[House Report 112-470]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-470

======================================================================

                                     

 
            SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012

                               ----------                              

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 5652

  A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201 OF THE 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2013

                             together with

                             MINORITY VIEWS




  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                         SEQUESTER REPLACEMENT
                       RECONCILIATION ACT OF 2012




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112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-470

======================================================================

                                     


            SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 5652

  A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201 OF THE 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2013

                             together with

                             MINORITY VIEWS




  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                KAREN BASS, California
TODD C. YOUNG, Indiana               SUZANNE BONAMICI, Oregon
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     3
Committee Oversight Findings.....................................    10

Title I--Committee on Agriculture:
    Transmittal Letter...........................................    15
    Brief Explanation............................................    19
    Purpose and Need.............................................    19
    Section-by-Section...........................................    23
    Committee Consideration......................................    24
    Reporting the Bill--Roll Call Votes..........................    25
    Committee Oversight Findings.................................    25
    Performance Goals and Objectives.............................    25
    Constitutional Authority Statement...........................    25
    Budget Act Compliance (Congressional Budget Office Estimate).    25
    Changes in Existing Law......................................    31
    Minority Views...............................................    41

Title II--Committee on Energy and Commerce:
    Transmittal Letter...........................................    45
    Purpose and Summary..........................................    49
    Background and Need for Legislation..........................    49
    Hearings.....................................................    56
    Committee Consideration......................................    57
    Committee Votes..............................................    57
    Committee Oversight Findings.................................    78
    Statement of General Performance Goals and Objectives........    78
    New Budget Authority, Entitlement Authority, and Tax 
      Expenditures...............................................    78
    Earmarks.....................................................    78
    Committee Cost Estimate......................................    78
    Congressional Budget Office Estimate.........................    78
    Federal Mandates Statement...................................    88
    Advisory Committee Statement.................................    88
    Constitutional Authority Statement...........................    88
    Applicability to Legislative Branch..........................    88
    Section-by-Section Analysis of the Legislation...............    88
    Changes in Existing Law Made by the Bill, as Reported........    92
    Dissenting Views.............................................   108

Title III--Committee on Financial Services:
    Transmittal Letter...........................................   151
    Purpose and Summary..........................................   154
    Background and Need for Legislation..........................   155
    Hearings.....................................................   160
    Committee Consideration......................................   163
    Committee Votes..............................................   163
    Constitutional Authority Statement...........................   169
    Committee Oversight Findings.................................   169
    Performance Goals and Objectives.............................   170
    New Budget Authority, Entitlement Authority, and Tax 
      Expenditures...............................................   171
    Committee Cost Estimate......................................   171
    Congressional Budget Office Estimate.........................   171
    Federal Mandates Statement...................................   182
    Advisory Committee Statement.................................   182
    Applicability to Legislative Branch..........................   183
    Earmark Identification.......................................   183
    Section-by-Section Analysis of the Legislation...............   184
    Changes in Existing Law......................................   191
    Dissenting Views.............................................   358

Title IV--Committee on the Judiciary:
    Transmittal Letter...........................................   363
    Summary of the Major Policy Decisions in the Legislation.....   365
    Background and Need for the Legislation......................   365
    Report Language: Section-by-Section..........................   412
    Advisory on Earmarks.........................................   413
    Committee Oversight Findings.................................   413
    Constitutional Authority Statement...........................   413
    Committee Votes..............................................   413
    Changes in Existing Law......................................   414
    Performance Goals............................................   414
    Congressional Budget Office Estimate.........................   415
    Dissenting Views.............................................   421

Title V--Committee on Oversight and Government Reform:
    Summary of the Major Policy Decisions in the Legislation.....   455
    Section-By-Section...........................................   456
    Committee Oversight Findings.................................   456
    Committee Votes..............................................   457
    Performance Goals............................................   457
    Congressional Budget Office Estimate.........................   457
    Changes in Existing Law......................................   462
    Dissenting Views.............................................   469

Title VI--Committee on Ways and Means:
    Transmittal Letter...........................................   473
    Subtitle A:
        Summary and Background...................................   475
        Legislative History......................................   476
        Explanation of Provision.................................   476
        Votes of the Committee...................................   479
        Budget Effects of the Provisions.........................   480
        Other Matters To Be Discussed Under the Rules of the 
          House..................................................   486
        Changes in Existing Law Made by the Budget Reconciliation 
          Legislative Recommendation as Transmitted..............   487
        Dissenting Views.........................................   489
    Subtitle B:
        Summary and Background...................................   493
        Explanation of Provision.................................   494
        Votes of the Committee...................................   495
        Budget Effects of the Provisions.........................   496
        Other Matters To Be Discussed Under The Rules of the 
          House..................................................   499
        Changes in Existing Law Made by the Legislative 
          Recommendations, as Transmitted........................   501
        Dissenting Views.........................................   503
    Subtitle C:
        Summary of the Major Policy Decisions in the Legislation.   505
        Report Language: Section-by-Section......................   513
        Committee Oversight Findings.............................   513
        Constitutional Authority Statement.......................   513
        Committee Votes..........................................   514
        Congressional Budget Office cost estimate................   514
        Changes in Existing Law (Ramseyer Submission)............   517
        Dissenting Views.........................................   539

Votes of the Committee...........................................   541
Statement on Committee Oversight Findings........................   546
Performance Goals and Objectives.................................   547
Constitutional Authority Statement...............................   547
Advisory Committee Statement.....................................   547
Applicability to the Legislative Branch..........................   547
Federal Mandates Statement.......................................   547
Advisory on Earmarks.............................................   547
Changes in Existing Law Made by the Bill as Reported.............   547
Committee Cost Estimate..........................................   547
Appendix: Revenues...............................................   553
Minority Views...................................................   559
H.R. 5652, Sequester Replacement Reconciliation Act of 2012......   573


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-470

======================================================================




                         SEQUESTER REPLACEMENT
                       RECONCILIATION ACT OF 2012

                                _______
                                

PROVIDING FOR RECONCILIATION PURSUANT TO SECTION 201 OF THE CONCURRENT 
             RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2013

                                _______
                                

  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Ryan, from the Committee on Budget, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 5652]

    The Committee on the Budget, to whom reconciliation 
recommendations were submitted pursuant to subsection (a) of 
section 201 of House Concurrent Resolution 112, the concurrent 
resolution on the budget for fiscal year 2013, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.
                              Introduction

                              ----------                              


    The Path to Prosperity budget that passed the U.S. House of 
Representatives on March 29, 2012 set in motion a process to 
reprioritize certain across-the-board spending reductions 
enacted as part of the Budget Control Act of 2011 [BCA]. This 
process, called reconciliation, consists of a special procedure 
to give expedited consideration to bills enacting the spending, 
revenue, and debt policies contained in the budget resolution.
    To trigger these expedited procedures, The Path to 
Prosperity included reconciliation instructions calling on six 
House committees to achieve specified amounts of deficit 
reduction from programs within their jurisdictions. This 
Reconciliation Act consists of the legislation they have 
recommended to achieve the same deficit reduction required by 
the BCA, but without the haphazard cuts--especially to national 
security--that an across-the-board approach would entail.

                     The Budget Control Act of 2011

    In mid-2011, as the nation approached the statutory limit 
on how much it could legally borrow, the Obama administration 
asked Congress for a ``clean piece of legislation'' to increase 
the government's legal borrowing authority without any spending 
cuts to match.\1\
---------------------------------------------------------------------------
    \1\Brian Patrick, ``Debt Limit Tick Tock,'' Blog Update, Office of 
Majority Leader Eric Cantor, August 1, 2011. http://majorityleader.gov/
blog/2011/08/debt-limit-tick-tock.html
---------------------------------------------------------------------------
    House Republicans refused to give the President the blank 
check he requested. Instead, Speaker of the House John Boehner 
insisted that any increase in the debt ceiling be accompanied 
by a greater amount of spending reduction. Speaker Boehner made 
clear on May 9, 2011 that, ``Without significant spending cuts 
and reforms to reduce our debt, there will be no debt limit 
increase. And the cuts should be greater than the accompanying 
increase in debt authority the President is given.''\2\
---------------------------------------------------------------------------
    \2\Remarks by House Speaker John Boehner. Economic Club of New 
York. May 9, 2011. http://www.speaker.gov/News/
DocumentSingle.aspx?DocumentID=240370
---------------------------------------------------------------------------
    Once it became clear that Congress would not rubber-stamp 
his requested increase in the debt ceiling, President Obama 
announced that he would not accept a debt-ceiling deal that did 
not include large tax increases on American families and 
businesses.\3\
---------------------------------------------------------------------------
    \3\Patrick, ``Debt Limit Tick Tock.''
---------------------------------------------------------------------------
    House Republicans succeeded in protecting hardworking 
taxpayers by preventing the President from securing a bill 
containing tax hikes. Instead, a bipartisan agreement was 
forged to reduce the deficit by putting an upper limit on 
discretionary spending and to set in motion a framework to 
achieve additional savings. The BCA paired a $2.1 trillion 
increase in the public debt limit with equivalent deficit 
reduction over the ensuing 10 years.
    The BCA called for deficit reduction in three phases:
    1. First, it established caps on discretionary spending, 
achieving approximately $917 billion in savings over 10 years.
    2. Second, it established and called upon a Joint Select 
Committee on Deficit Reduction (JSCDR) to produce legislation 
with at least an additional $1.2 trillion in deficit reduction.
    3. Third, it established an automatic sequestration process 
to force spending reductions in the event the JSCDR did not 
produce a deficit-reduction bill or Congress refused to pass 
it. This ``sequester'' would result in immediate discretionary 
spending reductions effective January 2, 2013.
    Understanding each component of the BCA is critical to 
understanding the fiscal impact of the law as a whole. The 
BCA's pre-sequester spending caps reduced discretionary 
spending for fiscal year 2013 to a maximum of $1.047 trillion. 
Some, including Senate Majority Leader Harry Reid, are still 
insisting that House Republicans are obligated to pass fiscal 
year 2013 spending bills at these levels.\4\
---------------------------------------------------------------------------
    \4\Naftali Bendavid, ``Fight Breaks Out Over 2013 Budget Cuts,'' 
Wall Street Journal, March 14, 2012. http://blogs.wsj.com/washwire/
2012/03/14/fight-breaks-out-over-2013-budget-cuts/
---------------------------------------------------------------------------
    But Congress is no longer operating in a pre-sequester 
world. Last November, the JSCDR announced that it could not 
reach agreement on a deficit-reduction bill by the statutory 
deadline, thus triggering the sequester. Congress is now 
operating in a post-sequester world--one in which discretionary 
spending for fiscal year 2013 is capped at $949 billion. Every 
non-exempt defense account will be cut proportionally for a 
total of $55 billion, or 10 percent, and every non-exempt non-
defense account will be cut proportionally for a total of $43 
billion, or 8 percent, in January 2013 unless Congress acts to 
replace this sequester by reprioritizing the savings.
    These across-the-board and arbitrary cuts would be 
devastating to America's defense capabilities. Leaders of both 
parties agree that sequester savings should be reprioritized. 
On August 4, 2011, then-director of the Office of Management 
and Budget (now White House Chief of Staff) Jack Lew wrote that 
the sequester was not intended to be implemented: ``Make no 
mistake: the sequester is not meant to be policy. Rather, it is 
meant to be an unpalatable option that all parties want to 
avoid.''\5\
---------------------------------------------------------------------------
    \5\Jack Lew, ``Security Spending in the Deficit Agreement,'' August 
4, 2011. http://www.whitehouse.gov/blog/2011/08/04/security-spending-
deficit-agreement (accessed March 19, 2012).
---------------------------------------------------------------------------

