[Congressional Record Volume 142, Number 87 (Thursday, June 13, 1996)]
[Senate]
[Pages S6228-S6234]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MOYNIHAN:
  S. 1870. A bill to establish a medical education trust fund, and for 
other purposes; to the Committee on Finance.


              THE MEDICAL EDUCATION TRUST FUND ACT OF 1996

  Mr. MOYNIHAN. Mr. President, I rise to introduce legislation that 
would establish a Medical Education Trust Fund to support America's 124 
medical schools and 1,250 teaching hospitals. These institutions are 
national treasures; they are the very best in the world. Yet today they 
find themselves in a precarious financial situation as market forces 
reshape the health care delivery system in the United States. Explicit 
and dedicated funding for these institutions, which this legislation 
will provide, will ensure that the United States continues to lead the 
world in the quality of its health care system.
  This legislation requires that the public sector, through the 
Medicare and Medicaid programs, and the private sector, through an 
assessment on health insurance premiums, will contribute broad-based 
and fair financial support. Over the 5-year period, 1997 to 2001, the 
Medical Education Trust Fund established under this legislation would 
provide average annual payments of about $17 billion, roughly doubling 
the funding that we currently provide for medical education.


                             Brief History

  My particular interest in this subject began in 1994, when the 
Finance Committee took up the President's Health Security Act. I was 
Chairman of the Committee at the time. In January of that year, I asked 
Paul Marks, M.D., President of Memorial Sloan-Kettering Cancer Center 
in New York City, if he would arrange a ``seminar'' for me on health 
care issues. He agreed, and gathered a number of medical school deans 
together one morning in New York.
  Early on in the meeting, one of the seminarians remarked that the 
University of Minnesota might have to close its medical school. In an 
instant I realized I had heard something new. Minnesota is a place 
where they open medical schools, not close them. How, then, could this 
be? The answer was that Minnesota, being Minnesota, was a leading state 
in the growth of Health Maintenance Organizations, and HMO's do not 
send patients to teaching hospitals, absent which you cannot have a 
medical school.
  We are in the midst of a great age of discovery in medical science. 
It is certainly not a time to close medical schools. This great era of 
medical discovery is occurring right here in the United States, not in 
Europe like past ages of scientific discovery. And it is centered in 
New York City. This heroic age of medical science started in the late 
1930's. Before then, the average patient was probably as well off, 
perhaps better, out of a hospital as in one. Progress from that point 
60 years ago has been remarkable. The last few decades have brought us 
images of the inside of the human body based on the magnetic resonance 
of bodily tissues; laser surgery; micro surgery for reattaching limbs; 
and organ transplantation, among other wonders. I can hardly imagine 
what might be next. Physicians are now working on a gene therapy that 
might eventually replace bypass surgery.
  After months of hearings and debate on the President's Health 
Security Act, I became convinced that special provisions would have to 
be made for medical schools, teaching hospitals, and medical research 
if we were not to see this great moment in medical science suddenly 
constrained. To that end, when the Committee on Finance voted 12 to 8 
on July 2, 1994, to report the Health Security Act, it included a 
graduate medical education and academic health centers trust fund. The 
trust fund provided an 80-percent increase in Federal funding for 
academic medicine; as importantly, it represented stable, long-term 
funding. While nothing came of the effort to enact universal health 
care coverage, the medical education trust fund enjoyed widespread 
support. An amendment by then-Senator Malcolm Wallop of Wyoming to kill 
the trust fund by striking the source of its revenue--a 1.75-percent 
assessment on health insurance premiums--failed on a 7 to 13 vote in 
the Finance Committee.
  I continued to press the issue in the first session of the 104th 
Congress. On September 29, 1995, during Finance Committee consideration 
of the budget reconciliation legislation, I offered an amendment to 
establish a similar trust fund. With a new majority in control and the 
committee in the midst of considering a highly partisan budget 
reconciliation bill, my amendment failed on a tie vote, 10 to 10. 
Notably, however, the House version of the reconciliation bill did 
include a graduate medical education trust fund. That provision 
ultimately passed both Houses as part of the conference agreement, 
which was subsequently vetoed by President Clinton.

  The conference agreement on the budget resolution, being considered 
by the Senate and House this week, also apparently assumes that this 
year's Medicare reconciliation bill will include a similar trust fund.
  That is the history of this effort, briefly stated.


                          Need for Legislation

  Medical education is one of America's most precious public resources. 
It should be explicitly financed with contributions from all sectors of 
the health care system, not just the Medicare Program as is the case 
today. The fiscal pressures of a competitive health care market are 
increasingly closing off traditional implicit revenue sources--such as 
additional payments from private payers--that have in the past 
supported medical schools, graduate medical education, and research. 
This legislation provides alternative funding to prevent the 
deterioration of these institutions and the invaluable services they 
provide.
  Events in Rochester, NY, a community with a long and proud tradition 
of quality, cost-effective health care, provide a good example of how 
market forces are reshaping the health care delivery system. Last year, 
the only option available to retirees of Kodak at no additional cost 
was a managed care plan. Unfortunately, that managed care plan excluded 
Strong Memorial, Rochester's prestigious teaching hospital. Strong 
Memorial was established in 1920 with the help of George Eastman and 
was named for Henry Strong, a financier of Eastman. Yet ironically, 75 
years later, Eastman Kodak's retirees could not get care at Strong 
Memorial Hospital.
  After much protest, the managed care plan brought Strong Memorial 
into its provider network, but only after Kodak agreed to make separate 
payments for 1 year to support the costs of graduate medical education 
at

[[Page S6229]]

Strong. The Rochester community worked out a solution, however 
temporary, to the problems faced by its primary teaching hospital, but 
we cannot, and should not, rely on the Kodaks of the world to finance 
medical education. We must adopt a comprehensive Federal strategy.
  Other teaching hospitals are facing similar difficulties. In its June 
1995 ``Report to Congress,'' the Prospective Payment Assessment 
Commission [ProPAC], the Commission which advises Congress on Medicare 
hospital insurance part A payment, summarized the situation of teaching 
hospitals as follows:

       As competition in the health care system intensifies, the 
     additional costs borne by teaching hospitals will place them 
     at a disadvantage relative to other facilities. The role, 
     scale, function, and number of these institutions 
     increasingly will be challenged. . .. Accelerating price 
     competition in the private sector . . . is reducing the 
     ability of teaching hospitals to obtain the higher patient 
     care rates from other payers that traditionally have 
     contributed to financing the costs associated with graduate 
     medical education.

