                (2) by redesignating paragraphs (2) through (7) as
            paragraphs (3) through (8), respectively, and by inserting
            after paragraph (1) the following new paragraph:
        ``(2)(A) In the case of an applicable benefit with respect to any
    individual who initially becomes eligible for old-age insurance
    benefits or who dies (before becoming eligible for such benefits) in
    calendar year 2018 or later, the primary insurance amount of the
    individual shall be equal to the sum of--
                ``(i) 90 percent of the individual's average indexed
            monthly earning (determined under subsection (b)) to the extent
            that such earnings do not exceed the amount established for
            purposes of paragraph (1)(A)(i) by paragraph (1)(B);
                ``(ii) 32 percent of the individual's average indexed
            monthly earnings to the extent that such earnings exceed the
            amount established for purposes of paragraph (1)(A)(i) by
            paragraph (1)(B) but do not exceed the amount established for
            purposes of this clause by subparagraph (B);
                ``(iii) 32 percent (reduced as provided in subparagraph
            (C)) of the individual's average indexed monthly earnings to
            the extent that such earnings exceed the amount established for
            purposes of clause (ii) but do not exceed the amount
            established for purposes of paragraph (1)(A)(ii) by paragraph
            (1)(B); and
                ``(iv) 15 percent (reduced as provided in subparagraph (C))
            of the individual's average indexed monthly earnings to the
            extent that such earnings exceed the amount established for
            purposes of paragraph (1)(A)(ii) by paragraph (1)(B).
        ``(B)(i) For purposes of subparagraph (A)(ii), the amount
    established under this subparagraph for calendar year 2016 shall be the
    level of average indexed monthly earnings determined by the Chief
    Actuary of the Social Security Administration under clause (ii) as
    being at the 30th percentile for the period of calendar years 2007
    through 2009.
        ``(ii) For purposes of clause (i), the average indexed monthly
    earnings for the period of calendar years 2007 through 2009 shall be
    determined by--
                ``(I) determining the average indexed monthly earnings for
            each individual who initially became eligible for old-age
            insurance benefits or who died (before becoming eligible for
            such benefits) during such period, except that in determining
            such average indexed monthly earnings under subsection (b),
            subsection (b)(3)(A)(ii)(I) shall be applied by substituting
            calendar year 2004 for the second calendar year described in
            such subsection; and
                ``(II) multiplying the amount determined for each
            individual under subclause (I) by the quotient obtained by
            dividing the national average wage index (as defined in section
            209(k)(1)) for the calendar year 2016 by such index for the
            calendar year 2004.
        ``(iii) For purposes of subparagraph (A)(ii), the amount
    established under this subparagraph for any calendar year after 2018
    shall be equal to the product of the amount in effect under clause (i)
    with respect to calendar year 2018 and the quotient obtained by
    dividing--
                ``(I) the national average wage index (as defined in
            section 209(k)(1)) for the second calendar year preceding the
            calendar year for which the determination is being made, by
                ``(II) the national average wage index (as so defined) for
            2016.
        ``(iv) The amount established under this subparagraph for any
    calendar year shall be rounded to the nearest $1, except that any
    amount so established which is a multiple of $0.50 but not of $1 shall
    be rounded to the next higher $1.
        ``(C)(i) Except as provided in clause (ii), in the case of any
    calendar year after 2017, each of the percentages to which this
    subparagraph applies by reason of clauses (iii) or (iv) of subparagraph
    (A) shall be a percentage equal to such percentage multiplied by the
    quotient obtained by dividing--
                ``(I) the difference of the maximum CPI-indexed benefit
            amount for such year over the amount determined under this
            paragraph for an individual whose average indexed monthly
            earnings are equal to the amount established for purposes of
            subparagraph (A)(ii) for such year, by
                ``(II) the difference of the maximum wage-indexed benefit
            amount for such year over the amount determined under this
            paragraph for an individual whose average indexed monthly
            earnings are equal to the amount established for purposes of
            subparagraph (A)(ii) for such year.
        ``(ii)(I) In the case of any calendar year which is a positive
    balance year, clause (i) shall not apply and each of the percentages to
    which this subparagraph applies by reason of clause (iii) or (iv) of
    subparagraph (B) shall be a percentage equal to the percentage
    determined under this subparagraph for the preceding year (determined
    after the application of this subparagraph).
        ``(II) In the case of any calendar year after a positive balance
    year which is not a positive balance year, this subparagraph shall be
    applied by substituting `the second calendar year preceding the most
    recent positive balance year' for `2015' each place it appears in
    clause (iv).
        ``(iii) For purposes of clause (i), the maximum wage-indexed
    benefit amount for any calendar year shall be equal to the amount
    determined under this paragraph (determined without regard to any
    reduction under this subparagraph) for an individual with wages paid in
    and self-employment income credited to each computation base year in an
    amount equal to the contribution and benefit base for each calendar
    year.
        ``(iv) For purposes of clause (i), the maximum CPI-indexed benefit
    amount for any calendar year shall be an amount equal to the amount
    determined under clause (iii) for such year multiplied by a fraction--
                ``(I) the numerator of which is the ratio (rounded to the
            nearest one-thousandth of 1 percent) of the Consumer Price
            Index for the second preceding year to such index for 2015; and
                ``(II) the denominator of which is the ratio (rounded to
            the nearest one-thousandth of 1 percent) of the national wage
            index (as defined in section 209(k)(1)) for the second year
            preceding such year to such index for 2015.
        ``(v)(I) For purposes of this subparagraph, a positive balance year
    is a calendar year following any calendar year after 2082 for which the
    Chief Actuary of the Social Security Administration certifies to the
    Secretary of the Treasury and the Congress that the combined balance
    ratio of the Federal Old-Age and Survivors Trust Fund and the Federal
    Disability Insurance Trust Fund is not less than 100 percent for such
    year.
        ``(II) For purposes of subclause (I), the combined balance ratio of
    the Federal Old-Age and Survivors Trust Fund and the Federal Disability
    Insurance Trust Fund for any calendar year is the ratio of the combined
    balance of such Trust Funds as of the last day of such calendar year
    (reduced by any transfer made pursuant to section 201(o) in such
    calendar year) to the amount estimated by the Commissioner of Social
    Security under section 201(l)(3)(B)(iii)(II) to be paid from such Trust
    Funds during the calendar year following such calendar year for all
    purposes authorized by section 201 (determined as if such following
    calendar year were a positive balance year).
        ``(D) For purposes of this paragraph, rules similar to the rules of
    subparagraphs (C) and (D) of paragraph (1) shall apply.
        ``(E) For purposes of this paragraph, the term `applicable benefit'
    means any benefit under section 202 other than--
                ``(i) a child's insurance benefit under section 202(d) with
            respect to a child of an individual who has died;
                ``(ii) a widow's insurance benefit under section 202(e)
            with respect to a widow who has not attained age 60 and is
            under a disability (as defined in section 223(d)) which began
            before the end of the period specified in section 202(e)(4);
                ``(iii) a widower's insurance benefit under section 202(f)
            with respect to a widower who has not attained age 60 and is
            under a disability (as defined in section 223(d)) which began
            before the end of the period specified in section 202(f)(4);
            and
                ``(iv) a mother's and father's insurance benefit under
            section 202(g).''.
        (b) Treatment of Disabled Beneficiaries.--Section 215(a) of such
    Act (as amended by subsection (a)) is amended further by adding at the
    end the following new paragraph:
        ``(9)(A) Notwithstanding the preceding provisions of this
    subsection, in the case of an individual who has or has had a period of
    disability and who initially becomes eligible for old-age insurance
    benefits or who dies (before becoming eligible for such benefits) in
    any calendar year in or after 2018, the primary insurance amount of
    such individual shall be the sum of--
                ``(i) the amount determined under subparagraph (B); and
                ``(ii) the product derived by multiplying--
                        ``(I) the excess of the amount determined under
                    subparagraph (C) over the amount determined under
                    subparagraph (B), by
                        ``(II) the adjustment factor for such individual
                    determined under subparagraph (D).
        ``(B) The amount determined under this subparagraph is the amount
    of such individual's primary insurance amount as determined under this
    section without regard to this paragraph.
        ``(C) The amount determined under this subparagraph is the amount
    of such individual's primary insurance amount as determined under this
    section as in effect with respect to individuals becoming eligible for
    old-age or disability insurance benefits under section 202(a) on the
    date of the enactment of the Social Security Personal Savings Guarantee
    and Prosperity Act of 2010.
        ``(D) The adjustment factor determined under this subparagraph for
    any individual is the ratio (not greater than 1) of--
                ``(i) the total number of months during which such
            individual is under a disability (as defined in section 223(d))
            during the period beginning on the date the individual attains
            age 22 and ending on the first day of such individual's first
            month of eligibility for old-age insurance benefits under
            section 202(a) (or, if earlier, the month of such individual's
            death), to
                ``(ii) the number of months during the period beginning on
            the date the individual attains age 22 and ending on the first
            day of such individual's first month of eligibility for old-age
            insurance benefits under section 202(a) (or, if earlier, the
            month of such individual's death).''.
        (c) Conforming Amendments.--
                (1) Subsections (e)(2)(B)(i)(I) and (f)(2)(B)(i)(I) of
            section 202 of the Social Security Act are each amended by
            inserting ``or section 215(a)(2)(B)(iii)'' after ``section
            215(a)(1)(B)(i) and (ii)''.
                (2) Section 203(a)(10) of such Act is amended--
                        (A) in subparagraph (A)(i), by striking
                    ``215(a)(2)(B)(i)'' and inserting ``215(a)(3)(B)(i)'';
                        (B) in subparagraph (A)(ii), by striking
                    ``215(a)(2)(C)'' and inserting ``215(a)(3)(C)''; and
                        (C) in subparagraph (B)(ii), by striking
                    ``215(a)(2)'' and inserting ``215(a)(3)''.
                (3) Section 209(k)(1) of such Act is amended by inserting
            ``215(a)(2)(B), 215(a)(2)(C),'' after ``215(a)(1)(D),''.
                (4) Section 215(a) of such Act is amended--
                        (A) in paragraph (4)(A), as redesignated by
                    paragraph (2), by striking ``paragraph (4)'' and
                    inserting ``paragraph (5)'';
                        (B) in paragraph (4)(B), as redesignated by
                    paragraph (2), by striking ``paragraph (2)(A)'' and
                    inserting ``paragraph (3)(A)'';
                        (C) in paragraph (5), as redesignated by paragraph
                    (2), by striking ``paragraph (3)(A)'' and inserting
                    ``paragraph (4)(A)'';
                        (D) in paragraph (6)(A), as redesignated by
                    paragraph (2), by striking ``paragraph (4)(B)'' and
                    inserting ``paragraph (5)(B)''; and
                        (E) in paragraph (8)(B)(ii)(I), as redesignated by
                    paragraph (2), by striking ``paragraph (3)(B)'' and
                    inserting ``paragraph (4)(B)''.
                (5) Section 215(d)(3) of such Act is amended--
                        (A) by striking ``paragraph (4)(B)(ii)'' and
                    inserting ``paragraph (5)(B)(ii)''; and
                        (B) by striking ``subsection (a)(7)(C)'' and
                    inserting ``subsection (a)(8)(C)''.
                (6) Subsection 215(f) of such Act is amended--
                        (A) in paragraph (2)(B), by striking ``subsection
                    (a)(4)(B)'' and inserting ``subsection (a)(5)(B)'';
                        (B) in paragraph (7), by striking ``subsection
                    (a)(4)(B)'' and inserting ``subsection (a)(5)(B)'', and
                    by striking ``subsection (a)(6)'' and inserting
                    ``subsection (a)(7)'';
                        (C) in paragraph (9)(A)--
                                (i) by striking ``subsection (a)(7)(A)''
                            and inserting ``subsection (a)(8)(A)''; and
                                (ii) by striking ``subsection (a)(7)(C)''
                            and inserting ``subsection (a)(8)(C)''; and
                        (D) in paragraph (9)(B), by striking ``subsection
                    (a)(7)'' each place it appears and inserting
                    ``subsection (a)(8)''.

    SEC. 409. ADJUSTMENTS TO SCHEDULE FOR INCREASES IN NORMAL RETIREMENT
                  AGE.

        (a) Completion of Phase-In of Normal Retirement Age to Age 67 by
    2021.--
                (1) In general.--Section 216(l) of the Social Security Act
            (42 U.S.C. 416(l)) is amended--
                        (A) in paragraph (1)(C), by striking ``2017'' and
                    inserting ``2016'';
                        (B) in paragraph (1)(D), by striking ``2016'' and
                    inserting ``2015'', and by striking ``2022'' and
                    inserting ``2021'';
                        (C) in paragraph (1)(E), by striking ``2021'' and
                    inserting ``2020''; and
                        (D) in paragraph (3)(B), by striking ``2017'' and
                    inserting ``2016'', by striking ``2021'' and inserting
                    ``2020'', and by striking ``2017'' and inserting
                    ``2016''.
                (2) Maintenance of current law for individuals born prior
            to january 1, 1956.--Section 216(l)(3) of such Act (as amended
            by paragraph (1)(D)) is amended--
                        (A) by redesignating subparagraphs (A) and (B) as
                    clauses (i) and (ii), respectively;
                        (B) by inserting ``(A)'' after ``(3)''; and
                        (C) by adding at the end the following new
                    subparagraph:
        ``(B) Notwithstanding the preceding provisions of this subsection--
                ``(i) with respect to an individual who attains early
            retirement age after December 31, 2015, and before January 1,
            2017, the age increase factor under subparagraph (A)(ii) shall
            not be applied; and
                ``(ii) with respect to an individual who attains early
            retirement age after December 31, 2016, and before January 1,
            2018, the age increase factor under subparagraph (A)(ii) shall
            be 2 months.''.
        (b) Adjustments to Normal Retirement Age After 2021.--Section
    216(l) of such Act (as amended by subsection (a)) is amended--
                (1) in paragraph (1)(E), by inserting ``and before January
            1, 2022,'' after ``2020,'' and by striking ``age.'' and
            inserting ``age; and'' ;
                (2) in paragraph (1), by adding after subparagraph (E) the
            following new subparagraph:
                ``(F) with respect to an individual who attains early
            retirement age after December 31, 2121, 67 years of age plus
            the number of months in the age increase factor (as determined
            under paragraph (3)) for the calendar year in which such
            individual attains early retirement age.''; and
                (3) in paragraph (3), by adding at the end the following
            new subparagraph:
                ``(C) The Commissioner of Social Security shall determine
            (using reasonable actuarial assumptions) and publish on or
            before November 1 of each calendar year after 2020 the number
            of months (rounded, if not a multiple of one month, to the next
            lower multiple of one month) by which the life expectancy as of
            October 1 of such calendar year of an individual attaining
            early retirement age on such October 1 exceeds the life
            expectancy as of October 1, 2020, of an individual attaining
            early retirement age on October 1, 2020. With respect to an
            individual who attains early retirement age in the calendar
            year following any calendar year in which a determination is
            made under this subparagraph, the age increase factor shall be
            the number of months determined under this subparagraph as of
            October 1 of such calendar year in which such determination is
            made.''.

                         TITLE V--SIMPLIFIED INCOME TAX

    SEC. 501. SHORT TITLE.

        This title may be cited as the ``Taxpayer Choice Act''.

    SEC. 502. REPEAL OF ALTERNATIVE MINIMUM TAX FOR NONCORPORATE TAXPAYERS.

        (a) In General.--Section 55(a) of the Internal Revenue Code of 1986
    (relating to alternative minimum tax imposed) is amended by adding at
    the end the following new flush sentence:
    ``In the case of a taxpayer other than a corporation, no tax shall be
    imposed by this section for any taxable year beginning after December
    31, 2010, and the tentative minimum tax of any taxpayer other than a
    corporation for any such taxable year shall be zero for purposes of
    this title.''.
        (b) Conforming Amendments.--
                (1) Section 26(c) of such Code is amended by striking ``the
            term `tentative minimum tax' means the amount determined under
            section 55(b)(1)'' and inserting ``the tentative minimum tax is
            zero.''.
                (2) Section 911(f)(2) of such Code is amended to read as
            follows:
                ``(2) the tentative minimum tax under section 55 for the
            taxable year shall be zero.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2010.

    SEC. 503. SIMPLIFIED INCOME TAX SYSTEM.

        (a) In General.--Part I of subchapter A of chapter 1 of the
    Internal Revenue Code of 1986 (relating to tax on individuals) is
    amended by redesignating section 5 as section 6 and by inserting after
    section 4 the following new section:

    ``SEC. 5. SIMPLIFIED INCOME TAX SYSTEM.

        ``(a) Election.--
                ``(1) In general.--A taxpayer other than a corporation may
            elect in accordance with this subsection to be subject to the
            tax imposed by this section in lieu of the tax imposed by
            section 1 for a taxable year and all subsequent taxable years.
                ``(2) Effect of election.--For purposes of this title, if
            an election is in effect under paragraph (1) for any taxable
            year, the tax imposed by this section shall be treated as the
            tax imposed by section 1 for the taxable year and, except as
            provided by sections 31 and 36, no amount shall be allowed as a
            credit against such tax for the taxable year.
                ``(3) Election.--
                        ``(A) In general.--
                                ``(i) In general.--Except as provided in
                            clause (ii) of this subparagraph and clauses
                            (ii) and (iii) of subparagraph (B), the
                            election under paragraph (1) may only be made
                            with respect to any taxable year beginning
                            before January 1, 2021, on a timely filed
                            return for the first taxable year for which the
                            election applies.
                                ``(ii) New taxpayers.--In the case of an
                            individual with no tax liability under this
                            title before January 1, 2021, the election
                            under paragraph (1) may only be made for the
                            first taxable year beginning after December 31,
                            2020, for which such individual has tax
                            liability under this title.
                        ``(B) Effect of election.--
                                ``(i) In general.--Except as provided in
                            clauses (ii) and (iii), the election under
                            paragraph (1), once made, shall be irrevocable.
                                ``(ii) One-time revocation of election.--A
                            taxpayer may revoke an election under paragraph
                            (1) for a taxable year and all subsequent
                            taxable years. The preceding sentence shall not
                            apply if the taxpayer has made a revocation
                            under such sentence for any prior taxable year.
                                ``(iii) Filing status changes due to major
                            life events.--In the case of any major life
                            event described in clause (iv), a taxpayer may
                            make an election under paragraph (1) or revoke
                            such an election under clause (ii). Any such
                            election or revocation shall apply for the
                            taxable year for which made and all subsequent
                            taxable years until the taxpayer makes an
                            election under the preceding sentence for any
                            subsequent (and all succeeding) taxable year.
                                ``(iv) Major life event.--For purposes of
                            clause (iii), a major life event described in
                            this clause is marriage, divorce, and death.
        ``(b) Tax Imposed.--
                ``(1) Married individuals and surviving spouses.--In the
            case of a taxpayer for whom an election under subsection (a) is
            in effect and who is a married individual (as defined in
            section 7703) who makes a single return jointly with his spouse
            under section 6013 or a surviving spouse (as defined in section
            2(a)), there is hereby imposed on the alternative taxable
            income of such individual a tax determined in accordance with
            the following table:

    ``If taxable income is:             The tax is:
        Not over $100,000..............
                                            10% of alternative taxable
                                                    income.
        Over $100,000..................
                                            $10,000, plus 25% of the excess
                                                    over $100,000.
                ``(2) Unmarried individuals (other than surviving
            spouses).--In the case of a taxpayer for whom an election under
            subsection (a) is in effect and who is not described in
            paragraph (1), there is hereby imposed on the alternative
            taxable income of such individual a tax determined in
            accordance with the following table:

    ``If taxable income is:             The tax is:
        Not over $50,000...............
                                            10% of alternative taxable
                                                    income.
        Over $50,000...................
                                            $5,000, plus 25% of the excess
                                                    over $50,000.
        ``(c) Alternative Taxable Income.--For purposes of this section--
                ``(1) In general.--The term `alternative taxable income'
            means--
                        ``(A) gross income,
                        ``(B) the amount excluded from income under section
                    139C for capital gains, dividends, and interest, minus
                        ``(C) the sum of--
                                ``(i) the personal exemption,
                                ``(ii) the dependent allowance, plus
                                ``(iii) the alternative standard deduction.
                ``(2) Personal exemption.--The personal exemption is--
                        ``(A) 200 percent of the dollar amount in effect
                    under subparagraph (B) in the case of--
                                ``(i) a joint return, or
                                ``(ii) a surviving spouse (as defined in
                            section 2(a)), and
                        ``(B) $3,500 in the case of an individual--
                                ``(i) who is not married and is not a
                            surviving spouse, or
                                ``(ii) who is a married individual filing a
                            separate return.
                ``(3) Dependent allowance.--The dependent allowance is
            $3,500 for each dependent (as defined in section 152).
                ``(4) Alternative standard deduction.--The alternative
            standard deduction means--
                        ``(A) $25,000 in the case of--
                                ``(i) a joint return, or
                                ``(ii) a surviving spouse (as defined in
                            section 2(a)), and
                        ``(B) $12,500 in the case of an individual--
                                ``(i) who is not married and is not a
                            surviving spouse, or
                                ``(ii) who is a married individual filing a
                            separate return.
        ``(d) Inflation Adjustments.--
                ``(1) In general.--In the case of any taxable year
            beginning in a calendar year after 2011, each of the dollar
            amounts for the rate brackets in subsection (b) and each of the
            dollar amounts in subsection (d)(2)(B), (d)(3), and (d)(4)
            shall be increased by an amount equal to--
                        ``(A) such dollar amount, multiplied by
                        ``(B) 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.
                ``(2) Rounding.--If any amount as adjusted under clause (i)
            is not a multiple of $100, such amount shall be rounded to the
            nearest multiple of $100.''.
        (b) Conforming Amendment.--The table of sections for part I of
    subchapter A of chapter 1 of such Code is amended by striking the item
    relating to section 5 and inserting after the item relating to section
    4 the following:

    ``Sec. 5. Simplified income tax system.
    ``Sec. 6. Cross references relating to tax on individuals.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2010.

    SEC. 504. EXCLUSION FOR CAPITAL GAINS, DIVIDENDS, AND INTEREST.

        (a) In General.--Part III of subchapter B of chapter 1 of the
    Internal Revenue Code of 1986 (relating to items specifically excluded
    from gross income) is amended by inserting after section 139C the
    following new section:

    ``SEC. 139D. CAPITAL GAINS, DIVIDENDS, AND INTEREST.

        ``(a) Exclusion.--Gross income does not include amounts received by
    an individual as net capital gains, qualified dividends, and interest.
        ``(b) Qualified Dividends.--For purposes of this section--
                ``(1) In general.--The term `qualified dividends' means
            dividends received during the taxable year from--
                        ``(A) domestic corporations, and
                        ``(B) qualified foreign corporations.
                ``(2) Qualified foreign corporations.--
                        ``(A) In general.--Except as otherwise provided in
                    this paragraph, the term `qualified foreign
                    corporation' means any foreign corporation if--
                                ``(i) such corporation is incorporated in a
                            possession of the United States, or
                                ``(ii) such corporation is eligible for
                            benefits of a comprehensive income tax treaty
                            with the United States which the Secretary
                            determines is satisfactory for purposes of this
                            paragraph and which includes an exchange of
                            information program.
                        ``(B) Dividends on stock readily tradable on united
                    states securities market.--A foreign corporation not
                    otherwise treated as a qualified foreign corporation
                    under subparagraph (A) shall be so treated with respect
                    to any dividend paid by such corporation if the stock
                    with respect to which such dividend is paid is readily
                    tradable on an established securities market in the
                    United States.
                        ``(C) Exclusion of dividends of certain foreign
                    corporations.--Such term shall not include any foreign
                    corporation which for the taxable year of the
                    corporation in which the dividend was paid, or the
                    preceding taxable year, is a passive foreign investment
                    company (as defined in section 1297).
                ``(3) Special rule.--If a taxpayer to whom this section
            applies receives, with respect to any share of stock, qualified
            dividend income from 1 or more dividends which are
            extraordinary dividends (within the meaning of section
            1059(c)), any loss on the sale or exchange of such share shall,
            to the extent of such dividends, be treated as long-term
            capital loss.
        ``(c) Interest.--For purposes of this section, the term `interest'
    means--
                ``(1) interest on deposits with a bank (as defined in
            section 581),
                ``(2) amounts (whether or not designated as interest) paid,
            in respect to deposits, investment certificates, or
            withdrawable or repurchasable shares, by--
                        ``(A) a mutual savings bank, cooperative bank,
                    domestic building and loan association, industrial loan
                    association or bank, or credit union, or
                        ``(B) any other savings or thrift institution,
                    which is chartered and supervised under Federal or
                    State law,
            the deposits or accounts in which are insured under Federal or
            State law or which are protected and guaranteed under State
            law,
                ``(3) interest on--
                        ``(A) evidences of indebtedness (including bonds,
                    debentures, notes, and certificates) issued by a
                    domestic corporation in registered form, and
                        ``(B) to the extent provided in regulations
                    prescribed by the Secretary, other evidences of
                    indebtedness issued by a domestic corporation of a type
                    offered by corporations to the public,
                ``(4) interest on obligations of the United States, a
            State, or a political subdivision of a State (not excluded from
            gross income of the taxpayer under any other provision of law),
            and
                ``(5) interest attributable to participation shares in a
            trust established and maintained by a corporation established
            pursuant to Federal law.
        ``(d) Certain Nonresident Aliens Ineligible for Exclusion.--In the
    case of a nonresident alien individual, subsection (a) shall apply
    only--
                ``(1) in determining the tax imposed for the taxable year
            pursuant to section 871(b)(1) and only in respect to dividends
            and interest which are effectively connected with the conduct
            of a trade or business within the United States, or
                ``(2) in determining the tax imposed for the taxable year
            pursuant to section 877(b).''.
        (b) Conforming Amendment.--Section 1 of such Code is amended by
    striking subsection (h).
        (c) Clerical Amendment.--The table of sections for such part III is
    amended by inserting after the item relating to section 139C the
    following new item:

    ``Sec. 139D. Capital gains, dividends, and interest.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2010.

