House Report 105-465 - RICKY RAY HEMOPHILIA RELIEF FUND ACT OF 1998

[House Report 105-465]
[From the U.S. Government Publishing Office]

105th Congress Rept. 105-465
HOUSE OF REPRESENTATIVES

2d Session Part 2
_______________________________________________________________________

RICKY RAY HEMOPHILIA RELIEF FUND ACT OF 1998

_______

May 7, 1998.--Ordered to be printed

_______________________________________________________________________

Mr. Archer, from the Committee on Ways and Means, submitted the
following

R E P O R T

[To accompany H.R. 1023]

[Including cost estimate of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the
bill (H.R. 1023) to provide for compassionate payments with
regard to individuals with blood-clotting disorders, such as
hemophilia, who contracted human immunodeficiency virus due to
contaminated blood products, and for other purposes, having
considered the same, report favorably thereon with amendments
and recommend that the bill as amended do pass.

CONTENTS

Page
I. Introduction......................................................3
A. Purpose and Scope..................................... 3
B. Background and Need for Legislation................... 3
C. Legislative History................................... 3
II. Explanation of Provisions.........................................3
III.Vote of The Committee.............................................6

IV. Budget Effects of The Bill........................................6
A. Committee Estimate of Budgetary Effects............... 6
B. Statement Regarding New Budget Authority And Tax
Expenditures......................................... 6
C. Cost Estimate Prepared by The Congressional Budget
Office............................................... 7
V. Other Matters Required To Be Discussed Under The Rules of The Hou10
A. Committee Oversight Findings And Recommendations...... 10
B. Summary of Findings And Recommendations of The
Government Reform And Oversight Committee............ 10
C. Constitutional Authority Statement.................... 10

The amendments are as follows:
Strike paragraph (1) of section 103(h) and insert the
following:

(1) shall be treated for purposes of the Internal
Revenue Code of 1986 as damages described in section
104(a)(2) of such Code;

Strike title II and insert the following:

TITLE II--TREATMENT OF CERTAIN PAYMENTS IN HEMOPHILIA-CLOTTING-FACTOR
SUIT UNDER THE SSI PROGRAM

SEC. 201. TREATMENT OF CERTAIN PAYMENTS IN HEMOPHILIA-CLOTTING-FACTOR
SUIT UNDER THE SSI PROGRAMS.

(a) Private Payments.--
(1) In general.--Notwithstanding any other provision
of law, the payments described in paragraph (2) shall
not be considered income or resources in determining
eligibility for, or the amount of--
(A) medical assistance under title XIX of the
Social Security Act, or
(B) supplemental security income benefits
under title XVI of the Social Security Act .
(2) Private payments described.--The payments
described in this subsection are--
(A) payments made from any fund established
pursuant to a class settlement in the case of
Susan Walker v. Bayer Corporation, et al., 96-
C-5024 (N.D. Ill.); and
(B) payments made pursuant to a release of
all claims in a case--
(i) that is entered into in lieu of
the class settlement referred to in
subparagraph (A); and
(ii) that is signed by all affected
parties in such case on or before the
later of--
(I) December 31, 1997, or
(II) the date that is 270
days after the date on which
such release is first sent to
the persons (or the legal
representative of such persons)
to whom the payment is to be
made.
(b) Government Payments.--
(1) In general.--Notwithstanding any other provision
of law, the payments described in paragraph (2) shall
not be considered income or resources in determining
eligibility for, or the amount of supplemental security
income benefits under title XVI of the Social Security
Act.
(2) Government payments described.--The payments
described in this subsection are payments made from the
fund established pursuant to section 101 of this Act.

I. INTRODUCTION

A. Purpose and Scope

H.R. 1023, the ``Ricky Ray Hemophilia Relief Fund Act of
1998,'' provides ``compassionate payments'' to individuals with
blood-clotting disorders, such as hemophilia, who contracted
human immunodeficiency virus (HIV) from tainted blood products.
Authorization of the $750 million Federal fund, which would
make payments of $100,000 to eligible individuals who
contracted HIV from the tainted blood products, is under the
jurisdiction of the Committee on the Judiciary. Information
about H.R. 1023 and its background can be found in the
Judiciary Committee's report (105th Congress, 2nd Session,
Rept. 105-465, Part 1). The Committee on Ways and Means has
jurisdiction over how payments to eligible individuals are
treated for purposes of determining the eligibility and benefit
levels of recipients under the Supplemental Security Income
(SSI) program, and over the tax treatment of these payments.

