[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.''.
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