    SEC. 505. REPEAL OF ESTATE AND GIFT TAXES.

        (a) In General.--Subtitle B of the Internal Revenue Code of 1986 is
    hereby repealed.
        (b) Effective Date.--The repeal made by subsection (a) shall apply
    to the estates of decedents dying, and gifts made, and generation-
    skipping transfers after December 31, 2010.

                       TITLE VI--BUSINESS CONSUMPTION TAX

    SEC. 601. SHORT TITLE.

        This title may be cited as the ``Competitive American Business
    Tax''.

    SEC. 602. REPEAL OF CORPORATE INCOME TAX; NEW TAX PAID BY CORPORATIONS
                  AND OTHER BUSINESSES.

        (a) In General.--Chapter 2 of the Internal Revenue Code is
    renumbered chapter 3 and the following new chapter is inserted after
    chapter 1:

                 ``CHAPTER 2--COMPETITIVE AMERICAN BUSINESS TAX

                       ``subchapter a. imposition of tax

            ``subchapter b. basic rules for business consumption tax

       ``subchapter c. capital contributions, mergers, acquisitions, and
                                 distributions

                    ``subchapter d. accounting method rules

                    ``subchapter e. land and rental property

                ``subchapter f. insurance and financial products

                    ``subchapter g. tax-exempt organizations

                          ``subchapter h. cooperatives

                         ``subchapter i. sourcing rules

               ``subchapter j. business conducted in a possession

                           ``subchapter k. import tax

                        ``subchapter l. transition rules

         ``subchapter m. rules for administration, consolidated returns

              ``subchapter n. definitions and rules of application

                       ``Subchapter A--Imposition of Tax

    ``Sec. 201. Tax imposed.

    ``SEC. 201. TAX IMPOSED.

        ``(a) Taxable Business Activity.--A business consumption tax is
    imposed on the sale of goods and services in the United States by a
    business entity.
        ``(b) Business Consumption Tax Imposed.--`Business consumption tax'
    is 8.5 percent of the gross profits of the business entity for the
    taxable year.
        ``(c) Import Tax.--For rules relating to the import tax imposed by
    this chapter, see subchapter K (sections 281 through 283).

            ``Subchapter B--Basic Rules for Business Consumption Tax

    ``Sec. 202. Gross profits.
    ``Sec. 203. Taxable receipts.
    ``Sec. 204. Deductible amounts.
    ``Sec. 205. Cost of business purchases.
    ``Sec. 206. Business entity and business activity.
    ``Sec. 207. Loss carryover deduction.

    ``SEC. 202. GROSS PROFITS.

        ```Gross profits' means for a taxable year of a business entity the
    amount by which--
                ``(1) the taxable receipts of the business entity for the
            taxable year exceed,
                ``(2) the deductible amounts for the business entity for
            the taxable year.

    ``SEC. 203. TAXABLE RECEIPTS.

        ``(a) In General.--`Taxable receipts' means all receipts from the
    sale of property, use of property, and performance of services in the
    United States.
        ``(b) Games of Chance.--Amounts received for playing games of
    chance by business entities engaging in the activity of providing such
    games shall be treated as receipts from the sale of property or
    services.
        ``(c) In-Kind Receipts.--The taxable receipts attributable to the
    receipt of property, use of property or services in whole or partial
    exchange for property, use of property or services equal the fair
    market value of the services or property received.
        ``(d) Taxes.--Taxable receipts do not include any excise tax, sales
    tax, custom duty, or other separately stated levy imposed by a Federal,
    State, or local government received by a business entity in connection
    with the sale of property or services or the use of property.
        ``(e) Financial Receipts.--
                ``(1) In general.--Taxable receipts do not include
            financial receipts.
                ``(2) Financial receipts.--`Financial receipts' include--
                        ``(A) interest,
                        ``(B) dividends and other distributions by a
                    business entity,
                        ``(C) proceeds from the sale of stock, other
                    ownership interests in business entities, or other
                    financial instruments,
                        ``(D) proceeds from life insurance policies,
                        ``(E) proceeds from annuities,
                        ``(F) proceeds from currency hedging or exchanges,
                    and
                        ``(G) proceeds from other financial transactions.
                ``(3) Financial instrument.--`Financial instrument' means
            any--
                        ``(A) share of stock in a corporation,
                        ``(B) equity ownership in any widely held or
                    publicly traded partnership, trust, or other business
                    entity,
                        ``(C) note, bond, debenture, or other evidence of
                    indebtedness,
                        ``(D) interest rate, currency, or equity notional
                    principal contract,
                        ``(E) evidence or interest in, or a derivative
                    financial instrument in, any financial instrument
                    described in subparagraph (A), (B), (C), or (D), or any
                    currency, including any option, forward contract, short
                    position, and any similar financial instrument in such
                    a financial instrument or currency, and
                        ``(F) a position which--
                                ``(i) is not a financial instrument
                            described in subparagraph (A), (B), (C), (D) or
                            (E),
                                ``(ii) is a hedge with respect to such a
                            financial instrument, and
                                ``(iii) is clearly identified in the
                            dealer's records as being described in this
                            subparagraph before the close of the day on
                            which it was acquired or entered into.
        ``(f) Cross References.--
                ``(1) Exports, sales in the united states.--See subchapter
            I for the exclusion from gross receipts for export sales and
            for rules on sales of property and services in the United
            States.
                ``(2) Land.--See subchapter E for rules relating to certain
            sales of land.

    ``SEC. 204. DEDUCTIBLE AMOUNTS.

        ```Deductible amounts' for a business entity in a taxable year
    include--
                ``(1) the cost of business purchases in the taxable year
            (as determined under section 205),
                ``(2) the cost of employer-provided health insurance for
            which the employee, members of his family, or persons
            designated by him or members of his family are the
            beneficiaries,
                ``(3) such entity's loss carryover deduction (as determined
            under section 207), and
                ``(4) the transition basis deduction (as determined under
            section 290).

    ``SEC. 205. COST OF BUSINESS PURCHASES.

        ``(a) Business Purchases.--
                ``(1) In general.--`Business purchases' means the
            acquisition of--
                        ``(A) property,
                        ``(B) the use of property, or
                        ``(C) services
            in the United States for use in a business activity.
                ``(2) Examples.--Business purchases include (without
            limitation) the--
                        ``(A) purchase or rental of real property,
                        ``(B) purchase or rental of capital equipment,
                        ``(C) purchase of supplies and inventory,
                        ``(D) purchase of services from independent
                    contractors, and
                        ``(E) imports for use in a business activity.
                ``(3) Exclusions.--Business purchases do not include--
                        ``(A) payments for use of money or capital, such as
                    interest or dividends (except to the extent that a
                    portion so paid is a fee for financial intermediation
                    services),
                        ``(B) premiums for life insurance,
                        ``(C) the acquisition of savings assets or other
                    financial instruments (as defined in section
                    203(e)(3)).
                        ``(D) property acquired outside the United States
                    (but such property shall be taken into account as an
                    import if imported),
                        ``(E) services performed outside the United States
                    (unless treated as imported into the United States),
                        ``(F) compensation expenses for an individual
                    (other than amounts paid to an individual in his
                    capacity as a business entity), or
                        ``(G) taxes (except as provided in subsection
                    (b)(2) relating to product taxes).
                ``(4) Compensation expenses.--`Compensation expenses'
            means--
                        ``(A) wages, salaries or other cash payable for
                    services,
                        ``(B) any taxes imposed on the recipient that are
                    withheld by the business entity,
                        ``(C) the cost of property purchased to provide
                    employees with compensation (other than property
                    incidental to the provision of fringe benefits that are
                    excluded from income under the individual tax),
                        ``(D) the cost of fringe benefits which are
                    includible in an employee's, partner's, or proprietor's
                    income under the business consumption tax (or are
                    excluded solely because they constitute employee
                    savings), including (without limitation)--
                                ``(i) contributions to retirement and
                            severance benefit plans,
                                ``(ii) premiums for the cost of life,
                            accident, disability and other insurance
                            policies for which the employee, members of his
                            family, or persons designated by him or members
                            of his family are the beneficiaries,
                                ``(iii) rental of parking spaces or parking
                            fees (unless the parking space is used for a
                            vehicle that is regularly used in a business
                            activity);
                                ``(iv) employer paid educational benefits;
                                ``(v) employer paid housing (other than
                            housing provided for the convenience of the
                            employer); and
                                ``(vi) employer paid meals (other than
                            meals provided for the convenience of the
                            employer).
        ``(b) Cost of Business Purchases.--
                ``(1) In general.--The `cost of a business purchase' is the
            amount paid or to be paid for the business purchase.
                ``(2) Taxes.--
                        ``(A) In general.--The `cost of business purchases'
                    includes any product taxes paid with respect to the
                    property or services purchased.
                        ``(B) Product tax.--`Product tax' means any excise
                    tax, sales or use tax, custom duty, or other separately
                    stated levy imposed by a Federal, State, or local
                    government on the production, severance or consumption
                    of property or on the provision of services, whether or
                    not separately stated, and including any such taxes
                    that are technically imposed on the seller of property
                    or services.
                        ``(C) Taxes not product taxes.--Product taxes do
                    not include--
                                ``(i) the import tax,
                                ``(ii) state and local property taxes,
                                ``(iii) franchise or income taxes,
                                ``(iv) payroll taxes and self-employment
                            taxes, or
                                ``(v) the business consumption tax.
                ``(3) Imports.--In the case of an import by a business
            entity, the cost of the import is the import price for purposes
            of the import tax. The import tax is not part of the cost of
            the import.
        ``(c) Property and Services Acquired for Property.--If a business
    entity receives property or services from a business entity in whole or
    partial exchange for property or services, the property or services
    acquired shall be treated as if they were purchased for an amount equal
    to the fair market value of the services or property received. For
    purposes of this section, property includes stock and other equity
    interests in business other than stock or an equity interest in the
    business entity acquiring the property or services. See section 210(b)
    for rules on property or services received in exchange for an equity
    interest in the recipient.
        ``(d) Gambling Payments.--In the case of a business involving
    gambling, lotteries, or other games of chance, business purchases
    include amounts paid to winners.
        ``(e) Savings Assets.--`Savings assets' means stocks, bonds,
    securities, certificates of deposits, investments in partnerships and
    limited liability companies, shares of mutual funds, life insurance
    policies, annuities, and other similar savings or investment assets.
        ``(f) Cross References.--
                ``(1) Land.--For special rules relating to the acquisition
            of land, see subchapter E.
                ``(2) Rental real estate.--For special rules relating to
            the rental of real estate previously occupied by an owner of
            the real estate, see section 232.
                ``(3) Outside the united states.--For special rules
            relating to services performed outside the United States but
            used inside the United States and international services, see
            subchapter I.

    ``SEC. 206. BUSINESS ENTITY AND BUSINESS ACTIVITY.

        ``(a) Business Entity.--For purposes of the business consumption
    tax, `business entity' means any corporation, unincorporated
    association, partnership, limited liability company, proprietorship,
    independent contractor, individual, or any other person engaging in
    business activity in the United States. An individual shall be
    considered a business entity only with respect to the individual's
    business activities.
        ``(b) Business Activity.--`Business activity' means the sale of
    property or services, the leasing of property, the development of
    property or services for subsequent sale or use in producing property
    or services for subsequent sale. `Business activity' does not include
    casual or occasional sales of property used by an individual (other
    than in a business activity), such as the sale by an individual of a
    vehicle used by the individual.
        ``(c) Exception for Certain Employees.--
                ``(1) In general.--`Business activity' does not include--
                        ``(A) the performance of services by an employee
                    for an employer that is a business entity with respect
                    to the activity in which the employee is engaged, or
                        ``(B) the performance of regular domestic household
                    services (including babysitting, housecleaning, and
                    lawn cutting) by an employee of an employer that is an
                    individual or family.
                ``(2) Employee defined.--For purposes of this subsection,
            `employee' includes an individual partner who provides services
            to a partnership or an individual member who provides services
            to a limited liability company, or a proprietor with respect to
            compensation for services from his proprietorship.

    ``SEC. 207. LOSS CARRYOVER DEDUCTION.

        ``(a) Deduction.--The `loss carryover deduction' for a taxable year
    is the lesser of--
                ``(1) the business entity's gross profits for the taxable
            year (determined without the loss carryover deduction), or
                ``(2) the amount of the loss carryover to the taxable year.
        ``(b) Loss Carryover.--
                ``(1) General rule.--A loss for any taxable year shall be a
            loss carryover to each of the 15 taxable years following the
            taxable year of the loss.
                ``(2) Loss carryovers to a taxable year.--The loss
            carryover to a taxable year is the sum of the loss carryovers
            from all prior taxable years beginning on or after January 1,
            2011, that can be carried over to the taxable year.
                ``(3) Reduction of loss carryovers as a result of the
            deduction.--A business entity's loss carryovers shall be
            reduced each year by the amount of the loss carryover deduction
            for the year. Loss carryovers shall be reduced in the order
            that they arose.
        ``(c) Loss for Taxable Year.--A business entity's loss (if any) for
    the taxable year equals the excess (if any) of--
                ``(1) the sum of--
                        ``(A) the cost of business purchases for the
                    taxable year, and
                        ``(B) the transition basis adjustment for the
                    taxable year, over
                ``(2) taxable receipts for the taxable year.
        ``(d) Special Rules.--
                ``(1) Consolidated returns.--In the case of a consolidated
            return, the loss for a taxable year shall be determined on a
            consolidated group basis. In the case of a deconsolidation, the
            loss carryovers from the consolidated group shall be allocated
            in accordance with rules to be prescribed by the Secretary.
                ``(2) Loss carryovers of acquired business entity.--
                        ``(A) In general.--If a business entity acquires
                    another business entity in a transaction that is
                    considered the acquisition of a business entity and the
                    two entities file a consolidated return or if two
                    business entities merge, the loss carryovers will
                    survive and can be applied against the taxable receipts
                    attributable to the business activities carried on (or
                    in the case of a merger formerly carried on) by either
                    entity.
                        ``(B) Asset acquisition.--If a business entity
                    acquires all or substantially all of the assets of
                    another entity in a transaction that is considered an
                    asset acquisition rather than the acquisition of a
                    business entity, the acquirer will be treated as if it
                    acquired the loss carryovers of the selling entity. For
                    purposes of this rule, the assets of a business entity
                    include ownership interests in other business entities.
                        ``(C) Substantially all.--For purposes of this
                    paragraph `substantially all' means more than 80
                    percent of the fair market value of a business entity's
                    net assets. Under rules prescribed by the Secretary,
                    the parties to a transaction may elect to treat
                    acquisitions in excess of 70 percent of the fair market
                    value of a business entity's net assets as acquisitions
                    of `substantially all' of a business entity's net
                    assets.

       ``Subchapter C--Capital Contributions, Mergers, Acquisitions, and
                                 Distributions

    ``Sec. 210. Contributions to a business entity.
    ``Sec. 211. Distributions of property.
    ``Sec. 212. Asset acquisitions.
    ``Sec. 213. Mergers and stock acquisitions.
    ``Sec. 214. Spin-offs, split-off, etc.
    ``Sec. 215. Allocation of certain tax attributes.

    ``SEC. 210. CONTRIBUTIONS TO A BUSINESS ENTITY.

        ``(a) By Business Entity.--
                ``(1) Cash.--If a business entity contributes cash to a
            business entity of which it is or becomes a partial or full
            owner, the amount contributed is not a deductible amount to the
            contributor or a taxable receipt to the recipient.
                ``(2) Property or services.--If a business entity
            contributes property or services to a business entity of which
            it is or becomes a partial or full owner, the transaction will
            not result in taxable receipts to the contributor or a
            deduction for a business purchase for the recipient and will
            not constitute a sale resulting in taxable receipts to the
            contributor.
        ``(b) By Individual.--
                ``(1) Cash.--If an individual contributes cash to a
            business entity, the cash received is not a taxable receipt.
                ``(2) New property.--If an individual contributes to a
            business entity property that the individual purchased for the
            business entity but which was not used by any person after its
            purchase, the property shall be considered purchased by such
            business entity from the person from which the individual
            purchased the property.
                ``(3) Personal use property.--
                        ``(A) In general.--If an individual contributes
                    personal use property to a business entity in which the
                    individual has an ownership interest or for which the
                    individual receives an ownership interest, the business
                    entity shall not be permitted to deduct the value of
                    the property received as a business expense. The
                    business entity will have a tax basis in the
                    contributed property equal to the contributor's basis.
                        ``(B) Personal use property.--`Personal use
                    property' means any property used by an individual at
                    any time other than in a business activity.
                ``(4) Services.--If an individual contributes services to a
            business entity in which the individual has an ownership
            interest or receives an ownership interest, the business entity
            shall not be permitted to deduct the value of the services
            received (or the value of the equity interest provided to the
            services provider).

    ``SEC. 211. DISTRIBUTIONS OF PROPERTY.

        ``(a) Distributions Other Than to Controlling Business.--If a
    business entity distributes all or a portion of its assets to its
    owners (other than a controlling business entity), the business entity
    will be treated as if it sold the assets to its owners at fair market
    value. The fair market value will be determined by the distributing
    corporation and those determinations, unless unreasonable, will be
    binding on the recipients.
        ``(b) Distributions to a Controlling Business.--If a business
    entity distributes all or a portion of its assets to a controlling
    business, the controlling business will assume the distributing
    entity's tax attributes with respect to the assets and neither entity
    will have taxable receipts or a deduction as a result of the
    transaction.
        ``(c) Distribution of Personal Use Property.--If personal use
    property is distributed to the individual who contributed the personal
    use property to a business entity, the fair market value of the
    property for purposes of paragraph (a) shall equal the basis of the
    property plus any enhancement in value of the property attributable to
    business purchases with respect to the property.
        ``(d) Controlling Business Entity.--A business entity is a
    `controlling business entity' with respect to another business entity
    if it owns directly or indirectly more than 50 percent of the profits
    or capital interest in the other business entity.
        ``(e) Application of This Section.--This section applies to both
    liquidating and nonliquidating distributions. Property shall be treated
    as distributed if the property is used for a nonbusiness purpose or
    used as non rental property (as defined in section 232) for more than
    an insubstantial period of time during a taxable year. See section 232
    for rules relating to certain rental property.

    ``SEC. 212. ASSET ACQUISITIONS.

        ``(a) In General.--If a business entity transfers some or all of
    its assets, the consideration received for such assets shall be
    allocated among the assets transferred in the same manner as was
    required by section 1060 of the Internal Revenue Code of 1986. If the
    transferee and transferor agree in writing on the allocation of any
    consideration, or as to the fair market value of any of the assets,
    such agreement shall be binding on both the transferor and transferee
    unless the Secretary determines that such allocation (or fair market
    value) is not appropriate.
        ``(b) Tax Consequences.--The tax consequences of an asset
    acquisition shall be determined in accordance with the rules of this
    chapter and shall be dependent upon allocations made under subsection
    (a). In general, consideration allocable to savings assets, such as
    stock in another business entity, would not be included in taxable
    receipts of the transferor and would not be a business purchase of the
    purchaser, but consideration allocable to the sale of tangible property
    and intangible property (other than savings assets) will constitute
    taxable receipts of the seller and a business purchase of the
    purchaser.
        ``(c) Election To Treat Asset Acquisition as a Stock Acquisition.--
    In the case of the sale of substantially all of the assets of a
    business entity or substantially all of the assets of a line of
    business or a separately standing business of a business entity, the
    transferee and transferor can jointly elect to treat the acquisition as
    if it were an acquisition of the stock of a business entity holding the
    assets so transferred. In such case, the rules of section 213 shall
    apply.
        ``(d) Authority To Require Allocation Agreement and Notice to the
    Secretary.--If the Secretary determines that certain types of asset
    acquisitions have significant possibilities of tax avoidance, the
    Secretary may require--
                ``(1) parties to such types of acquisitions to enter into
            agreements allocating consideration,
                ``(2) parties to acquisitions involving certain kinds of
            assets to enter into agreements allocating part of the
            consideration to those assets, or
                ``(3) parties to certain acquisitions to report information
            to the Secretary.
        ``(e) Asset Acquisition Rules Do Not Apply if Consideration
    Includes Equity in Purchaser.--
                ``(1) In general.--If a business entity issues its own
            equity or equity in a subsidiary or other controlled entity as
            part of the consideration for the transfer of assets to it, the
            transaction shall be treated as a business purchase and not as
            an asset acquisition, and the taxpayer shall not be entitled to
            a loss carryover for any unused deduction attributable to the
            equity portion of such transfer.
                ``(2) Equity.--For purposes of this subsection, equity
            means--
                        ``(A) stock, in the case of a corporation,
                        ``(B) partnership or similar interest, in the case
                    of a partnership or limited liability company, and
                        ``(C) an ownership interest or interest in profits
                    in the case of any other business entity.

    ``SEC. 213. MERGERS AND STOCK ACQUISITIONS.

        ``(a) Mergers.--A merger of one business entity into another or two
    businesses entities into a third business entity or any other similar
    transaction shall have no direct consequences under the business
    consumption tax. The surviving entity shall assume the tax attributes
    of the merged corporations, including any loss carryovers and credit
    carryovers.
        ``(b) Stock Acquisition.--The acquisition of all or substantially
    all of the ownership interest in one business entity either for cash or
    in exchange for ownership in the acquiring entity or an entity
    controlled by the acquired entity shall have no direct consequences
    under the business consumption tax.

    ``SEC. 214. SPIN-OFFS, SPLIT-OFFS, ETC.

        ``A spin-off, split-off or split-up of a business entity shall have
    no direct tax consequences under the business consumption tax.

    ``SEC. 215. ALLOCATION OF CERTAIN TAX ATTRIBUTES.

        ``The Secretary shall prescribe rules for allocation of loss
    carryovers in cases of substantial shifts of assets from one business
    entity to another business entity. Under such rules, a portion of a
    business entity's carryovers may be deemed transferred when assets are
    transferred.

                    ``Subchapter D--Accounting Method Rules

    ``Sec. 220. General accounting rules.
    ``Sec. 221. Use of the cash method of accounting.
    ``Sec. 222. Taxable year.
    ``Sec. 223. Long-term contracts.
    ``Sec. 224. Post-sale price adjustments and refunds.
    ``Sec. 225. Bad debts.
    ``Sec. 226. Transition rules.

    ``SEC. 220. GENERAL ACCOUNTING RULES.

        ``(a) In General.--Except as provided in section 221, a business
    entity shall use an accrual method of accounting for purposes of
    determining the timing of recognition of taxable receipts and deduction
    of business purchases. All business purchases shall be deducted when
    incurred (in the case of a business entity using the accrual method of
    accounting) or when paid (in case of a business entity using the cash
    method of accounting) without regard to whether the business purchases
    are for or relate to--
                ``(1) inventory,
                ``(2) assets with a useful life of more than one year, or
                ``(3) property that will be used to produce other property.
        ``(b) Economic Performance.--For purposes of determining whether an
    amount has been incurred, the all events test shall not be treated as
    met any earlier than when economic performance with respect to such
    item occurs.
        ``(c) Consistent Accounting Methods.--Except as otherwise expressly
    provided in this chapter, a business entity shall secure the consent of
    the Secretary before changing the method of accounting by which it
    determines gross profits. This provision shall not apply to changes
    required by the adoption of the business consumption tax.

    ``SEC. 221. USE OF THE CASH METHOD OF ACCOUNTING.

        ``(a) In General.--A business entity that was permitted to use and
    used the cash method of accounting under the Internal Revenue Code of
    1986 shall be permitted to continue to use the cash method of
    accounting.
        ``(b) New Business Entities.--A new business entity shall be
    permitted to use the cash method of accounting if permitted to under
    regulations prescribed by the Secretary.
        ``(c) Change or Expansion of Business.--Subsection (a) shall cease
    to apply to a business entity that changes or expands its business such
    that under regulations prescribed by the Secretary it is no longer
    eligible to use the cash method of accounting.
        ``(d) Regulations.--
                ``(1) Use of cash method.--The Secretary shall prescribe
            regulations defining which business entities may use the cash
            method of accounting. In general, those regulations shall be
            consistent with the rules under sections 447 and 448 of the
            Internal Revenue Code of 1986. The regulations shall not
            require a business entity described in subsection (a) to
            convert to the accrual method prior to January 1, 2012.
                ``(2) Change in accounting method.--The Secretary shall
            prescribe regulations to prevent double counting of taxable
            receipts and deductible expenses in the case of a change in
            accounting method.

    ``SEC. 222. TAXABLE YEAR.