B. Background and Need for Legislation

Under current law, payments to victims of hemophilia who
received tainted blood products would be treated as income by
most welfare programs, including the Supplemental Security
Income program. Thus, without Committee action, individuals
eligible for both Federal payments under H.R. 1023 as well as
payments from a class action lawsuit brought against the
pharmaceutical companies that supplied the tainted blood would
be treated as income or resources by the SSI program. As a
result, most individuals receiving payments would either lose
or experience a sharp reduction in their SSI benefit payments.
Action by the Committee on Ways and Means on H.R. 1023 is
necessary to prevent this loss of benefits.
In addition, the authors of the legislation intended that
these payments are to be treated as tax exempt. Action by the
Committee on Ways and Means is necessary to ensure this.

C. Legislative History

Committee bill

On April 22, 1998, the Committee ordered favorably reported
H.R. 1023, as amended, by voice vote.

II. EXPLANATION OF PROVISIONS WITHIN THE JURISDICTION OF THE COMMITTEE
ON WAYS AND MEANS

A. Tax Treatment of Certain Payments Made to Individuals With Blood-
Clotting Disorders (Section 103(h))

Present law

Under present law, gross income does not include any
damages received (whether by suit or agreement and whether as
lump sums or as periodic payments) on account of a personal
physical injury or physical sickness.\1\ If an action has its
origin in a physical injury or physical sickness, then all
damages (other than punitive damages) that flow therefrom are
treated as payments received on account of physical injury or
physical sickness whether or not the recipient of the damages
is the injured party. The term ``damages received (whether by
suit or agreement)'' is defined under Treasury regulations to
mean an amount received (other than workmen's compensation)
through prosecution of a legal suit or action based upon tort
or tort type rights, or through a settlement agreement entered
into in lieu of such prosecution.\2\
---------------------------------------------------------------------------
\1\ Internal Revenue Code section 104(a)(2).
\2\ Treas. Reg. section 1.104-1(c).
---------------------------------------------------------------------------

Explanation of provision

The bill is amended to provide that payments to certain
individuals with blood-clotting disorders, who contracted HIV
due to contaminated blood products, pursuant to the provisions
of the bill are treated for purposes of the Internal Revenue
Code as damages received on account of personal physical injury
or physical sickness described in section 104(a)(2). Thus,
payments made to such individuals are excluded from gross
income.

Reasons for change

The Committee has agreed to clarify the tax treatment of
certain ``compassionate'' payments made to individuals with
blood-clotting disorders who contracted the human
immunodeficiency virus (``HIV'') because the Committee believes
that, in the absence of such clarification, such payments
generally are not excluded from gross income under the present-
law exclusion for damage payments. Whether such amounts might
be excluded from income under some other provision of the
Internal Revenue Code or regulations is unclear. The Committee
finds the payments proposed under the bill to be sufficiently
unusual and sympathetic to justify clarifying that such
payments are not included in gross income. However, the
Committee emphasizes that it is taking action because of the
extraordinary nature of the problem that is addressed by the
bill.

Effective date

The provision is effective on the date of enactment.