            The Joint Select Committee on Deficit Reduction

    While both parties have expressed their desire to avoid the 
consequences of the sequester, there is profound disagreement 
over how. This disagreement was evident in the JSCDR's failure 
to produce a deficit-reduction bill last year.
    Despite the good-faith effort on the part of committee 
Republicans to avoid the sequester (and, by extension, to avoid 
its disproportionate impact on defense), the negotiations 
exposed a fundamental lack of seriousness by some in Washington 
regarding the need to control government spending and address 
the structural drivers of the debt. As JSCDR Co-Chairman Jeb 
Hensarling made clear, Democrats on the committee ``were 
unwilling to agree to anything less than $1 trillion in tax 
hikes--and unwilling to offer any structural reforms to put our 
health care entitlements on a permanently sustainable 
basis.''\6\
---------------------------------------------------------------------------
    \6\Hensarling, Jeb. ``Why the Super Committee Failed,'' Wall Street 
Journal, November 22, 2011. http://online.wsj.com/article/
SB10001424052970204531404577052240098105190.html
---------------------------------------------------------------------------
    Committee Democrats refused to address the problem, so the 
problem remains. Therefore, the immediate question of how to 
reprioritize sequester savings--and the larger challenge of 
averting a debt-fueled economic crisis--have become central to 
this year's budget debate during this year's budget season.

                The President's Fiscal Year 2013 Budget

    The President's fiscal year 2013 budget calls on Congress 
to replace the sequester, but it does not make a specific 
proposal to turn the sequester off. It assumes that the 
sequester does not occur, but it does not lay out a specific 
path forward to avoid its consequences. The President's budget 
includes tax increases and spending cuts (including a $487 
billion reduction in defense spending), which it claims are 
enough to offset the sequester--but it includes a net spending 
increase that consumes nearly all of its claimed deficit 
reduction.
    This approach is deeply flawed, for three reasons. First, 
it imposes a net tax increase on American families and 
businesses of $2.0 trillion. Washington's fiscal imbalance is 
overwhelmingly driven by runaway spending, not insufficient tax 
revenue, and reducing the deficit by taking more from 
hardworking Americans would simply slow the economy, reduce job 
opportunities, and ultimately prove counterproductive as a 
deficit-reduction strategy.
    Second, despite the large tax increase, the President's 
budget also contains a net spending increase of $1.4 trillion, 
for a total of only $605 billion in deficit reduction. The rest 
of the President's deficit-reduction claims are based on 
discredited budget gimmicks, including almost $1 trillion in 
``savings'' that come from projecting current wartime spending 
in Iraq and Afghanistan out for the next 10 years, then 
proposing not to spend that money, even though it was never 
requested and was never going to be spent.
    And third, much of the President's actual spending 
reduction comes from cutting too deeply into the Defense 
Department. Although the President's budget does not cut 
defense as deeply as the sequester would, these cuts would 
still jeopardize the capability of the U.S. military.

                     The Senate's Lack of a Budget

    It has been three years since the Senate passed a budget, 
and the legal deadline for passing a congressional budget 
resolution this year has already passed. Yet there has been no 
indication that Senator Reid plans to put forward an 
alternative plan for prioritizing spending, much less for 
averting the sequester. Instead, he continues to insist that 
Congress is still operating in a pre-sequester world, even 
though the President's own budget admits that ``the sequester 
was triggered and will take effect in January 2013 if no action 
is taken.''\7\ Senator Reid's approach has been the very 
definition of inaction. There is a better way forward.
---------------------------------------------------------------------------
    \7\``Fiscal Year 2013 Budget of the U.S. Government,'' Office of 
Management and Budget, February 2012. http://www.whitehouse.gov/sites/
default/files/omb/budget/fy2013/assets/budget.pdf
---------------------------------------------------------------------------

                    The Path to Prosperity Approach:
              Reprioritize Savings Through Reconciliation

    Pursuant to the Path to Prosperity budget resolution, the 
House has advanced a series of reforms that replace across-the-
board cuts scheduled in law with common-sense reforms that take 
steps to address government's unsustainable autopilot spending.
    Six House Committees have advanced legislation that will:
    1. Stop Abuse, by Ensuring that Individuals are Actually 
Eligible for the Taxpayer Benefits They Receive;
    2. Eliminate Government Slush Funds and Stop Bailouts;
    3. Control Runaway, Unchecked Spending;
    4. Restrain Spending on Government Bureaucracies; and
    5. Reduce Waste and Duplicative Programs.
    The savings from these reforms will replace the arbitrary 
discretionary sequester cuts and lay the groundwork for further 
efforts to avert the spending-driven economic crisis before us.
    Below is an outline of the reforms being advanced by the 
six committees (Agriculture, Energy and Commerce, Financial 
Services, Judiciary, Oversight and Government Reform, and Ways 
and Means) that received reconciliation instructions under the 
budget resolution.

 1. STOP ABUSE BY ENSURING THAT INDIVIDUALS ARE ACTUALLY ELIGIBLE FOR 
                   THE TAXPAYER BENEFITS THEY RECEIVE

    A troubling trend has emerged in recent years, in which 
eligibility restrictions intended to focus limited government 
resources on those who need them most have been systematically 
weakened or have broken down due to loopholes in the law. This 
Reconciliation Act protects aid for those who need it by making 
sure that taxpayer dollars are not going to those who don't 
qualify for assistance.
     It eliminates a loophole that has allowed 
individuals to qualify for food stamps on such flimsy pretexts 
as receiving a brochure from another government program.
     It eliminates a loophole that allows individuals 
to increase their food-stamp benefits by as much as $130 a 
month for receiving as little as $1 in federal utility 
assistance.
     It stops the practice of sending the refundable 
portion of the Child Tax Credit to individuals who are 
ineligible to work in the United States.
     It requires anyone who receives an overpayment of 
health insurance subsidies under the Democrats' health care law 
to repay the full amount of the overpayment.

         2. ELIMINATE GOVERNMENT SLUSH FUNDS AND STOP BAILOUTS

    Recent legislation has all too often ceded too much power 
to unaccountable bureaucrats, and has just as often provided 
them with access to taxpayer money in ways that fuel wasteful 
spending and bailouts. This Reconciliation Act targets these 
indefensible slush funds and automatic subsidies for 
elimination.
     It protects taxpayers by eliminating the Wall 
Street bailout fund included as part of the 2010 Dodd-Frank 
financial overhaul.
     It terminates the Obama Administration's 
ineffective housing bailouts, which have become the target of 
widespread and bipartisan criticism for actually making matters 
worse for homeowners.
     It reforms the National Flood Insurance Program to 
increase financial accountability by requiring the program to 
sufficiently cover risks.
     It eliminates the unaccountable government health 
slush fund created by the Democrats' health care law.