  ProPAC's June 1996 ``Report to Congress,'' issued just last week, 
confirmed that ``major teaching hospitals have the dual problems of 
higher overall losses from uncompensated care and less above cost 
revenue from private insurers.''
  It is obvious that teaching hospitals can no longer rely on higher 
payments from private payers to cover the costs of their teaching 
programs. Nor should they. The establishment of this trust fund, which 
reimburses teaching hospitals for the costs of graduate medical 
education, will ensure that teaching hospitals can pursue their vitally 
important patient care, training, and research missions in the face of 
an increasingly competitive health system.
  Medical schools also face an uncertain future. There are many policy 
issues that need to be examined regarding the role of medical schools 
in our health system, but two threats faced by medical schools now 
require immediate attention. This legislation addresses both. First, 
many medical schools are immediately threatened by the dire financial 
condition of their affiliated teaching hospitals. Medical schools rely 
on teaching hospitals to provide a place for their faculty to practice 
and perform research, a place to send third- and fourth-year medical 
school students for training, and for some direct revenues. By 
improving the financial condition of teaching hospitals, this 
legislation significantly improves the outlook for medical schools.

  The second immediate threat faced by medical schools stems from their 
reliance on a portion of the clinical practice revenue generated by 
their faculties to support their operations. As competition within the 
health system intensifies and managed care proliferates, these revenues 
are shrinking. This legislation provides payments to medical schools 
from the trust fund that are designed to partially offset this loss of 
revenue.
  None of the foregoing is meant to suggest that the new competitive 
forces reshaping health care have brought only negative results. To the 
contrary, the onset of competition has had many beneficial effects, the 
dramatic curtailing of growth in health insurance premiums being the 
most obvious. But as Msgr. Charles J. Fahey of Fordham University 
warned in testimony before the Finance Committee in 1994, we must be 
wary of the ``commodification of health care,'' by which he meant that 
health care is not just another commodity. We can rely on competition 
to hold down costs in much of the health system, but we must not allow 
it to bring a premature end to this great age of medical discovery, an 
age made possible by this country's exceptionally well-trained health 
professionals and superior medical schools and teaching hospitals. This 
legislation complements a competitive health market by providing tax-
supported funding for the public services provided by teaching 
hospitals and medical schools.


                       Description of Legislation

  The medical education trust fund established in the legislation I 
have just introduced would receive funding from three sources broadly 
representing the entire health care system: A 1.5-percent tax on health 
insurance premiums, the private sector's contribution; Medicare, and 
Medicaid, the latter two sources comprising the public sector's 
contribution. The relative contribution from each of these sources will 
be in rough proportion to the medical education costs attributable to 
their respective covered populations.
  Over the 5-year period 1997 to 2001, the medical education trust fund 
will provide average annual payments of about $17 billion. The tax on 
health insurance premiums, including self-insured health plans, raises 
approximately $4 billion per year for the trust fund. Federal health 
programs contribute about $13 billion per year to the trust fund: $9 
billion in transfers of Medicare graduate medical education payments 
and $4 billion in Federal Medicaid spending.
  This legislation is only a first step. It establishes the principle 
that, as a public good, medical education should be supported by 
dedicated, long-term Federal funding. To ensure that the United States 
continues to lead the world in the quality of its medical education and 
its health system as a whole, the legislation would also create a 
medical education advisory commission to conduct a thorough study and 
make recommendations, including the potential use of demonstration 
projects, regarding the following: alternative and additional sources 
of medical education financing; alternative methodologies for financing 
medical education; policies designed to maintain superior research and 
educational capacities in an increasingly competitive health system; 
the appropriate role of medical schools in graduate medical education; 
and policies designed to expand eligibility for graduate medical 
education payments to institutions other than teaching hospitals.
  Mr. President, the services provided by this Nation's teaching 
hospitals and medical schools--groundbreaking research, highly skilled 
medical care, and the training of tomorrow's physicians--are vitally 
important and must be protected in this time of intense economic 
competition in the health system. I therefore urge Senators to support 
the Medical Education Trust Fund Act of 1996.
  I ask unanimous consent that a summary and a copy of the bill be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1870

       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 ``Medical 
     Education Trust Fund Act of 1996''.
       (b) Table of Contents.--The table of contents of this title 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Medical Education Trust Fund.
Sec. 3. Amendments to medicare program.
Sec. 4. Amendments to medicaid program.
Sec. 5. Assessments on insured and self-insured health plans.
Sec. 6. Medical Education Advisory Commission.
Sec. 7. Demonstration projects.

     SEC. 2. MEDICAL EDUCATION TRUST FUND.

       The Social Security Act (42 U.S.C. 300 et seq.) is amended 
     by adding after title XX the following new title:

               ``TITLE XXI--MEDICAL EDUCATION TRUST FUND


                      ``table of contents of title

``Sec. 2101. Establishment of Trust Fund.
``Sec. 2102. Payments to medical schools.
``Sec. 2103. Payments to teaching hospitals.

     ``SEC. 2101. ESTABLISHMENT OF TRUST FUND.

       ``(a) In General.--There is established in the Treasury of 
     the United States a fund to be known as the Medical Education 
     Trust Fund (in this title referred to as the `Trust Fund'), 
     consisting of the following accounts:
       ``(1) The Medical School Account.
       ``(2) The Medicare Teaching Hospital Indirect Account.
       ``(3) The Medicare Teaching Hospital Direct Account.
       ``(4) The Non-Medicare Teaching Hospital Indirect Account.
       ``(5) The Non-Medicare Teaching Hospital Direct Account.