        ``(a) Computation of Gross Profits.--Gross profits shall be
    computed on the basis of a business entity's taxable year.
        ``(b) Taxable Year.--`Taxable year' means--
                ``(1) the taxpayer's annual accounting period, if it is a
            calendar year or a fiscal year;
                ``(2) the calendar year, if subsection (g) applies; or
                ``(3) the period for which the return is made if the return
            is made for a period of less than 12 months.
        ``(c) Annual Accounting Period.--`Annual accounting period' means
    the annual period on the basis of which the business entity regularly
    keeps its books.
        ``(d) Calendar Year.--`Calendar year' means a period of 12 months
    ending on December 31.
        ``(e) Fiscal Year.--`Fiscal year' means a period of 12 months
    ending on the last day of any month other than December. In the case of
    any business entity that has made the election provided by subsection
    (f), the term means the annual period (varying from 52 to 53 weeks) so
    elected.
        ``(f) Election of 52-53 Week Year.--
                ``(1) General rule.--A business entity which, in keeping
            its books, regularly computes its income or profits on a basis
            of an annual period which varies from 52 to 53 weeks and ends
            always on the same day of the week and ends always--
                        ``(A) on whatever date such same day of the week
                    last occurs in a calendar month, or
                        ``(B) on whatever date such same day of the week
                    falls which is nearest to the last day of a calendar
                    month, may elect to compute its gross profits on the
                    basis of such annual period.
                ``(2) Regulations.--The Secretary shall prescribe such
            regulations as he deems necessary for the application of this
            subsection, including regulations relating to the application
            of effective dates to taxpayers using a 52-53 week year.
        ``(g) Calendar Year Required.--
                ``(1) No accounting period.--A business entity's taxable
            year shall be the calendar year if the business entity does not
            have an annual accounting period or has an annual accounting
            period that does not qualify as a fiscal year.
                ``(2) New business entity.--The taxable year of a business
            entity that begins business activity after December 31, 2010,
            shall be the calendar year (or a 52-53 week fiscal year ending
            in December) unless the business entity can demonstrate a
            business reason for selecting an accounting period other than
            the calendar year.
        ``(h) Transition Rule for Business Entities With a Fiscal Year.--
                ``(1) In general.--A business entity with a taxable year
            that is not the calendar year shall have a short taxable year
            ending on December 31, 2010, and a subsequent taxable year
            beginning on January 1, 2011, and ending on the day immediately
            preceding the beginning of the business entity's next fiscal
            year.
                ``(2) Business entities with 52-53 week year ending in
            december.--
                        ``(A) In general.--If a business entity has a 52-53
                    week taxable year (under the Internal Revenue Code of
                    1986) that ends in December 2010, it may elect to begin
                    its first taxable year for the business consumption tax
                    on the first day immediately following the last day of
                    such taxable year.
                        ``(B) No election.--If a business entity that has a
                    52-53 week taxable year that ends in December 2010,
                    does not make the election under subparagraph (A) or is
                    prohibited from making such election by subparagraph
                    (C), the business entity's taxable year under the
                    Internal Revenue Code of 1986 that would end in
                    December 2010 shall end on December 31, 2010.
                        ``(C) Anti-abuse rule.--Subparagraph (A) shall not
                    apply to any taxpayer that enters into business
                    transactions in 2010 following the scheduled end of its
                    fiscal year with business entities that are not subject
                    to the business consumption tax at the time of such
                    transactions if such transactions deviate from the
                    normal course of business in order to achieve some tax
                    benefit.

    ``SEC. 223. LONG-TERM CONTRACTS.

        ``(a) In General.--In the case of a long-term contract--
                ``(1) Contractor expenses.--The contractor shall be
            entitled to deduct its business purchases when paid or
            incurred.
                ``(2) Contractor receipts.--The contractor shall recognize
            taxable receipts--
                        ``(A) in the case of a project in which the
                    acquirer has no ownership interest in the project until
                    delivery--
                                ``(i) upon delivery of the project, in the
                            case of an accrual basis contractor, or
                                ``(ii) upon the later of delivery of the
                            project or the receipt of payment, in the case
                            of cash-basis contractor.
                        ``(B) in the case of a project in which the
                    acquirer obtains an ownership interest as the project
                    is constructed--
                                ``(i) when the contractor has the right to
                            payments, in the case of an accrual basis
                            contractor, or
                                ``(ii) upon the later of when the
                            contractor receives the cash or has the right
                            to payments, in the case of a cash basis
                            contractor.
                ``(3) Acquirer expenses.--The acquirer that is a business
            entity shall be entitled to deduct its costs of the business
            purchase--
                        ``(A) in the case of a cash-basis acquirer, at such
                    time as a cash basis contractor would be required to
                    treat the amounts paid as taxable receipts, or
                        ``(B) in the case of an accrual-basis acquirer, at
                    such time as an accrual basis contractor would be
                    required to treat the amounts paid or due as taxable
                    receipts.
        ``(b) Right to Payments.--
                ``(1) In general.--A contractor shall be treated as having
            a right to payments with respect to a project at any time to
            the extent that the contractor would not be required to return
            payments received (or would be entitled to collect payments not
            yet received) if the project were terminated at such time by
            the contractor.
                ``(2) Contractual provisions.--If a long-term contract
            includes a procedure for paying the contractor as work is
            completed (for example, by reason of a draw down from a trust
            account), the contractual provisions shall generally govern
            when a contractor has a right to payment.
                ``(3) Percentage completion method of accounting.--If a
            long-term contract does not include a mechanism for paying the
            contractor as work is completed, the percentage-of-completion
            method of accounting shall be used to determine the timing of
            taxable receipts of the contractor and business purchases of
            the acquirer.
        ``(c) Long-Term Contract.--
                ``(1) In general.--`Long-term contract' means--
                        ``(A) any contract that covers service or
                    production through parts of two different calendar
                    years if the contract includes a formal deposit and
                    draw-down mechanism, and
                        ``(B) any contract for the manufacture, building,
                    installation, or construction of property if such
                    contract is not completed within the taxable year of
                    the contractor in which such contract is entered into.
                ``(2) Exception.--A contract for the manufacture of
            property shall not be treated as a long-term contract unless
            such contract involves the manufacture of--
                        ``(A) any unique item of a type which is not
                    normally included in the finished goods inventory of
                    the taxpayer, or
                        ``(B) any item which normally requires more than 12
                    calendar months to complete.
        ``(d) Consistency.--The Secretary may require business entities to
    file statements containing such information with respect to long-term
    contracts as the Secretary may prescribe to ensure consistency in
    reporting.
        ``(e) Foreign Contracts.--This section shall not be construed to
    permit a deduction for a business purchase for the cost of property
    produced outside the United States pursuant to a long-term contract at
    any time prior to the import of such property into the United States.

    ``SEC. 224. POST-SALE PRICE ADJUSTMENTS AND REFUNDS.

        ``(a) Receipt of Price Adjustment.--In the case of a post-sale
    price adjustment attributable to a business purchase which was taken
    into account in computing gross profits for a prior taxable year, the
    amount of such adjustment shall be treated as a reduction or increase,
    as the case may be, in the cost of business purchases for the taxable
    year in which the adjustment is made or incurred.
        ``(b) Issuance of Price Adjustment.--In the case of a post-sale
    price adjustment attributable to a sale the receipts from which were
    taken into account in determining taxable receipts for a prior taxable
    year, the amount of such adjustment shall be treated as a reduction or
    increase, as the case may be, in taxable receipts for the taxable year
    in which the adjustment is made or incurred.
        ``(c) Post-Sale Price Adjustment.--`Post-sale price adjustment'
    means a refund, rebate, or other price allowance attributable to a sale
    of property or services or an upward adjustment in price that was not
    previously taken into account under the business entity's method of
    accounting.

    ``SEC. 225. BAD DEBTS.

        ``(a) Seller.--If an amount owed to an accrual basis business
    entity for property or services sold--
                ``(1) was taken into account as a taxable receipt in a
            prior taxable year, and
                ``(2) becomes wholly or partially uncollectible during the
            taxable year, then the seller shall treat the amount as a
            reduction in taxable receipts for the taxable year in which it
            becomes wholly or partially uncollectible.
        ``(b) Notice Requirement.--No reduction shall be allowed under
    subsection (a) unless the seller notifies the purchaser of the amount
    which the seller has treated as wholly or partially uncollectible.
        ``(c) Subsequent Collection.--If an amount which was treated as
    uncollectible under subsection (a) is subsequently collected, it shall
    be treated as a taxable receipt when collected.
        ``(d) Purchaser.--If a purchaser receives notice under subsection
    (b) from a seller and the purchaser has treated the amount labeled
    uncollectible as a business purchase in a prior taxable year, then the
    purchaser shall treat such amount as a reduction in the cost of
    business purchases in the taxable year to which the notice relates. If
    the purchaser subsequently repays such amount, the repayment shall
    constitute the cost of a business purchase.

    ``SEC. 226. TRANSITION RULES.

        ``(a) No Double Deductions.--A business entity shall not be
    entitled to treat as a `cost of business purchase' any amount that the
    business entity deducted in computing taxable income under the income
    tax in effect prior the effective date of the business consumption tax.
        ``(b) No Double Inclusion.--A business entity shall not be required
    to include in taxable receipts any receipt that the business entity
    took into account in computing taxable income under the income tax in
    effect prior to the effect date of the business consumption tax.
        ``(c) No Loss of Deduction.--An expense which--
                ``(1) a business entity would have been able to deduct as a
            cost of a business purchase in an accounting period before the
            effective date of the business consumption tax if the business
            consumption tax had been in effect in such period, and
                ``(2) the business entity would have been able to deduct as
            an expense in computing taxable income in a period after the
            business consumption tax is effective if the income tax had
            continued in effect,
    shall be treated as a cost of a business purchase incurred or paid at
    the time that it would have been paid or incurred under the income tax
    if the income tax had continued in effect. This subsection shall not
    apply to any amount which is to be taken into account under subchapter
    L (relating to transition rules), any amounts which would have been
    deducted under the income tax through loss carryover deductions, or any
    deductions deferred by the uniform capitalization rules under section
    263A of the Internal Revenue Code of 1986.
        ``(d) All Taxable Receipts Taxed.--A receipt which--
                ``(1) a business entity would have been required to treat
            as a taxable receipt in an accounting period before the
            effective date of the business consumption tax if the business
            consumption tax had been in effect in such period, and
                ``(2) the business entity would have been required to
            include in gross income in a period after the business
            consumption tax is effective if the income tax had continued in
            effect,
    shall be treated as a taxable receipt at the time that it would have
    been included in income if the income tax had continued in effect.

                    ``Subchapter E--Land and Rental Property

    ``Sec. 230. No deduction for land purchased for nonbusiness use.
    ``Sec. 231. Taxable receipts for land held for nonbusiness use.
    ``Sec. 232. Certain rental property.

    ``SEC. 230. NO DEDUCTION FOR LAND PURCHASED FOR NONBUSINESS USE.

        ``(a) In General.--The acquisition of unimproved land shall not
    constitute a business purchase if the unimproved land is not acquired
    to be used in a business activity or if the land is acquired for--
                ``(1) speculation,
                ``(2) development (including subdivision), or
                ``(3) temporary leasing or other use not commensurate with
            the value of the land,
                ``(4) indefinite future use in a business activity, or
                ``(5) use in compensating employees.
        ``(b) Future Use in Business Activity.--Unimproved land will not be
    considered held for `indefinite future use in a business activity' if
    promptly upon acquisition, the purchaser or the lessee begins
    construction of improvements on the land (other than improvements, such
    as paving or sewage lines, intended for indefinite future development)
    that will be used in a business activity. Such improvement must be
    commensurate with the value of the land.
        ``(c) Unimproved Land.--`Unimproved land' means--
                ``(1) land with no buildings on it,
                ``(2) land with improvements if the value of the
            improvements is relatively small in comparison to the value of
            the land and it is anticipated that the improvements will be
            demolished and not used,
                ``(3) land in excess of the amount reasonably needed for
            the buildings located on it.
        ``(d) Conversion to Business Use.--If the acquisition of land is
    not treated as a business purchase by reason of subsection (a) and the
    land is subsequently used in a manner for which it could have been
    treated as a business purchase, the cost of the land will be treated as
    a business purchase when the improvements on the land are placed in
    service (or in the case of construction for sale, substantially
    completed and advertised for sale).

    ``SEC. 231. TAXABLE RECEIPTS FROM SALE OF LAND HELD FOR NONBUSINESS
                  USE.

        ``(a) Tax Basis.--A business entity shall have a tax basis in land
    equal to the cost of the land if such cost is not deductible by reason
    of section 230(a) and the land has not been converted to business use
    for purposes of section 230(d).
        ``(b) Taxable Receipts of a Land Sale.--The taxable receipts from
    the sale of land (or portion thereof) in which a business entity has a
    tax basis by reason of subsection (a) shall be the amount by which the
    proceeds exceed the basis of such land (or portion thereof).

    ``SEC. 232. CERTAIN RENTAL PROPERTY.

        ``(a) In General.--Except as provided in subsection (b), the
    activity of rental of real estate is a business activity to which the
    business consumption tax applies.
        ``(b) Not Rental Property.--Subsection (a) shall not apply--
                ``(1) to property used on more than 14 days during the
            taxable year for nonbusiness purposes, or
                ``(2) to property rented for no more than 14 days during
            the taxable year and the total rental received with respect to
            such property does not exceed $10,000.
        ``(c) Rental Property Becomes Nonrental Property.--If property
    which is considered rental property for purposes of subsection (a) in
    one taxable year ceases to be rental property (by reason of subsection
    (b)) in the following taxable year, the property (and any associated
    debt) shall be treated as distributed by the business entity to its
    owners. Section 211(a) shall apply to such distribution.

                ``Subchapter F--Insurance and Financial Products

    ``Sec. 241. General rules.

    ``SEC. 241. GENERAL RULES.

        ``(a) Taxable Receipts.--Taxable receipts do not include financial
    receipts (as defined in section 203(e)(2)).
        ``(b) Business Purchases.--Business purchases do not include the
    cost of financial instruments (as defined in section 203(e)(3)) or
    payments for use of money or capital.

                    ``Subchapter G--Tax-exempt Organizations

    ``Sec. 251. Exemption for governmental entities.
    ``Sec. 252. Taxable activity of governmental entities.
    ``Sec. 253. Tax-exempt organizations.
    ``Sec. 254. Special rules for (c)(3) organizations.
    ``Sec. 255. Tax on unrelated business activity.
    ``Sec. 256. Unrelated business activity.

    ``SEC. 251. EXEMPTION FOR GOVERNMENTAL ENTITIES.

        ``(a) States.--Except as provided in section 252, a state,
    political subdivision thereof and the District of Columbia shall be
    exempt from taxation under this chapter on any gross profits derived
    from the exercise of any essential governmental function.
        ``(b) Possessions.--The government of any possession of the United
    States shall be exempt from taxation under this chapter on any gross
    profits earned by the possession.

    ``SEC. 252. TAXABLE ACTIVITY OF GOVERNMENTAL ENTITIES.

        ``(a) Certain Activities Taxable.--A governmental entity shall be
    considered a business and subject to tax on any business activity of a
    type frequently provided by business entities subject to tax under this
    chapter.
        ``(b) Certain Activities Treated as Essential Government
    Functions.--Subsection (a) shall not apply to the following activities,
    which shall be treated as essential government functions:
                ``(1) Provision of mass transportation services.
                ``(2) Provision of public utility services.

    ``SEC. 253. TAX-EXEMPT ORGANIZATIONS.