                 3. CONTROL RUNAWAY, UNCHECKED SPENDING

    Federal programs across the board experienced an explosion 
of funding in recent years. Federal spending on food stamps has 
increased by 267 percent over the last decade--with part of 
that expansion coming from President Obama's failed 2009 
stimulus law. Medicaid spending is up 86 percent over the last 
ten years. And the Democrats' health care law would increase 
spending by $1.6 trillion over the next ten years. This 
Reconciliation Act takes measures to stop the spending spree 
and restrain spending growth in the future.
     It repeals automatic increases in food-stamp 
benefits enacted as part of the President's failed stimulus 
law.
     It repeals a provision of the Democrats' health 
care law that allows the Secretary of Health and Human Services 
unprecedented authority to spend ``such sums as necessary'' for 
grants to states to comply with the law.
     It defunds the health law's ``CO-OP'' program, 
which disburses government subsidized loans--50 percent of 
which, according to the Office of Management and Budget, will 
never be repaid.
     It gives states more freedom and flexibility to 
tailor Medicaid to the needs of their unique populations.
     It prevents provisions of the health law from 
exacerbating problems with Medicaid's current matching formula, 
which gives states and territories a perverse incentive to grow 
the program and little incentive to save.

            4. RESTRAIN SPENDING ON GOVERNMENT BUREAUCRACIES

    The federal government has added 149,000 new workers since 
the President took office. Such a rapid expansion of government 
weighs on private-sector employment, because it requires either 
higher taxes now or higher borrowing now and higher taxes 
later. This Reconciliation Act aims to slow the federal 
government's unsustainable growth, reduce the public-sector 
bureaucracy, and reflect the growing frustration of workers 
across the country at the privileged rules enjoyed by 
government employees.
     It eliminates the ability of the newly created 
Consumer Financial Protection Bureau and Office of Financial 
Research to set their own budgets.
     It requires Federal employees to more equitably 
share in the cost of their retirement benefits.
     It eliminates the provision that pays Federal 
workers a special benefit if they retire early.

                5. REDUCE WASTE AND DUPLICATIVE PROGRAMS

    Annual examinations of wasteful spending conducted by the 
Federal government's independent auditors routinely reach the 
same conclusion: Government agencies and departments are rife 
with examples of waste, duplication and overlap.\8\ This 
Reconciliation Act protects taxpayers and reduces spending by 
eliminating wasteful and duplicative programs.
---------------------------------------------------------------------------
    \8\2012 Annual Report: Overlap and Fragmentation, Achieve Savings, 
and Enhance Revenue, Government Accountability Office, March 2012. 
http://www.gao.gov/products/GAO-12-342SP
---------------------------------------------------------------------------
     It repeals the outdated and duplicative Social 
Services Block Grant, whose missions have been supplanted by 
dozens of newer Federal programs.
     It begins the process of consolidating the dozens 
of overlapping and duplicative Federal employment training 
programs by eliminating 50/50 cost-sharing for an employment 
training program tied to food stamps.
     It reforms the medical liability system by reining 
in unlimited lawsuits and thereby making health care delivery 
more accessible and affordable for families.
     It removes incentives that encourage states to add 
to their Medicaid rolls through careless processes that lead to 
billions in overpayments.

                 The Sequester Replacement Act of 2012

    By targeting fraud, eliminating slush funds, restraining 
runaway spending, reforming bureaucracies, and ending wasteful 
and duplicative programs, this Reconciliation Act provides a 
responsible way to achieve all of the 2013 spending reductions 
required by the BCA. With--and only with--the enactment of this 
targeted, carefully prioritized spending reduction, Congress 
can move to the second part of this task: replacing the across-
the-board sequester before it jeopardizes the security of 
American families and the safety of our troops.
    A separate piece of legislation, the Sequester Replacement 
Act of 2012 [SRA], would achieve this task by amending the BCA 
to replace the sequester for fiscal year 2013 with the spending 
reductions enacted through the Reconciliation Act. To safeguard 
against an end-run around the Reconciliation Act, the SRA 
stipulates that it would only take effect upon enactment of the 
reconciliation bill.
    The SRA takes additional steps to protect the U.S. military 
and veterans and to lock in spending savings for the American 
taxpayer:
     It clarifies that veterans programs are not 
subject to sequester.
     It lowers the BCA's discretionary caps to levels 
set in the House-passed Path to Prosperity budget.
     It closes a potential loophole that would 
otherwise allow Congress to enact large direct spending 
increases by counting Reconciliation Act savings as an offset.
     It eliminates the fiscal year 2013 sequester of 
mandatory spending on national defense.
    In late 2011, the President issued a veto threat against 
any legislation overturning the sequester unless fully offset. 
The President called on Congress to develop an alternative: 
``The only way these spending cuts will not take place is if 
Congress gets back to work and agrees on a balanced plan to 
reduce the deficit by at least $1.2 trillion. That's exactly 
what they need to do. That's the job they promised to do. And 
they've still got a year to figure it out.''\9\
---------------------------------------------------------------------------
    \9\Statement by the President on the Supercommittee, November 21, 
2011, the White House. http://www.whitehouse.gov/the-press-office/2011/
11/21/statement-president-supercommittee
---------------------------------------------------------------------------
    With passage of the Reconciliation Act and the SRA, the 
House will have done its job. These bills take the responsible 
step of offsetting the cost (approximately $78 billion) of 
replacing the automatic across-the-board discretionary spending 
cuts that are scheduled to occur on January 2, 2013 through 
sequestration. The additional savings achieved through 
reconciliation beyond the $78 billion (over $237 billion in the 
next ten years) would further reduce the deficit. And this 
approach provides a blueprint for replacing the rest of the 
sequester with responsible, targeted spending reduction in the 
years ahead.

             The Need for Willing Partners to Move Forward

    This Reconciliation Act provides a clear solution that can 
be implemented quickly to replace the sequester. It does so by 
using an expedited procedure to reduce lower-priority spending. 
This solution cuts through the gridlock in Washington to start 
eliminating excessive autopilot spending immediately. It 
protects taxpayers, and it would shield the U.S. military from 
a crippling, 10 percent across-the-board reduction in its 
funding.
    Unfortunately, the House needs willing partners to 
implement this solution--and the Senate Democratic leadership's 
only plan has been to oppose solutions put forward in the 
House. U.S. troops and their families should not have to suffer 
because the Democratic Party's leaders refuse to lead. House 
Republicans will continue to show a way forward by directly 
addressing the nation's most urgent fiscal and economic 
challenges. It is not too late for Americans to choose a better 
path.
    Under the Congressional Budget Act, the Budget Committee 
cannot amend this reconciliation bill. However, there are two 
changes the Committee intends to seek at the Rules Committee. 
First, the Committee supports the incorporation of the 
Sequester Replacement Act (HR 4966) in this Reconciliation 
bill. Second, the Committee supports a technical amendment to 
the Committee on Oversight and Government Reform's submission 
to ensure that the taxpayer receives the full savings from the 
proposed federal retirement reforms.

                    Oversight Hearings and Findings

    Pursuant to clause 3(c)(1) of Rule XIII of the Rules of the 
House of Representatives, the oversight findings of the 
Committee on the Budget and recommendations are set forth in 
this section. In addition, the oversight findings of each 
committee of jurisdiction are included at the appropriate 
places in this committee report.
    The Committee on the Budget held nine hearings in 2012 that 
have informed the Committee's work on the FY 2013 budget 
resolution including reconciliation legislation reported 
pursuant to that budget resolution. (A complete list of these 
hearings is included below.) The Budget Committee staff has 
also engaged in intensive discussions with executive branch, 
congressional, and private sector experts to consider the 
implications of the deficit and debt crisis facing the country 
and the best means of reducing current and future deficits. 
These hearings and consultations informed the committee's 
reconciliation instructions to each of the six authorizing 
committees. In particular, the recent rapid growth of means-
tested entitlements through benefit and eligibility expansions 
poses a budget problem that this reconciliation bill begins to 
address.
    The Committee on the Budget has also inquired into the 
operation and implications of the sequester required by the 
Budget Control Act. The Office of Management and Budget is the 
lead agency responsible for implementing any sequester and 
witnesses from this agency have twice testified before the 
Budget Committee this year. Unfortunately, in both the February 
15 and April 25 hearings, the administration declined to 
provide specific information in response to Members' questions 
relating to what the administration's specific proposal is to 
avoid the sequester and how the administration would implement 
the sequester if legislation is not enacted by January 2, 2013. 
In a third attempt to fill the remaining information gaps, the 
Chairman of the Committee on the Budget wrote to Acting OMB 
Director Zients on April 26, requesting additional information 
by May 4 on how the administration would execute the sequester 
required by the Budget Control Act. To date Acting Director 
Zients has not responded.
    The Committee intends to continue to conduct active 
oversight of the execution and implementation of the Budget 
Control Act over the course of 2012 as it works to avoid the 
negative consequences of a sequester, while ensuring that 
significant deficit reduction is not delayed.