     Each such account shall consist of such amounts as are 
     allocated and transferred to such account under this section, 
     sections 1876(a)(7), 1886(j) and 1931, and section 4503 of 
     the Internal Revenue Code of 1986. Amounts in the accounts of 
     the Trust Fund shall remain available until expended.
       ``(b) Expenditures From Trust Fund.--Amounts in the 
     accounts of the Trust Fund are available to the Secretary for 
     making payments under sections 2102 and 2103.
       ``(c) Investment.--
       ``(1) In general.--The Secretary of the Treasury shall 
     invest amounts in the accounts of the Trust Fund which the 
     Secretary determines are not required to meet

[[Page S6230]]

     current withdrawals from the Trust Fund. Such investments may 
     be made only in interest-bearing obligations of the United 
     States. For such purpose, such obligations may be acquired on 
     original issue at the issue price, or by purchase of 
     outstanding obligations at the market price.
       ``(2) Sale of obligations.--The Secretary of the Treasury 
     may sell at market price any obligation acquired under 
     paragraph (1).
       ``(3) Availability of income.--Any interest derived from 
     obligations held in each such account, and proceeds from any 
     sale or redemption of such obligations, are hereby 
     appropriated to such account.
       ``(d) Monetary Gifts to Trust Fund.--There are appropriated 
     to the Trust Fund such amounts as may be unconditionally 
     donated to the Federal Government as gifts to the Trust Fund. 
     Such amounts shall be allocated and transferred to the 
     accounts described in subsection (a) in the same proportion 
     as the amounts in each of the accounts bears to the total 
     amount in all the accounts of the Trust Fund.

     ``SEC. 2102. PAYMENTS TO MEDICAL SCHOOLS.

       ``(a) Federal Payments to Medical Schools for Certain 
     Costs.--
       ``(1) In general.--In the case of a medical school that in 
     accordance with paragraph (2) submits to the Secretary an 
     application for fiscal year 1997 or any subsequent fiscal 
     year, the Secretary shall make payments for such year to the 
     medical school for the purpose specified in paragraph (3). 
     The Secretary shall make such payments from the Medical 
     School Account in an amount determined in accordance with 
     subsection (b), and may administer the payments as a 
     contract, grant, or cooperative agreement.
       ``(2) Application for payments.--For purposes of paragraph 
     (1), an application for payments under such paragraph for a 
     fiscal year is in accordance with this paragraph if--
       ``(A) the medical school involved submits the application 
     not later than the date specified by the Secretary; and
       ``(B) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this section.
       ``(3) Purpose of payments.--The purpose of payments under 
     paragraph (1) is to assist medical schools in maintaining and 
     developing quality educational programs in an increasingly 
     competitive health care system.
       ``(b) Availability of Trust Fund for Payments; Annual 
     Amount of Payments.--
       ``(1) Availability of trust fund for payments.--The 
     following amounts shall be available for a fiscal year for 
     making payments under subsection (a) from the amount 
     allocated and transferred to the Medical School Account under 
     sections 1876(a)(7), 1886(j), 1931, 2101(c)(3) and (d), and 
     section 4503 of the Internal Revenue Code of 1986:
       ``(A) In the case of fiscal year 1997, $200,000,000.
       ``(B) In the case of fiscal year 1998, $300,000,000.
       ``(C) In the case of fiscal year 1999, $400,000,000.
       ``(D) In the case of fiscal year 2000, $500,000,000.
       ``(E) In the case of fiscal year 2001, $600,000,000.
       ``(F) In the case of each subsequent fiscal year, the 
     amount specified in this paragraph in the previous fiscal 
     year updated through the midpoint of the year by the 
     estimated percentage change in the general health care 
     inflation factor (as defined in subsection (d)) during the 
     12-month period ending at that midpoint, with appropriate 
     adjustments to reflect previous underestimations or 
     overestimations under this subparagraph in the projected 
     health care inflation factor.
       ``(2) Amount of payments for medical schools.--
       ``(A) In general.--Subject to the annual amount available 
     under paragraph (1) for a fiscal year, the amount of payments 
     required under subsection (a) to be made to a medical school 
     that submits to the Secretary an application for such year in 
     accordance with subsection (a)(2) is an amount equal to an 
     amount determined by the Secretary in accordance with 
     subparagraph (B).
       ``(B) Development of formula.--The Secretary shall develop 
     a formula for allocation of funds to medical schools under 
     this section consistent with the purpose described in 
     subsection (a)(3).
       ``(c) Medical School Defined.--For purposes of this 
     section, the term `medical school' means a school of medicine 
     (as defined in section 799 of the Public Health Service Act) 
     or a school of osteopathic medicine (as defined in such 
     section).
       ``(d) General Health Care Inflation Factor.--The term 
     `general health care inflation factor' means the consumer 
     price index for medical services as determined by the Bureau 
     of Labor Statistics.

     ``SEC. 2103. PAYMENTS TO TEACHING HOSPITALS.