        ``(a) Exemption From Taxation.--An organization described in
    subsection (c) or (d) shall be exempt from taxation under this chapter.
        ``(b) Tax on Unrelated Business Activity.--An organization exempt
    from taxation under subsection (a) shall be subject to tax to the
    extent provided in sections 255 and 256, but shall be considered a tax-
    exempt organization for purposes of any law that refers to tax-exempt
    organizations.
        ``(c) List of Exempt Organizations.--The following organizations
    are referred to in subsection (a):
                ``(1) Instrumentality of the united states.--Any
            corporation organized under Act of Congress which is an
            instrumentality of the United States but only if such
            corporation--
                        ``(A) is exempt from Federal income taxes--
                                ``(i) under such Act as amended and
                            supplemented before July 18, 1984, or
                                ``(ii) under this title without regard to
                            any provision of law which is not contained in
                            this title and which is not contained in a
                            revenue Act, or
                        ``(B) is described in subsection (h).
                ``(2) Title holding companies.--Corporations organized for
            the exclusive purpose of holding title to property, collecting
            income therefrom, and turning over the entire amount thereof,
            less expenses, to an organization which itself is exempt under
            this section. Rules similar to the rules of subparagraph (G) of
            paragraph (25) shall apply for purposes of this paragraph.
                ``(3) Charitable, educational and religious
            organizations.--Corporations, and any community chest, fund, or
            foundation, organized and operated exclusively for religious,
            charitable, scientific, testing for public safety, literary, or
            educational purposes, or to foster national or international
            amateur sports competition (but only if no part of its
            activities involve the provision of athletic facilities or
            equipment), or for the prevention of cruelty to children or
            animals, no part of the net earnings of which inures to the
            benefit of any private shareholder or individual, no
            substantial part of the activities of which is carrying on
            propaganda, or otherwise attempting, to influence legislation
            (except as otherwise provided in subsection (g)), and which
            does not participate in, or intervene in (including the
            publishing or distributing of statements), any political
            campaign on behalf of (or in opposition to) any candidate for
            public office.
                ``(4) Social welfare organizations, etc.--
                        ``(A) Civic leagues or organizations not organized
                    for profit but operated exclusively for the promotion
                    of social welfare, or local associations of employees,
                    the membership of which is limited to the employees of
                    a designated person or persons in a particular
                    municipality, and the net earnings of which are devoted
                    exclusively to charitable, educational, or recreational
                    purposes.
                        ``(B) Subparagraph (A) shall not apply to an entity
                    unless no part of the net earnings of such entity
                    inures to the benefit of any private shareholder or
                    individual.
                ``(5) Labor and agricultural organizations.--Labor,
            agricultural, or horticultural organizations.
                ``(6) Trade associations.--Business leagues, chambers of
            commerce, real-estate boards, boards of trade, or professional
            football leagues (whether or not administering a pension fund
            for football players) not organized for profit and no part of
            the net earnings of which inures to the benefit of any private
            shareholder or individual.
                ``(7) Social clubs.--Clubs organized for pleasure,
            recreation, and other nonprofitable purposes, substantially all
            of the activities of which are for such purposes and no part of
            the net earnings of which inures to the benefit of any private
            shareholder.
                ``(8) Certain fraternal societies.--Fraternal beneficiary
            societies, orders, or associations--
                        ``(A) operating under the lodge system or for the
                    exclusive benefit of the members of a fraternity itself
                    operating under the lodge system, and
                        ``(B) providing for the payment of life, sick,
                    accident, or other benefits to the members of such
                    society, order, or association or their dependents.
                ``(9) Vebas.--Voluntary employees' beneficiary associations
            providing for the payment of life, sick, accident, or other
            benefits to the members of such association or their dependents
            or designated beneficiaries, if no part of the net earnings of
            such association inures (other than through such payments) to
            the benefit of any private shareholder or individual.
                ``(10) Other fraternal organizations.--Domestic fraternal
            societies, orders, or associations, operating under the lodge
            system--
                        ``(A) the net earnings of which are devoted
                    exclusively to religious, charitable, scientific,
                    literary, educational, and fraternal purposes, and
                        ``(B) which do not provide for the payment of life,
                    sick, accident, or other benefits.
                ``(11) Local teachers' retirement funds.--Teachers'
            retirement fund associations of a purely local character, if--
                        ``(A) no part of their net earnings inures (other
                    than through payment of retirement benefits) to the
                    benefit of any private shareholder or individual, and
                        ``(B) the income consists solely of amounts
                    received from public taxation, amounts received from
                    assessments on the teaching salaries of members, and
                    income in respect of investments.
                ``(12) Certain cooperatives.--
                        ``(A) Benevolent life insurance associations of a
                    purely local character, mutual ditch or irrigation
                    companies, mutual or cooperative telephone companies,
                    or like organizations; but only if 85 percent or more
                    of the income consists of amounts collected from
                    members for the sole purpose of meeting losses and
                    expenses.
                        ``(B) In the case of a mutual or cooperative
                    telephone company, subparagraph (A) shall be applied
                    without taking into account any income received or
                    accrued--
                                ``(i) from a nonmember telephone company
                            for the performance of communication services
                            which involve members of the mutual or
                            cooperative telephone company,
                                ``(ii) from qualified pole rentals,
                                ``(iii) from the sale of display listings
                            in a directory furnished to the members of the
                            mutual or cooperative telephone company, or
                                ``(iv) from the prepayment of a loan under
                            section 306A, 306B, or 311 of the Rural
                            Electrification Act of 1936 (as in effect on
                            January 1, 1987).
                        ``(C) In the case of a mutual or cooperative
                    electric company, subparagraph (A) shall be applied
                    without taking into account any income received or
                    accrued--
                                ``(i) from qualified pole rentals, or
                                ``(ii) from the prepayment of a loan under
                            section 306A, 306B, or 311 of the Rural
                            Electrification Act of 1936 (as in effect on
                            January 1, 1987).
                        ``(D) For purposes of this paragraph, the term
                    `qualified pole rental' means any rental of a pole (or
                    other structure used to support wires) if such pole (or
                    other structure)--
                                ``(i) is used by the telephone or electric
                            company to support one or more wires which are
                            used by such company in providing telephone or
                            electric services to its members, and
                                ``(ii) is used pursuant to the rental to
                            support one or more wires (in addition to the
                            wires described in clause (i)) for use in
                            connection with the transmission by wire of
                            electricity or of telephone or other
                            communications.
                    For purposes of the preceding sentence, the term
                    `rental' includes any sale of the right to use the pole
                    (or other structure).
                ``(13) Nonprofit cemeteries.--Cemetery companies owned and
            operated exclusively for the benefit of their members or which
            are not operated for profit; and any corporation chartered
            solely for the purpose of the disposal of bodies by burial or
            cremation which is not permitted by its charter to engage in
            any business not necessarily incident to that purpose and no
            part of the net earnings of which inures to the benefit of any
            private shareholder or individual.
                ``(14) Grandfathered mutual financial institutions.--
                        ``(A) Credit unions without capital stock organized
                    and operated for mutual purposes and without profit.
                        ``(B) Certain corporations or associations
                    organized before September 1, 1957, and described in
                    subparagraphs (B) or (C) of section 501(c)(14) of the
                    Internal Revenue Code of 1986.
                ``(15) Grandfathered small insurance companies.--Insurance
            companies described in section 501(c)(15) of the Internal
            Revenue Code of 1986.
                ``(16) Crop financing associations.--Corporations organized
            by an association subject to part IV of this subchapter or
            members thereof, for the purpose of financing the ordinary crop
            operations of such members or other producers, and operated in
            conjunction with such association. Exemption shall not be
            denied any such corporation because it has capital stock, if
            the dividend rate of such stock is fixed at not to exceed the
            legal rate of interest in the State of incorporation or 8
            percent per annum, whichever is greater, on the value of the
            consideration for which the stock was issued, and if
            substantially all such stock (other than nonvoting preferred
            stock, the owners of which are not entitled or permitted to
            participate, directly or indirectly, in the profits of the
            corporation, on dissolution or otherwise, beyond the fixed
            dividends) is owned by such association, or members thereof;
            nor shall exemption be denied any such corporation because
            there is accumulated and maintained by it a reserve required by
            State law or a reasonable reserve for any necessary purpose.
                ``(17) Supplemental employment benefit trust.--
                        ``(A) A trust or trusts forming part of a plan
                    providing for the payment of supplemental unemployment
                    compensation benefits, if--
                                ``(i) under the plan, it is impossible, at
                            any time prior to the satisfaction of all
                            liabilities, with respect to employees under
                            the plan, for any part of the corpus or income
                            to be (within the taxable year or thereafter)
                            used for, or diverted to, any purpose other
                            than the providing of supplemental unemployment
                            compensation benefits,
                                ``(ii) such benefits are payable to
                            employees under a classification which is set
                            forth in the plan and which is found by the
                            Secretary not to be discriminatory in favor of
                            employees who are highly compensated employees
                            (within the meaning of section 414(q)), and
                                ``(iii) such benefits do not discriminate
                            in favor of employees who are highly
                            compensated employees (within the meaning of
                            section 414(q). A plan shall not be considered
                            discriminatory within the meaning of this
                            clause merely because the benefits received
                            under the plan bear a uniform relationship to
                            the total compensation, or the basic or regular
                            rate of compensation, of the employees covered
                            by the plan.
                        ``(B) Rules similar to those contained in
                    subparagraphs (B) through (E) of section 501(c)(7) of
                    the Internal Revenue Code of 1986 shall apply to
                    subparagraph (A).
                ``(18) Grandfathered trusts.--A trust or trusts created
            before June 25, 1959, and described in section 501(c)(18) of
            the Internal Revenue Code of 1986.
                ``(19) Certain veterans' organizations.--A post or
            organization of past or present members of the Armed Forces of
            the United States, or an auxiliary unit or society of, or a
            trust or foundation for, any such post or organization--
                        ``(A) organized in the United States or any of its
                    possessions,
                        ``(B) at least 75 percent of the members of which
                    are past or present members of the Armed Forces of the
                    United States and substantially all of the other
                    members of which are individuals who are cadets or are
                    spouses, widows, or widowers of past or present members
                    of the Armed Forces of the United States or of cadets,
                    and
                        ``(C) no part of the net earnings of which inures
                    to the benefit of any private shareholder or
                    individual.
                ``(20) Legal service plan trusts.--An organization or trust
            created or organized in the United States, the exclusive
            function of which is to form part of a qualified group legal
            services plan or plans.
                ``(21) Black lung act trusts.--A trust or trusts
            established in writing, created or organized in the United
            States, and contributed to by any person (except an insurance
            company) if--
                        ``(A) the purpose of such trust or trusts is
                    exclusively--
                                ``(i) to satisfy, in whole or in part, the
                            liability of such person for, or with respect
                            to, claims for compensation for disability or
                            death due to pneumoconiosis under Black Lung
                            Acts,
                                ``(ii) to pay premiums for insurance
                            exclusively covering such liability,
                                ``(iii) to pay administrative and other
                            incidental expenses of such trust in connection
                            with the operation of the trust and the
                            processing of claims against such person under
                            Black Lung Acts, and
                                ``(iv) to pay accident or health benefits
                            for retired miners and their spouses and
                            dependents (including administrative and other
                            incidental expenses of such trust in connection
                            therewith) or premiums for insurance
                            exclusively covering such benefits; and
                        ``(B) such trusts meets requirements similar to
                    those contained in section 501(c)(21) of the Internal
                    Revenue Code of 1986.
                ``(22) Multiemployer erisa trust.--A trust created or
            organized in the United States and established in writing by
            the plan sponsors of multiemployer plans if--
                        ``(A) the purpose of such trust is exclusively--
                                ``(i) to pay any amount described in
                            section 4223(c) or (h) of the Employee
                            Retirement Income Security Act of 1974, and
                                ``(ii) to pay reasonable and necessary
                            administrative expenses in connection with the
                            establishment and operation of the trust and
                            the processing of claims against the trust,
                        ``(B) no part of the assets of the trust may be
                    used for, or diverted to, any purpose other than--
                                ``(i) the purposes described in
                            subparagraph (A), or
                                ``(ii) prudent investment in securities,
                            obligations, or time or demand deposits,
                        ``(C) such trust meets the requirements of
                    paragraphs (2), (3), and (4) of section 4223(b),
                    4223(h), or, if applicable, section 4223(c) of the
                    Employee Retirement Income Security Act of 1974, and
                        ``(D) the trust instrument provides that, on
                    dissolution of the trust, assets of the trust may not
                    be paid other than to plans which have participated in
                    the plan or, in the case of a trust established under
                    section 4223(h) of such Act, to plans with respect to
                    which employers have participated in the fund.
                ``(23) Grandfathered veterans' insurance organization.--Any
            association organized before 1880 more than 75 percent of the
            members of which are present or past members of the Armed
            Forces and a principal purpose of which is to provide insurance
            and other benefits to veterans or their dependents.
                ``(24) ERISA trust.--A trust described in section 4049 of
            the Employee Retirement Income Security Act of 1974 (as in
            effect on the date of the enactment of the Single-Employer
            Pension Plan Amendments Act of 1986).
                ``(25) Real title holding corporation or trust.--
                        ``(A) Any corporation or trust which--
                                ``(i) has no more than 35 shareholders or
                            beneficiaries,
                                ``(ii) has only 1 class of stock or
                            beneficial interest, and
                                ``(iii) is organized for the exclusive
                            purposes of--
                                        ``(I) acquiring real property and
                                    holding title to, and collecting income
                                    from, such property, and
                                        ``(II) remitting the entire amount
                                    of income from such property (less
                                    expenses) to 1 or more organizations
                                    described in subparagraph (C) which are
                                    shareholders of such corporation or
                                    beneficiaries of such trust.
                    For purposes of clause (iii), the term `real property'
                    shall not include any interest as a tenant in common
                    (or similar interest) and shall not include any
                    indirect interest.
                        ``(B) A corporation or trust shall be described in
                    subparagraph (A) without regard to whether the
                    corporation or trust is organized by 1 or more
                    organizations described in subparagraph (C).
                        ``(C) An organization is described in this
                    subparagraph if such organization is--
                                ``(i) a qualified pension, profit sharing,
                            or stock bonus plan that meets the requirements
                            of section 401(a),
                                ``(ii) a governmental plan (within the
                            meaning of section 414(d)),
                                ``(iii) the United States, any State or
                            political subdivision thereof, or any agency or
                            instrumentality of any of the foregoing, or
                                ``(iv) any organization described in
                            paragraph (3).
                        ``(D) A corporation or trust shall in no event be
                    treated as described in subparagraph (A) unless such
                    corporation or trust permits its shareholders or
                    beneficiaries--
                                ``(i) to dismiss the corporation's or
                            trust's investment adviser, following
                            reasonable notice, upon a vote of the
                            shareholders or beneficiaries holding a
                            majority of interest in the corporation or
                            trust, and
                                ``(ii) to terminate their interest in the
                            corporation or trust by either, or both, of the
                            following alternatives, as determined by the
                            corporation or trust:
                                        ``(I) by selling or exchanging
                                    their stock in the corporation or
                                    interest in the trust (subject to any
                                    Federal or State securities law) to any
                                    organization described in subparagraph
                                    (C) so long as the sale or exchange
                                    does not increase the number of
                                    shareholders or beneficiaries in such
                                    corporation or trust above 35, or
                                        ``(II) by having their stock or
                                    interest redeemed by the corporation or
                                    trust after the shareholder or
                                    beneficiary has provided 90 days notice
                                    to such corporation or trust.
                        ``(E)(i) For purposes of this paragraph--
                                ``(I) a corporation which is a qualified
                            subsidiary shall not be treated as a separate
                            corporation, and
                                ``(II) all assets, liabilities, and items
                            of income, deduction, and credit of a qualified
                            subsidiary shall be treated as assets,
                            liabilities, and such items (as the case may
                            be) of the corporation or trust described in
                            subparagraph (A).
                        ``(ii) For purposes of this subparagraph, the term
                    `qualified subsidiary' means any corporation if, at all
                    times during the period such corporation was in
                    existence, 100 percent of the stock of such corporation
                    is held by the corporation or trust described in
                    subparagraph (A).
                        ``(iii) For purposes of this subtitle, if any
                    corporation which was a qualified subsidiary ceases to
                    meet the requirements of clause (ii), such corporation
                    shall be treated as a new corporation acquiring all of
                    its assets (and assuming all of its liabilities)
                    immediately before such cessation from the corporation
                    or trust described in subparagraph (A) in exchange for
                    its stock.
                        ``(F) For purposes of subparagraph (A), the term
                    `real property' includes any personal property which is
                    leased under, or in connection with, a lease of real
                    property, but only if the rent attributable to such
                    personal property for the taxable year does not exceed
                    15 percent of the total rent for the taxable year
                    attributable to both the real and personal property
                    leased under, or in connection with, such lease.
                        ``(G)(i) An organization shall not be treated as
                    failing to be described in this paragraph merely by
                    reason of the receipt of any otherwise disqualifying
                    income which is incidentally derived from the holding
                    of real property.
                        ``(ii) Clause (i) shall not apply if the amount of
                    gross income described in such clause exceeds 10
                    percent of the organization's gross income for the
                    taxable year unless the organization establishes to the
                    satisfaction of the Secretary that the receipt of gross
                    income described in clause (i) in excess of such
                    limitation was inadvertent and reasonable steps are
                    being taken to correct the circumstances giving rise to
                    such income.
                ``(26) State established medical care insurer.--Any
            membership organization if--
                        ``(A) such organization is established by a State
                    exclusively to provide coverage for medical care on a
                    not-for-profit basis to individuals described in
                    subparagraph (B) through--
                                ``(i) insurance issued by the organization,
                            or
                                ``(ii) a health maintenance organization
                            under an arrangement with the organization,
                        ``(B) the only individuals receiving such coverage
                    through the organization are individuals--
                                ``(i) who are residents of such State, and
                                ``(ii) who, by reason of the existence or
                            history of a medical condition--
                                        ``(I) are unable to acquire medical
                                    care coverage for such condition
                                    through insurance or from a health
                                    maintenance organization, or
                                        ``(II) are able to acquire such
                                    coverage only at a rate which is
                                    substantially in excess of the rate for
                                    such coverage through the membership
                                    organization,
                        ``(C) the composition of the membership in such
                    organization is specified by such State, and
                        ``(D) no part of the net earnings of the
                    organization inures to the benefit of any private
                    shareholder or individual. A spouse and any qualifying
                    child) of an individual described in subparagraph (B)
                    (without regard to this sentence) shall be treated as
                    described in subparagraph (B).
                ``(27) Grandfathered workers compensation organization.--
            Any membership organization established before June 1, 1996, by
            a State exclusively to reimburse its members for losses arising
            under workmen's compensation acts, and described in section
            501(c)(27) of the Internal Revenue Code of 1986.
        ``(d) Religious and Apostolic Organizations.--The following
    organizations are referred to in subsection (a): Religious or apostolic
    associations or corporations, if such associations or corporations have
    a common treasury or community treasury, even if such associations or
    corporations engage in business for the common benefit of the members,
    but only if such activity is treated as unrelated business activity.
        ``(e) Cooperative Hospital Service Organizations.--For purposes of
    this chapter, an organization shall be treated as an organization
    organized and operated exclusively for charitable purposes, if--
                ``(1) such organization is organized and operated solely--
                        ``(A) to perform, on a centralized basis, one or
                    more of the following services which, if performed on
                    its own behalf by a hospital which is an organization
                    described in subsection (c)(3) and exempt from taxation
                    under subsection (a), would constitute activities in
                    exercising or performing the purpose or function
                    constituting the basis for its exemption: data
                    processing, purchasing (including the purchasing of
                    insurance on a group basis), warehousing, billing and
                    collection, food, clinical, industrial engineering,
                    laboratory, printing, communications, record center,
                    and personnel (including selection, testing, training,
                    and education of personnel) services; and
                        ``(B) to perform such services solely for two or
                    more hospitals each of which is--
                                ``(i) an organization described in
                            subsection (c)(3) which is exempt from taxation
                            under subsection (a),
                                ``(ii) a constituent part of an
                            organization described in subsection (c)(3)
                            which is exempt from taxation under subsection
                            (a) and which, if organized and operated as a
                            separate entity, would constitute an
                            organization described in subsection (c)(3), or
                                ``(iii) owned and operated by the United
                            States, a State, the District of Columbia, or a
                            possession of the United States, or a political
                            subdivision or an agency or instrumentality of
                            any of the foregoing;
                ``(2) such organization is organized and operated on a
            cooperative basis and allocates or pays, within 8\1/2\ months
            after the close of its taxable year, all net earnings to
            patrons on the basis of services performed for them; and
                ``(3) if such organization has capital stock, all of such
            stock outstanding is owned by its patrons.
    For purposes of this title, any organization which, by reason of the
    preceding sentence, is an organization described in subsection (c)(3)
    and exempt from taxation under subsection (a), shall be treated as a
    hospital and as an organization the principal purpose or functions of
    which are the providing of medical or hospital care or medical
    education or medical research, if the organization is a hospital, or if
    the organization is a medical research organization directly engaged in
    the continuous active conduct of medical research in conjunction with a
    hospital.
        ``(f) Cooperative Service Organizations of Operating Educational
    Organizations.--For purposes of this chapter--
                ``(1) If an organization is--
                        ``(A) organized and operated solely to hold,
                    commingle, and collectively invest and reinvest
                    (including arranging for and supervising the
                    performance by independent contractors of investment
                    services related thereto) in stocks and securities, the
                    moneys contributed thereto by each of the members of
                    such organization, and to collect income therefrom and
                    turn over the entire amount thereof, less expenses, to
                    such members,
                        ``(B) organized and controlled by one or more such
                    members, and
                        ``(C) comprised solely of members that are
                    organizations described in paragraph (2) or (3)--
                                ``(i) which are exempt from taxation under
                            subsection (a), or
                                ``(ii) the gross profits of which are
                            excluded from taxation under section 251(a),
                    then such organization shall be treated as an
                    organization organized and operated exclusively for
                    charitable purposes.
                ``(2) An organization is described in this paragraph if the
            organization is an educational organization which normally
            maintains a regular faculty and curriculum and normally has a
            regularly enrolled body of pupils or students in attendance at
            the place where its educational activities are regularly
            carried on.
                ``(3) An organization is described in this paragraph if the
            organization is an organization which normally receives a
            substantial part of its support (exclusive of income received
            in the exercise or performance by such organization of its
            charitable, educational, or other purpose or function
            constituting the basis for its exemption under section 253(a))
            from the United States or any State or political subdivision
            thereof or from direct or indirect contributions from the
            general public, and which is organized and operated exclusively
            to receive, hold, invest, and administer property and to make
            expenditures to or for the benefit of a college or university
            which is an organization referred to in clause (ii) of this
            subparagraph and which is an agency or instrumentality of a
            State or political subdivision thereof, or which is owned or
            operated by a State or political subdivision thereof or by an
            agency or instrumentality of one or more States or political
            subdivisions.
        ``(g) Expenditures by Public Charities to Influence Legislation.--
                ``(1) General rule.--In the case of an organization to
            which this subsection applies, exemption from taxation under
            subsection (a) shall be denied because a substantial part of
            the activities of such organization consists of carrying on
            propaganda, or otherwise attempting, to influence legislation,
            but only if such organization normally--
                        ``(A) makes lobbying expenditures in excess of the
                    lobbying ceiling amount for such organization for each
                    taxable year, or
                        ``(B) makes grass roots expenditures in excess of
                    the grass roots ceiling amount for such organization
                    for each taxable year.
                ``(2) Definitions.--For purposes of this subsection--
                        ``(A) Lobbying expenditures.--`Lobbying
                    expenditures' means expenditures for the purpose of
                    influencing legislation (as defined in section
                    4911(d)).
                        ``(B) Lobbying ceiling amount.--The lobbying
                    ceiling amount for any organization for any taxable
                    year is 150 percent of the lobbying nontaxable amount
                    for such organization for such taxable year, determined
                    under section 4911.
                        ``(C) Grass roots expenditures.--`Grass roots
                    expenditures' means expenditures for the purpose of
                    influencing legislation (as defined in section 4911(d)
                    without regard to paragraph (1)(B) thereof).
                        ``(D) Grass roots ceiling amount.--The grass roots
                    ceiling amount for any organization for any taxable
                    year is 150 percent of the grass roots nontaxable
                    amount for such organization for such taxable year,
                    determined under section 4911.
                ``(3) Organizations to which this subsection applies.--This
            subsection shall apply to any organization which has elected
            (in such manner and at such time as the Secretary may
            prescribe) to have the provisions of this subsection apply to
            such organization and which, for the taxable year which
            includes the date the election is made, is described in
            subsection (c)(3) and is not described in paragraph (4) and is
            not a private foundation.
                ``(4) Disqualified organizations.--This subsection does not
            apply to--
                        ``(A) a church,
                        ``(B) an integrated auxiliary of a church or of a
                    convention or association of churches, or
                        ``(C) a member of an affiliated group of
                    organizations (within the meaning of section
                    4911(f)(2)) if one or more members of such group is
                    described in subparagraph (A) or (B).
                ``(5) Years for which election is effective.--An election
            by an organization under this subsection shall be effective for
            all taxable years of such organization which--
                        ``(A) end after the date the election is made, and
                        ``(B) begin before the date the election is revoked
                    by such organization (under regulations prescribed by
                    the Secretary).
                ``(6) No effect on certain organizations.--With respect to
            any organization for a taxable year for which--
                        ``(A) such organization is described in paragraph
                    (5), or
                        ``(B) an election under this subsection is not in
                    effect for such organization, nothing in this
                    subsection or in section 4911 shall be construed to
                    affect the interpretation of the phrase, `no
                    substantial part of the activities of which is carrying
                    on propaganda, or otherwise attempting, to influence
                    legislation,' under subsection (c)(3).
        ``(h) Government Corporations Exempt Under Subsection (c)(1).--For
    purposes of subsection (c)(1), the following organizations are
    described in this subsection:
                ``(1) The Central Liquidity Facility established under
            title III of the Federal Credit Union Act (12 U.S.C. 1795 et
            seq.).
                ``(2) The Resolution Trust Corporation established under
            section 21A of the Federal Home Loan Bank Act.
                ``(3) The Resolution Funding Corporation established under
            section 21B of the Federal Home Loan Bank Act.
        ``(i) Certain Educational Organizations.--An organization shall not
    be eligible for exemption as an educational organization under
    subsection (c)(3) if a substantial amount of its activities and funds
    are devoted to--
                ``(1) conducting seminars and other similar programs,
                ``(2) conducting research to educate Congress or the
            general public about public policy issues,
                ``(3) producing books and pamphlets, or
                ``(4) a combination of the foregoing.

    ``SEC. 254. SPECIAL RULES FOR (C)(3) ORGANIZATIONS.

        ``(a) New Organizations Must Notify Secretary.--Except as provided
    in subsection (c), an organization shall not be treated as an
    organization described in section 253(c)(3)--
                ``(1) unless that it has given notice to the Secretary, in
            such manner as the Secretary may prescribe, that it is applying
            for recognition of such status, or
                ``(2) for any period before giving of such notice, if such
            notice is given after the time prescribed by the Secretary by
            regulations for giving notice under this subsection.
        ``(b) Presumption That Organizations Are Private Foundations.--
    Except as provided in subsection (c), any organization described in
    section 253(c)(3) and which does not notify the Secretary, at such time
    and in such manner as the Secretary may by regulations prescribe, that
    it is not a private foundation shall be presumed to be a private
    foundation.
        ``(c) Exceptions.--Subsections (a) and (b) shall not apply to--
                ``(1) organizations organized before October 10, 1969;
                ``(2) organizations which obtained recognition of tax-
            exempt status under section 501(c)(3) of the Internal Revenue
            Code of 1986 (in the case of subsection (a) only);
                ``(3) organizations which were determined not to be private
            foundations under the Internal Revenue Code of 1986;
                ``(4) churches, their integrated auxiliaries, and
            conventions and associations of churches;
                ``(5) any organization that is not a private foundation and
            the gross receipts of which in each taxable year are not more
            than $25,000, or
                ``(6) such other classes of organizations which the
            Secretary may exempt.

    ``SEC. 255. TAX ON UNRELATED BUSINESS ACTIVITY.

        ``(a) In General.--Each organization described in subsection (b)
    shall be subject to the Competitive American Business Tax for
    businesses under section 201 on its gross profits from its unrelated
    business activity.
        ``(b) Organizations Subject to Tax.--This section shall apply to--
                ``(1) organizations exempt from the business consumption
            tax under section 253(a), other than instrumentalities of the
            United States described in section 253(c)(1).
                ``(2) colleges and universities which are instrumentalities
            of any government and corporations owned by one or more such
            colleges or universities.

    ``SEC. 256. UNRELATED BUSINESS ACTIVITY.

        ``(a) In General.--`Unrelated business activity' means any trade or
    business the conduct of which is not substantially related (aside from
    the need of such organization for income or funds or the use it makes
    of the profits derived) to the exercise or performance by such
    organization of its charitable, educational, or other purpose or
    function constituting the basis for its exemption under section 253,
    except that such term does not include any trade or business--
                ``(1) in which substantially all the work in carrying on
            such trade or business is performed for the organization
            without compensation; or
                ``(2) which is carried on, in the case of an organization
            described in section 253(c)(3) or in the case of a college or
            university described in section 255(b), by the organization
            primarily for the convenience of its members, students,
            patients, officers, or employees, which is the selling by the
            organization of items of work-related clothes and equipment and
            items normally sold through vending machines, through food
            dispensing facilities, or by snack bars, for the convenience of
            its members at their usual places of employment; or
                ``(3) which is the selling of merchandise, substantially
            all of which has been received by the organization as gifts or
            contributions.
        ``(b) Advertising, etc., Activities.--For purposes of this section,
    `trade or business' includes any activity which is carried on for the
    production of income from the sale of goods or the performance of
    services. For purposes of the preceding sentence, an activity does not
    lose identity as a trade or business merely because it is carried on
    within a larger aggregate of similar activities or within a larger
    complex of other endeavors which may, or may not, be related to the
    exempt purposes of the organization. Where an activity carried on for
    profit constitutes an unrelated trade or business, no part of such
    trade or business shall be excluded from such classification merely
    because it does not result in profit.
        ``(c) Trade or Business.--
                ``(1) Certain business activities.--An activity shall not
            be considered a `trade or business' solely because the activity
            is a business activity (such as certain passive rental
            activity) that would be subject to the business consumption tax
            if conducted by a business entity other than a tax-exempt
            organization.
                ``(2) Regulations.--The Secretary shall prescribe
            regulations defining a `trade or business'. Such regulations
            shall be consistent with the provisions under sections 511
            through 513 of the Internal Revenue Code of 1986, except to the
            extent such provisions are inconsistent with other principles
            of the business consumption tax. The regulations shall include
            exclusions from the definition of `trade or business' similar
            to those contained in section 513 of the Internal Revenue Code
            for--
                        ``(A) certain bingo games,
                        ``(B) certain hospital services, and
                        ``(C) certain public entertainment activity at
                    fairs and expositions by an organization which
                    regularly conducts, as one of its substantial exempt
                    purposes, an agricultural or educational fair or
                    exhibition.
                ``(3) Trade shows.--The conduct of trade shows and
            conventions shall not be excluded from the definition of trade
            or business.

                          ``Subchapter H--Cooperatives

    ``Sec. 260. Patronage dividends of cooperatives.

    ``SEC. 260. PATRONAGE DIVIDENDS OF COOPERATIVES.

        ``(a) Patronage Dividends Paid by Supply Cooperatives.--A qualified
    patronage dividend paid by a supply cooperative to a patron shall be
    treated as if it is a refund of a portion of the amounts paid by the
    patron for goods, services, or use of capital. In general, if the
    supply cooperative included the amount received from the patron in
    taxable receipts, the dividend shall reduce taxable receipts in the
    year incurred. If the recipient of the dividend is a business entity
    which deducted the cost of business purchases to which the dividend
    related, the recipient will reduce its cost of business purchases by
    the amount of the dividend in the year the dividend is paid or
    incurred.
        ``(b) Patronage Dividends Paid by Marketing Cooperatives.--A
    qualified patronage dividend paid to a patron by a marketing
    cooperative shall be treated as an upward price adjustment in the
    amount received by the patron for its goods marketed by the
    cooperative. In general, the cooperative will increase its cost of
    business purchases by the amount of the qualified patronage dividend
    and the recipient will increase its taxable receipts by the amount of
    the qualified patronage dividend.
        ``(c) Dividend Treatment.--Only the portion of a patronage dividend
    that is not a qualified patronage dividend shall be treated as a
    dividend under this chapter and chapter 2.
        ``(d) Definitions.--
                ``(1) Qualified patronage dividend.--A `qualified patronage
            dividend' is that part of a patronage dividend that is
            attributable to the patron's allocable share of patronage
            earnings of a marketing cooperative or a supply cooperative.
                ``(2) Supply cooperative.--A `supply cooperative' is a
            cooperative that sells goods or service to patrons and provided
            patronage dividends with respect to the quantity of purchases
            of the patrons.
                ``(3) Marketing cooperative.--A `marketing cooperative' is
            a cooperative that sells goods produced by its members and
            provides patronage dividends to the members based on the
            quantities of goods sold or provided for sale.
        ``(e) Special Rules.--
                ``(1) Notices of allocation and per-unit retain
            certificates.--Except as provided in paragraph (2), a notice of
            allocation, per-unit retain certificate, or other similar
            document shall not be treated as a patronage dividend until it
            is redeemed in cash or property.
                ``(2) Opportunity to receive cash.--If a patron is given an
            opportunity to receive a patronage dividend in cash, but
            instead chooses to accept a per-unit retain certificate or a
            qualified notice of allocation, the patron will be treated as
            receiving cash and simultaneously contributing to the capital
            of the cooperative.
                ``(3) Application limited to qualified cooperatives.--Under
            rules to be prescribed by the Secretary, this section shall
            apply only to cooperatives to which one of the following
            provisions of the Internal Revenue Code of 1986 would have
            applied:
                        ``(A) Section 501(c)(12) (relating to cooperative
                    telephone companies and similar organizations).
                        ``(B) Section 501(c)(14) (relating to certain
                    cooperative banks).
                        ``(C) Section 521 (relating to farm cooperatives).
                        ``(D) Section 1381 (relating to cooperatives
                    generally).
                ``(4) Regulations.--The Secretary shall prescribe
            regulations for the application of this section. The
            regulations shall generally be consistent with subchapter T of
            chapter 1 of the Internal Revenue Code of 1986 except to the
            extent that such rules are inconsistent with provisions of this
            chapter.

                         ``Subchapter I--Sourcing Rules

    ``Sec. 265. Exports of property or services.
    ``Sec. 266. Imports of property or services.
    ``Sec. 267. Import or export of services.
    ``Sec. 268. International transportation services.
    ``Sec. 269. International communications.
    ``Sec. 270. Insurance.
    ``Sec. 271. Banking services.

    ``SEC. 265. EXPORTS OF PROPERTY OR SERVICES.

        ``(a) General Rule.--Taxable receipts do not include amounts
    received by the exporter thereof for property or services exported from
    the United States for use or consumption outside the United States.
        ``(b) Export Through Nonbusiness Entity.--For purposes of
    subsection (a), if property or services are sold to a governmental
    entity or a tax-exempt organization for export and are exported other
    than in an activity of such entity which is subject to the business
    consumption tax, then the seller of such property or services is deemed
    to be the exporter thereof.
        ``(c) Export of Services.--See section 267 for rules for
    determining whether services are exported or imported.

    ``SEC. 266. IMPORTS OF PROPERTY OR SERVICES.

        ``(a) In General.--The import of property or services for
    consumption in the United States shall constitute a business purchase
    if such property or service is to be used in a business activity in the
    United States. Property being held for sale or retail by a business
    entity that is in the business of selling goods shall be considered
    held for `use in a business activity'.
        ``(b) Amount of Business Purchase.--
                ``(1) In general.--The cost of business purchases with
            respect to the import of property or services for use or
            consumption in the United States is the customs value, price or
            other amount used for purposes of determining the import tax
            under section 281 or section 282.
                ``(2) Import tax.--The cost of business purchases does not
            include any import tax paid. No deduction shall be allowed with
            respect to property or service imported by a business entity
            unless the import tax is paid with respect to such import.

    ``SEC. 267. IMPORT OR EXPORT OF SERVICES.

        ``(a) In General.--Except as otherwise provided in this subchapter,
    services shall not be treated as imported or exported from the location
    in which they are performed.
        ``(b) Import of Services.--A business entity shall be treated as
    importing a service if--
                ``(1) the entire benefit of the service will be realized in
            the United States, and
                ``(2) the benefit will be realized in connection with the
            United States business activities of the business entity.
        ``(c) Export of Services.--A business will be treated as exporting
    a service if--
                ``(1) the entire benefit of the service will be realized
            outside of the United States, and
                ``(2) the benefit will be realized solely in connection
            with the activities of the purchaser occurring outside the
            United States.
        ``(d) Services Acquired From Service Provider That Provides
    Services In and Outside the United States.--
                ``(1) In general.--If a business entity acquires services
            from a service provider that provides services both in and
            outside the United States and the service provider shows on the
            invoice where the services are provided--
                        ``(A) the business entity shall treat the services
                    as provided where stated on the invoice, and
                        ``(B) the service provider shall treat as taxable
                    receipts any services listed as provided in the United
                    States.
                ``(2) No invoice.--If a business entity acquires services
            from a service provider that provides services both in and
            outside the United States and the service provider does not
            show on an invoice where such services are provided--
                        ``(A) the business entity shall treat the services
                    as if provided in the location to which payment is
                    sent, and
                        ``(B) the service provider shall treat as taxable
                    receipts any payments received in the United States.
        ``(e) Special Rules Prevail.--See sections 268 and 269 for special
    rule relating to transportation and communication services.