         2012 OVERSIGHT HEARINGS OF THE COMMITTEE ON THE BUDGET
------------------------------------------------------------------------
    Date               Topic                       Witnesses
------------------------------------------------------------------------
Feb. 1        Budget and Economic      Doug Elmendorf, CBO Director
               Outlook
------------------------------------------------------------------------
Feb. 2        The State of the U.S.    Ben Bernanke, Federal Reserve
               Economy                  Board Chairman
------------------------------------------------------------------------
Feb. 15       The President's FY 2013  Jeffrey Zients, OMB Acting
               Budget Request           Director
------------------------------------------------------------------------
Feb. 16       The President's FY 2013  Timothy Geithner, Secretary of
               Revenue and Economic     the Treasury
               Policy Proposals
------------------------------------------------------------------------
Feb. 28       Strengthening Health     Stephen Goss, Actuary, Social
               and Retirement           Security Administration
               Security                Rick Foster, Actuary, Center for
                                        Medicare & Medicaid Services
------------------------------------------------------------------------
Feb. 29       The Department of        Leon Panetta, Secretary of
               Defense and the FY       Defense
               2013 Budget             General Martin Dempsey, Chairman
                                        of the Joint Chiefs of Staff
------------------------------------------------------------------------
Mar. 8        Members' Day             Members of Congress
------------------------------------------------------------------------
April 17      Strengthening the        Private Sector Experts on Federal
               Safety Net               Safety Net Programs
------------------------------------------------------------------------
April 25      Replacing the Sequester  Danny Werfel, OMB Controller
                                       Susan Poling, GAO Deputy General
                                        Counsel
------------------------------------------------------------------------

                 TITLE I--THE COMMITTEE ON AGRICULTURE
                         LETTER OF TRANSMITTAL

                              ----------                              

                                  Committee on Agriculture,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on the Budget,
Washington, DC.
    Dear Mr. Chairman: I am transmitting herewith the 
recommendations of the Committee on Agriculture with respect to 
the reconciliation bill for fiscal year 2013, provided under 
House Concurrent Resolution 112, the Concurrent Resolution on 
the Budget for Fiscal Year 2013 and as modified by H. Res. 614.
    The enclosed recommendations were adopted by this Committee 
in a business meeting on April 18, 2012, in the presence of a 
quorum. Enclosed please find a hard copy of the Committee's 
recommendations on Title I--Agriculture; Section-by-Section; 
Purpose and Need; Committee Consideration; CBO score; and the 
remainder of the contents as required, including a set of 
Minority Views.
    With best wishes, I am
            Sincerely,
                                            Frank D. Lucas,
                                                          Chairman.
    Enclosure.
                 TITLE I--THE COMMITTEE ON AGRICULTURE

                           TABLE OF CONTENTS

                               __________
                                                                   Page
Brief Explanation................................................    19
Purpose and Need.................................................    19
Section-by-Section...............................................    23
Committee Consideration..........................................    24
Reporting the Bill--Roll Call Votes..............................    25
Committee Oversight Findings.....................................    25
Performance Goals and Objectives.................................    25
Constitutional Authority Statement...............................    25
Budget Act Compliance (Congressional Budget Office Estimate).....    25
Changes in Existing Law..........................................    31
Minority Views...................................................    41
                     TITLE I--AGRICULTURAL PROGRAMS

                           Brief Explanation

    The Agricultural Reconciliation Act of 2012 reduces 
spending within the jurisdiction of the Committee on 
Agriculture as required by H. Con. Res. 112, establishing the 
budget for the United States Government for fiscal year 2013 
and setting forth appropriate budgetary levels for fiscal years 
2014 through 2022, as passed by the House of Representatives on 
March 29, 2012, as modified by H. Res. 614.

                            Purpose and Need

    The House Budget Resolution, H. Con. Res. 112, as modified 
by H. Res. 614, included reconciliation instructions directing 
the Committee on Agriculture to report changes in laws within 
its jurisdiction that result in savings over fiscal years 2012 
through 2013, fiscal years 2012 through 2017, and fiscal year 
2012 through 2022, with estimates of $7.7 billion, $19.7 
billion, and $33.2 billion respectively.
    The nation faces a severe debt crisis with approximately 
$16 trillion in federal debt and counting. The House is doing 
its part to take a serious, common sense look at all programs 
and spending trends across the entire federal budget in order 
to address our nation's mounting debt. It is unrealistic to 
think that we can meet these pressing challenges without 
reducing federal spending. As in previous reconciliation bills, 
the Committee on Agriculture has shown willingness to do its 
part to ensure our nation's fiscal well being.
    The Supplemental Nutrition Assistance Program (SNAP), 
formerly known as the food stamp program, has seen an 
unprecedented growth in participation and cost over the past 
ten years, now accounting for almost 80 percent of the 
Committee's mandatory spending. Since 2002, the cost of SNAP 
has nearly tripled, increasing by 270 percent while 
participation has more than doubled. Consequently, the 
Committee agreed to achieve our directed savings by reducing 
SNAP spending by $35.8 billion over ten years, which represents 
only a four percent cut to the program. When programs within 
the Committee's jurisdiction soar well beyond historical 
participation and spending patterns, it is the Committee's duty 
to know why these programs are seeing such a surge and take 
action if necessary.
    These changes to SNAP are reasonable and credible 
approaches that will increase the integrity of the program. The 
provisions passed by the House Committee on Agriculture will 
close program loopholes, significantly reduce waste and abuse 
within the program, eliminate costs that taxpayers can no 
longer afford, and ensure the program continues to serve those 
who are most in need of food assistance according to the rule 
of law. It is the Committee's clear intent that none of the 
provisions passed by the Committee prevent families who qualify 
for assistance under SNAP law from receiving their benefits.
    The first provision closes a loophole in SNAP regarding how 
Low Income Home Energy Assistance Program (LIHEAP) payments 
interact with SNAP benefit calculation. Current law allows low-
income households receiving any amount of LIHEAP assistance, 
even $1, to automatically qualify for the SNAP Standard Utility 
Allowance (SUA). In the last several years, approximately 16 
states and the District of Columbia have been taking advantage 
of this loophole to bring more SNAP benefits to their states.
    In practice, if a participant receives $1 in LIHEAP, they 
can automatically deduct the SUA from their income. Therefore, 
their net income is reduced, and they subsequently receive a 
higher amount in SNAP benefits. According to a newsletter 
provided by the U.S. Department of Health and Human Services, 
Administration for Children and Families, an annual $1 LIHEAP 
benefit in New York will provide an average monthly hike in 
SNAP benefits of $131 for nearly 90,000 households in New York 
City. Similarly, an Associated Press article reported that the 
state of Washington sent out $1 LIHEAP checks to trigger an 
additional $43 million in SNAP benefits. The agreed to 
provision will end this egregious practice that uses the 
interaction between LIHEAP and SNAP to abuse the program. Under 
this provision, LIHEAP payments will no longer automatically 
trigger the SUA deduction, thus saving the taxpayers $14.3 
billion over ten years.
    States also have the option of using ``categorical 
eligibility,'' or automatic eligibility, which allows those 
receiving benefits from other specified low-income assistance 
programs to be eligible for SNAP. These other programs are 
Temporary Assistance for Needy Families (TANF), Supplemental 
Security Income (SSI), or other state general assistance 
programs. TANF assistance can be in the form of cash or non-
cash benefits (i.e. informational brochures, or access to an 
informational 800-number). When states implement categorical 
eligibility, these households do not need to meet SNAP asset or 
gross income tests. As of May 1, 2012, 43 jurisdictions (40 
States, the District of Columbia, Guam, and the U.S. Virgin 
Islands) have implemented ``broad-based'' categorical 
eligibility. These jurisdictions generally make all households 
with incomes below a state-determined income threshold eligible 
for SNAP.
    This Administration has been actively encouraging states to 
implement this policy as demonstrated through various U.S. 
Department of Agriculture (USDA) memos. One memo dated March 
18, 2010, states, ``With broad-based categorical eligibility, 
state agencies can effectively raise the income limit and raise 
or eliminate the asset test. A de facto elimination of the 
asset test through broad-based categorical eligibility saves 
administrative costs because state agencies do not have to 
devote staff time towards verifying assets, and makes it easier 
for families to apply for SNAP because they do not have to 
provide verification of their assets.''
    There was public outrage when the press reported that two 
lottery winners, both receiving more than $1 million in 
winnings, were also found to have been receiving SNAP 
assistance, even after collecting their winnings. When lottery 
winners choose to receive one lump sum payment for their 
winnings, that money is considered an asset. Under broad-based 
categorical eligibility, there are 38 states that do not verify 
assets when determining SNAP eligibility, thus creating a 
loophole for lottery winners and anyone with substantial 
assets. This reform to SNAP law would put an end to lottery 
winners receiving SNAP as states will have to review assets in 
determining SNAP eligibility.
    The Cincinnati Enquirer also printed an article that proves 
how wasteful states can be with taxpayer dollars when they 
implement broad-based categorical eligibility and no longer 
take into account assets. The article reports that a woman 
qualified for $500 a month in SNAP benefits after she lost her 
job, even though she had $80,000 in her bank account, a paid-
off $311,000 home, and a Mercedes.
    This provision would restrict categorical eligibility to 
only those households receiving cash assistance from SSI, TANF, 
or a state-run General Assistance program, saving taxpayers 
$11.7 billion over ten years. Merely, receiving a TANF-funded 
brochure or a referral to an ``800'' number telephone hotline 
would no longer automatically make a household SNAP eligible. 
It is estimated that 3.9 percent of the 46.4 million people 
currently enrolled in SNAP would be affected by this provision. 
Those who no longer have categorical eligibility status under 
the amended provision would have the opportunity to be reviewed 
for SNAP eligibility independent of their status as a TANF 
beneficiary. And those who receive cash assistance from SSI, 
TANF, or a state-run General Assistance program will still be 
categorically eligible for SNAP. By refining the eligibility 
requirements, this proposal ensures that those most in need 
will continue to receive assistance.
    Third, the Committee followed the example from the previous 
majority and agreed to terminate an artificial increase in SNAP 
benefits. The American Recovery and Reinvestment Act (ARRA) 
included an across-the-board increase in SNAP benefits 
effective in April 2009. The ARRA effectively replaced the 
increase in SNAP benefits that occurs based on annual food-
price inflation indexing. The ARRA benefit originally 
terminated after FY2018, when food-price inflation was 
estimated to ``catch up'' with the ARRA increase. The 
Congressional Budget Office (CBO) originally projected the ARRA 
increase to last through FY 2018 at an additional benefit cost 
of $57 billion.
    In the 111th Congress, when the Democrat majority needed to 
pay for other ``priorities,'' including a teacher's union 
bailout and increasing school meal standards, the ARRA SNAP 
increase was cut twice to offset these other two laws. They 
achieved their offsets by moving up the ARRA termination date 
to March 31, 2014, to cut $11.9 billion from SNAP to help pay 
for P.L. 111-226. Then they moved the ARRA termination date to 
October 31, 2013, to cut $2.5 billion from SNAP to help pay for 
P.L. 111-296. While many Democrats have talked about restoring 
these cuts, an overwhelming majority of Democrats voted for 
both the laws that benefited from an offset from SNAP benefits 
totaling almost $14.5 billion.
    This provision terminates the ARRA increase on July 1, 
2012, and reinstates the law that calculates SNAP benefits 
based on food-price inflation, rather than an arbitrary number. 
SNAP benefits will still be able to rise with the growing cost 
of food as stated in SNAP law. Rather than redirect these funds 
towards more bureaucracy, this provision will provide $5.9 
billion towards deficit reduction.
    Next, the Committee agreed to eliminate the cost share for 
the SNAP Employment and Training (E&T) program. While States 
are technically required to provide E&T programs, the program 
has been historically underutilized. For example, fewer than 7 
percent of all SNAP recipients participated in a SNAP E&T 
program in FY2009.
    States have great flexibility in how they implement their 
program and who they serve; relatively few SNAP participants 
are subject to work requirements. Recently, almost half of the 
states have been exercising their authority to exempt all SNAP 
recipients from participation in E&T and operate their programs 
on an entirely voluntary basis, which means participants are 
choosing whether or not they want to participate in this 
program.
    In addition to being underutilized, this program is 
duplicative. According to a GAO report from January 2011, 
almost all federal E&T programs overlap with at least one other 
program in that they provide similar services to similar 
populations. GAO reported there are 47 federal E&T programs at 
an annual cost of $18 billion.
    For the SNAP E&T program, states receive a combination of 
formula grants and reimbursements for qualifying expenses. 
Currently, $90 million per year is allocated to the states 
under a formula to fund their respective E&T programs. In 
addition to the formula grants, the federal government will 
provide reimbursements to states of up to 50 percent for 
administrative costs as well as E&T participant expenses 
directly related to participation in the program. This portion 
of funding is referred to as the 50-50 cost share funds, and is 
not capped.
    Because the FY2012 Agriculture Appropriations Act reduced 
the federal grant funding from $90 million to $79 million, the 
Committee agreed to continue the grant funding at $79 million 
per the appropriations law. While the federal grant funding has 
been subject to rescissions, the Committee kept the formula 
grants to assist states in administering the program. However, 
the Committee eliminated the 50-50 cost share reimbursement for 
SNAP E&T. States can continue to invest their own funding as 
well as leverage funding from the public and private sector as 
they currently do; this provision would no longer allow USDA to 
provide the reimbursement, saving taxpayers $3.1 billion over 
ten years.
    The Committee also passed a provision to eliminate indexing 
on the SNAP nutrition education program. States provide 
nutrition education to SNAP participants to encourage them to 
make healthy food choices within a limited budget and to choose 
a physically active lifestyle. Current funding for this program 
is $375 million and indexed for inflation each fiscal year. The 
Committee agreed to keep the base funding for this program and 
eliminate indexing, saving $546 million over ten years. Given 
the federal deficit, it is no longer fiscally responsible to 
allow programs to grow on ``auto-pilot'' year after year.
    Finally, the Committee eliminated state performance 
bonuses, saving $480 million over ten years. States are 
responsible for administering the SNAP program and it is their 
duty to process applications in a timely manner, ensure 
households receive the accurate amount of SNAP benefits, and 
make certain the program is administered in the most effective 
and efficient manner. When a state receives a bonus from USDA, 
there is no requirement that they reinvest the funds back into 
SNAP; it can simply be absorbed into the state's budget. In 
this economic climate it is very difficult to justify awarding 
states bonuses for practices that should be the daily operating 
procedure. This provision would end bonuses that are given to 
states for essentially doing their job.
    While the SNAP program comprises almost 80 percent of the 
Committee on Agriculture's mandatory spending, these reductions 
only account for about 3.5 percent of total spending over ten 
years. Every one of these provisions represents common sense 
and good government in a time that requires fiscal restraint. 
The Committee closed loopholes, reduced waste and abuse, and 
ended arbitrary policies that are artificially inflating the 
costs of the program.
    Some states have taken great liberties in administering the 
program, as encouraged by this Administration, and those 
practices must end. Encouraging states to stretch policies 
beyond the original intent of the law further proves this 
Administration has no regard for ensuring hard-earned taxpayer 
dollars are spent wisely.
    Other laws and programs have been circumventing SNAP law 
for far too long that simply add more costs to the program. 
These provisions return the program to the purpose of the 
original SNAP law and prevent other programs from becoming the 
de facto administrator of SNAP. The changes made to SNAP in the 
2008 farm bill remain fully intact and will continue to benefit 
SNAP participants.
    There is no denying that SNAP provides important support 
for many Americans and these provisions further protect that 
program. The Committee wants to ensure the integrity of this 
program so we can continue to provide nutrition assistance for 
those who are in need. Under these provisions, any household 
that qualifies for SNAP and meets the SNAP eligibility 
requirements will continue to be eligible for and receive 
benefits from the program. The Committee on Agriculture is 
better targeting the program to serve those in need while 
continuing the long standing tradition that the Committee has 
always been willing to do its part to ensure the fiscal well 
being of our nation.