       ``(a) Formula Payments to Eligible Entities.--
       ``(1) In general.--In the case of any fiscal year beginning 
     after September 30, 1996, the Secretary shall make payments 
     to each eligible entity that, in accordance with paragraph 
     (2), submits to the Secretary an application for such fiscal 
     year. Such payments shall be made from the Trust Fund, and 
     the total of the payments to the eligible entity for the 
     fiscal year shall equal the sum of the amounts determined 
     under subsections (b), (c), (d), and (e).
       ``(2) Application.--For purposes of paragraph (1), an 
     application shall contain such information as may be 
     necessary for the Secretary to make payments under such 
     paragraph to an eligible entity during a fiscal year. An 
     application shall be treated as submitted in accordance with 
     this paragraph if it is submitted not later than the date 
     specified by the Secretary, and is made in such form and 
     manner as the Secretary may require.
       ``(3) Periodic payments.--Payments under paragraph (1) to 
     an eligible entity for a fiscal year shall be made 
     periodically, at such intervals and in such amounts as the 
     Secretary determines to be appropriate (subject to applicable 
     Federal law regarding Federal payments).
       ``(4) Administrator of programs.--The Secretary shall carry 
     out responsibility under this title by acting through the 
     Administrator of the Health Care Financing Administration.
       ``(5) Eligible entity.--For purposes of this title, the 
     term `eligible entity', with respect to any fiscal year, 
     means--
       ``(A) for payment under subsections (b) and (c), an entity 
     which would be eligible to receive payments for such fiscal 
     year under--
       ``(i) section 1886(d)(5)(B), if such payments had not been 
     terminated for discharges occurring after September 30, 1996;
       ``(ii) section 1886(h), if such payments had not been 
     terminated for cost reporting periods beginning after 
     September 30, 1996; or
       ``(iii) both sections; or
       ``(B) for payment under subsections (d) and (e)--
       ``(i) an entity which meets the requirement of subparagraph 
     (A); or
       ``(ii) an entity which the Secretary determines should be 
     considered an eligible entity.
       ``(b) Determination of Amount From Medicare Teaching 
     Hospital Indirect Account.--
       ``(1) In general.--The amount determined for an eligible 
     entity for a fiscal year under this subsection is the amount 
     equal to the applicable percentage of the total amount 
     allocated and transferred to the Medicare Teaching Hospital 
     Indirect Account under sections 1876(a)(7) and 1886(j)(1), 
     and subsections (c)(3) and (d) of section 2101 for such 
     fiscal year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage for any fiscal year is equal 
     to the percentage of the total payments which would have been 
     made to the eligible entity in such fiscal year under section 
     1886(d)(5)(B) if--
       ``(A) such payments had not been terminated for discharges 
     occurring after September 30, 1996; and
       ``(B) such payments included payments for individuals 
     enrolled in a plan under section 1876, except that for fiscal 
     years 1997, 1998, and 1999, only the applicable percentage 
     (as defined in section 1876(a)(7)(B)) of such payments shall 
     be taken into account.
       ``(c) Determination of Amount From Medicare Teaching 
     Hospital Direct Account.--
       ``(1) In general.--The amount determined for an eligible 
     entity for a fiscal year under this subsection is the amount 
     equal to the applicable percentage of the total amount 
     allocated and transferred to the Medicare Teaching Hospital 
     Direct Account under sections 1876(a)(7) and 1886(j)(2), and 
     subsections (c)(3) and (d) of section 2101 for such fiscal 
     year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage for any fiscal year is equal 
     to the percentage of the total payments which would have been 
     made to the eligible entity in such fiscal year under section 
     1886(h) if--
       ``(A) such payments had not been terminated for cost 
     reporting periods beginning after September 30, 1996; and
       ``(B) such payments included payments for individuals 
     enrolled in a plan under section 1876, except that for fiscal 
     years 1997, 1998, and 1999, only the applicable percentage 
     (as defined in section 1876(a)(7)(B)) of such payments shall 
     be taken into account.
       ``(d) Determination of Amount From Non-Medicare Teaching 
     Hospital Indirect Account.--
       ``(1) In general.--The amount determined for an eligible 
     entity for a fiscal year under this subsection is the amount 
     equal to the applicable percentage of the total amount 
     allocated and transferred to the Non-Medicare Teaching 
     Hospital Indirect Account for such fiscal year under section 
     1931, subsections (c)(3) and (d) of section 2101, and section 
     4503 of the Internal Revenue Code of 1986.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage for any fiscal year for an 
     eligible entity is equal to the percentage of the total 
     payments which, as determined by the Secretary, would have 
     been made in such fiscal year under section 1886(d)(5)(B) 
     if--
       ``(A) such payments had not been terminated for discharges 
     occurring after September 30, 1996; and
       ``(B) non-medicare patients were taken into account in lieu 
     of medicare patients.
       ``(e) Determination of Amount From Non-Medicare Teaching 
     Hospital Direct Account.--
       ``(1) In general.--The amount determined for an eligible 
     entity for a fiscal year under this subsection is the amount 
     equal to the applicable percentage of the total amount 
     allocated and transferred to the Non-Medicare Teaching 
     Hospital Direct Account for such fiscal year under section 
     1931, subsections

[[Page S6231]]

     (c)(3) and (d) of section 2101, and section 4503 of the 
     Internal Revenue Code of 1986.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage for any fiscal year for an 
     eligible entity is equal to the percentage of the total 
     payments which, as determined by the Secretary, would have 
     been made in such fiscal year under section 1886(h) if--
       ``(A) such payments had not been terminated for cost 
     reporting periods beginning after September 30, 1996; and
       ``(B) non-medicare patients were taken into account in lieu 
     of medicare patients.''.

     SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.

       (a) In General.--Section 1886 of the Social Security Act 
     (42 U.S.C. 1395ww) is amended--
       (1) in subsection (d)(5)(B), in the matter preceding clause 
     (i), by striking ``The Secretary shall provide'' and 
     inserting the following: ``For discharges occurring before 
     October 1, 1996, the Secretary shall provide'';
       (2) in subsection (h)--
       (A) in paragraph (1), in the first sentence, by striking 
     ``the Secretary shall provide'' and inserting ``the Secretary 
     shall, subject to paragraph (6), provide''; and
       (B) by adding at the end the following new paragraph:
       ``(6) Limitation.--
       ``(A) In general.--The authority to make payments under 
     this subsection shall not apply with respect to--
       ``(i) cost reporting periods beginning after September 30, 
     1996; and
       ``(ii) any portion of a cost reporting period beginning on 
     or before such date which occurs after such date.
       ``(B) Rule of construction.--This paragraph may not be 
     construed as authorizing any payment under section 1861(v) 
     with respect to graduate medical education.''; and
       (3) by adding at the end the following new subsection:
       ``(j) Transfers to Medical Education Trust Fund.--
       ``(1) Indirect costs of medical education.--
       ``(A) Transfer.--
       ``(i) In general.--From the Federal Hospital Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1997 and 
     each subsequent fiscal year, transfer to the Medical 
     Education Trust Fund an amount equal to the amount estimated 
     by the Secretary under subparagraph (B).
       ``(ii) Allocation.--Of the amount transferred under clause 
     (i)--

       ``(I) there shall be allocated and transferred to the 
     Medical School Account an amount which bears the same ratio 
     to the total amount available under section 2102(b)(1) for 
     the fiscal year (reduced by the balance in such account at 
     the end of the preceding fiscal year) as the amount 
     transferred under clause (i) bears to the total amounts 
     transferred to the Medical Education Trust Fund under title 
     XXI (excluding amounts transferred under subsections (c)(3) 
     and (d) of section 2101) for such fiscal year; and
       ``(II) the remainder shall be allocated and transferred to 
     the Medicare Teaching Hospital Indirect Account.

       ``(B) Determination of amounts.--The Secretary shall make 
     an estimate for each fiscal year involved of the nationwide 
     total of the amounts that would have been paid under 
     subsection (d)(5)(B) to hospitals during the fiscal year if 
     such payments had not been terminated for discharges 
     occurring after September 30, 1996.
       ``(2) Direct costs of medical education.--
       ``(A) Transfer.--
       ``(i) In general.--From the Federal Hospital Insurance 
     Trust Fund and the Federal Supplementary Medical Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1997 and 
     each subsequent fiscal year, transfer to the Medical 
     Education Trust Fund an amount equal to the amount estimated 
     by the Secretary under subparagraph (B).
       ``(ii) Allocation.--Of the amount transferred under clause 
     (i)--

       ``(I) there shall be allocated and transferred to the 
     Medical School Account an amount which bears the same ratio 
     to the total amount available under section 2102(b)(1) for 
     the fiscal year (reduced by the balance in such account at 
     the end of the preceding fiscal year) as the amount 
     transferred under clause (i) bears to the total amounts 
     transferred to the Medical Education Trust Fund under title 
     XXI (excluding amounts transferred under subsections (c)(3) 
     and (d) of section 2101) for such fiscal year; and
       ``(II) the remainder shall be allocated and transferred to 
     the Medicare Teaching Hospital Direct Account.