B. Treatment of Certain Payments in Hemophilia-Clotting-Factor Suit
Under the SSI Program (Section 201)

Present law

Under the SSI program, income is anything a person receives
that can be used to obtain food, clothing, or shelter, unless
it is specifically exempted by Federal law. In recent years,
many compensatory payments have been excluded from being
counted as income and/or resources under the SSI program.
Sometimes an individual is given food, clothing, or shelter
directly; more often an individual is given a cash payment that
can be used to purchase food, clothing, or shelter. The SSI
program does not count all income. There are more than 50
income exclusions under the SSI program, all of which provide a
financial advantage to persons who receive certain types of
income. Most income exclusions for SSI are written into the
Social Security Act, but some are also written into statutes
governing other programs. These other statutory exclusions
stipulate that the payment in question is not to be counted as
income or resources in determining an individual's SSI
eligibility or benefit status. The following is a list of
compensatory-type payments in which the authorizing statute
specified that the SSI program was not to consider the payment
as income (or a resource) in determining a person's SSI
eligibility or benefit status:
Restitution payments made to Japanese internees and
relocated Aleutians (P.L. 100-383, enacted August 10,
1988);
Payments from the Agent Orange settlement (P.L. 101-
239, enacted December 19, 1989);
Payments received from a state-administered fund
established to aid victims of crime (P.L. 101-508,
enacted November 5, 1990);
Payments received as state or local government
relocation assistance (P.L. 101-508, enacted November
5, 1990--made permanent in P.L. 103-66, enacted August
10, 1993);
Payments received under the Radiation Exposure
Compensation Act (P.L. 101-508, enacted November 5,
1990);
Hostile fire pay to members of the uniformed services
(P.L. 103-66, enacted August 10, 1993); and
Payments to victims of Nazi persecution (P.L. 103-
286, enacted August 1, 1994).
Under a recent settlement, four manufacturers of blood
plasma products will pay $100,000 to each of 6,200 hemophilia
patients who are infected with the human immunodeficiency virus
(HIV). Payments made under the settlement to these individuals
would in most instances cause them to exceed the income and/or
resource limits for SSI and Medicaid eligibility. Pursuant to
section 4735 of P.L. 105-33, the settlement payments are not
considered income and/or resources in determining eligibility
for, or the amount of benefits under, the Medicaid program.
However, section 4735 of P.L. 105-33 does not provide a similar
exemption for the SSI program. Thus, the settlement payments
currently are counted as income and/or resources under the SSI
program. In addition, payments from the fund authorized by
section 101 of H.R. 1023 also would be counted as income and/or
resources under the SSI program, should payment be made from
this fund without the creation of the exception provided for in
this legislation.

Explanation of provision

The Committee provision stipulates that neither settlement
payments in the hemophilia-clotting-factor suit nor payments
from the Federal Ricky Ray Hemophilia Relief Fund are to be
considered income or resources in determining eligibility for,
or the amount of benefits under, the SSI program.

Reason for change

The Committee provision is designed to ensure that
individuals and their families who have suffered greatly
through contraction of the human immunodeficiency virus (HIV)
from tainted blood products remain eligible for continued
Federal support, including new assistance designed to help
them. For example, a number of the individuals in the
settlement class are currently on SSI and Medicaid. However,
because these programs are means-tested, accepting the private
settlement money ($100,000 per plaintiff) and the public
``compassionate payments'' (also $100,000 per person) may
disqualify the recipients from these programs. This despite the
fact that the average person with hemophilia spends about
$100,000 per year on clotting factor, and those with HIV spend
approximately $10,000 to $50,000 in additional medical expenses
for AIDS-related treatment.
Congress acted in the 1997 Balanced Budget legislation to
exempt settlement payments from affecting Medicaid eligibility.
Given the high amount of health care and other expenses
individuals afflicted with HIV face each year and the intent of
the settlement, making a similar exception for SSI has equal
merit. Without the changes provided for in the Committee
amendment, many individuals might no longer qualify for Federal
SSI benefits due to their receipt of payments from the
hemophilia-clotting-factor suit. An exception is also made to
aid from the new Federal Ricky Ray Hemophilia Relief Fund, so
that payments from it as well would be exempted from
consideration for purposes of determining SSI eligibility and
benefits.

Effective date

Upon enactment.

III. VOTES OF THE COMMITTEE

In compliance with clause 2(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the following statements
are made concerning the vote of the Committee in its
consideration of the bill, H.R. 1023:

MOTION TO REPORT THE BILL

On April 22, 1998, the Committee ordered favorably reported
H.R. 1023, as amended, by voice vote, with a quorum present.

IV. BUDGET EFFECTS OF THE BILL

A. Committee Estimate of Budgetary Effects

In compliance with clause 7(a) of rule XIII of the Rules of
the House of Representatives, the following statement is made:
The Committee agrees with the estimate prepared by the
Congressional Budget office (CBO) which is included below.

B. Statement Regarding New Budget Authority and Tax Expenditures

In compliance with clause 2(l)(3)(B) of rule XI of the
Rules of the House of Representatives, the Committee states
that the Committee bill results in no new budget authority and
has no effect on federal revenues.