                           Section-by-Section


Sec. 101. Short title

    Section 101 is the short title.

Sec. 102. ARRA Sunset at June 30, 2012

    Section 102 amends the American Recovery and Reinvestment 
Act of 2009 (ARRA) by terminating on July 1, 2012 the increased 
Supplemental Nutrition Assistance Program benefits provided 
under the Act.

Sec. 103. Categorical eligibility limited to cash assistance

    Section 103 amends the Food and Nutrition Act of 2008 to 
restrict categorical eligibility for the Supplemental Nutrition 
Assistance Program to only those households receiving cash 
assistance through other low-income assistance programs.

Sec. 104. Standard utility allowances based on the receipt of energy 
        assistance payments

    Section 104 amends the Food and Nutrition Act of 2008 by 
striking a provision that requires a state agency using a 
standard utility allowance to provide the allowance to each 
household that receives any payment under the Low Income Home 
Energy Assistance Act of 1981.

Sec. 105. Employment and training; workfare

    Section 105 amends the Food and Nutrition Act of 2008 by 
striking a provision that provides a cost share to states for 
certain expenses incurred in operating an employment and 
training program.

Sec. 106. End State Bonus Program for the Supplemental Nutrition 
        Assistance Program

    Section 106 amends the Food and Nutrition Act of 2008 by 
eliminating the performance bonuses provided to states for 
effectively administering the Supplemental Nutrition Assistance 
Program.

Sec. 107. Funding of employment and training programs

    Section 107 amends the Food and Nutrition Act of 2008 by 
reducing the allocation to State agencies to carry out 
employment and training programs for fiscal year 2013 to 
$79,000,000.

Sec. 108. Turn off indexing for nutrition education and obesity 
        prevention

    Section 108 amends the Food and Nutrition Act of 2008 by 
eliminating indexing on the Nutrition Education and Obesity 
Prevention Grant Program.

Sec. 109. Extension of Authorization of Food and Nutrition Act of 2008

    Section 109 amends the Food and Nutrition Act of 2008 by 
extending the authorization for appropriations to carry out the 
Act through fiscal year 2013.

Sec. 110. Effective dates and application of amendments

    Section 110 provides the effective dates of the amendments.

                        Committee Consideration

    The Committee on Agriculture met, pursuant to notice, with 
a quorum present, on April 18, 2012, to consider the 
Agricultural Reconciliation Act of 2012, with respect to the 
instructions provided under H. Con. Res. 112, the Concurrent 
Resolution on the Budget, as modified by H. Res. 614.
    Chairman Lucas offered an opening statement as did Ranking 
Member Peterson. Without objection the Agricultural 
Reconciliation Act was placed before the Committee for 
consideration, a first reading of the bill was waived and it 
was opened for amendment at any point.
    Discussion occurred and there being no amendments, Mr. 
Goodlatte offered a motion that the Committee favorably report 
the bill to the Committee on the Budget for insertion in the 
Reconciliation Bill. By voice vote, the motion was agreed to.
    Mr. Peterson reserved the right for minority views to be 
included with the report for submission to the Budget 
Committee.
    Chairman Lucas advised Members that pursuant to the rules 
of the House of Representatives that Members have 2 calendar 
days to file such views with the Committee.
    Without objection, staff were given permission to make any 
necessary clerical, technical or conforming changes to reflect 
the intent of the Committee.
    Chairman Lucas thanked all the Members and adjourned the 
meeting.

                  Reporting the Bill--Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, Agricultural Reconciliation Act of 2012 was 
reported by voice vote with a majority quorum present. There 
was no request for a recorded vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee on Agriculture's 
oversight findings and recommendations are reflected in the 
body of this report.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objections of this legislation are to 
reduce spending within the jurisdiction of the Committee on 
Agriculture as required by H. Con. Res. 112, the Concurrent 
Resolution on the Budget for Fiscal Year 2013 and as modified 
by H. Res. 614.