       ``(B) Determination of amounts.--For each hospital, the 
     Secretary shall make an estimate for the fiscal year involved 
     of the amount that would have been paid under subsection (h) 
     to the hospital during the fiscal year if such payments had 
     not been terminated for cost reporting periods beginning 
     after September 30, 1996.
       ``(C) Allocation between funds.--In providing for a 
     transfer under subparagraph (A) for a fiscal year, the 
     Secretary shall provide for an allocation of the amounts 
     involved between part A and part B (and the trust funds 
     established under the respective parts) as reasonably 
     reflects the proportion of direct graduate medical education 
     costs of hospitals associated with the provision of services 
     under each respective part.''.
       (b) Medicare HMO's.--Section 1876(a) of the Social Security 
     Act (42 U.S.C. 1395mm(a)) is amended by inserting after 
     paragraph (6) the following new paragraph:
       ``(7)(A) In determining the adjusted average per capita 
     cost under paragraph (4) for fiscal years after 1996, the 
     Secretary shall not take into account the applicable 
     percentage of costs under sections 1886(d)(5)(B) (indirect 
     costs of medical education) and 1886(h) (direct graduate 
     medical education costs).
       ``(B) For purposes of subparagraph (A), the applicable 
     percentage is--
       ``(i) for fiscal year 1997, 25 percent;
       ``(ii) for fiscal year 1998, 50 percent;
       ``(iii) for fiscal year 1999, 75 percent; and
       ``(iv) for fiscal year 2000 and each subsequent fiscal 
     year, 100 percent.
       ``(C)(i) There is appropriated and transferred to the 
     Medical Education Trust Fund each fiscal year an amount equal 
     to the aggregate amounts not taken into account under 
     paragraph (4) by reason of subparagraph (A).
       ``(ii) Of the amounts transferred under clause (i)--
       ``(I) there shall be allocated and transferred to the 
     Medical School Account an amount which bears the same ratio 
     to the total amount available under section 2102(b)(1) for 
     the fiscal year (reduced by the balance in such account at 
     the end of the preceding fiscal year) as the amount 
     transferred under clause (i) bears to the total amounts 
     transferred to the Medical Education Trust Fund under section 
     2101 (excluding amounts transferred under subsections (c)(3) 
     and (d) of such section) for such fiscal year; and
       ``(II) the remainder shall be allocated and transferred to 
     the Medicare Teaching Hospital Indirect Account under such 
     section and the Medicare Teaching Hospital Direct Account 
     under such section in the same proportion as the amounts 
     attributable to the costs under sections 1886(d)(5)(B) and 
     1886(h) were of the amounts transferred under clause (i).
       ``(iii) The Secretary shall make payments under clause (i) 
     from the Federal Hospital Insurance Trust Fund and the 
     Federal Supplementary Medical Insurance Trust Fund, in the 
     same manner as the Secretary determines under section 
     1886(j).''.

     SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.

       (a) In General.--Title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.) is amended--
       (1) by redesignating section 1931 as section 1932; and
       (2) by inserting after section 1930, the following new 
     section:


                    ``transfer of funds to accounts

       ``Sec. 1931. (a) Transfer of Funds.--
       ``(1) In general.--For fiscal year 1997 and each subsequent 
     fiscal year, the Secretary shall transfer to the Medical 
     Education Trust Fund an amount equal to the amount determined 
     under subsection (b).
       ``(2) Allocation.--Of the amount transferred under 
     paragraph (1)--
       ``(A) there shall be allocated and transferred to the 
     Medical School Account an amount which bears the same ratio 
     to the total amount available under section 2102(b)(1) for 
     the fiscal year (reduced by the balance in such account at 
     the end of the preceding fiscal year) as the amount 
     transferred under paragraph (1) bears to the total amounts 
     transferred to the Medical Education Trust Fund under title 
     XXI (excluding amounts transferred under subsections (c)(3) 
     and (d) of section 2101) for such fiscal year; and
       ``(B) the remainder shall be allocated and transferred to 
     the Non-Medicare Teaching Hospital Indirect Account and the 
     Non-Medicare Teaching Hospital Direct Account, in the same 
     proportion as the amounts transferred to each account under 
     section 1886(j) relate to the total amounts transferred under 
     such section for such fiscal year.
       ``(b) Amount Determined.--
       ``(1) Outlays for acute medical services during preceding 
     fiscal year.--Beginning with fiscal year 1997, the Secretary 
     shall determine 5 percent of the total amount of Federal 
     outlays made under this title for acute medical services, as 
     defined in paragraph (2), for the preceding fiscal year.
       ``(2) Acute medical services defined.--The term `acute 
     medical services' means items and services described in 
     section 1905(a) other than the following:
       ``(A) Nursing facility services (as defined in section 
     1905(f)).
       ``(B) Intermediate care facility for the mentally retarded 
     services (as defined in section 1905(d)).
       ``(C) Personal care services (as described in section 
     1905(a)(24)).
       ``(D) Private duty nursing services (as referred to in 
     section 1905(a)(8)).
       ``(E) Home or community-based services furnished under a 
     waiver granted under subsection (c), (d), or (e) of section 
     1915.
       ``(F) Home and community care furnished to functionally 
     disabled elderly individuals under section 1929.
       ``(G) Community supported living arrangements services 
     under section 1930.
       ``(H) Case-management services (as described in section 
     1915(g)(2)).
       ``(I) Home health care services (as referred to in section 
     1905(a)(7)), clinic services, and rehabilitation services 
     that are furnished to an individual who has a condition or 
     disability that qualifies the individual to receive any of 
     the services described in a previous subparagraph.
       ``(J) Services furnished in an institution for mental 
     diseases (as defined in section 1905(i)).