    ``SEC. 268. INTERNATIONAL TRANSPORTATION SERVICES.

        ``(a) Transportation of Property.--
                ``(1) Taxable receipts.--
                        ``(A) Exports.--Taxable receipts do not include
                    receipts from the transportation of property exported
                    from the United States.
                        ``(B) Imports.--Taxable receipts include receipts
                    from transportation of property imported into the
                    United States only if such costs are not taken into
                    account in determining the import tax.
                        ``(C) Presumptions.--The Secretary shall prescribe
                    regulations describing situations in which a
                    transporter of property must presume that no import tax
                    has been paid on the cost of its services.
                ``(2) Business purchases.--
                        ``(A) Exports.--Business purchases do not include
                    amounts paid or incurred for the cost of transportation
                    of property exported from the United States.
                        ``(B) Imports.--Amounts paid or incurred for
                    transportation of goods imported into the United
                    States, shall constitute a cost of business purchase
                    only to the extent that they are taken into account in
                    determining the customs value for purposes of section
                    281(a) (relating to the import tax).
        ``(b) Transportation of Passengers.--
                ``(1) Taxable receipts.--Taxable receipts--
                        ``(A) include receipts from the transportation of
                    passengers from the United States to a destination
                    outside the United States, but
                        ``(B) do not include receipts from the
                    transportation of passengers from outside the United
                    States to a destination in the United States.
                ``(2) Business purchases.--Business purchases--
                        ``(A) include amounts paid or incurred in a
                    business activity for the transportation of passengers
                    from the United States to a destination outside the
                    United States, but
                        ``(B) do not include amounts paid or incurred for
                    transportation of passengers from outside the United
                    States to a destination in the United States.
                ``(3) Simplifying rules.--The Secretary may provide rules
            that simplify this subsection, including rules under which--
                        ``(A) half of receipts attributable to
                    transportation to or from the United States are treated
                    as taxable receipts,
                        ``(B) half of the cost for business trips to and
                    from the United States are treated as business
                    purchases, and
                        ``(C) all transportation expenses of a business
                    entity that has no regular business outside the United
                    States are treated as business purchases.

    ``SEC. 269. INTERNATIONAL COMMUNICATIONS.

        ``(a) In General.--For purposes of section 266, communications
    services shall be treated as provided at the point of origin of the
    communications and shall not be treated as imported or exported.
        ``(b) Communications Services.--Communications services include--
                ``(1) internet services,
                ``(2) telephone and electronic email communications
            services,
                ``(3) courier services (except in the case of
            transportation of property that is imported or exported),
                ``(4) satellite transmission services,
                ``(5) telegraph services,
                ``(6) facsimile transmission services, and
                ``(7) other similar services.

    ``SEC. 270. INSURANCE.

        ``(a) In General.--Insurance services will be treated as provided
    at the location of the insurance company providing the services. Except
    as the Secretary may prescribe by regulations, insurance companies will
    be treated as providing services at the location to which insurance
    payments are made.
        ``(b) Insured Risks in the United States.--If insurance services
    are provided outside the United States and the insured risk is located
    in the United States--
                ``(1) the insurance service shall be treated as imported,
                ``(2) the insurance premiums shall be subject to the import
            tax, and
                ``(3) payments of insurance benefits shall not be treated
            as imported.
        ``(c) Insured Risk Outside the United States.--If insurance
    services are provided inside the United States and the insured risk is
    located outside the United States--
                ``(1) insurance services shall be treated as exported,
                ``(2) payments of insurance benefits shall be treated as
            payments for services outside the United States, and shall not
            be deducted as business purchases.
        ``(d) Insurance Services.--Insurance services means the provision
    of insurance and services related to insurance other than insurance
    that is treated as a savings asset.

    ``SEC. 271. BANKING SERVICES.

        ``The Secretary shall prescribe regulations on the location of
    banking services and the extent to which such services are to be
    treated as imported or exported.

               ``Subchapter J--Business Conducted in a Possession

    ``Sec. 276. Treatment of possessions.

    ``SEC. 276. TREATMENT OF POSSESSIONS.

        ``(a) In General.--For purposes of the business consumption tax
    imposed by this chapter, the U.S. possessions shall not be treated as
    part of the United States.
        ``(b) Possession.--For purposes of this subchapter, `U.S.
    possession' or `possession' means a possession of the United States and
    includes the Commonwealth of Puerto Rico and the Virgin Islands.

                           ``Subchapter K--Import Tax

    ``Sec. 281. Imposition of tax on property.
    ``Sec. 282. Imposition of tax on import of services.
    ``Sec. 283. General rules for the import tax.

    ``SEC. 281. IMPOSITION OF TAX ON PROPERTY.

        ``(a) General Rule.--There is hereby imposed a tax equal to 8.5
    percent of the customs value of all property entered into the United
    States for consumption, use or warehousing.
        ``(b) Liability for Tax.--The tax imposed on the import of property
    by subsection (a) shall be paid by the person entering the property
    into the United States for consumption, use or warehousing. Such tax
    shall be due and payable at the time of import.
        ``(c) Imports of Previously Exported Property.--In the case of any
    article that is classified under a heading or subheading of subchapter
    I or II of chapter 98 of the Tariff Schedules of the United States, the
    tax under this section shall be imposed only on that portion of the
    customs value of such article that is dutiable under such heading or
    subheading.
        ``(d) Imports for Personal Consumption.--The import tax imposed by
    this section shall not apply to any article entered into the United
    States duty free under subchapters I through VII of chapter 98 of the
    Tariff Schedules of the United States.
        ``(e) Exception for Certain Commodities and Products.--The import
    tax imposed by this section shall not apply to petroleum, petroleum
    products or such commodities or products as the President shall by
    Executive Order determine to be in short supply and vital to national
    security.

    ``SEC. 282. IMPOSITION OF TAX ON IMPORT OF SERVICES.

        ``(a) General Rule.--There is hereby imposed a tax equal to 8.5
    percent of the cost of all services treated as imported into the United
    States during the taxable year of the service recipient.
        ``(b) Liability for the Tax.--The tax on the import of services
    imposed by subsection (a) shall be paid by the person who receives the
    imported services. The tax shall be payable as if it were an addition
    to the business consumption tax imposed by section 201.
        ``(c) Imported Services.--For purposes of this section, services
    shall be treated as imported if they are treated as imported under
    section 267 (general rules on import or export of services) or section
    270 (related to insurance).
        ``(d) Special Rule for Insurance.--The seller of insurance that is
    treated as imported under section 270 shall be liable for the
    collection of the tax imposed by subsection (a) on the insurance and
    for paying such tax to the Secretary. The first sentence of subsection
    (b) (relating to the person liable for the tax) shall apply to
    insurance only to the extent that the seller of the insurance services
    does not collect such tax.

    ``SEC. 283. GENERAL RULES FOR THE IMPORT TAX.

        ```Import tax' means the tax imposed by section 281 on the import
    of property and the tax imposed by section 282 on the import of
    services.

                        ``Subchapter L--Transition Rules

    ``Sec. 290. Amortization of transition basis.

    ``SEC. 290. AMORTIZATION OF TRANSITION BASIS.

        ``(a) Transition Basis Deduction.--The `transition basis deduction'
    for a taxable year is the sum of the amortization allowance determined
    under this section for the taxable year.
        ``(b) Treatment of Interest Flows.--Interest flows between non-
    financial businesses shall be treated as under current law, phased out
    over 5 years.
        ``(c) Amortization Rules.--The amortization allowance to all
    property placed in service before the effective date of this section
    shall be the lesser of--
                ``(1) the amortization period under current law remaining
            on such date, or
                ``(2) a 5-year ratable period beginning on such date.

         ``Subchapter M--Rules for Administration, Consolidated Returns

    ``Sec. 301. Returns, due dates, etc.
    ``Sec. 302. Consolidated returns.

    ``SEC. 301. RETURNS, DUE DATES, ETC.

        ``(a) In General.--Until subtitle F is amended to reflect the
    adoption of this chapter, the rules of subtitle F relating to C
    corporations shall apply to business entities with respect to--
                ``(1) returns and records;
                ``(2) time and place for paying tax;
                ``(3) assessment of taxes;
                ``(4) collections and liens;
                ``(5) abatements, credits, and refunds;
                ``(6) interest on underpayments and overpayments;
                ``(7) additions to tax and penalties;
                ``(8) closing agreements and compromises;
                ``(9) crimes;
                ``(10) judicial proceedings;
                ``(11) discovery of liability and enforcement; and
                ``(12) estimated taxes.
        ``(b) Individuals Engaging in Business Activities.--Under rules
    prescribed by the Secretary, individuals engaging in business
    activities on their own or with their spouses shall be permitted to
    file their business consumption tax returns with their individual tax
    returns and shall be subject to estimated tax rules for individual
    income tax returns. Such rules shall include rules to prevent the
    avoidance or abuse of this chapter and chapter 1.

    ``SEC. 302. CONSOLIDATED RETURNS.

        ``(a) In General.--Business entities may file consolidated returns
    of business consumption tax if they would have been permitted to file
    consolidated returns under section 1501 of the Internal Revenue Code
    and such section were applied by treating each business entity as a
    corporation and its owners or partners as shareholders.
        ``(b) Financial Institutions.--Financial intermediation businesses
    may be included in consolidated returns.
        ``(c) Intercompany Transactions.--In computing the gross profits of
    a consolidated group, intercompany transactions can be taken into
    account, or at the election of the filer, be disregarded (except in the
    case of transactions with financial intermediation businesses).

              ``Subchapter N--Definitions and Rules of Application

    ``Sec. 310. Definitions.
    ``Sec. 311. Rules of application.

    ``SEC. 310. DEFINITIONS.

        ``When used in this chapter, where not otherwise distinctly
    expressed or manifestly incompatible with the intent thereof--
                ``(1) Internal revenue code of 1986.--`Internal Revenue
            Code of 1986' means the Internal Revenue Code of 1986 as in
            effect immediately before the enactment of the Competitive
            American Business Tax.
                ``(2) United states.--`United States' means the States and
            the District of Columbia.

    ``SEC. 311. RULES OF APPLICATION.

        ``(a) Definitions.--Any definition included in this chapter shall
    apply for all purposes of this chapter unless--
                ``(1) such definition is limited to the purposes of a
            particular chapter, section, or subsection, or
                ``(2) the definition clearly would not be applicable in a
            particular context.
        ``(b) Interpretations Consistent With Internal Revenue Code of
    1986.--Terms not defined in this chapter or elsewhere in this title,
    but defined in the Internal Revenue Code of 1986, shall be interpreted
    in a manner consistent with the Internal Revenue Code of 1986, except
    to the extent such interpretation would be inconsistent with the
    principles and purposes of this chapter.''.
        (b) The amendments made by this section shall be effective on
    January 1, 2011, except to the extent otherwise specifically provided
    in the text of such amendments.

    SEC. 603. REPEAL OF CHAPTER 6.

        Chapter 6 of the Code (relating to consolidated returns) is
    repealed as of January 1, 2011.

                  TITLE VII--JOB TRAINING RESULTS ACT OF 2010

    SEC. 701. SHORT TITLE.

        This title may be cited as the ``Job Training Results Act of
    2010''.

    SEC. 702. PURPOSE.

        The purpose of this title is to ensure accountability and job
    training results in Federal job training programs.

    SEC. 703. IMPROVEMENT OF JOB TRAINING PROGRAMS; PERFORMANCE METRICS FOR
                  WIA JOB TRAINING PROGRAMS.

        Title V of the Workforce Investment Act of 1998 (20 U.S.C. 9271 et
    seq.) is amended--
                (1) by redesignating section 507 as section 510; and
                (2) by inserting after section 506, the following:

    ``SEC. 507. IMPROVEMENT OF JOB TRAINING PROGRAMS.

        ``(a) General Rules.--
                ``(1) Grant competition.--In order to encourage competition
            under the grant programs for providers of job training programs
            authorized under this Act, any grants under such grant programs
            shall be awarded on a competitive basis.
                ``(2) Priority.--In awarding grants under this Act, the
            Secretary shall give priority to applicants that leverage
            private resources.
                ``(3) Grant renewal.--
                        ``(A) Threshold determination.--The Secretary shall
                    not renew a grant for a provider of a training program
                    under this Act that fails to demonstrate, in accordance
                    with the performance measures described section 508(b),
                    that at least 50 percent of the participants of such
                    program were employed for at least 1 year in an
                    occupation related to the training provided under the
                    program.
                        ``(B) Priority.--In renewing grants for providers
                    who meet the requirement described in subparagraph (A),
                    the Secretary shall give priority to those providers
                    that have the greatest percentage of participants who--
                                ``(i) were employment for at least 1 year
                            in an occupation related to the training
                            provided under the program; and
                                ``(ii) as a result of the training provided
                            under the program--
                                        ``(I) have the highest income
                                    levels; and
                                        ``(II) the lowest percentage of
                                    participants receiving Federal
                                    assistance.
        ``(b) Exceptions.--Subsection (a) shall not apply to State
    allotments made under sections 127 and 132.
        ``(c) Enrollment Prohibition and Requirement.--
                ``(1) Prohibition.--A provider of a job training program
            under this Act may not in any way limit recruitment for, or
            enrollment in, such program to individuals who are more likely
            to be successful in obtaining employment or earning a higher
            income after the completion of the program, as compared to
            other individuals.
                ``(2) Requirement.--An individual who participates in, or
            receives any service under, a training program shall be
            considered to be enrolled as a participant in the program.
        ``(d) Definitions.--For purposes of this section and section 508:
                ``(1) Federal assistance.--
                        ``(A) In general.--The term `Federal assistance'
                    includes--
                                ``(i) supplemental nutrition assistance
                            authorized under the Food and Nutrition Act of
                            2008 (7 U.S.C. 2011 et seq.);
                                ``(ii) the case where a participant's
                            adjusted gross income (or, if greater, earned
                            income) for the most recently ended taxable
                            year exceeds the amount of adjusted gross
                            income, or earned income, as the case may be,
                            which would cause the credit allowable to the
                            participant for such taxable year under
                            paragraph (1) of section 32(a) of the Internal
                            Revenue Code of 1986 to be reduced by reason of
                            paragraph (2) of such section;
                                ``(iii) supplemental security income
                            benefits under title XVI of the Social Security
                            Act (42 U.S.C. 1382 et seq.);
                                ``(iv) assistance under the State medicaid
                            program under title XIX of the Social Security
                            Act (42 U.S.C. 1396 et seq.); and
                                ``(v) benefits under the temporary
                            assistance for needy families program funded
                            under part A of title IV of the Social Security
                            Act (42 U.S.C. 601 et seq.).
                        ``(B) Defined terms.--The terms `adjusted gross
                    income', `earned income', and `phaseout amount' shall
                    have the respective meanings given such terms by
                    section 32 of the Internal Revenue Code of 1986.
                ``(2) Job training program.--The term `job training
            program' includes the following programs:
                        ``(A) Programs for migrant youth authorized under
                    section 127.
                        ``(B) Native American Programs authorized under
                    section 166.
                        ``(C) Migrant and seasonal farm workers programs
                    authorized under section 167.
                        ``(D) Youth Opportunity Grant authorized under
                    section 169.
                        ``(E) Grants to States for Incarcerated Youth
                    Offenders authorized under section 171.
                        ``(F) Programs for the reintegration of ex-
                    offenders authorized under section 171.
                        ``(G) Responsible Reintegration of Youth Offenders
                    program authorized under section 171.
                        ``(H) Program of Competitive Grants for Worker
                    Training and Placement in High Growth and Emerging
                    Industry Sectors authorized under section 171.
                        ``(I) Energy Efficiency and Renewable Worker
                    Training Programs authorized under section 171(e).
                        ``(J) Youthbuild Program authorized under section
                    173A.
                        ``(K) Veterans' Workforce Investment Program
                    authorized under section 168.
                        ``(L) The program of workforce investment
                    activities for youth authorized under chapter 4 of
                    subtitle B of title I.
                        ``(M) The program of workforce investment
                    activities for adults authorized under chapter 5 of
                    subtitle B of title I.
                        ``(N) The program of workforce investment
                    activities for dislocated workers under chapter 5 of
                    subtitle B of title I.
                        ``(O) Job Corps program authorized under subtitle C
                    of title I.
                        ``(P) The Adult Education and Family Literacy Act
                    authorized under title II.
                ``(3) Participant.--The term `participant' means an
            individual who participated in, or received a service under, a
            job training program that is funded under this Act.
                ``(4) Provider.--The term `provider'--
                        ``(A) has the meaning given the term `eligible
                    provider' in section 101(12);
                        ``(B) has the meaning given the term `service
                    provider' in section 142(10); and
                        ``(C) means any other agency, entity, or provider
                    that is responsible for administering, or carrying out,
                    a job training program under this Act.

    ``SEC. 508. PERFORMANCE MEASURES FOR JOB TRAINING PROGRAMS.

        ``(a) In General.--Notwithstanding any other provision of law, each
    provider of a job training program under this Act shall, annually--
                ``(1) use the performance measures described in subsection
            (b) to assess the effectiveness of such job training program;
            and
                ``(2) submit the results of such assessment to the
            Secretary.
        ``(b) Performance Measures.--In carrying out the assessment
    described in subsection (a), a provider of a job training program shall
    include the following performance measures in the assessment:
                ``(1) The type of job training each participant received
            under the program and the program costs (such as tuition and
            fees) for each participant.
                ``(2) The employment status of each participant--
                        ``(A) 1 year after the participant completes the
                    program;
                        ``(B) 3 years after the participant completes the
                    program; and
                        ``(C) 5 years after the participant completes the
                    program.
                ``(3) The percentage and number of participants who
            obtained employment after the completion of the program in an
            occupation related to the training provided under the program.
                ``(4) The income level of each participant--
                        ``(A) 2 years prior to participating in the
                    program; and
                        ``(B) every year, up to 5 years, after
                    participation in the program.
                ``(5) The percentage and number of participants receiving
            Federal assistance--
                        ``(A) prior to participating in the program; and
                        ``(B) every year, up to 5 years, after
                    participation in the program.
        ``(c) Rule of Construction.--Nothing in this section shall be
    construed to prohibit a provider of a job training program from
    assessing the program by using (in addition to the performance measures
    described in subsection (b)) a performance measure--
                ``(1) not described in subsection (b); or
                ``(2) that was being used by the provider on the day before
            the date of the enactment of this section.
        ``(d) Audits.--
                ``(1) In general.--The Inspector General of the Department
            of Labor and the Comptroller General of the United States shall
            conduct periodic audits to ensure that providers of job
            training programs are--
                        ``(A) accurately assessing the programs, including
                    the outcomes of all participants of such programs,
                    using the performance measures required under this
                    section; and
                        ``(B) in compliance with section 507(c).
                ``(2) Requirements.--
                        ``(A) In general.--In carrying out any audit under
                    this section (other than any initial audit survey or
                    any audit investigating possible criminal or fraudulent
                    conduct), either directly or through grant or contract,
                    the Inspector General of the Department of Labor and
                    the Comptroller General of the United States shall
                    furnish to the providers of job training programs, or
                    other entity to be audited, advance notification of the
                    overall objectives and purposes of the audit, and any
                    extensive recordkeeping or data requirements to be met,
                    not later than 14 days (or as soon as practicable),
                    prior to the commencement of the audit.
                        ``(B) Notification requirement.--If the scope,
                    objectives, or purposes of the audit change
                    substantially during the course of the audit, the
                    entity being audited shall be notified of the change as
                    soon as practicable.
                        ``(C) Additional requirement.--The reports on the
                    results of such audits shall cite the law, regulation,
                    policy, or other criteria applicable to any finding
                    contained in the reports.
                        ``(D) Rule of construction.--Nothing contained in
                    this title shall be construed so as to be inconsistent
                    with the Inspector General Act of 1978 (5 U.S.C. App.)
                    or government auditing standards issued by the
                    Comptroller General of the United States.''.

    SEC. 704. OTHER JOB TRAINING PROGRAMS.

        (a) In General.--The appropriate Secretaries shall--
                (1) require that the providers of job training programs, as
            such term is defined by such Secretaries, under the programs
            described in subsection (b), conduct an annual assessment of
            the programs in accordance with section 508(b) of the Workforce
            Investment Act of 1998; and
                (2) award grants under the programs described in subsection
            (b) on a competitive basis.
        (b) Job Training Programs.--Subsection (a) shall apply to the
    following programs:
                (1) The Disabled Veterans Outreach Program authorized under
            section 4103A of title 38, United States Code.
                (2) The Local Veterans' Employment Representative Program
            authorized under section 4104 of title 38, United States Code.
                (3) The Homeless Veterans' Reintegration Program authorized
            under section 2021 of title 38, United States Code.
                (4) Vocational Rehabilitation for Disabled Veterans
            authorized under chapter 31 of title 38, United States Code.
                (5) The National Guard Challenge Program authorized under
            section 509 of title 32, United States Code.
                (6) The Older American Community Service Program authorized
            under title V of the Older Americans Act of 1965 (42 U.S.C.
            3056 et seq.).
                (7) The Native American Vocational and Technical Education
            Program authorized under section 116 of the Carl D. Perkins
            Career and Technical Education Act of 2006 (29 U.S.C. 741).
                (8) Tribally Controlled Post-secondary Vocational and
            Technical Institutions programs authorized under section 117 of
            the Carl D. Perkins Career and Technical Education Act of 2006
            (20 U.S.C. 2327).
                (9) The Native Hawaiian Vocational Education Program
            authorized under section 116 of the Carl D. Perkins Career and
            Technical Education Act of 2006 (29 U.S.C. 741).
                (10) Career and Technical Assistance to the States
            authorized under section title I of the Carl D. Perkins Career
            and Technical Education Act of 2006 (20 U.S.C. 2321 et seq.).
                (11) Tech Prep Education Program authorized under title II
            of the Carl D. Perkins Career and Technical Education Act of
            2006 (29 U.S.C. 2371 et seq.).
                (12) Migrant and Seasonal Farmworkers Program authorized
            under section 304 of the Rehabilitation Act of 1973 (29 U.S.C.
            774).
                (13) Projects with industry authorized under section 611 of
            the Rehabilitation Act of 1973 (29 U.S.C. 795).
                (14) Vocational Rehabilitation Services authorized under
            title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et
            seq.).
                (15) American Indian Vocational Rehabilitation Services
            authorized under part C of title I of the Rehabilitation Act of
            1973 (29 U.S.C. 741 et seq.).
                (16) Coordination of Migrant Education Activities
            authorized under section 1308 of the Elementary and Secondary
            Education Act of 1965 (20 U.S.C. 6398).
                (17) Programs authorized under the Community Services Block
            Grant Act (42 U.S.C. 9901 et seq.).
                (18) The Tribal Work Grants program authorized under
            section 412(a)(2) of Social Security Act (42 U.S.C. 612(a)(2)).
                (19) Job training grants authorized under section 414(c) of
            the American Competitiveness and Workforce Improvement Act of
            1998 (29 U.S.C. 2916a).
                (20) Indian Employment, Job Placement Assistance, and
            Vocational Training programs authorized under the Indian Self-
            Determination Act (25 U.S.C. 450 et seq.).
                (21) Programs authorized under part A of title IV of the
            Social Security Act (42 U.S.C. 601 et seq.).
                (22) Refugee assistance programs authorized under chapter 2
            of title IV of the Immigration and Nationality Act (8 U.S.C.
            1521 et seq.).
                (23) Targeted assistance programs for refugees and entrants
            authorized under chapter 2 of title IV of the Immigration and
            Nationality Act (8 U.S.C. 1521 et seq.).
                (24) Programs authorized under section 16(h) of the Food
            and Nutrition Act of 2008 (7 U.S.C. 2025(h)).
                (25) The Federal Prisoner Reentry Initiative authorized
            under section 231(i) of Second Chance Act of 2007 (42 U.S.C.
            17541(i)).
                (26) Employment services authorized under the Wagner-Peyser
            Act of 1933 (29 U.S.C. 49 et seq.).
                (27) Training programs under section 236 of part II of
            subchapter B of chapter 2 of title II of the Trade Adjustment
            Assistance Act of 1974 (19 U.S.C. 2296).
        (c) Definition.--The term ``appropriate Secretary'' means the head
    of the Federal agency who exercises administrative authority over a
    program described in subsection (b).

    SEC. 705. TRANSPARENCY.

        Section 136(d)(3)(A) of the Workforce Investment Act of 1998 (29
    U.S.C. 2871) is amended to read as follows:
                        ``(A) shall make available to the general public
                    the information contained in such reports and the
                    results of an assessment using the performance measures
                    described in section 508(b) with respect to the
                    workforce investment activities authorized under this
                    subtitle--
                                ``(i) through publication; and
                                ``(ii) by posting such information and
                            results on the Internet website of the
                            Department of Labor in a format and language
                            understandable by the general public.''.

    SEC. 706. EVALUATIONS.