                   Constitutional Authority Statement

    The Committee finds the Constitutional authority for this 
legislation in Article I, section 8, clause 18, that grants 
Congress the power to make all laws necessary and proper for 
carrying out the powers vested by Congress in the Constitution 
of the United States or in any department or officer thereof.

           Budget Act Compliance (Sections 308, 402, and 423)

    The provisions of clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, new credit authority, 
or increased or decreased revenues or tax expenditures) are not 
considered applicable. The estimate and comparison required to 
be prepared by the Director of the Congressional Budget Office 
under clause 3(c)(3) of rule XIII of the Rules of the House of 
Representatives and sections 402 and 423 of the Congressional 
Budget Act of 1974 submitted to the Committee prior to the 
filing of this report are as follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 23, 2012.
Hon. Frank D. Lucas,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Agricultural 
Reconciliation Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
FitzGerald.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Agricultural Reconciliation Act of 2012

    Summary: The Agricultural Reconciliation Act of 2012 would 
make several changes to the Supplemental Nutrition Assistance 
Program (SNAP) and extend its authorization for one year. CBO 
estimates that enacting this legislation would reduce direct 
spending by $5.6 billion in 2013 and by $33.7 billion over the 
2013-2022 period, relative to CBO's March 2012 baseline 
projections. Those estimates are based on CBO's assumption that 
the legislation will be enacted on or near October 1, 2012.
    In addition, the Chairman of the House Committee on the 
Budget has directed CBO to prepare estimates assuming a July 1, 
2012, enactment date for this year's reconciliation proposals. 
If the legislation were enacted by that earlier date, some of 
the SNAP proposals would result in greater reductions in direct 
spending than those estimated assuming an October 1 enactment 
date. Under the alternative assumption of a July 1 enactment 
date, CBO estimates that the SNAP proposals would reduce direct 
spending by $7.8 billion over the 2012-2013 period and $35.8 
billion over the 2012-2022 period.
    The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the Agricultural Reconciliation Act of 2012 
is shown in the following table (on pages 2 and 3). The costs 
of this legislation fall within budget function 600 (income 
security)


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     By fiscal year, in millions of dollars--
                                                ------------------------------------------------------------------------------------------------------------------------------------------------
                                                    2012       2013       2014       2015       2016       2017       2018       2019       2020       2021        2022     2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT OCTOBER 1, 2012

Changes to SNAP Eligibility and Benefits:
    Standard Utility Allowances:
        Estimated Budget Authority.............          0       -750     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470       -1,470     -6,680    -13,980
        Estimated Outlays......................          0       -750     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470       -1,470     -6,680    -13,980
    Restrict Categorical Eligibility:
        Estimated Budget Authority.............          0       -620     -1,245     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170        1,155     -5,610    -11,520
        Estimated Outlays......................          0       -615     -1,240     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170        1,155     -5,600    -11,510
    Benefit Increase Sunset:a
        Estimated Budget Authority.............          0     -4,084       -289          0          0          0          0          0          0          0            0     -4,372     -4,372
        Estimated Outlays......................          0     -4,084       -289          0          0          0          0          0          0          0            0     -4,372     -4,372
    Interaction Effects:
        Estimated Budget Authority.............          0        140         25         20         20         20         20         20         20         20           20        225        325
        Estimated Outlays......................          0        140         25         20         20         20         20         20         20         20           20        225        325
Changes to Other SNAP Activities:
    Employment and Training:
        Estimated Budget Authority.............          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
        Estimated Outlays......................          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
    Awards and Grants:
        Estimated Budget Authority.............          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
        Estimated Outlays......................          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
    Total Changes in Direct Spending:
        Estimated Budget Authority.............          0     -5,638     -3,347     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -18,307    -33,694
        Estimated Outlays......................          0     -5,633     -3,342     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -18,297    -33,684

                                                                   CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT JULY 1, 2012
                                                            (Per the Direction of the Chairman of the House Committee on the Budget)

Changes to SNAP Eligibility and Benefits:
    Standard Utility Allowances:
        Estimated Budget Authority.............        -30     -1,070     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470        1,470     -7,030    -14,330
        Estimated Outlays......................        -30     -1,070     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470        1,470     -7,030    -14,330
    Restrict Categorical Eligibility:
        Estimated Budget Authority.............        -25       -875     -1,245     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170       -1,155     -5,890    -11,800
        Estimated Outlays......................        -25       -870     -1,240     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170       -1,155     -5,880    -11,790
    Benefit Increase Sunset:a
        Estimated Budget Authority.............       -675     -5,000       -289          0          0          0          0          0          0          0            0     -5,963     -5,963
        Estimated Outlays......................       -675     -5,000       -289          0          0          0          0          0          0          0            0     -5,963     -5,963
    Interaction Effects:
        Estimated Budget Authority.............         10        205         25         20         20         20         20         20         20         20           20        300        400
        Estimated Outlays......................         10        205         25         20         20         20         20         20         20         20           20        300        400
Changes to Other SNAP Activities:
    Employment and Training:
        Estimated Budget Authority.............          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
        Estimated Outlays......................          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
    Awards and Grants:
        Estimated Budget Authority.............          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
        Estimated Outlays......................          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
    Total Changes in Direct Spending:
        Estimated Budget Authority.............       -720     -7,064     -3,347     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -20,453    -35,840
        Estimated Outlays......................       -720     -7,059     -3,342     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -20,443    -35,830
Memorandum:
    Spending for SNAP Under CBO's March 2012        80,993     81,986     79,886     80,048     79,679     78,089     76,637     75,388     74,274     73,497       72,624    480,682   853,102
     Baseline..................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Components may not sum to totals because of rounding.
SNAP = Supplemental Nutrition Assistance Program.
aThe benefit increase, originally provided in the American Recovery and Reinvestment Act, was previously designated as spending for an emergency requirement.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes the bill will be enacted on or near October 1, 2012, as 
shown in the first panel of the table (above). As directed by 
the Chairman of the House Budget Committee, CBO has also 
prepared a set of estimates based on the assumption that the 
legislation is enacted by July 1, 2012. Those alternative 
estimates are presented on the second panel of the table (on 
the next page).

Changes to SNAP Eligibility and Benefits

    The Agricultural Reconciliation Act of 2012 would make 
several changes to the amount of SNAP benefits that households 
receive as well as eligibility for the program. In particular, 
the legislation would change the terms for granting heating and 
cooling (utility) allowances under SNAP, restrict the automatic 
extension of SNAP eligibility for individuals in households 
that receive assistance under certain other federal programs, 
and accelerate the sunset date for enhanced SNAP benefits 
pursuant to a provision enacted in the American Recovery and 
Reinvestment Act of 2009 (ARRA). Together, those provisions 
would reduce direct spending by about $29.5 billion over the 
2012-2022 period, assuming enactment on October 1, 2012; and by 
about $31.7 billion over the same period under the July 1 
enactment assumption.
    Standard Utility Allowances. Under current law, households 
qualify for a Heating and Cooling Standard Utility Allowance 
(HCSUA) if they provide proof that they pay heating or cooling 
expenses or receive assistance through the Low-Income Home 
Energy Assistance Program (LIHEAP). The Agriculture Committee's 
proposal would eliminate the automatic qualification for those 
allowances for SNAP households who receive energy assistance. 
Some states currently send nominal LIHEAP benefit amounts 
(typically between $1 and $5, and typically only once per year) 
to SNAP participants to automatically qualify them for the 
utility allowance. The value of the HCSUA is used, along with 
other factors, to determine the amount of housing expenses that 
households can deduct from their income.
    The legislation would eliminate that automatic 
qualification and require all households to provide proof that 
they paid heating or cooling expenses to claim the utility 
allowance. CBO estimates that under this provision about 1.3 
million households would have their SNAP benefits reduced by an 
average of $90 per month. CBO estimates that about 80 percent 
of households with reduced benefits would be those that qualify 
for the HCSUA under current law through their receipt of 
nominal LIHEAP benefits (as described above). We estimate that 
this provision would reduce direct spending by $14.0 billion 
over the 2012-2022 period, assuming enactment on October 1, 
2012. (Assuming a July 1, 2012, enactment date, CBO estimates 
that this provision would reduce direct spending by $14.3 
billion over the 2012-2022 period.)
    Restrict Categorical Eligibility. Individuals in households 
in which all members receive cash assistance from the Temporary 
Assistance to Needy Families Program (TANF), Supplemental 
Security Income, or similar state cash assistance programs are 
considered automatically eligible for SNAP and are not subject 
to the program's income and asset requirements. States 
currently have the option to extend such categorical 
eligibility to households that receive or are eligible to 
receive non-cash services through TANF.
    The legislation would restrict categorical eligibility to 
only households receiving cash assistance. Based on data from 
the Department of Agriculture, CBO estimates that about 1.8 
million people per year, on average, would lose benefits if 
they were subject to SNAP's income and asset tests. In 
addition, about 280,000 school-age children in those households 
would no longer be automatically eligible for free school meals 
through their receipt of SNAP benefits. Assuming enactment on 
October 1, 2012, CBO estimates that this provision would lower 
direct spending by $11.5 billion over the 2012-2022 period. (We 
estimate the reduction would be $11.8 billion for a July 1, 
2012, enactment date.)
    Benefit Increase Sunset. The maximum SNAP benefit is 
determined by the cost of the Thrifty Food Plan--a basket of 
goods selected by the Department of Agriculture to provide a 
nutritious diet--published in June of each year. The American 
Recovery and Reinvestment Act of 2009 raised the maximum SNAP 
benefit in 2009 by 13.6 percent and held it at that amount 
until the annual inflation adjustment exceeded that amount. 
Subsequent legislation established a sunset date of October 31, 
2013, for this increase. ARRA designated this temporary benefit 
increase as an emergency requirement.
    The legislation would accelerate the sunset date for the 
ARRA benefit increase to June 30, 2012. Based on discussions 
with states, CBO expects that states would need about two 
months to implement the benefit calculation change in their 
payment systems. As a result, we assume that the effective date 
for the change in benefits will be after August 31, 2012. CBO 
estimates that in fiscal year 2013, the maximum benefit for a 
household of four would be $34 lower than it would have been 
under current law. In total, CBO estimates enacting this 
provision would reduce direct spending by nearly $6.0 billion 
if the legislation is enacted by July 1, 2012, but the savings 
would drop to $4.4 billion if the legislation is not enacted 
until October 1, 2012.
    Interaction Effects. Changes to standard utility allowances 
and benefit amounts set by ARRA would reduce benefit amounts 
that households receive; restricting categorical eligibility 
would reduce the total number of households receiving SNAP. 
Therefore, the estimated savings from each provision would be 
reduced if all three were enacted simultaneously. Accounting 
for the interactions of those provisions, CBO estimates that 
the total savings would decline by $325 million over the 2013-
2022 period for an assumed enactment on October 1, 2012. (CBO 
estimates that the interaction effect would be $400 million for 
the July 1 enactment date.)