[[Page S6232]]

       ``(c) Entitlement.--This section constitutes budget 
     authority in advance of appropriations Acts and represents 
     the obligation of the Federal Government to provide for the 
     payment to the Non-Medicare Teaching Hospital Indirect 
     Account, the Non-Medicare Teaching Hospital Direct Account, 
     and the Medical School Account of amounts determined in 
     accordance with subsections (a) and (b).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall be effective on and after October 1, 1996.

     SEC. 5. ASSESSMENTS ON INSURED AND SELF-INSURED HEALTH PLANS.

       (a) General Rule.--Subtitle D of the Internal Revenue Code 
     of 1986 (relating to miscellaneous excise taxes) is amended 
     by adding after chapter 36 the following new chapter:

                ``CHAPTER 37--HEALTH RELATED ASSESSMENTS

``Subchapter A. Insured and self-insured health plans.

         ``Subchapter A--Insured and Self-Insured Health Plans

``Sec. 4501. Health insurance and health-related administrative 
              services.
``Sec. 4502. Self-insured health plans.
``Sec. 4503. Transfer to accounts.
``Sec. 4504. Definitions and special rules.

     ``SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED 
                   ADMINISTRATIVE SERVICES.

       ``(a) Imposition of Tax.--There is hereby imposed--
       ``(1) on each taxable health insurance policy, a tax equal 
     to 1.5 percent of the premiums received under such policy, 
     and
       ``(2) on each amount received for health-related 
     administrative services, a tax equal to 1.5 percent of the 
     amount so received.
       ``(b) Liability for Tax.--
       ``(1) Health insurance.--The tax imposed by subsection 
     (a)(1) shall be paid by the issuer of the policy.
       ``(2) Health-related administrative services.--The tax 
     imposed by subsection (a)(2) shall be paid by the person 
     providing the health-related administrative services.
       ``(c) Taxable Health Insurance Policy.--For purposes of 
     this section--
       ``(1) In general.--Except as otherwise provided in this 
     section, the term `taxable health insurance policy' means any 
     insurance policy providing accident or health insurance with 
     respect to individuals residing in the United States.
       ``(2) Exemption of certain policies.--The term `taxable 
     health insurance policy' does not include any insurance 
     policy if substantially all of the coverage provided under 
     such policy relates to--
       ``(A) liabilities incurred under workers' compensation 
     laws,
       ``(B) tort liabilities,
       ``(C) liabilities relating to ownership or use of property,
       ``(D) credit insurance, or
       ``(E) such other similar liabilities as the Secretary may 
     specify by regulations.
       ``(3) Special rule where policy provides other coverage.--
     In the case of any taxable health insurance policy under 
     which amounts are payable other than for accident or health 
     coverage, in determining the amount of the tax imposed by 
     subsection (a)(1) on any premium paid under such policy, 
     there shall be excluded the amount of the charge for the 
     nonaccident or nonhealth coverage if--
       ``(A) the charge for such nonaccident or nonhealth coverage 
     is either separately stated in the policy, or furnished to 
     the policyholder in a separate statement, and
       ``(B) such charge is reasonable in relation to the total 
     charges under the policy.

     In any other case, the entire amount of the premium paid 
     under such policy shall be subject to tax under subsection 
     (a)(1).
       ``(4) Treatment of prepaid health coverage arrangements.--
       ``(A) In general.--In the case of any arrangement described 
     in subparagraph (B)--
       ``(i) such arrangement shall be treated as a taxable health 
     insurance policy,
       ``(ii) the payments or premiums referred to in subparagraph 
     (B)(i) shall be treated as premiums received for a taxable 
     health insurance policy, and
       ``(iii) the person referred to in subparagraph (B)(i) shall 
     be treated as the issuer.
       ``(B) Description of arrangements.--An arrangement is 
     described in this subparagraph if under such arrangement--
       ``(i) fixed payments or premiums are received as 
     consideration for any person's agreement to provide or 
     arrange for the provision of accident or health coverage to 
     residents of the United States, regardless of how such 
     coverage is provided or arranged to be provided, and
       ``(ii) substantially all of the risks of the rates of 
     utilization of services is assumed by such person or the 
     provider of such services.
       ``(d) Health-Related Administrative Services.--For purposes 
     of this section, the term `health-related administrative 
     services' means--
       ``(1) the processing of claims or performance of other 
     administrative services in connection with accident or health 
     coverage under a taxable health insurance policy if the 
     charge for such services is not included in the premiums 
     under such policy, and
       ``(2) processing claims, arranging for provision of 
     accident or health coverage, or performing other 
     administrative services in connection with an applicable 
     self-insured health plan (as defined in section 4502(c)) 
     established or maintained by a person other than the person 
     performing the services.

     For purposes of paragraph (1), rules similar to the rules of 
     subsection (c)(3) shall apply.

     ``SEC. 4502. SELF-INSURED HEALTH PLANS.

       ``(a) Imposition of Tax.--In the case of any applicable 
     self-insured health plan, there is hereby imposed a tax for 
     each month equal to 1.5 percent of the sum of--
       ``(1) the accident or health coverage expenditures for such 
     month under such plan, and
       ``(2) the administrative expenditures for such month under 
     such plan to the extent such expenditures are not subject to 
     tax under section 4501.

     In determining the amount of expenditures under paragraph 
     (2), rules similar to the rules of subsection (d)(3) apply.
       ``(b) Liability for Tax.--
       ``(1) In general.--The tax imposed by subsection (a) shall 
     be paid by the plan sponsor.
       ``(2) Plan sponsor.--For purposes of paragraph (1), the 
     term `plan sponsor' means--
       ``(A) the employer in the case of a plan established or 
     maintained by a single employer,
       ``(B) the employee organization in the case of a plan 
     established or maintained by an employee organization, or
       ``(C) in the case of--
       ``(i) a plan established or maintained by 2 or more 
     employers or jointly by 1 or more employers and 1 or more 
     employee organizations,
       ``(ii) a voluntary employees' beneficiary association under 
     section 501(c)(9), or
       ``(iii) any other association plan,

     the association, committee, joint board of trustees, or other 
     similar group of representatives of the parties who establish 
     or maintain the plan.
       ``(c) Applicable Self-Insured Health Plan.--For purposes of 
     this section, the term `applicable self-insured health plan' 
     means any plan for providing accident or health coverage if 
     any portion of such coverage is provided other than through 
     an insurance policy.
       ``(d) Accident or Health Coverage Expenditures.--For 
     purposes of this section--
       ``(1) In general.--The accident or health coverage 
     expenditures of any applicable self-insured health plan for 
     any month are the aggregate expenditures paid in such month 
     for accident or health coverage provided under such plan to 
     the extent such expenditures are not subject to tax under 
     section 4501.
       ``(2) Treatment of reimbursements.--In determining accident 
     or health coverage expenditures during any month of any 
     applicable self-insured health plan, reimbursements (by 
     insurance or otherwise) received during such month shall be 
     taken into account as a reduction in accident or health 
     coverage expenditures.
       ``(3) Certain expenditures disregarded.--Paragraph (1) 
     shall not apply to any expenditure for the acquisition or 
     improvement of land or for the acquisition or improvement of 
     any property to be used in connection with the provision of 
     accident or health coverage which is subject to the allowance 
     under section 167, except that, for purposes of paragraph 
     (1), allowances under section 167 shall be considered as 
     expenditures.