C. Cost Estimate Prepared by the Congressional Budget Office

In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives requiring a cost estimate
prepared by the Congressional Budget Office (CBO), the
following report prepared by CBO is provided.

U.S. Congress,
Congressional Budget Office,
Washington, DC, May 4, 1998.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1023, the Ricky
Ray Hemophilia Relief Fund Act of 1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Anne
Cappabianca.
Sincerely,
June E. O'Neill, Director.
Enclosure.

congressional budget office cost estimate

H.R. 1023--Ricky Ray Hemophilia Relief Fund Act of 1998

Summary: H.R. 1023 would authorize $750 million to make
compensatory payments to hemophiliacs who contracted HIV from
an antihemophilic factor, and to certain of their family
members. By accepting payments, individuals would agree that
any claim they have against the federal government would be
fully satisfied. The bill also would exclude from eligibility
determinations for Medicaid and Supplemental Security Income
(SSI) benefits settlement payments from private lawsuits by
hemophiliacs who contracted HIV.
Assuming the authorized amounts would be appropriated, CBO
estimates that H.R. 1023 would result in additional
discretionary spending of $767 million over the 1998-2003
period. The bill would also increase direct spending by $18
million and therefore be subject to pay-as-you-go procedures.
H.R. 1023 does not contain any intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
of 1995.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1023 is shown in the following table.
For the purposes of this estimate, CBO assumes an enactment
date of July 1, 1998.

Authorization Level....................................... 752 3 3 3 3 2
Estimated Outlays......................................... 2 116 228 228 116 77

DIRECT SPENDING

Estimated Budget Authority................................ 1 5 4 3 3 2
Estimated Outlays......................................... 1 5 4 3 3 2
----------------------------------------------------------------------------------------------------------------

The costs of this legislation fall within budget functions
550 (Health) and 600 (Income Security).

Basis of estimate

Title I
H.R. 1023 would authorize $750 million to be placed in a
trust fund, from which compensatory payments would be made to
qualified claimants. Eligible claimants include individuals
with blood-clotting disorders who contracted HIV from a
contaminated antihemophilic factor between July 1, 1982, and
December 1, 1987. Spouses of these patients also qualify as
claimants, provided they demonstrate that they contracted HIV
from their infected spouse. Finally, any children of these
couples who contracted HIV perinatally could petition for
payments. Claimants must be able to submit medical
documentation of their HIV status, a hemophilia diagnosis, and
the date of the antihemophilic factor treatment.
The Secretary of Health and Human Services would administer
the trust fund, which would pay $100,000 to each approved
claimant. Claims would be paid in the order received until the
fund is depleted. However, the Secretary could make payments
for only five years after enactment of the bill. For the
purposes of this estimate, CBO assumes that payments would
equal the amount authorized.
If a claimant died before filing a petition, his survivors
could submit a petition in his name. If the claimant died
before the claim was settled, payment would be made to his
spouse, children, or parents, in that order. In accepting these
payments, petitioners would agree that any claims they have
against the government or its agents are fully satisfied.
The bill provides that all claims must be filed within
three years of its enactment. Therefore, CBO assumes that the
majority of payments from the fund would occur during the first
four years of the program's operation. We also assume that
payments would not start until fiscal year 1999, when outlays
would total $113 million.
H.R. 1023 specifies that, for tax purposes, payments from
the fund would be considered damages received on account of
personal injuries or sickness. However, this provision would
not affect federal revenues since, under current law, there
would be no compensatory payments that could be taxed. The bill
also stipulates that, in determining eligibility for Medicaid
or other entitlement benefits under section 3803(c)(2)(C) of
title 31 of the United States Code, payments to claimants could
not be counted as income or resources.
Under the proposal, individuals accepting payments from the
fund agree not to pursue any further claim against the federal
government. These claims might have taken the form of
individual lawsuits against the federal government, or of a
class-action lawsuit. CBO cannot estimate the amount of the
government's liability, if any, under current law. However, it
is possible that this provision of the bill could yield some
savings to the federal government.
Finally, the bill would require that administrative costs
not be paid from the fund's appropriation. Based on the
administrative costs of other, similar federal trust funds, CBO
estimates that the fund's administrative costs would be $2
million in 1998, and $16 million over the 1998-2003 period.
Title II
Thousands of hemophiliacs who contracted HIV through
contaminated blood products have filed lawsuits against the
manufacturers of those blood products. H.R. 1023 would exempt
any settlement payments arising from these lawsuits from
consideration as income or resources in determining eligibility
for Medicaid or SSI benefits. Most payments will be part of a
class settlement in the Susan Walker v. Bayer Corporation, et
al. case. (This settlementis also known as the In Re Factor VII
or IX Concentrate Blood Products Litigation settlement.) Under this
settlement, hemophiliacs or their survivors would receive a payment of
$100,000 per case of HIV infection. These settlement payments have
already been exempted from Medicaid eligibility determinations by the
Balanced Budget Act of 1997.
Under current law settlement payments are treated as income
in SSI eligibility determinations. The size of the payments in
the Susan Walker v. Bayer settlement and other lawsuits would
almost certainly make individuals currently receiving SSI
ineligible. H.R. 1023 thus preserves SSI eligibility for a
group of people who would otherwise become ineligible.
Approximately 3,250 hemophiliacs who have contracted HIV
through tainted blood products are currently alive. Of this
total, CBO estimates that 1,300 people are receiving SSI
benefits. A small number of these individuals would not be
affected by the bill because they will place their settlement
payments in a special needs trust, which preserves their SSI
eligibility. The estimated cost of preserving SSI eligibility
for the remaining beneficiaries will be $1 million in 1998, $5
million in 1999, and less in subsequent years.
Pay-as-you-go-considerations: The provisions of Title II of
this bill would affect direct spending and would therefore be
subject to pay-as-you-go procedures. The pay-as-you-go effects
of the bill are shown in the following table. For the purposes
of enforcing pay-as-you-go procedures, only the effects in the
current year, the budget year, and the succeeding four years
are counted.