Changes to Other SNAP Activities

    The Agricultural Reconciliation Act of 2012 also would make 
changes to the level of administrative and award funding under 
SNAP. Finally, it would reauthorize SNAP through fiscal year 
2013. Those changes would reduce direct spending by about $4.1 
billion over the 2012-2022 period for both enactment date 
assumptions.
    Employment and Training Funding. Under current law, states 
receive a base grant to fund employment and training activities 
for SNAP participants. In addition, the federal government 
shares costs above that amount with states on a matching basis. 
The legislation would eliminate the authority for the federal 
government to provide such additional funds above the base 
grant level. As a result of that reduction in funding, CBO 
estimates that a small number of nondisabled adults without 
children, who are subject to a work requirement in order to 
receive SNAP benefits, would lose eligibility if states scale 
back their employment and training activities. In total, CBO 
estimates that this provision would lower direct spending by 
$3.1 billion over the 2012-2022 period.
    Awards and Grants. The proposal also would eliminate $48 
million in annual funding for awards to states with high or 
improved performance in administering SNAP. The legislation 
also would eliminate the annual inflation adjustment of grants 
to states for nutrition education. CBO estimates that these two 
provisions together would reduce direct spending by $1.0 
billion over the 2012-2022 period.
    Program Extensions. The Food, Conservation, and Energy Act 
of 2008 authorized SNAP through 2012. The reconciliation 
proposal would extend the program through the end of fiscal 
year 2013. Under the assumptions underlying CBO's March 2012 
baseline projections, we estimate that extending the program 
for one year would result in outlays of $82 billion in 2013. 
Pursuant to the Balanced Budget and Emergency Deficit Control 
Act of 1985, this extension is assumed in CBO's current 
baseline projections and has no cost relative to that baseline.
    Estimated impact on state, local, and tribal governments: 
For large entitlement programs such as SNAP, UMRA defines an 
increase in the stringency of conditions as an 
intergovernmental mandate if the affected governments lack 
authority to offset those costs while continuing to provide 
required services. The legislation would decrease federal 
payments to states for administering employment and training 
services under SNAP. CBO estimates that the decrease in federal 
aid would total $256 million in 2013 and $3.1 billion over the 
2012-2022 period. However, because states have flexibility to 
amend their employment and training services to offset those 
costs, the decrease in federal aid would not impose an 
intergovernmental mandate as defined in UMRA.
    Estimated impact on the private sector: The legislation 
contains no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal Costs: Kathleen FitzGerald 
and Emily Holcombe; Impact on State, Local, and Tribal 
Governments: Lisa Ramirez-Branum; Impact on the Private Sector: 
Jimmy Jin.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

           *       *       *       *       *       *       *


DIVISION A--APPROPRIATIONS PROVISIONS

           *       *       *       *       *       *       *


                     GENERAL PROVISIONS--THIS TITLE

  Sec. 101. Temporary Increase in Benefits Under the 
Supplemental Nutrition Assistance Program. (a) Maximum Benefit 
Increase.--
          (1) * * *
          (2) Termination.--The authority provided by this 
        subsection shall terminate after [October 31, 2013] 
        June 30, 2012.

           *       *       *       *       *       *       *

                              ----------                              


FOOD AND NUTRITION ACT OF 2008

           *       *       *       *       *       *       *


                          ELIGIBLE HOUSEHOLDS

  Sec. 5. (a) Participation in the supplemental nutrition 
assistance program shall be limited to those households whose 
incomes and other financial resources, held singly or in joint 
ownership, are determined to be a substantial limiting factor 
in permitting them to obtain a more nutritious diet. 
Notwithstanding any other provisions of this Act except 
sections 6(b), 6(d)(2), and 6(g) and section 3(n)(4), 
[households in which each member receives benefits] households 
in which each member receives cash assistance under a State 
program funded under part A of title IV of the Social Security 
Act (42 U.S.C. 601 et seq.), supplemental security income 
benefits under title XVI of the Social Security Act, or aid to 
the aged, blind, or disabled under title I, X, XIV, or XVI of 
the Social Security Act, shall be eligible to participate in 
the supplemental nutrition assistance program. Except for 
sections 6, 16(e)(1), and section 3(n)(4), households in which 
each member receives benefits under a State or local general 
assistance program that complies with standards established by 
the Secretary for ensuring that the program is based on income 
criteria comparable to or more restrictive than those under 
subsection (c)(2), and not limited to one-time emergency 
payments that cannot be provided for more than one consecutive 
month, shall be eligible to participate in the supplemental 
nutrition assistance program. Assistance under this program 
shall be furnished to all eligible households who make 
application for such participation.

           *       *       *       *       *       *       *

  (e) Deductions From Income.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Excess shelter expense deduction.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Standard utility allowance.--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(iv) Availability of allowance to 
                        recipients of energy assistance.--
                                  [(I) In general.--Subject to 
                                subclause (II), if a State 
                                agency elects to use a standard 
                                utility allowance that reflects 
                                heating or cooling costs, the 
                                standard utility allowance 
                                shall be made available to 
                                households receiving a payment, 
                                or on behalf of which a payment 
                                is made, under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.) 
                                or other similar energy 
                                assistance program, if the 
                                household still incurs out-of-
                                pocket heating or cooling 
                                expenses in excess of any 
                                assistance paid on behalf of 
                                the household to an energy 
                                provider.
                                  [(II) Separate allowance.--A 
                                State agency may use a separate 
                                standard utility allowance for 
                                households on behalf of which a 
                                payment described in subclause 
                                (I) is made, but may not be 
                                required to do so.
                                  [(III) States not electing to 
                                use separate allowance.--A 
                                State agency that does not 
                                elect to use a separate 
                                allowance but makes a single 
                                standard utility allowance 
                                available to households 
                                incurring heating or cooling 
                                expenses (other than a 
                                household described in 
                                subclause (I) or (II) of clause 
                                (ii)) may not be required to 
                                reduce the allowance due to the 
                                provision (directly or 
                                indirectly) of assistance under 
                                the Low-Income Home Energy 
                                Assistance Act of 1981 (42 
                                U.S.C. 8621 et seq.).
                                  [(IV) Proration of 
                                assistance.--For the purpose of 
                                the supplemental nutrition 
                                assistance program, assistance 
                                provided under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.) 
                                shall be considered to be 
                                prorated over the entire 
                                heating or cooling season for 
                                which the assistance was 
                                provided.]

           *       *       *       *       *       *       *

  (j) Notwithstanding subsections (a) through (i), a State 
agency shall consider a household member who receives 
supplemental security income benefits under title XVI of the 
Social Security Act (42 U.S.C. 1382 et seq.), aid to the aged, 
blind, or disabled under title I, II, X, XIV, or XVI of such 
Act (42 U.S.C. 301 et seq.), [or who receives benefits under a 
State program] or who receives cash assistance under a State 
program funded under part A of title IV of the Act (42 U.S.C. 
601 et seq.) to have satisfied the resource limitations 
prescribed under subsection (g).
  (k)(1) * * *

           *       *       *       *       *       *       *

          [(4) Third party energy assistance payments.--
                  [(A) Energy assistance payments.--For 
                purposes of subsection (d)(1), a payment made 
                under a State law (other than a law referred to 
                in paragraph (2)(H)) to provide energy 
                assistance to a household shall be considered 
                money payable directly to the household.
                  [(B) Energy assistance expenses.--For 
                purposes of subsection (e)(6), an expense paid 
                on behalf of a household under a State law to 
                provide energy assistance shall be considered 
                an out-of-pocket expense incurred and paid by 
                the household.]
          (4) Third party energy assistance payments.--For 
        purposes of subsection (d)(1), a payment made under a 
        State law (other than a law referred to in paragraph 
        (2)(G)) to provide energy assistance to a household 
        shall be considered money payable directly to the 
        household.