        (a) Evaluations.--Section 172 of the Workforce Investment Act of
    1998 (29 U.S.C. 2917) is amended--
                (1) in subsection (a)--
                        (A) in the matter preceding paragraph (1)--
                                (i) by inserting ``impact'' after
                            ``continuing''; and
                                (ii) by inserting ``impact'' after
                            ``Such''; and
                        (B) in paragraph (1)--
                                (i) by striking ``the general
                            effectiveness'' and inserting ``outcomes
                            measuring of the effectiveness'';
                                (ii) in subparagraph (A), by striking
                            ``and'' after the semicolon;
                                (iii) in subparagraph (B)--
                                        (I) by striking ``to the extent
                                    feasible,''; and
                                        (II) by inserting ``and'' after the
                                    semicolon; and
                                (iv) by adding at the end the following:
                        ``(C) increase the incomes and hourly wages of
                    participants in comparison to similarly situated
                    individuals who did not participate in such programs
                    and activities.'';
                (2) in subsection (b), by inserting ``impact'' after
            ``conduct'';
                (3) in subsection (c)--
                        (A) by striking ``Evaluations'' and inserting
                    ``Impact evaluations'';
                        (B) by inserting ``intervention and'' after ``,
                    including the use of'''
                        (C) by inserting ``The Secretary for each impact
                    evaluation shall fulfill all the notification and
                    reporting requirements under subsections (d), (e), and
                    (f).'' after ``assignment methodologies.''; and
                        (D) by striking ``by the end of fiscal year 2005''
                    and inserting ``not later than 3 years after the date
                    of the enactment of the Job Training Results Act of
                    2010'';
                (4) by redesignating subsections (c) through (f), as
            subsections (d) through (g), respectively; and
                (5) by inserting after subsection (c), the following:
        ``(a) Notification of Impact Evaluation Progress.--
                ``(1) Reports to congress.--Not later than 1 year after the
            date of the enactment of the Job Training Results Act of 2010,
            and annually thereafter, the Secretary shall transmit to the
            Committee on Education and the Labor, and the Committee on the
            Budget, of the House of Representatives and the Committee on
            Health, Education, Labor, and Pensions, and the Committee on
            Budget, of the Senate a report on the progress the Secretary is
            making in evaluating the programs and activities carried out
            under this section.
                ``(2) Availability to general public.--Not later than 1
            year after the date of the enactment of the Job Training
            Results Act of 2010, and annually thereafter not later than 30
            days after the transmission of an annual report under paragraph
            (1), the Secretary shall make available the reports to the
            general public on the Internet website of the Department of
            Labor.'';
                (6) by amending subsection (e) (as so redesignated), by
            inserting ``impact'' after ``carrying out an'';
                (7) by amending subsection (f) (as so redesignated)--
                        (A) by striking ``Workforce'' and inserting ``,
                    Labor and the Committee on the Budget,'';
                        (B) by striking ``Committee on Labor and Human
                    Resources'' and inserting ``Committee on Health,
                    Education, Labor, and Pensions, and the Committee on
                    Budget,'';
                        (C) by striking ``30 days'' and inserting ``60
                    days''; and
                        (D) by inserting the following: ``All reports
                    transmitted under this subsection shall be made
                    available to the general public on the Internet website
                    of the Department of Labor.''; and
                (8) by adding at the end the following:
        ``(h) GAO Report.--Not later than 3 years after the date of the
    enactment of the Job Training Results Act of 2010, and every 3 years
    thereafter, the Comptroller General of the United States shall conduct
    a study and submit a report to Congress that evaluates--
                ``(1) the effectiveness of the impact evaluations conducted
            under this section; and
                ``(2) the impact of such evaluations on the assessments
            conducted under section 508(b) with respect to the programs and
            activities carried out under this title.
        ``(i) Definitions.--In this section:
                ``(1) Impact evaluation.--The term `impact evaluation'
            means an evaluative study that evaluates, in accordance with
            subsection (a), the outcomes of programs and activities carried
            out under this title, including the impact on social conditions
            such programs and activities are intended to improve.
                ``(2) Scientific random assignment methodologies.--The term
            `scientific random assignment methodologies' means research
            designs conducted in program settings in which intervention and
            control groups are--
                        ``(A) formed by random assignment; and
                        ``(B) compared on the basis of outcome measures for
                    the purpose of determining the impact of the programs
                    and activities carried out under this title on
                    participants.
                ``(3) Control group.--The term `control group' means a
            group of individuals--
                        ``(A) who did not participate in the programs and
                    activities carried out under this title; and
                        ``(B) whose outcome measures are compared to the
                    outcome measures of individuals in an intervention
                    group.
                ``(4) Intervention group.--The term `intervention group'
            means a group of individuals--
                        ``(A) who participated in the programs and
                    activities carried out under this title; and
                        ``(B) whose outcome measures are compared to the
                    outcome measures of individuals in a control group.''.

    SEC. 707. ENCOURAGING INNOVATION.

        (a) State Block Grant.--Section 192 (29 U.S.C. 2942) is amended to
    read as follows:

    ``SEC. 192. JOB TRAINING IMPROVEMENT PLAN.

        ``(a) State Block Grant.--
                ``(1) In general.--Not earlier than 1 year of the date of
            the enactment of the `Job Training Results Act of 2010', a
            State may submit to the Secretary, and the Secretary (in
            cooperation with the appropriate Secretaries) may approve a Job
            Training Improvement Plan (in this section referred to as a
            `Plan') submitted by a State pursuant to subsection (d) under
            which the State is authorized to--
                        ``(A) integrate any of the funds that the State is
                    eligible to receive under the job training programs
                    described in subsection (g) to improve job training
                    results in the State; and
                        ``(B) waive, in accordance with the Plan and except
                    as otherwise indicated in this subsection, any of the
                    statutory and regulatory requirements--
                                ``(i) applicable under this title to local
                            areas; and
                                ``(ii) applicable under the programs
                            described in subsection (g), the funds of which
                            will be integrated under a Plan submitted under
                            this section.
                ``(2) Eligibility.--In order for a State's Plan to be
            approved under this section, the providers of training programs
            in the State shall have carried out at least 1 assessment
            pursuant to section 508 with respect to such programs.
        ``(b) Periods.--
                ``(1) In general.--The Secretary (in cooperation with other
            appropriate Secretaries) may--
                        ``(A) approve a State's Plan under this section for
                    a period of not more than 3 years; and
                        ``(B) renew a State's Plan under this section for
                    additional 3-year periods if the State demonstrates a
                    significant improvement in job training results at the
                    end of the preceding 3-year period.
        ``(c) Definitions.--For purposes of this section:
                ``(1) Job training results.--
                        ``(A) In general.--The term `job training results'
                    means an improvement in the assessment carried out
                    pursuant to section 508 with respect to the job
                    training programs conducted in a State, as compared to
                    the assessment of such programs carried out in the most
                    recent preceding fiscal year.
                        ``(B) Improvements.--An improvement in an
                    assessment described in subparagraph (A) shall
                    include--
                                ``(i) an increase in the percentage of
                            participants--
                                        ``(I) who were employed for at
                                    least 1 year in an occupation related
                                    to the training provided under the
                                    program;
                                        ``(II) who are employed at higher
                                    income levels; and
                                ``(ii) a decrease in the percentage of
                            participants who are receiving Federal
                            assistance
                ``(2) Appropriate secretary.--The term `appropriate
            Secretary' means the head of the Federal agency who exercises
            administrative authority over a program described in subsection
            (g).
        ``(d) Contents of Plan.--To have a Plan approved under this
    subsection, a State, after consultation with State and local workforce
    investment boards, shall submit a Plan to the Secretary at such time,
    in such manner, and containing such information as the Secretary may
    require, including--
                ``(1) identification of the funds the State is eligible to
            receive under the job training programs described in subsection
            (g) that will be integrated;
                ``(2) a description of how the Plan, including how the
            integration of funds under the Plan will result in a
            significant improvement in job training results in the State;
                ``(3) a description of how the State will maintain accurate
            records of the performance measures for the assessments
            required pursuant to section 508;
                ``(4) assurances that in carrying out the Plan--
                        ``(A) the State will serve populations consistent
                    with the populations served by the funds which are
                    being integrated, and will provide such populations
                    universal access to work ready services as described in
                    section 134(d)(2) of this Act;
                        ``(B) of the funds expended under the plan each
                    fiscal year, not more than 10 percent of such funds
                    will be expended on the costs of administration (as
                    defined by the Secretary); and
                        ``(C) the State will comply with requirements under
                    this title and the programs to be integrated relating
                    to wage and labor standards (including nondisplacement
                    provisions), grievance procedures and judicial review,
                    and nondiscrimination;
                ``(5) identification of private resources that will be used
            to assist in improving job training results; and
                ``(6) a description of the job training awareness campaign
            that the State will carry out as part of such Plan.
        ``(e) Integration of Job Training Programs Authorized.--
                ``(1) Authorization for integration.--In carrying out this
            subsection, the Secretary, in cooperation with the appropriate
            Secretaries, shall, upon the approval of the Plan submitted
            under subsection (d), authorize a State to integrate, as
            described in paragraph (2) the portion of the funds the State
            is eligible to receive under the programs described in
            subsection (g) to assist in implementing such Plan.
                ``(2) Integration.--The authorization shall give the State
            the authority to integrate, in accordance with the State's
            Plan, funds the State--
                        ``(A) is eligible to receive under the programs
                    described in subsection (g); and
                        ``(B) has identified under the Plan as funds to be
                    integrated.
        ``(f) Effect on Program Requirements.--The State may use the
    integrated funds used to carry out any of the activities authorized
    under any of the programs described in subsection (g), but shall not be
    required to carry out any requirements of the statutes authorizing the
    programs, except as otherwise specified in this section.
        ``(g) Job Training Programs.--Funds that shall be made available
    for integration under an approved Plan are funds provided under the
    following programs:
                ``(1) Programs for migrant youth authorized under section
            127.
                ``(2) Native American Programs authorized under section
            166.
                ``(3) Migrant and seasonal farm workers programs authorized
            under section 167.
                ``(4) Youth Opportunity Grant authorized under section 169.
                ``(5) Grants to States for Incarcerated Youth Offenders
            authorized under section 171.
                ``(6) Programs for the reintegration of ex-offenders
            authorized under section 171.
                ``(7) Responsible Reintegration of Youth Offenders program
            authorized under section 171.
                ``(8) Program of Competitive Grants for Worker Training and
            Placement in High Growth and Emerging Industry Sectors
            authorized under section 171.
                ``(9) Energy Efficiency and Renewable Worker Training
            Programs authorized under section 171(e).
                ``(10) Youthbuild Program authorized under section 173A.
                ``(11) Veterans' Workforce Investment Program authorized
            under section 168.
                ``(12) The program of workforce investment activities for
            youth authorized under chapter 4 of subtitle B of title I.
                ``(13) The program of workforce investment activities for
            adults authorized under chapter 5 of subtitle B of title I.
                ``(14) The program of workforce investment activities for
            dislocated workers under chapter 5 of subtitle B of title I.
                ``(15) The Adult Education and Family Literacy Act
            authorized under title II.
                ``(16) The Disabled Veterans Outreach Program authorized
            under section 4103A of title 38, United States Code.
                ``(17) The Local Veterans' Employment Representative
            Program authorized under section 4104 of title 38, United
            States Code.
                ``(18) The Homeless Veterans' Reintegration Program
            authorized under section 2021 of title 38, United States Code.
                ``(19) Vocational Rehabilitation for Disabled Veterans
            authorized under chapter 31 of title 38, United States Code.
                ``(20) The National Guard Challenge Program authorized
            under section 509 of title 32, United States Code.
                ``(21) The Older American Community Service Program
            authorized under title V of the Older Americans Act of 1965 (42
            U.S.C. 3056 et seq.).
                ``(22) The Native American Vocational and Technical
            Education Program authorized under section 116 of the Carl D.
            Perkins Career and Technical Education Act of 2006 (29 U.S.C.
            741).
                ``(23) Tribally Controlled Post-secondary Vocational and
            Technical Institutions programs authorized under section 117 of
            the Carl D. Perkins Career and Technical Education Act of 2006
            (20 U.S.C. 2327).
                ``(24) The Native Hawaiian Vocational Education Program
            authorized under section 116 of the Carl D. Perkins Career and
            Technical Education Act of 2006 (29 U.S.C. 741).
                ``(25) Career and Technical Assistance to the States
            authorized under section title I of the Carl D. Perkins Career
            and Technical Education Act of 2006 (20 U.S.C. 2321 et seq.).
                ``(26) Tech Prep Education Program authorized under title
            II of the Carl D. Perkins Career and Technical Education Act of
            2006 (29 U.S.C. 2371 et seq.).
                ``(27) Migrant and Seasonal Farmworkers Program authorized
            under section 304 of the Rehabilitation Act of 1973 (29 U.S.C.
            774).
                ``(28) Projects with industry authorized under section 611
            of the Rehabilitation Act of 1973 (29 U.S.C. 795).
                ``(29) Vocational Rehabilitation Services authorized under
            title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et
            seq.).
                ``(30) American Indian Vocational Rehabilitation Services
            authorized under part C of title I of the Rehabilitation Act of
            1973 (29 U.S.C. 741 et seq.).
                ``(31) Coordination of Migrant Education Activities
            authorized under section 1308 of the Elementary and Secondary
            Education Act of 1965 (20 U.S.C. 6398).
                ``(32) Programs authorized under the Community Services
            Block Grant Act (42 U.S.C. 9901 et seq.).
                ``(33) The Tribal Work Grants program authorized under
            section 412(a)(2) of Social Security Act (42 U.S.C. 612(a)(2)).
                ``(34) Job training grants authorized under section 414(c)
            of the American Competitiveness and Workforce Improvement Act
            of 1998 (29 U.S.C. 2916a).
                ``(35) Indian Employment, Job Placement Assistance, and
            Vocational Training programs authorized under the Indian Self-
            Determination Act (25 U.S.C. 450 et seq.).
                ``(36) Programs authorized under part A of title IV of the
            Social Security Act (42 U.S.C. 601 et seq.).
                ``(37) Refugee assistance programs authorized under chapter
            2 of title IV of the Immigration and Nationality Act (8 U.S.C.
            1521 et seq.).
                ``(38) Targeted assistance programs for refugees and
            entrants authorized under chapter 2 of title IV of the
            Immigration and Nationality Act (8 U.S.C. 1521 et seq.).
                ``(39) Programs authorized under section 16(h) of the Food
            and Nutrition Act of 2008 (7 U.S.C. 2025(h)).
                ``(40) The Federal Prisoner Reentry Initiative authorized
            under section 231(i) of Second Chance Act of 2007 (42 U.S.C.
            17541(i)).
                ``(41) Employment services authorized under the Wagner-
            Peyser Act of 1933 (29 U.S.C. 49 et seq.).
                ``(42) Training programs under section 236 of part II of
            subchapter B of chapter 2 of title II of the Trade Adjustment
            Assistance Act of 1974 (19 U.S.C. 2296).
        ``(h) Performance Measures and Reporting.--
                ``(1) Performance measures.--Each State with an approved
            Plan under this section shall carry out an assessment pursuant
            to section 508 of all the job training programs conducted in
            such State that receive funding under the Plan for each fiscal
            year the Plan is approved under this section.
                ``(2) Reporting.--Each State with an approved Plan under
            this section shall ensure that records are maintained and
            reports are submitted, in such form and containing such
            information, as the Secretary may require regarding the
            performance of job training programs funded pursuant to this
            section.
        ``(i) Technical Assistance and Evaluation.--
                ``(1) Technical assistance.--The Secretary shall provide
            such staff training, technical assistance, and other activities
            as the Secretary deems appropriate to support the
            implementation of this section.
                ``(2) Evaluation.--The Secretary may require that States
            with an approved Plan under this section participate in an
            evaluation of job training programs funded pursuant to this
            subsection, including an evaluation using the techniques
            described in section 172(c).
        ``(j) Plan Review.--
                ``(1) In general.--Upon receipt of a Plan from the
            Governor, the Secretary shall consult with the appropriate
            Secretaries in reviewing and approving such plan. Such plan
            shall be approved if it meets the requirements described in
            subsection (d).
                ``(2) Plan approval.--
                        ``(A) 90-day period.--Subject to subparagraph (B),
                    a Plan that is submitted to the Secretary under this
                    section shall be considered to be approved by the
                    Secretary at the end of the 90-day period beginning on
                    the day the Secretary receives the Plan, unless the
                    Secretary denies the Plan during the 90-day period.
                        ``(B) 30-day extensions.--If the Secretary is in
                    good faith negotiations with a State with respect to
                    the State's Plan--
                                ``(i) at the end of the 90-day period
                            described in subparagraph (A), the Secretary
                            may have an additional 30 days to determine
                            whether to approve the Plan; or
                                ``(ii) at the end of the 30 days described
                            in clause (i), the Secretary may have an
                            additional 30 days to determine whether to
                            approve the Plan.
                ``(3) Plan denial.--In the case where the Secretary denies
            a Plan submitted by a State under this section, the Secretary
            shall--
                        ``(A) provide a written explanation to the State
                    for the denial of the Plan; and
                        ``(B) make such written explanation accessible to
                    the general public.
        ``(k) Federal Responsibilities.--
                ``(1) Interagency memorandum of understanding.--Within 90
            days following the date of enactment of this section, the
            Secretary and the appropriate Secretaries shall enter into an
            interdepartmental memorandum of agreement providing for the
            implementation of the Plans with respect to the integration of
            funds administered by each Secretary.
                ``(2) Interagency funds transfers authorized.--The
            Secretary and the appropriate Secretaries responsible for the
            programs that are included in a Plan approved are authorized to
            take such action as may be necessary to provide for intra-
            agency or interagency transfers of funds otherwise available to
            a State in order to further the purposes of this section.''.

    SEC. 708. MAKING WIA TRAINING VOUCHERS MORE ACCESSIBLE AND FLEXIBLE.

        (a) Use of Funds for Employment and Training Activities.--
                (1) Work ready services.--Section 134(d)(2) (29 U.S.C.
            2864(c)(2)) is amended--
                        (A) in the heading, by striking ``core services''
                    and inserting ``work ready services'';
                        (B) by striking ``core services'' and inserting
                    ``work ready services'';
                        (C) by striking ``paragraph (1)(A)'' and inserting
                    ``paragraph (1)(A)(i)'';
                        (D) by striking ``who are adults or dislocated
                    workers'';
                        (E) in subparagraph (A), by inserting ``and
                    assistance in obtaining eligibility determinations
                    under the other one-stop partner programs through such
                    activities as assisting in the submission of
                    applications, the provision of information on the
                    results of such applications, the provision of intake
                    services and information, and, where appropriate and
                    consistent with the authorizing statute of the one-stop
                    partner program, determinations of eligibility'' after
                    ``subtitle'';
                        (F) by amending subparagraph (D) to read as
                    follows:
                        ``(D) labor exchange services, including--
                                ``(i) job search and placement assistance,
                            and where appropriate career counseling;
                                ``(ii) appropriate recruitment services for
                            employers, including small employers, in the
                            local area, which may include services
                            described in this subsection, including
                            information and referral to specialized
                            business services not traditionally offered
                            through the one-stop delivery system; and
                                ``(iii) reemployment services provided to
                            unemployment claimants, including claimants
                            identified as in need of such services under
                            the worker profiling system established under
                            section 303(j) of the Social Security Act (42
                            U.S.C. 503(j));'';
                        (G) in subparagraph (I), by inserting ``and the
                    administration of the work test for the unemployment
                    compensation system'' after ``compensation''; and
                        (H) by striking subparagraph (H) and inserting the
                    following:
                        ``(H) provision of accurate information, in formats
                    that are usable and understandable to all one-stop
                    center customers, relating to the availability of
                    supportive services or assistance, including child
                    care, child support, medical or child health assistance
                    under title XIX or XXI of the Social Security Act (42
                    U.S.C. 1396 et seq. and 1397aa et seq.), benefits under
                    the Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), the
                    earned income tax credit under section 32 of the
                    Internal Revenue Code of 1986, and assistance under a
                    State program funded under part A of title IV of the
                    Social Security Act (42 U.S.C. 601 et seq.) and other
                    supportive services and transportation provided through
                    funds made available under such part, available in the
                    local area, and referral to such services or assistance
                    as appropriate;''; and
                        (I) by amending subparagraph (J) to read as
                    follows:
                        ``(J) assistance in establishing eligibility for
                    programs of financial aid assistance for training and
                    education programs that are not funded under this Act
                    and are available in the local area; and''; and
                        (J) by redesignating subparagraph (K) as
                    subparagraph (M); and
                        (K) by inserting the following new subparagraphs
                    after subparagraph (J)):
                        ``(K) the provision of information from official
                    publications of the Internal Revenue Service, regarding
                    Federal tax credits available to individuals relating
                    to education, job training and employment, including
                    the Hope Scholarship Credit and the Lifetime Learning
                    Credit (26 U.S.C. 25A), and the Earned Income Tax
                    Credit (26 U.S.C. 32);
                        ``(L) services relating to the Work Opportunity Tax
                    Credit (26 U.S.C. 51);
                        ``(M) comprehensive and specialized assessments of
                    the skill levels and service needs of adults and
                    dislocated workers, which may include--
                                ``(i) diagnostic testing and use of other
                            assessment tools; and
                                ``(ii) in-depth interviewing and evaluation
                            to identify employment barriers and appropriate
                            employment goals;
                        ``(N) development of an individual employment plan,
                    to identify the employment goals, appropriate
                    achievement objectives, and appropriate combination of
                    services for the participation to achieve the
                    employment goals;
                        ``(O) group counseling;
                        ``(P) individual counseling and career planning;
                        ``(Q) case management;
                        ``(R) short-term prevocational services, including
                    development of learning skills, communications skills,
                    interviewing skills, punctuality, personal maintenance
                    skills, and professional conduct, to prepare
                    individuals for unsubsidized employment or training;
                        ``(S) internships and work experience;
                        ``(T) literacy activities relating to basic work
                    readiness, information and communication technology
                    literacy activities, and financial literacy activities,
                    if such activities are not available to participants in
                    the local area under programs administered under the
                    Adult Education and Family Literacy Act (20 U.S.C. 2901
                    et seq.); and
                        ``(U) out-of-area job search assistance and
                    relocation assistance.''.
                        (L) Delivery of services.--Section 134(c)(3) (29
                    U.S.C. 2864(c)(3)) is amended to read as follows:
                ``(3) Delivery of services.--The work ready services
            described in paragraph (M) through (U) shall be provided
            through the one-stop delivery system and may be provided
            through contracts with public, private for-profit, and private
            nonprofit service providers, approved by the local board.''.
                        (M) Training services.--Section 134(c)(4) is
                    amended--
                                (i) by amending subparagraph (A) to read as
                            follows:
                        ``(A) In general.--Funds allocated to a local area
                    under section 133(b) shall be used to provide training
                    services to adults who--
                                ``(i) after an interview, evaluation, or
                            assessment, and case management, have been
                            determined by a one-stop operator or one-stop
                            partner, as appropriate, to--
                                        ``(I) be in need of training
                                    services to obtain or retain suitable
                                    employment; and
                                        ``(II) have the skills and
                                    qualifications to successfully
                                    participate in the selected program of
                                    training services;
                                ``(ii) select programs of training services
                            that are directly linked to the employment
                            opportunities in the local area involved or in
                            another area in which the adults receiving such
                            services are willing to commute or relocate;
                                ``(iii) who meet the requirements of
                            subparagraph (B); and
                                ``(iv) who are determined eligible in
                            accordance with the priority system in effect
                            under subparagraph (E).'';
                                (ii) in subparagraph (B)(i), by striking
                            ``Except'' and inserting ``Notwithstanding
                            section 479B of the Higher Education Act of
                            1965 (20 U.S.C. 1087uu) and except'';
                                (iii) by amending subparagraph (D) to read
                            as follows:
                        ``(D) Training services.--Training services
                    authorized under this paragraph may include--
                                ``(i) occupational skills training;
                                ``(ii) on-the-job training;
                                ``(iii) skill upgrading and retraining;
                                ``(iv) entrepreneurial training;
                                ``(v) education activities leading to a
                            high school diploma or its equivalent,
                            including a General Educational Development
                            credential, in combination with, concurrently
                            or subsequently, occupational skills training;
                                ``(vi) adult education and literacy
                            activities provided in conjunction with other
                            training authorized under this subparagraph;
                                ``(vii) workplace training combined with
                            related instruction; and
                                ``(viii) occupational skills training that
                            incorporates English language acquisition.'';
                                (iv) by amending subparagraph (E) to read
                            as follows:
                        ``(E) Priority.--
                                ``(i) In general.--A priority shall be
                            given to dislocated workers or workers who are
                            in danger of being dislocated for the provision
                            of intensive and training services under this
                            subsection.
                                ``(ii) Determinations.--The Governor and
                            the appropriate local board shall direct the
                            one-stop operators in the local area with
                            regard to making determinations with respect to
                            the priority of service under this
                            subparagraph.'';
                                (v) in subparagraph (F), by striking clause
                            (iii) and inserting the following:
                                ``(iii) Enhanced individual training
                            accounts.--An individual who seeks training
                            services and who is eligible pursuant to
                            subparagraph (A), may, in consultation with a
                            case manager, select an eligible provider of
                            training services from the list or identifying
                            information for providers described in clause
                            (ii)(I). Upon such selection, the one-stop
                            operator involved shall, to the extent
                            practicable, refer such individual to the
                            eligible provider of training services, and
                            arrange for payment for such services through a
                            enhanced individual training account.
                                ``(iv) Coordination.--Each local board may,
                            through one-stop centers, coordinate enhanced
                            individual training accounts with other
                            Federal, State, local, or private job training
                            programs or sources to assist the individual in
                            obtaining training services.
                                ``(v) Enhanced individual training
                            accounts.--Each local board may, through one-
                            stop centers, assist individuals receiving
                            enhanced individual training accounts through
                            the establishment of such accounts that
                            include, in addition to the funds provided
                            under this paragraph, funds from other programs
                            and sources that will assist the individual in
                            obtaining training services.''; and
                                (vi) in subparagraph (G)--
                                        (I) in the subparagraph heading, by
                                    striking ``individual training
                                    accounts'' and inserting ``enhanced
                                    individual training accounts'';
                                        (II) in clause (i) by striking
                                    ``individual training accounts'' and
                                    inserting ``enhanced individual
                                    training accounts'';
                                        (III) in clause (ii)--
                                                (aa) by striking ``an
                                            individual training account''
                                            and inserting ``a enhanced
                                            individual training account'';
                                                (bb) in subclause (II), by
                                            striking ``individual training
                                            accounts'' and inserting
                                            ``enhanced individual training
                                            accounts'';
                                                (cc) in subclause (II) by
                                            striking ``or'' after the
                                            semicolon;
                                                (dd) in subclause (III) by
                                            striking the period and
                                            inserting ``; or''; and
                                                (ee) by adding at the end
                                            of the following:
                                        ``(IV) The local board determines
                                    that it would be most appropriate to
                                    award a contract to an institution of
                                    higher education in order to facilitate
                                    the training of multiple individuals in
                                    high-demand occupations, if such
                                    contract does not limit customer
                                    choice.''.
                                        (IV) in clause (iv)--
                                                (aa) by redesignating
                                            subclause (IV) as subclause (V)
                                            and inserting after subclause
                                            (III) the following:
                                        ``(IV) Individuals with
                                    disabilities.''.
                (2) Permissible activities.--Section 134(c) is amended by
            amending paragraph (1) to read as follows:
                ``(1) Discretionary one-stop delivery activities.--
                        ``(A) In general.--Funds allocated to a local area
                    under section 133(b) may be used to provide, through
                    the one-stop delivery system--
                                ``(i) customized screening and referral of
                            qualified participants in training services to
                            employers;
                                ``(ii) customized employment-related
                            services to employers on a fee-for-service
                            basis;
                                ``(iii) customer support to navigate among
                            multiple services and activities for special
                            participant populations that face multiple
                            barriers to employment, including individuals
                            with disabilities;
                                ``(iv) employment and training assistance
                            provided in coordination with child support
                            enforcement activities of the State agency
                            carrying out subtitle D of title IV of the
                            Social Security Act (42 U.S.C. 651 et seq.);
                                ``(v) activities to improve services to
                            local employers, including small employers in
                            the local area, and increase linkages between
                            the local workforce investment system and
                            employers;
                                ``(vi) activities to facilitate remote
                            access to services provided through a one-stop
                            delivery system, including facilitating access
                            through the use of technology; and
                                ``(vii) activities to carry out business
                            services and strategies that meet the workforce
                            investment needs of local area employers, as
                            determined by the local board, consistent with
                            the local plan under section 118, which
                            services--
                                        ``(I) may be provided through
                                    effective business intermediaries
                                    working in conjunction with the local
                                    board, and may also be provided on a
                                    fee-for-service basis or through the
                                    leveraging of economic development and
                                    other resources as determined
                                    appropriate by the local board; and
                                        ``(II) may include--
                                                ``(aa) identifying and
                                            disseminating to business,
                                            educators, and job seekers,
                                            information related to the
                                            workforce, economic and
                                            community development needs,
                                            and opportunities of the local
                                            economy;
                                                ``(bb) development and
                                            delivery of innovative
                                            workforce investment services
                                            and strategies for area
                                            businesses, which may include
                                            sectoral, industry cluster,
                                            regional skills alliances,
                                            career ladder, skills
                                            upgrading, skill standard
                                            development and certification,
                                            apprenticeship, and other
                                            effective initiatives for
                                            meeting the workforce
                                            investment needs of area
                                            employers and workers;
                                                ``(cc) participation in
                                            seminars and classes offered in
                                            partnership with relevant
                                            organizations focusing on the
                                            workforce-related needs of area
                                            employers and job seekers;
                                                ``(dd) training consulting,
                                            needs analysis, and brokering
                                            services for area businesses,
                                            including the organization and
                                            aggregation of training (which
                                            may be paid for with funds
                                            other than those provided under
                                            this title), for individual
                                            employers and coalitions of
                                            employers with similar
                                            interests, products, or
                                            workforce needs;
                                                ``(ee) assistance to area
                                            employers in the aversion of
                                            layoffs and in managing
                                            reductions in force in
                                            coordination with rapid
                                            response activities;
                                                ``(ff) the marketing of
                                            business services offered under
                                            this title, to appropriate area
                                            employers, including small and
                                            mid-sized employers;
                                                ``(gg) information referral
                                            on concerns affecting local
                                            employers; and
                                                ``(hh) other business
                                            services and strategies
                                            designed to better engage
                                            employers in workforce
                                            investment activities and to
                                            make the workforce investment
                                            system more relevant to the
                                            workforce investment needs of
                                            area businesses, as determined
                                            by the local board to be
                                            consistent with the objectives
                                            of this title.''.