----------------------------------------------------------------------------------------------------------------
By fiscal years, in millions of dollars--
----------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
Change in outlays.................. 1 5 4 3 3 2 2 2 1 1 1
Change in receipts.................
(10)Not applicable
----------------------------------------------------------------------------------------------------------------

Estimated impact on State, local, and tribal government:
H.R. 1023 contains no intergovernmental mandates as defined in
the Unfunded Mandates Reform Act of 1995 (UMRA). By excluding
payments from the Susan Walker v. Bayer Corporation, et al. and
other settlements from being used to consider SSI eligibility,
some SSI recipients would remain eligible for state benefits.
However, CBO estimates that the cost of these benefits would be
less than $500,000 annually and that states have sufficient
authority to amend their financial or programmatic
responsibilities to offset these costs.
Estimated impact on the private sector: None.
Comparison with other estimates: On March 20, 1998, CBO
released an estimate for H.R. 1023 as ordered reported by the
House Committee on Judiciary. CBO estimated that that version
of H.R. 1023 would increase discretionary spending by $767
million and direct spending by $17 million over the 1998-2003
period. The Ways and Means version of the bill would have a
slightly larger impact on direct spending because it exempts
from SSI eligibility determinations all private settlement
payments. The Judiciary version covered only payments stemming
from the In Re Factor VIII or IX settlement.
Estimate prepared by: Federal Costs: Anne Cappabianca
(Title I), and Eric Rollins (Title II). Impact on State, Local,
and Tribal Governments: Leo Lex. Impact on the Private Sector:
Julia Matson.
Estimate approved by: Paul N. Van de Water, Assistant
Director for Budget Analysis.

V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

A. Committee Oversight Findings and Recommendations

In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that it was the result of its oversight of the Supplemental
Security Income program and the tax laws that it deemed the
action taken to be appropriate.

B. Summary of Findings and Recommendations of the Government Reform and
Oversight Committee

In compliance with clause 2(l)(3)(D) of rule XI of the
Rules of the House of Representatives, the Committee states
that no oversight findings or recommendations have been
submitted to the Committee on Government Reform and Oversight
regarding the subject of the bill.

C. Constitutional Authority Statement

With respect to clause 2(l)(4) of rule XI of the Rules of
the House of Representatives, relating to Constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article I of the
Constitution, Section 8 (``The Congress shall have power to lay
and collect taxes, duties, imposts and excises, to pay the
debts and to provide for * * * the general Welfare of the
United States * * *''), and the 16th amendment to the
Constitution.