     ``SEC. 4503. TRANSFER TO ACCOUNTS.

       ``For fiscal year 1997 and each subsequent fiscal year, 
     there are hereby appropriated and transferred to the Medical 
     Education Trust Fund amounts equivalent to taxes received in 
     the Treasury under sections 4501 and 4502, of which--
       ``(1) there shall be allocated and transferred to the 
     Medical School Account an amount which bears the same ratio 
     to the total amount available under section 2102(b)(1) for 
     the fiscal year (reduced by the balance in such account at 
     the end of the preceding fiscal year) as the amount 
     transferred to the Medical Education Trust Fund under title 
     XXI of the Social Security Act under this section bears to 
     the total amounts transferred to such Trust Fund (excluding 
     amounts transferred under subsections (c)(3) and (d) of 
     section 2101 of such Act) for such fiscal year; and
       ``(2) the remainder shall be allocated and transferred to 
     the Non-Medicare Teaching Hospital Indirect Account and the 
     Non-Medicare Teaching Hospital Direct Account, in the same 
     proportion as the amounts transferred to such account under 
     section 1886(j) relate to the total amounts transferred under 
     such section for such fiscal year.
     Such amounts shall be transferred in the same manner as under 
     section 9601.

     ``SEC. 4504. DEFINITIONS AND SPECIAL RULES.

       ``(a) Definitions.--For purposes of this subchapter--
       ``(1) Accident or health coverage.--The term `accident or 
     health coverage' means any coverage which, if provided by an 
     insurance policy, would cause such policy to be a taxable 
     health insurance policy (as defined in section 4501(c)).
       ``(2) Insurance policy.--The term `insurance policy' means 
     any policy or other instrument whereby a contract of 
     insurance is issued, renewed, or extended.
       ``(3) Premium.--The term `premium' means the gross amount 
     of premiums and other consideration (including advance 
     premiums, deposits, fees, and assessments) arising from 
     policies issued by a person acting as the primary insurer, 
     adjusted for any return or additional premiums paid as a 
     result of endorsements, cancellations, audits, or 
     retrospective rating. Amounts returned where the amount is 
     not fixed in the contract but depends on the experience of 
     the insurer or the

[[Page S6233]]

     discretion of management shall not be included in return 
     premiums.
       ``(4) United states.--The term `United States' includes any 
     possession of the United States.
       ``(b) Treatment of Governmental Entities.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) the term `person' includes any governmental entity, 
     and
       ``(B) notwithstanding any other law or rule of law, 
     governmental entities shall not be exempt from the taxes 
     imposed by this subchapter except as provided in paragraph 
     (2).
       ``(2) Exempt governmental programs.--In the case of an 
     exempt governmental program--
       ``(A) no tax shall be imposed under section 4501 on any 
     premium received pursuant to such program or on any amount 
     received for health-related administrative services pursuant 
     to such program, and
       ``(B) no tax shall be imposed under section 4502 on any 
     expenditures pursuant to such program.
       ``(3) Exempt governmental program.--For purposes of this 
     subchapter, the term `exempt governmental program' means--
       ``(A) the insurance programs established by parts A and B 
     of title XVIII of the Social Security Act,
       ``(B) the medical assistance program established by title 
     XIX of the Social Security Act,
       ``(C) any program established by Federal law for providing 
     medical care (other than through insurance policies) to 
     individuals (or the spouses and dependents thereof) by reason 
     of such individuals being--
       ``(i) members of the Armed Forces of the United States, or
       ``(ii) veterans, and
       ``(D) any program established by Federal law for providing 
     medical care (other than through insurance policies) to 
     members of Indian tribes (as defined in section 4(d) of the 
     Indian Health Care Improvement Act).
       ``(c) No Cover Over to Possessions.--Notwithstanding any 
     other provision of law, no amount collected under this 
     subchapter shall be covered over to any possession of the 
     United States.''.
       (b) Clerical Amendment.--The table of chapters for subtitle 
     D of the Internal Revenue Code of 1986 is amended by 
     inserting after the item relating to chapter 36 the following 
     new item:

``Chapter 37. Health related assessments.''

       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to premiums received, and expenses 
     incurred, with respect to coverage for periods after 
     September 30, 1996.

     SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.