    SEC. 709. LIFE LONG LEARNING AWARENESS CAMPAIGNS.

        (a) Federal Communications Commission.--
                (1) In general.--The Federal Communications Commission
            shall require that each licensed broadcaster keep a record of
            the number and duration of public service announcements
            voluntarily broadcast with respect to the job training
            opportunities and services described in section 509 of the
            Workforce Investment Act of 1998.
                (2) Deadline.--Not later than 90 days after the date of the
            enactment of this Act, the Federal Communications Commission
            shall take all actions necessary to adopt a regulation to
            implement paragraph (1).
                (3) Requirement.--The Federal Communications Commission
            shall consider the voluntary broadcast of any public service
            announcement described in paragraph (1) as--
                        (A) fulfilling part of a broadcaster's obligation
                    to serve the public interest; and
                        (B) demonstrating such service for the purposes of
                    license renewal.
        (b) Job Training Providers.--Title V of the Workforce Investment
    Act of 1998 (20 U.S.C. 9271 et seq.) is further amended by adding at
    the end the following:

    ``SEC. 509. PUBLIC SERVICE ANNOUNCEMENTS.

        ``(a) In General.--Each provider of a job training program shall
    make periodic public service announcements to inform the general public
    about job training opportunities and services, including--
                ``(1) the availability of job training opportunities under
            the program;
                ``(2) Federal Pell Grants available under title IV of the
            Higher Education Act of 1965 (20 U.S.C. 1070 et seq.);
                ``(3) the Job Corps centers;
                ``(4) the one-stop delivery systems; and
                ``(5) community colleges.
        ``(b) Regulations.--The Secretary shall promulgate regulations to
    assist providers of job training programs in carrying out the
    requirements described in subsection (a). In promulgating such
    regulations, the Secretary shall consider whether the requirements may
    be satisfied by--
                ``(1) posting the required information on an Internet Web
            site;
                ``(2) publishing the required information in a newspaper;
            or
                ``(3) making an announcement containing the required
            information on the television or radio.
        ``(c) Definition.--The term `job training program' has the meaning
    given such term in section 507(d).''.

    SEC. 710. GAO REPORTS.

        (a) Identifying Duplication.--Not later than 1 year after the date
    of the enactment of this Act, the Comptroller General of the United
    States shall conduct a study and submit a report to Congress on job
    training programs that--
                (1) identifies duplications among such programs; and
                (2) if applicable, recommends the consolidation of such
            programs.
        (b) Effectiveness of Programs.--Not later than 2 years after the
    date of the enactment of this Act, and every 2 years thereafter, the
    Comptroller General of the United States shall conduct a study and
    submit a report to Congress that evaluates the effectiveness of job
    training programs based on the assessments of such programs carried out
    under section 508(b) of the Workforce Investment Act of 1998 (as
    amended by this Act).
        (c) Definition.--For purposes of this section, the term ``job
    training program'' has the meaning given such term in 507(d) of the
    Workforce Investment Act of 1998 (as amended by this Act).

                TITLE VIII--SPENDING LIMITS AND DEFICIT CONTROL

    SEC. 800. SHORT TITLE.

        This title may be cited as the ``Spending Enforcement and Control
    Act of 2010''.

                Subtitle A--Spending Limits and Deficit Control

    SEC. 801. DISCRETIONARY SPENDING LIMITS.

        (a)  Discretionary Spending Limits.--Section 251 of the Balanced
    Budget and Emergency Deficit Control of Act of 1985 is amended to read
    as follows:
        ``(a)  Discretionary Spending Limits.--The fiscal years for the
    discretionary spending limits shall be as follows:
                ``(1) Fiscal year 2011: $1,203,000,000,000 in outlays.
                ``(2) Fiscal year 2012: $1,144,000,000,000 in outlays.
                ``(3) Fiscal year 2013: $1,143,000,000,000 in outlays.
                ``(4) Fiscal year 2014: $1,143,000,000,000 in outlays.
                ``(5) Fiscal year 2015: $1,149,000,000,000 in outlays.
                ``(6) Fiscal year 2016: $1,165,000,000,000 in outlays.
                ``(7) Fiscal year 2017: $1,176,000,000,000 in outlays.
                ``(8) Fiscal year 2018: $1,184,000,000,000 in outlays.
                ``(9) Fiscal year 2019: $1,202,000,000,000 in outlays.
        ``(b) Spending Reduction Order.--A spending reduction ordered shall
    be implemented using the procedures set forth in section 256.''.
        (b) Conforming Amendment.--The item relating to section 251 in the
    table of contents set forth in 250(c) of the Balanced Budget and
    Emergency Deficit Control Act of 1985 is amended to read as follows:

    ``Sec. 251. Discretionary spending limits.''.

    SEC. 802. TOTAL SPENDING LIMITS.

        (a) Total Spending Limits.--After section 252 of the Balanced
    Budget and Emergency Deficit Control Act of 1985, add the following new
    section:

    ``SEC. 252A. TOTAL SPENDING LIMITS.

        ``(a) Projections.--
                ``(1) OMB report.--OMB shall prepare a report comparing
            projected total spending under section 257 and the total
            spending limits in subsection (d), and include such report in
            the budget as submitted by the President annually under section
            1105(a) of title 31, United States Code.
                ``(2) CBO report.--CBO shall prepare a report comparing
            projected total spending under section 257 and the total
            spending limits in subsection (d) and include such report in
            the CBO annual baseline and reestimate of the President's
            budget.
                ``(3) Inclusion in spending reduction orders.--Reports
            prepared pursuant to this subsection shall be included in the
            spending reduction report.
        ``(b) Spending Reduction Order.--A spending reduction order shall
    be implemented using the procedures set forth in section 256.
        ``(c) Fiscal Years of the Total Spending Period.--The fiscal years
    within the total spending period shall be as follows:
                ``(1) Fiscal year 2011: 22.8 percent.
                ``(2) Fiscal year 2012: 21.6 percent.
                ``(3) Fiscal year 2013: 21.8 percent.
                ``(4) Fiscal year 2014: 21.9 percent.
                ``(5) Fiscal year 2015: 21.7 percent.
                ``(6) Fiscal year 2016: 22.0 percent.
                ``(7) Fiscal year 2017: 21.7 percent.
                ``(8) Fiscal year 2018: 21.6 percent.
                ``(9) Fiscal year 2019: 22.3 percent.
                ``(10) Fiscal year 2020: 22.3 percent.
                ``(11) Fiscal year 2021: 22.4 percent.
                ``(12) Fiscal year 2022: 22.6 percent.
                ``(13) Fiscal year 2023: 22.8 percent.
                ``(14) Fiscal year 2024: 22.9 percent.
                ``(15) Fiscal year 2025: 22.9 percent.
                ``(16) Fiscal year 2026: 23.2 percent.
                ``(17) Fiscal year 2027: 23.5 percent.
                ``(18) Fiscal year 2028: 23.6 percent.
                ``(19) Fiscal year 2029: 23.7 percent.
                ``(20) Fiscal year 2030: 23.8 percent.
                ``(21) Fiscal year 2031: 23.9 percent.
                ``(22) Fiscal year 2032: 24.0 percent.
                ``(23) Fiscal year 2033: 24.1 percent.
                ``(24) Fiscal year 2034: 24.1 percent.
                ``(25) Fiscal year 2035: 24.1 percent.
                ``(26) Fiscal year 2036: 24.1 percent.
                ``(27) Fiscal year 2037: 24.1 percent.
                ``(28) Fiscal year 2038: 23.9 percent.
                ``(29) Fiscal year 2039: 23.7 percent.
                ``(30) Fiscal year 2040: 23.5 percent.
                ``(31) Fiscal year 2041: 23.5 percent.
                ``(32) Fiscal year 2042: 23.4 percent.
                ``(33) Fiscal year 2043: 23.1 percent.
                ``(34) Fiscal year 2044: 23.0 percent.
                ``(35) Fiscal year 2045: 22.7 percent.
                ``(36) Fiscal year 2046: 22.4 percent.
                ``(37) Fiscal year 2047: 22.2 percent.
                ``(38) Fiscal year 2048: 21.9 percent.
                ``(39) Fiscal year 2049: 21.7 percent.
                ``(40) Fiscal year 2050: 21.6 percent.
                ``(41) Fiscal year 2051: 21.4 percent.
                ``(42) Fiscal year 2052: 21.2 percent.
                ``(43) Fiscal year 2053: 20.9 percent.
                ``(44) Fiscal year 2054: 20.9 percent.
                ``(45) Fiscal year 2055: 20.6 percent.
                ``(46) Fiscal year 2056: 20.3 percent.
                ``(47) Fiscal year 2057: 20.1 percent.
                ``(48) Fiscal year 2058: 20.0 percent.
                ``(49) Fiscal year 2059: 19.7 percent.
                ``(50) Fiscal year 2060: 19.6 percent.
                ``(51) Fiscal year 2061: 19.4 percent.
                ``(52) Fiscal year 2062: 19.2 percent.
                ``(53) Fiscal year 2063: 18.9 percent.
                ``(54) Fiscal year 2064: 18.8 percent.
                ``(55) Fiscal year 2065: 18.4 percent.
                ``(56) Fiscal year 2066: 18.2 percent.
                ``(57) Fiscal year 2067: 18.1 percent.
                ``(58) Fiscal year 2068: 17.6 percent.
                ``(59) Fiscal year 2069: 17.5 percent.
                ``(60) Fiscal year 2070: 17.1 percent.
                ``(61) Fiscal year 2071: 16.8 percent.
                ``(62) Fiscal year 2072: 16.6 percent.
                ``(63) Fiscal year 2073: 16.2 percent.
                ``(64) Fiscal year 2074: 16.0 percent.
                ``(65) Fiscal year 2075: 15.6 percent.
                ``(66) Fiscal year 2076: 15.4 percent.
                ``(67) Fiscal year 2077: 15.0 percent.
                ``(68) Fiscal year 2078: 14.7 percent.
                ``(69) Fiscal year 2079: 14.3 percent.
                ``(70) Fiscal year 2080: 14.0 percent.
                ``(71) Fiscal year 2081: 13.6 percent.
                ``(72) Fiscal year 2082: 13.4 percent.
                ``(73) Fiscal year 2083: 13.0 percent.''.
        (b) Definitions.--Section 3 of the Congressional Budget and
    Impoundment Control Act of 1974 (2 U.S.C. 622) is amended by adding at
    the end the following new paragraph:
                ``(11) The term `total spending' means all outlays of the
            Federal Government including those from off-budget entities and
            budget authority and outlays flowing therefrom, as applicable,
            designated as emergencies.''.
        (c) Conforming Amendment.--The table of contents set forth in
    250(c) of the Balanced Budget and Emergency Deficit Control Act of 1985
    is amended by inserting after the item relating to section 252A the
    following new item:

    ``Sec. 252A. Total spending limits.''.

                         Subtitle B--Reports and Orders

    SEC. 811. REPORTS AND ORDERS.

        Section 254 of the Balanced Budget and Emergency Deficit Control
    Act of 1985 is amended to read as follows:

    ``SEC. 254. REPORTS AND ORDERS.

        ``(a) Timetable.--

    ``Date:                                   Action to be completed:
    5 days before the President's budget      CBO sequestration preview report.
     submission.
    President's budget submission...........  OMB sequestration preview report.
    August 10...............................  CBO sequestration update report.
    August 20...............................  OMB sequestration update report.
    10 days after end of session............  CBO sequestration final report.
    15 days after end of session............  OMB sequestration final report; Presidential order.

        ``(b) Submission and Availability of Reports.--Each report required
    by this section shall be submitted to the Committees on the Budget of
    the House of Representatives and the Senate. On the following day a
    notice of the report shall be printed in the Federal Register.
        ``(c) Sequestration Preview Report.--
                ``(1) Reporting requirement.--On the dates specified in
            subsection (a), OMB and CBO shall issue a preview report
            regarding discretionary limits and total spending limits,
            sequestration based on laws enacted through those dates.
                ``(2)  Discretionary spending limit sequestration report.--
            The preview report shall set forth for the current year and the
            budget year the following:
                        ``(A) The discretionary spending limit;
                        ``(B) The estimated discretionary spending amount;
                    and
                        ``(C) The amount of reductions required under
                    section 251.
                ``(3) Total spending limit sequestration report.--The
            preview reports shall set forth for the budget year estimates
            for the following:
                        ``(A) The total spending limit;
                        ``(B) The estimated total spending amount; and
                        ``(C) The amount of reductions required under
                    section 252A.
                ``(4) Explanation of differences.--The OMB reports shall
            explain the differences between OMB and CBO estimates for each
            item set forth in this subsection.
        ``(d) Sequestration Update Report.--On the dates specified in
    subsection (a), OMB and CBO shall issue a sequestration update report,
    reflecting laws enacted through those dates, containing all of the
    information required in the sequestration preview report.
        ``(e) Sequestration Final Report.--
                ``(1) Reporting requirement.--On the dates specified in
            subsection (a), OMB and CBO shall issue a sequestration final
            report, reflecting laws enacted through those dates, containing
            all of the information required in the sequestration preview
            report.
                ``(2) Presidential order.--On the date specified in
            subsection (a), if in its sequestration final report OMB
            estimates that any sequestration is required, the President
            shall issue an order fully implementing without change all
            sequestrations required by the OMB calculations set forth in
            that report. This order shall be effective on issuance.
        ``(f) GAO Compliance Report.--Upon request of the Committee on the
    Budget of the House of Representatives or the Senate, the Comptroller
    General shall submit to the Congress and the President a report on--
                ``(1) the extent to which each order issued by the
            President under this section complies with all of the
            requirements contained in this part, either certifying that the
            order fully and accurately complies with such requirements or
            indicating the respects in which it does not; and
                ``(2) the extent to which each report issued by OMB or CBO
            under this section complies with all of the requirements
            contained in this part, either certifying that the report fully
            and accurately complies with such requirements or indicating
            the respects in which it does not.
        ``(g) Low-Growth Report.--At any time, CBO and OMB shall notify the
    Congress if--
                ``(1) during the period consisting of the quarter during
            which such notification is given, the quarter preceding such
            notification, and the 4 quarters following such notification,
            CBO or OMB has determined that real economic growth is
            projected or estimated to be less than zero with respect to
            each of any 2 consecutive quarters within such period; or
                ``(2) the most recent of the Department of Commerce's
            advance preliminary or final reports of actual real economic
            growth indicate that the rate of real economic growth for each
            of the most recently reported quarter and the immediately
            preceding quarter is less than one percent.
        ``(h) Economic and Technical Assumptions.--In all reports required
    by this section, OMB shall use the same economic and technical
    assumptions as used in the most recent budget submitted by the
    President under section 1105(a) of title 31, United States Code''.

    SEC. 812. SPENDING LIMITS ENFORCEMENT.

        (a) Conforming Amendments to Section 312.--Section 312 of the
    Congressional Budget Act of 1974 is amended--
                (1) by striking subsection (a) and inserting the following:
        ``(a) Budget Committee Determinations.--For purposes of this title,
    the levels of new budget authority, outlays, direct spending, deficits,
    revenues, and debt, or the increases or decreases of such levels for
    purpose of section 303, shall be determined on the basis of estimates
    made by the Committee on the Budget of the House of Representatives or
    the Senate, as applicable.''.
                (2) by striking subsections (b) and (c) and redesignating
            subsections (d), (e), and (f) as (g), (h), and (i),
            respectively.
        (b) Enforcement Amendments to Section 312.--Section 312 of the
    Congressional Budget Act of 1974 is further amended by adding the
    following new subsections:
        ``(b) Discretionary Spending Limit Point of Order.--It shall not be
    in order in the House of Representatives or the Senate to consider any
    bill, joint resolution, amendment, or conference report that--
                ``(1) causes the discretionary spending limits for the
            budget year to be breached; or
                ``(2) increases the discretionary spending limits for the
            budget year or any ensuing fiscal year.
        ``(c) Total Spending Limit Point of Order.--It shall not be in
    order in the House of Representatives or the Senate to consider any
    bill, joint resolution, amendment, or conference report that--
                ``(1) causes the total spending limits for the budget year,
            as a percentage of gross domestic product, to be breached; or
                ``(2) increases the total spending limits for the budget
            year or any ensuing fiscal year after the budget year, as a
            percentage of gross domestic product.
        ``(d) Revenue Limit Point of Order.--It shall not be in order in
    the House of Representatives or the Senate to consider any bill, joint
    resolution, amendment, or conference report that increases levels of
    revenue above 19 percent of gross domestic product, as estimated by the
    Committee on the Budget of the applicable House.
        ``(e) Waiver or Suspension.--The provisions of this section may be
    waived or suspended:
                ``(1) In the senate.--In the Senate only by the affirmative
            vote of three-fifths of the Members, duly chosen and sworn.
                ``(2) In the house of representatives.--In the House of
            Representatives:
                        ``(A) Only by a rule or order proposing only to
                    waive such provisions by an affirmative vote of two-
                    thirds of the Members, duly chosen and sworn.
                        ``(B) It shall not be in order to consider a rule
                    or order that waives the application of subparagraph
                    (A).
                        ``(C) It shall not be in order for the Speaker to
                    entertain a motion to suspend the application of this
                    section under clause 1 of rule XV of the Rules of the
                    House of Representatives.''.

    SEC. 813. SPENDING REDUCTION ORDERS.

        (a) In General.--Section 256 of the Balanced Budget and Emergency
    Deficit Control Act of 1985 is amended to read as follows:

    ``SEC. 256. SPENDING REDUCTION ORDER.

        ``(a) General Rules.--
                ``(1) Calculation of spending reduction percentage.--OMB
            shall include in its final spending sequestration report a
            requirement that each nonexempt spending account shall be
            reduced by an amount of budget authority calculated by
            multiplying the baseline level of budgetary resources in that
            account at that time by the uniform percentage necessary to
            reduce outlays sufficient to eliminate an excess spending
            amount.
                ``(2) Exemptions.--The following shall be exempt from
            reduction under any order issued under this part:
                        ``(A) Payments for net interest.
                        ``(B) Benefits payable under the old-age,
                    survivors, and disability insurance program established
                    under title II of the Social Security Act if--
                                ``(i) OASDI Trust Funds are actuarially
                            solvent in the 75-year period utilized in the
                            most recent annual report of the Board of
                            Trustees provided pursuant to section 201(C)(2)
                            of the Social Security Act; and
                                ``(ii) OASDI Trust Funds have not run a
                            cash deficit in the fiscal year prior to the
                            transmittal of the most recent Sequestration
                            Preview Report.
                        ``(C) Benefits provided to veterans defined as
                    direct spending payable by the Department of Veterans
                    Affairs.
                        ``(D) Obligated balances of budget authority
                    carried over from prior fiscal years.
                        ``(E) Any obligations of the Federal Government
                    required to be paid under the United States
                    Constitution or legally contractual obligations.
                        ``(F) Any program whose growth in the budget year
                    is equal to or less than the consumer price index.
                        ``(G) Intergovernmental transfers.
                ``(3) One-percent reduction limitation.--No program shall
            be subject to a spending reduction of more than one percent of
            its budgetary resources.
                ``(4) Calculation of spending reduction.--The percentage
            required to produce a spending reduction, as ordered by a
            spending reduction order, shall be calculated by OMB by adding
            all budgetary resources of the Government, and reducing that
            amount by an amount sufficient to reduce the total amount of
            outlays of the Government to equal, or lower, a level of
            outlays than the amount set forth in the guideline period.
                ``(5) Application.--Once issued, a spending reduction shall
            be applied to nonexempt programs as follows:
                        ``(A) Budgetary resources subject to a spending
                    reduction to any discretionary account shall be
                    permanently canceled.
                        ``(B) The same percentage spending reduction shall
                    apply to all programs, projects, and activities within
                    a budget account (with programs, projects, and
                    activities as delineated in the appropriation Act or
                    accompanying report for the relevant fiscal year
                    covering that account, or for accounts not included in
                    appropriation Acts, as delineated in the most recently
                    submitted President's budget).
                        ``(C) Administrative regulations implementing a
                    spending reduction shall be made within 120 days of the
                    issue of a spending reduction order.
                ``(6) OASDI special procedures.--If the OASDI Trust Funds
            are subject to sequestration, then payments from such Trust
            Funds shall be treated the same as other programs, except--
                        ``(A) reductions from such Trust Funds shall not
                    exceed one percent of the 75-year unfunded liability
                    set forth in the most current Social Security Trustees
                    Report;
                        ``(B) reduction in individual benefits shall be
                    implemented by increasing the Normal Retirement Age
                    (NRA) by an amount certified by the Social Security
                    Office of the Chief Actuary;
                        ``(C) the increase in the NRA shall not be applied
                    to any beneficiary born in a year 55 years or before--
                                ``(i) the year of the enactment of the
                            Roadmap for America's Future Act of 2010; or
                                ``(ii) the year in which the final spending
                            sequestration report is issued; and
                        ``(D) no change in the NRA shall be made before it
                    is fully phased-in under the Social Security Act as in
                    effect before the date of enactment of the Roadmap for
                    America's Future Act of 2010.
        ``(b) Emergencies.--No program shall be subject to sequestration or
    counted for purposes of calculating a sequester if it is designated as
    an emergency under this section and so designated by the President.''.
        (b) Low-Growth Amendment.--Section 258(b) of the Balanced Budget
    and Emergency Deficit Control Act of 1985 is amended to read as
    follows:
        ``(b) Suspension of Sequestration Procedures.--Upon the enactment
    of a declaration of war or a joint resolution described in subsection
    (a)--
                ``(1) the subsequent issuance of any sequestration report
            to enforce the spending limits in sections 251 and 252A order
            is precluded;
                ``(2) sections 302(f), 310(d), and 311(a), of the
            Congressional Budget Act of 1974 are suspended; and
                ``(3) section 1103 of title 31, United States Code, is
            suspended.''.
        (c) Technical and Conforming Amendments.--
                (1) Repeals.--Sections 255 and 275 of the Balanced Budget
            and Emergency Deficit Control Act of 1985 are repealed.
                (2) Conforming amendment.--The item relating to section 256
            in the table of contents set forth in section 250(a) of the
            Balanced Budget and Emergency Deficit Control Act of 1985 is
            amended to read as follows:

    ``Sec. 256. Spending reduction order.''.

    SEC. 814. ALTERNATE SPENDING REDUCTION LEGISLATION IN THE HOUSE OF
                  REPRESENTATIVES.

        (a) Introduction of Joint Resolution.--At any time after the
    Director of OMB issues a final order for a fiscal year, but before the
    end of the session of Congress in session on the date of the issuance
    of such order, the majority leader of the House of Representatives may
    introduce a joint resolution which contains provisions directing the
    President to modify the most recent final order issued pursuant to this
    title, or provide an alternative to eliminate the spending excess for
    such fiscal year or years. After the introduction of the first such
    joint resolution in either House of Congress in any calendar year, then
    no other joint resolution introduced pursuant to this section shall be
    subject to the procedures set forth in this section.
        (b) Procedures for Consideration of Joint Resolutions.--
                (1) Any committee of the House of Representatives to which
            an alternative spending compliance measure is referred shall
            report it to the House without amendment not later than the
            seventh legislative day after the date of its introduction. If
            a committee fails to report the bill within that period or the
            House has adopted a concurrent resolution providing for
            adjournment sine die at the end of a Congress, it shall be in
            order to move that the House discharge the committee from
            further consideration of the bill. Such a motion shall be in
            order only at a time designated by the Speaker in the
            legislative schedule within two legislative days after the day
            on which the proponent announces his intention to offer the
            motion. Such a motion shall not be in order after a committee
            has reported a spending compliance measure with respect to that
            special message or after the House has disposed of a motion to
            discharge with respect to that special message. The previous
            question shall be considered as ordered on the motion to its
            adoption without intervening motion except twenty minutes of
            debate equally divided and controlled by the proponent and an
            opponent. If such a motion is adopted, the House shall proceed
            immediately to consider the spending compliance measure bill in
            accordance with paragraph (3). A motion to reconsider the vote
            by which the motion is disposed of shall not be in order.
                (2) After a spending compliance measure is reported or a
            committee has been discharged from further consideration, or
            the House has adopted a concurrent resolution providing for
            adjournment sine die at the end of a Congress, it shall be in
            order to move to proceed to consider the spending compliance
            measure in the House. Such a motion shall be in order only at a
            time designated by the Speaker in the legislative schedule
            within two legislative days after the day on which the
            proponent announces his intention to offer the motion. Such a
            motion shall not be in order after the House has disposed of a
            motion to proceed with respect to that special message. The
            previous question shall be considered as ordered on the motion
            to its adoption without intervening motion. A motion to
            reconsider the vote by which the motion is disposed of shall
            not be in order.
                (3) The spending compliance measure shall be considered as
            read. All points of order against an approval bill and against
            its consideration are waived. The previous question shall be
            considered as ordered on an approval bill to its passage
            without intervening motion except five hours of debate equally
            divided and controlled by the proponent and an opponent and one
            motion to limit debate on the bill. A motion to reconsider the
            vote on passage of the bill shall not be in order.
                (4) A spending compliance measure received from the Senate
            shall not be referred to committee.
        (c) Voting.--The vote on final passage of a joint resolution or
    conference report thereon referred to in paragraph (1) shall require
    approval of not less than three-fifths of the Members of the House of
    Representatives.

    SEC. 815. ALTERNATE SPENDING REDUCTION LEGISLATION IN THE SENATE.

        (a) Introduction of Joint Resolution.--At any time after OMB issues
    a final order for a fiscal year, but before the end of the session of
    Congress in session on the date of the issuance of such order, the
    majority leader of either House of Congress may introduce a joint
    resolution which contains provisions directing the President to modify
    the most recent final order provide an alternative to eliminate the
    spending excess for such fiscal year or years. After the introduction
    of the first such joint resolution in either House of Congress in any
    calendar year, then no other joint resolution introduced in such House
    in such calendar year shall be subject to the procedures set forth in
    this section.
        (b) Procedures for Consideration of Joint Resolutions.--
                (1) Referral to committee.--A joint resolution introduced
            in the Senate under subsection (a) shall not be referred to a
            committee of the Senate and shall be placed on the calendar
            pending disposition of such joint resolution in accordance with
            this subsection.
                (2) Consideration in the senate.--On or after the third
            calendar day (excluding Saturdays, Sundays, and legal holidays)
            beginning after a joint resolution is introduced under
            subsection (a), notwithstanding any rule or precedent of the
            Senate, including rule XXII of the Standing Rules of the
            Senate, 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 the joint
            resolution. The motion is not in order after the eighth
            calendar day (excluding Saturdays, Sundays, and legal holidays)
            beginning after a joint resolution (to which the motion
            applies) is introduced. The joint resolution is privileged in
            the Senate. A motion to reconsider the vote by which the motion
            is agreed to or disagreed to shall not be in order. If a motion
            to proceed to the consideration of the joint resolution is
            agreed to, the Senate shall immediately proceed to
            consideration of the joint resolution without intervening
            motion, order, or other business, and the joint resolution
            shall remain the unfinished business of the Senate until
            disposed of.
                (3) Debate in the senate.--
                        (A) In the Senate, debate on a joint resolution
                    introduced under subsection (a), amendments thereto,
                    and all debatable motions and appeals in connection
                    therewith shall be limited to not more than 10 hours,
                    which shall be divided equally between the majority
                    leader and the minority leader (or their designees).
                        (B) A motion to postpone, or a motion to proceed to
                    the consideration of other business is not in order. A
                    motion to reconsider the vote by which the joint
                    resolution is agreed to or disagreed to is not in
                    order, and a motion to recommit the joint resolution is
                    not in order.
                        (C)(i) No amendment that is not germane to the
                    provisions of the joint resolution shall be in order in
                    the Senate. In the Senate, an amendment, any amendment
                    to an amendment, or any debatable motion or appeal is
                    debatable for not to exceed 30 minutes to be equally
                    divided between, and controlled by, the mover and the
                    majority leader (or their designees), except that in
                    the event that the majority leader favors the
                    amendment, motion, or appeal, the minority leader (or
                    the minority leader's designee) shall control the time
                    in opposition to the amendment, motion, or appeal.
                        (ii) In the Senate, an amendment that is otherwise
                    in order shall be in order notwithstanding the fact
                    that it amends the joint resolution in more than one
                    place or amends language previously amended. It shall
                    not be in order in the Senate to vote on the question
                    of agreeing to such a joint resolution or any amendment
                    thereto unless the figures then contained in such joint
                    resolution or amendment are mathematically consistent.
                (4) Vote on final passage.--Immediately following the
            conclusion of the debate on a joint resolution introduced under
            subsection (a), a single quorum call at the conclusion of the
            debate if requested in accordance with the rules of the Senate,
            and the disposition of any pending amendments under paragraph
            (3), the vote on final passage of the joint resolution shall
            occur.
                (5) Appeals.--Appeals from the decisions of the Chair shall
            be decided without debate.
                (6) Conference reports.--In the Senate, points of order
            under titles III and IV of the Congressional Budget Act of 1974
            are applicable to a conference report on the joint resolution
            or any amendments in disagreement thereto.
                (7) Resolution from other house.--If, before the passage by
            the Senate of a joint resolution of the Senate introduced under
            subsection (a), the Senate receives from the House of
            Representatives a joint resolution introduced under subsection
            (a), then the following procedures shall apply:
                        (A) The joint resolution of the House of
                    Representatives shall not be referred to a committee
                    and shall be placed on the calendar.
                        (B) With respect to a joint resolution introduced
                    under subsection (a) in the Senate--
                                (i) the procedure in the Senate shall be
                            the same as if no joint resolution had been
                            received from the House; but
                                (ii)(I) the vote on final passage shall be
                            on the joint resolution of the House if it is
                            identical to the joint resolution then pending
                            for passage in the Senate; or
                                (II) if the joint resolution from the House
                            is not identical to the joint resolution then
                            pending for passage in the Senate and the
                            Senate then passes the Senate joint resolution,
                            the Senate shall be considered to have passed
                            the House joint resolution as amended by the
                            text of the Senate joint resolution.
                        (C) Upon disposition of the joint resolution
                    received from the House, it shall no longer be in order
                    to consider the resolution originated in the Senate.
                (8) Senate action on house resolution.--If the Senate
            receives from the House of Representatives a joint resolution
            introduced pursuant to this section after the Senate has
            disposed of a Senate originated resolution which is identical
            to the House passed joint resolution, the action of the Senate
            with regard to the disposition of the Senate originated joint
            resolution shall be deemed to be the action of the Senate with
            regard to the House originated joint resolution. If it is not
            identical to the House passed joint resolution, then the Senate
            shall be considered to have passed the joint resolution of the
            House as amended by the text of the Senate joint resolution.
                (9) The vote on final passage of a joint resolution or
            conference report thereon referred to in paragraph (1) shall
            require approval of not less than three-fifths of the Members
            of the Senate.

                        Subtitle C--Long-Term Budgeting

    SEC. 821. CBO AND OMB PROJECTIONS.

        (a) Congressional Budget Office.--At the end of section 308 of the
    Congressional Budget Act of 1974, add the following:
        ``(d) Long-Term Projections.--Not later than February 15 of each
    calendar year after the date of enactment of this subsection, the
    Director of the Congressional Budget Office shall issue a report
    projecting total spending, revenue, deficits, and debt for 75 years
    beginning with such fiscal year as a percentage of gross domestic
    product annually based on current law levels as modified to maintain
    current policy.
        ``(e) CBO Spending Review Report Issuance.--As a component of the
    report required by subsection (d), the Congressional Budget Office
    shall issue a Spending Review Report and transmit such report to the
    Committees on the Budget of the House of Representatives and the
    Senate.
        ``(f) Content of Spending Review Report.--The content of the
    Spending Review Report referred to in subsection (e) shall include
    analyses of the following:
                ``(1) OASDI.--The solvency of the Old-Age, Survivors, and
            Disability Insurance Trust Fund.
                ``(2) Medicare.--The long-range sustainability of the
            spending levels of Medicare.
                ``(3) Medicaid.--The long-range sustainability of the
            spending levels of Medicaid.
                ``(4) Other direct spending.--The long-range sustainability
            of spending levels of other direct spending.
        ``(g) Definitions.--For purposes of the development of the Spending
    Review Report referred to in subsection (b):
                ``(1) Solvency of the oasdi.--The term `solvency' as used
            in this section means the solvency of the Old-Age Security and
            Disability Insurance Trust Funds over a 75-year period
            beginning in the year the Spending Review Report is reported.
                ``(2) Sustainability.--The term `sustainability' means the
            following:
                        ``(A) Medicare.--The Medicare program is
                    sustainable if it is projected to grow, beginning in
                    the tenth year following the date of the enactment of
                    this Act from the fixed percentage of Gross Domestic
                    Product in the year prior to the date of enactment of
                    this subsection, adjusted by the adjustment formula as
                    set forth in section 252A(e) of the Balanced Budget and
                    Emergency Deficit Control Act of 1985.
                        ``(B) Medicaid.--The Medicaid program is
                    sustainable if its outlays, excluding those designated
                    as emergencies, are projected to grow from the fixed
                    percentage of Gross Domestic Product in the year prior
                    to the date of the enactment of this Act, adjusted by a
                    rate no higher than a blend of the Consumer Price Index
                    and the Medical Economic Index, as adjusted after
                    fiscal year 2018 using the same calculation, excluding
                    benefits provided from the OASDI Trust funds, as that
                    set forth in section 252A(e) of the Balanced Budget and
                    Emergency Deficit Control Act of 1985 to reflect the
                    increase in the the number of Medicare eligible
                    retirees receiving benefiits in the program relative to
                    fiscal year 2018.
                        ``(C) Other direct spending.--Other direct spending
                    is direct spending other than OASDI, the Medicare and
                    Medicaid program and is sustainable if it grows from a
                    fixed percentage of gross domestic product in fiscal
                    year 2008.''.
        (b) Office of Management and Budget.--Section 1105(a) of title 31,
    United States Code, (as amended by section 142(e)) is further amended
    by adding at the end the following:
                ``(38) long-term projections of total spending over 75
            years as a percentage of gross domestic product annually and
            the impact of proposed policies over that period.''.

    SEC. 822. GAO AND OMB STATEMENTS OF THE FEDERAL GOVERNMENT'S FINANCIAL
                  CONDITION.

        (a) Government Accountability Office.--On or before April 15 of
    each fiscal year, the Government Accountability Office shall submit a
    report on the federal government's financial condition, including the
    long-term unfunded obligations.
        (b) Definition of Long-Term Unfunded Obligations.--Section 3 of the
    Congressional Budget Act of 1974 is further amended by adding at the
    end the following new paragraph, and redesignate the paragraph
    accordingly:
                ``(11) Unfunded obligations.--The term `Unfunded
            Obligations' means the dollar sum of the Total Net Position as
            displayed in the United States Government Balance Sheets
            contained within the most recently published Financial Report
            of the United States Government; plus the 75-year actuarial
            balances, using the intermediate open-group assumption, of
            Medicare's Hospital Insurance, Supplementary Medical Insurance,
            and Prescription Drug programs contained within the most
            recently published Annual Report of the Boards of Trustees of
            the Federal Hospital Insurance and Federal Supplementary
            Medical Insurance Trust Funds; plus the 75-year actuarial
            balance, using the intermediate open group assumption, of the
            Old-Age Survivors and Disability Insurance program contained
            within the most recently published Annual Report of the Board
            of Trustees of the Federal Old-Age and Survivors Insurance and
            Federal Disability Insurance Trust Funds.''.
        (c) Office of Management and Budget.--Section 1105(a) of title 31,
    United States Code, (as amended by section 301(b)) is further amended
    by adding at the end the following:
                ``(39) a report on the Federal Government's financial
            condition, the including the long-term unfunded obligations.''.

    SEC. 823. FIVE-YEAR FISCAL SUSTAINABILITY REVIEW.

        Title III of the Congressional Budget Act of 1974 (as amended by
    section 126(a)) is further amended by adding at the end the following
    new section:

                    ``five-year fiscal sustainability review

        ``Sec. 318.  (a) Congressional Spending Review Report.--Not later
    than 15 calendar days after the date of the transmittal of the report
    referred to in subsection 308(e), the Committees on the Budget of the
    House of Representatives and the Senate shall issue, and have printed
    in the Congressional Record, an assessment of such report.
        ``(b) Committee Recommendations.--Not later than 15 calendar days
    after the date of the report of the review referred to in subsection
    (c), the committees of the House of Representatives and the Senate
    shall consider and vote to submit to the Committees on the Budget of
    the House of Representatives and Senate, as applicable,
    recommendations, if any, such committees deem appropriate in response
    to the Spending Review Report issued pursuant to subsection (c).
        ``(c) Expedited Consideration of Spending Review Legislation.--
                ``(1) Consideration in the house of representatives.--
                        ``(A) Introduction of spending review
                    legislation.--
                                ``(i) If the report referred to in section
                            308 indicates that the OASDI Trust Funds are
                            not solvent, or that Medicare, Medicaid or
                            other direct spending programs are not
                            sustainable, or total spending exceeds the
                            limits set forth in section 252A for any year
                            within the 75-year period referred to in such
                            report, then not later than 30 calendar days
                            after the transmittal of the report referred to
                            in subsection (a), if any, the majority leader
                            and minority leader of the House of
                            Representatives shall each introduce
                            legislation implementing to the extent
                            practicable the recommendations referred to in
                            subsection (d), or if necessary additional
                            spending reduction sufficient to achieve the
                            spending levels referred to in subsection (b).
                                ``(ii) If Spending Review Legislation is
                            not introduced pursuant to this subparagraph by
                            the majority leader or minority leader, then
                            not later than 45 calendar days after the
                            transmittal of the report referred to in
                            subsection (a), the chairman or ranking member
                            of the Committee on the Budget shall introduce
                            Spending Review Legislation sufficient to
                            achieve the same spending levels.
                                ``(iii) Spending review legislation shall
                            be referred solely to the Committee on the
                            Budget of the House of Representatives which
                            shall have sole jurisdiction of such
                            legislation.
                                ``(iv) Spending review legislation
                            introduced pursuant to this section shall cause
                            total spending to be reduced by an amount equal
                            or greater than the amount of the breach of the
                            limits set forth in section 252A, and shall
                            cause the OASDI Trust Funds to achieve
                            solvency, and shall cause Medicare, Medicaid,
                            and other direct spending programs to achieve
                            sustainability.
                        ``(B) Referral and reporting.--The Committee on the
                    Budget of the House of Representatives shall report
                    Spending Review Legislation to the House of
                    Representatives not later than the seventh legislative
                    day after the date of introduction of the legislation
                    referred to in subparagraph (A). If such committee
                    fails to report the Spending Review Legislation within
                    that period or the House of Representatives has adopted
                    a concurrent resolution providing for adjournment sine
                    die at the end of a Congress, such committee shall be
                    automatically discharged from further consideration of
                    the Spending Review Legislation and it shall be placed
                    on the appropriate calendar.
                        ``(C) Proceeding to consideration.--After Spending
                    Review Legislation is reported by or discharged from
                    the Committee on the Budget or the House of
                    Representatives has adopted a concurrent resolution
                    providing for adjournment sine die at the end of a
                    Congress, it shall be in order to move to proceed to
                    consider the Spending Review Legislation in the House
                    of Representatives. Such a motion shall be in order in
                    the legislative schedule within two legislative days
                    after the day on which the proponent announces his
                    intention to offer the motion. Such a motion shall not
                    be in order after the House of Representatives has
                    disposed of a motion to proceed with respect to that
                    special message. The previous question shall be
                    considered as ordered on the motion to its adoption
                    without intervening motion. A motion to reconsider the
                    vote by which the motion is disposed of shall not be in
                    order.
                        ``(D) Consideration.--The Spending Review
                    Legislation shall be considered as read. All points of
                    order against Spending Review Legislation and against
                    its consideration are waived. The previous question
                    shall be considered as ordered on an Spending Review
                    Legislation to its passage without intervening motion
                    except five hours of debate equally divided and
                    controlled by the proponent and an opponent and one
                    motion to limit debate on the Spending Review
                    Legislation. A motion to reconsider the vote on passage
                    of the Spending Review Legislation shall not be in
                    order.
                        ``(E) Senate spending review legislation.--Spending
                    Review Legislation received from the Senate shall not
                    be referred to committee.
                ``(2) Consideration in the senate.--
                        ``(A) Motion to proceed to consideration.--A motion
                    to proceed to the consideration of Spending Review
                    Legislation under this subsection in the Senate shall
                    not be debatable. It shall not be in order to move to
                    reconsider the vote by which the motion to proceed is
                    agreed to or disagreed to.
                        ``(B) Limits on debate.--Debate in the Senate on
                    Spending Review Legislation under this subsection, and
                    all debatable motions and appeals in connection
                    therewith (including debate pursuant to subparagraph
                    (D)), shall not exceed 10 hours, equally divided and
                    controlled in the usual form.
                        ``(C) Appeals.--Debate in the Senate on any
                    debatable motion or appeal in connection with Spending
                    Review Legislation under this subsection shall be
                    limited to not more than 1 hour, to be equally divided
                    and controlled in the usual form.
                        ``(D) Motion to limit debate.--A motion in the
                    Senate to further limit debate on Spending Review
                    Legislation under this subsection is not debatable.
                        ``(E) Motion to recommit.--A motion to recommit
                    Spending Review Legislation under this subsection is
                    not in order.
                        ``(F) Consideration of the house of representatives
                    spending review legislation.--
                                ``(i) In general.--If the Senate has
                            received the House of Representatives companion
                            resolution to the Spending Review Legislation
                            introduced in the Senate prior to the vote
                            required under paragraph (1)(C), then the
                            Senate may consider, and the vote under
                            paragraph (1)(C) may occur on, the House of
                            Representatives companion resolution.
                                ``(ii) Procedure after vote on senate
                            spending review legislation.--If the Senate
                            votes, pursuant to paragraph (1)(C), on the
                            Spending Review Legislation introduced in the
                            Senate, then immediately following that vote,
                            or upon receipt of the House of Representatives
                            companion resolution, the House of
                            Representatives Spending Review Legislation
                            shall be deemed to be considered, read the
                            third time, and the vote on passage of the
                            Senate resolution shall be considered to be the
                            vote on the Spending Review Legislation
                            received from the House of Representatives.
                ``(3) Jurisdiction.--The Committees on the Budget of the
            House of Representatives and Senate shall have exclusive
            jurisdiction over any Spending Review Legislation and all the
            provisions therein for all purposes of the rules of either
            House.''.

    SEC. 824. LONG-TERM RECONCILIATION.

        (a) Long-Term Reconciliation.--Section 310 of the Congressional
    Budget Act of 1974 is amended as follows:
        ``(h) Long-Term Reconciliation Directives.--
                ``(1) Long-term reconciliation directives.--In addition to
            a reconciliation measure as set forth in subsection (a), a
            concurrent resolution on the budget for any fiscal year, to the
            extent necessary to effectuate the spending levels as set forth
            for such categories in section 301(a) (providing for long-term
            spending levels as a percentage of gross domestic product) of
            such resolution, shall--
                        ``(A) specify the total amount by which Medicare,
                    Medicaid, the OASDI Trust Funds, and other direct
                    spending outlays are to be reduced within the
                    jurisdiction of a committee as a percentage of gross
                    domestic product of such fiscal year; and
                        ``(B) direct that committee to determine and
                    recommend changes to accomplish a reduction of such
                    total amount for such categories as a percentage of
                    gross domestic product.
                ``(2)  Limitation on amendments to long-term reconciliation
            legislation.--
                        ``(A) It shall not be in order in the House of
                    Representatives to consider any amendment to a
                    reconciliation bill or reconciliation resolution if
                    such amendment decreases outlay reductions below the
                    level of such outlay reductions provided (for the
                    fiscal years covered) in the reconciliation
                    instructions which relate to such long-term
                    reconciliation bill.
                        ``(B) It shall not be in order in the Senate to
                    consider any amendment to a reconciliation bill or
                    reconciliation resolution if such amendment decreases
                    outlay reductions below the level of such outlay
                    reductions provided (for the fiscal years covered) in
                    the reconciliation instructions which relate to such
                    long-term reconciliation bill.
                        ``(C) Subparagraphs (A) and (B) shall not apply if
                    a declaration of war by the Congress is in effect.
                        ``(D) For purposes of this section, the levels of
                    outlays as a percentage of a gross domestic product for
                    a fiscal year shall be determined on the basis of
                    estimates made by the Committee on the Budget of the
                    House of Representatives or of the Senate.
                        ``(E) The Committee on Rules of the House of
                    Representatives may make in order amendments to achieve
                    outlay reductions specified by reconciliation
                    directives contained in a concurrent resolution on the
                    budget if a committee or committees of the House of
                    Representatives fail to submit recommended reductions
                    in outlays as a percentage or gross domestic product to
                    its Committee on the Budget pursuant to its
                    instruction.
                        ``(F) In the Senate, a motion to strike a provision
                    shall always be in order.
                ``(3) Subject matter.--Subject matter included in a long-
            term reconciliation bill may be any of the following:
                        ``(A) Any part of the Medicare program.
                        ``(B) Medicaid.
                        ``(C) The Old-Age, Survivors, and Disability
                    Insurance Trust Fund.
                        ``(D) Other direct spending.
                ``(4) Application.--Subsections (c), (d), and (g) shall not
            apply to long-term reconciliation measures reported under this
            subsection.''.
        (b) Conforming Amendment.--In section 310(b) of the Congressional
    Budget Act of 1974, strike ``subsection (a)'' and insert ``subsections
    (a) and (h)''.

    SEC. 825. LONG-TERM SPENDING INCREASE POINT OF ORDER.

        (a) In General.--Title III of the Congressional Budget Act of 1974
    (as amended by section 303) is further amended by adding at the end the
    following new section:

                  ``long-term spending increase point of order

        ``Sec. 317.  (a) Congressional Budget Office Analysis of
    Proposals.--The Director of the Congressional Budget Office shall, to
    the extent practicable, prepare for each bill and joint resolution
    reported from committee (except measures within the jurisdiction of the
    Committee on Appropriations), and amendments thereto and conference
    reports thereon, an estimate of whether the measure causes, relative to
    current law, a net increase in direct spending in excess of
    $5,000,000,000 in any of the four 10-year periods beginning in fiscal
    year 2019 through fiscal year 2058.
        ``(b) In the Senate.--
                ``(1) Point of order.--It shall not be in order in the
            Senate to consider any bill, joint resolution, amendment,
            motion, or conference report that causes a net increase in
            deficits in excess of $5,000,000,000 in any of the four 10-year
            periods beginning in 2019 through 2058.
                ``(2) Supermajority waiver and appeal.--
                        ``(A) This section may be waived or suspended only
                    by the affirmative vote of three-fifths of the Members,
                    duly chosen and sworn.
                        ``(B) An affirmative vote of three-fifths of the
                    Members, duly chosen and sworn, shall be required to
                    sustain an appeal of the ruling of the Chair on a point
                    of order raised under this section.
        ``(c) In the House of Representatives.--
                ``(1) Point of order.--It shall not be in order in the
            House of Representatives to consider any bill, joint
            resolution, amendment, motion, or conference report that causes
            a net increase in deficits in excess of $5,000,000,000 in any
            of the four 10-year periods beginning in 2019 through 2058.
                ``(2) Supermajority waiver and appeal.--
                        ``(A) This section may be waived or suspended only
                    by the affirmative vote of three-fifths of the Members,
                    duly chosen and sworn.
                        ``(B) An affirmative vote of two-thirds of the
                    Members, duly chosen and sworn, shall be required to
                    sustain an appeal of the ruling of the Chair on a point
                    of order raised under this section.
        ``(d) Determinations of Budget Levels.--For purposes of this
    section, the levels of net deficit increases shall be determined on the
    basis of estimates provided by the chairmen of the Senate and House
    Committees on the Budget, as applicable.''.
        (b) Conforming Amendment.--The table of contents set forth in
    section 1(b) of the Congressional Budget and Impoundment Control Act of
    1974 is amended by inserting after the item relating to section 316 the
    following new item:

    ``Sec. 317. Long-term spending increase point of order.''.
                                     <all>