       (a) Establishment.--There is hereby established an advisory 
     commission to be known as the Medical Education Advisory 
     Commission (in this section referred to as the ``Advisory 
     Commission'').
       (b) Duties.--
       (1) In general.--The Advisory Commission shall--
       (A) conduct a thorough study of all matters relating to--
       (i) the operation of the Medical Education Trust Fund 
     established under section 2;
       (ii) alternative and additional sources of graduate medical 
     education funding;
       (iii) alternative methodologies for compensating teaching 
     hospitals for graduate medical education;
       (iv) policies designed to maintain superior research and 
     educational capacities in an increasing competitive health 
     system;
       (v) the role of medical schools in graduate medical 
     education; and
       (vi) policies designed to expand eligibility for graduate 
     medical education payments to institutions other than 
     teaching hospitals;
       (B) develop recommendations, including the use of 
     demonstration projects, on the matters studied under 
     subparagraph (A) in consultation with the Secretary of Health 
     and Human Services and the entities described in paragraph 
     (2);
       (C) not later than January 1998, submit an interim report 
     to the Committee on Finance of the Senate, the Committee on 
     Ways and Means of the House of Representatives, and the 
     Secretary of Health and Human Services; and
       (D) not later than January 2000, submit a final report to 
     the Committee on Finance of the Senate, the Committee on Ways 
     and Means of the House of Representatives, and the Secretary 
     of Health and Human Services.
       (2) Entities described.--The entities described in this 
     paragraph are--
       (A) other advisory groups, including the Council on 
     Graduate Medical Education, the Prospective Payment 
     Assessment Commission, and the Physician Payment Review 
     Commission;
       (B) interested parties, including the Association of 
     American Medical Colleges, the Association of Academic Health 
     Centers, and the American Medical Association;
       (C) health care insurers, including managed care entities; 
     and
       (D) other entities as determined by the Secretary of Health 
     and Human Services.
       (c) Number and Appointment.--The membership of the Advisory 
     Commission shall include 9 individuals who are appointed to 
     the Advisory Commission from among individuals who are not 
     officers or employees of the United States. Such individuals 
     shall be appointed by the Secretary of Health and Human 
     Services, and shall include individuals from each of the 
     following categories:
       (1) Physicians who are faculty members of medical schools.
       (2) Officers or employees of teaching hospitals.
       (3) Officers or employees of health plans.
       (4) Such other individuals as the Secretary determines to 
     be appropriate.
       (d) Terms.--
       (1) In general.--Except as provided in paragraph (2), 
     members of the Advisory Commission shall serve for the lesser 
     of the life of the Advisory Commission, or 4 years.
       (2) Service beyond term.--A member of the Advisory 
     Commission may continue to serve after the expiration of the 
     term of the member until a successor is appointed.
       (e) Vacancies.--If a member of the Advisory Commission does 
     not serve the full term applicable under subsection (d), the 
     individual appointed to fill the resulting vacancy shall be 
     appointed for the remainder of the term of the predecessor of 
     the individual.
       (f) Chair.--The Secretary of Health and Human Services 
     shall designate an individual to serve as the Chair of the 
     Advisory Commission.
       (g) Meetings.--The Advisory Commission shall meet not less 
     than once during each 4-month period and shall otherwise meet 
     at the call of the Secretary of Health and Human Services or 
     the Chair.
       (h) Compensation and Reimbursement of Expenses.--Members of 
     the Advisory Commission shall receive compensation for each 
     day (including travel time) engaged in carrying out the 
     duties of the Advisory Commission. Such compensation may not 
     be in an amount in excess of the maximum rate of basic pay 
     payable for level IV of the Executive Schedule under section 
     5315 of title 5, United States Code.
       (i) Staff.--
       (1) Staff director.--The Advisory Commission shall, without 
     regard to the provisions of title 5, United States Code, 
     relating to competitive service, appoint a Staff Director who 
     shall be paid at a rate equivalent to a rate established for 
     the Senior Executive Service under 5382 of title 5, United 
     States Code.
       (2) Additional staff.--The Secretary of Health and Human 
     Services shall provide to the Advisory Commission such 
     additional staff, information, and other assistance as may be 
     necessary to carry out the duties of the Advisory Commission.
       (j) Termination of the Advisory Commission.--The Advisory 
     Commission shall terminate 90 days after the date on which 
     the Advisory Commission submits its final report under 
     subsection (b)(1)(D).
       (k) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     the purposes of this section.

     SEC. 7. DEMONSTRATION PROJECTS.

       (a) Establishment.--The Secretary of Health and Human 
     Services (in this section referred to as the ``Secretary'') 
     shall establish, by regulation, guidelines for the 
     establishment and operation of demonstration projects which 
     the Medical Education Advisory Commission recommends under 
     subsection (b)(1)(B) of section 6.
       (b) Funding.--
       (1) In general.--For any fiscal year after 1996, amounts in 
     the Medical Education Trust Fund under title XXI of the 
     Social Security Act shall be available for use by the 
     Secretary in the establishment and operation of demonstration 
     projects described in subsection (a).
       (2) Funds available.--
       (A) Limitation.--Not more than \1/10\ of 1 percent of the 
     funds in such trust fund shall be available for the purposes 
     of paragraph (1).
       (B) Allocation.--Amounts under paragraph (1) shall be paid 
     from the accounts established under paragraphs (2) through 
     (5) of section 2101(a) of the Social Security Act, in the 
     same proportion as the amounts transferred to such accounts 
     bears to the total of amounts transferred to all 4 such 
     accounts for such fiscal year.
       (c) Limitation.--Nothing in this section shall be construed 
     to authorize any change in the payment methodology for 
     teaching hospitals and medical schools established by this 
     Act.
                                                                    ____


        Summary of the Medical Education Trust Fund Act of 1996


                                OVERVIEW

       The legislation establishes a Medical Education Trust Fund 
     to support America's 124 medical schools and 1,250 teaching 
     hospitals. These institutions are in a precarious financial 
     situation as market forces reshape the health care delivery 
     system. Explicit and dedicated funding for these institutions 
     will guarantee that the United States continues to lead the 
     world in the quality of its health care system.
       The Medical Education Trust Fund Act of 1996 recognizes the 
     need to begin moving away from existing medical education 
     payment policies. Funding would be provided for demonstration 
     projects and alternative payment methods, but permanent 
     policy changes would await a report from a new Medical 
     Education Advisory Commission established by the bill. The 
     primary, and immediate, purpose of the legislation is to 
     establish as Federal policy that medical education is a 
     public good which should be supported by all sectors of the 
     health care system.
       To ensure that the burden of financing medical education is 
     shared equitably by all sectors, the Medical Education Trust 
     Fund

[[Page S6234]]

     will receive funding from three sources: a 1.5 percent 
     assessment on health insurance premiums (the private sector's 
     contribution), Medicare, and Medicaid (the public sector's 
     contribution). The relative contribution from each of these 
     sources is in rough proportion to the medical education costs 
     attributable to their respective covered populations.
       Over the five year period 1997-2001, the Medical Education 
     Trust Fund will provide average annual payments of about $17 
     billion, roughly doubling federal funding for medical 
     education. The assessment on health insurance premiums 
     (including self-insured health plans) contributes 
     approximately $4 billion per year to the Trust Fund. Federal 
     health programs contribute about $13 billion per year to the 
     Trust Fund: $9 billion in transfers of current Medicare 
     graduate medical education payments and $4 billion in federal 
     Medicaid spending.

    Estimated Average Annual Trust Fund Revenue By Source, 1997-2001

                        (In billions of dollars)

1.5% Assessment.......................................................4
Medicare..............................................................9
Medicaid..............................................................4
                                                               ________