           *       *       *       *       *       *       *


            ADMINISTRATIVE COST-SHARING AND QUALITY CONTROL

  Sec. 16. (a) Subject to subsection (k), the Secretary is 
authorized to pay to each State agency an amount equal to 50 
per centum of all administrative costs involved in each State 
agency's operation of the supplemental nutrition assistance 
program (other than a program carried out under section 6(d)(4) 
or section 20), which costs shall include, but not be limited 
to, the cost of (1) the certification of applicant households, 
(2) the acceptance, storage, protection, control, and 
accounting of benefits after their delivery to receiving points 
within the State, (3) the issuance of benefits to all eligible 
households, (4) informational activities relating to the 
supplemental nutrition assistance program, including those 
undertaken under section 11(e)(1)(A), but not including 
recruitment activities, (5) fair hearings, (6) automated data 
processing and information retrieval systems subject to the 
conditions set forth in subsection (g), (7) supplemental 
nutrition assistance program investigations and prosecutions, 
and (8) implementing and operating the immigration status 
verification system established under section 1137(d) of the 
Social Security Act (42 U.S.C. 1320b-7(d)): Provided, That the 
Secretary is authorized at the Secretary's discretion to pay 
any State agency administering the supplemental nutrition 
assistance program on all or part of an Indian reservation 
under section 11(d) of this Act or in a Native village within 
the State of Alaska identified in section 11(b) of Public Law 
92-203, as amended. such amounts for administrative costs as 
the Secretary determines to be necessary for effective 
operation of the supplemental nutrition assistance program, as 
well as to permit each State to retain 35 percent of the value 
of all funds or allotments recovered or collected pursuant to 
sections 6(b) and 13(c) and 20 percent of the value of any 
other funds or allotments recovered or collected, except the 
value of funds or allotments recovered or collected that arise 
from an error of a State agency. The officials responsible for 
making determinations of ineligibility under this Act shall not 
receive or benefit from revenues retained by the State under 
the provisions of this subsection.

           *       *       *       *       *       *       *

  [(d) Bonuses for States That Demonstrate High or Most 
Improved Performance.--
          [(1) Fiscal years 2003 and 2004.--
                  [(A) Guidance.--With respect to fiscal years 
                2003 and 2004, the Secretary shall establish, 
                in guidance issued to State agencies not later 
                than October 1, 2002--
                          [(i) performance criteria relating 
                        to--
                                  [(I) actions taken to correct 
                                errors, reduce rates of error, 
                                and improve eligibility 
                                determinations; and
                                  [(II) other indicators of 
                                effective administration 
                                determined by the Secretary; 
                                and
                          [(ii) standards for high and most 
                        improved performance to be used in 
                        awarding performance bonus payments 
                        under subparagraph (B)(ii).
                  [(B) Performance bonus payments.--With 
                respect to each of fiscal years 2003 and 2004, 
                the Secretary shall--
                          [(i) measure the performance of each 
                        State agency with respect to the 
                        criteria established under subparagraph 
                        (A)(i); and
                          [(ii) subject to paragraph (3), award 
                        performance bonus payments in the 
                        following fiscal year, in a total 
                        amount of $48,000,000 for each fiscal 
                        year, to State agencies that meet 
                        standards for high or most improved 
                        performance established by the 
                        Secretary under subparagraph (A)(ii).
          [(2) Fiscal years 2005 and thereafter.--
                  [(A) Regulations.--With respect to fiscal 
                year 2005 and each fiscal year thereafter, the 
                Secretary shall--
                          [(i) establish, by regulation, 
                        performance criteria relating to--
                                  [(I) actions taken to correct 
                                errors, reduce rates of error, 
                                and improve eligibility 
                                determinations; and
                                  [(II) other indicators of 
                                effective administration 
                                determined by the Secretary;
                          [(ii) establish, by regulation, 
                        standards for high and most improved 
                        performance to be used in awarding 
                        performance bonus payments under 
                        subparagraph (B)(ii); and
                          [(iii) before issuing proposed 
                        regulations to carry out clauses (i) 
                        and (ii), solicit ideas for performance 
                        criteria and standards for high and 
                        most improved performance from State 
                        agencies and organizations that 
                        represent State interests.
                  [(B) Performance bonus payments.--With 
                respect to fiscal year 2005 and each fiscal 
                year thereafter, the Secretary shall--
                          [(i) measure the performance of each 
                        State agency with respect to the 
                        criteria established under subparagraph 
                        (A)(i); and
                          [(ii) subject to paragraph (3), award 
                        performance bonus payments in the 
                        following fiscal year, in a total 
                        amount of $48,000,000 for each fiscal 
                        year, to State agencies that meet 
                        standards for high or most improved 
                        performance established by the 
                        Secretary under subparagraph (A)(ii).
          [(3) Prohibition on receipt of performance bonus 
        payments.--A State agency shall not be eligible for a 
        performance bonus payment with respect to any fiscal 
        year for which the State agency has a liability amount 
        established under subsection (c)(1)(C).
          [(4) Payments not subject to judicial review.--A 
        determination by the Secretary whether, and in what 
        amount, to award a performance bonus payment under this 
        subsection shall not be subject to administrative or 
        judicial review.]

           *       *       *       *       *       *       *

  (h) Funding of Employment and Training Programs.--
          (1) * * *
  [(2) If, in carrying out such program during such fiscal 
year, a State agency incurs costs that exceed the amount 
allocated to the State agency under paragraph (1), the 
Secretary shall pay such State agency an amount equal to 50 per 
centum of such additional costs, subject to the first 
limitation in paragraph (3), including the costs for case 
management and casework to facilitate the transition from 
economic dependency to self-sufficiency through work.
  [(3) The Secretary shall also reimburse each State agency in 
an amount equal to 50 per centum of the total amount of 
payments made or costs incurred by the State agency in 
connection with transportation costs and other expenses 
reasonably necessary and directly related to participation in 
an employment and training program under section 6(d)(4), 
except that the amount of the reimbursement for dependent care 
expenses shall not exceed an amount equal to the payment made 
under section 6(d)(4)(I)(i)(II) but not more than the 
applicable local market rate, and such reimbursement shall not 
be made out of funds allocated under paragraph (1).]
  [(4)] (2) Funds provided to a State agency under this 
subsection may be used only for operating an employment and 
training program under section 6(d)(4), and may not be used for 
carrying out other provisions of this Act.
  [(5)] (3) The Secretary shall monitor the employment and 
training programs carried out by State agencies under section 
6(d)(4) to measure their effectiveness in terms of the increase 
in the numbers of household members who obtain employment and 
the numbers of such members who retain such employment as a 
result of their participation in such employment and training 
programs.

           *       *       *       *       *       *       *


                RESEARCH, DEMONSTRATION, AND EVALUATIONS

  Sec. 17. (a) * * *
  (b)(1)(A) * * *
                  (B) Project requirements.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) Impermissible projects.--The 
                        Secretary may not conduct a project 
                        under subparagraph (A) that--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) is inconsistent with--
                                          (aa) * * *

           *       *       *       *       *       *       *

                                          (hh) subsection (a), 
                                        (c), [(g), (h)(2), or 
                                        (h)(3)] or (g) of 
                                        section 16;

           *       *       *       *       *       *       *


                    AUTHORIZATION FOR APPROPRIATIONS

  Sec. 18. (a)(1) To carry out this Act, there are authorized 
to be appropriated such sums as are necessary for each of 
fiscal years 2008 through [2012] 2013. Not to exceed one-fourth 
of 1 per centum of the previous year's appropriation is 
authorized in each such fiscal year to carry out the provisions 
of section 17 of this Act, subject to paragraph (3).

           *       *       *       *       *       *       *


                                WORKFARE

  Sec. 20. (a) * * *

           *       *       *       *       *       *       *

  [(g)(1) The Secretary shall pay to each operating agency 50 
per centum of all administrative expenses incurred by such 
agency in operating a workfare program, including 
reimbursements to participants for work-related expenses as 
described in subsection (d)(3) of this section.
  [(2)(A) From 50 per centum of the funds saved from employment 
related to a workfare program operated under this section, the 
Secretary shall pay to each operating agency an amount not to 
exceed the administrative expenses described in paragraph (1) 
for which no reimbursement is provided under such paragraph.
  [(B) For purposes of subparagraph (A), the term ``funds saved 
from employment related to a workfare program operated under 
this section'' means an amount equal to three times the dollar 
value of the decrease in allotments issued to households, to 
the extent that such decrease results from wages received by 
members of such households for the first month of employment 
beginning after the date such members commence such employment 
if such employment commences--
          [(i) while such members are participating for the 
        first time in a workfare program operated under this 
        section; or
          [(ii) in the thirty-day period beginning on the date 
        such first participation is terminated.
  [(3) The Secretary may suspend or cancel some or all of these 
payments, or may withdraw approval from a political subdivision 
to operate a workfare program, upon a finding that the 
subdivision has failed to comply with the workfare 
requirements.]

           *       *       *       *       *       *       *


                  MINNESOTA FAMILY INVESTMENT PROJECT

  Sec. 22. (a) * * *

           *       *       *       *       *       *       *

  (d) Funding.--
          (1) If an application submitted under subsection (a) 
        complies with the requirements specified in subsection 
        (b), then the Secretary shall--
                  (A) * * *
                  (B) subject to subsection (b)(12) from the 
                funds appropriated under this Act provide grant 
                awards and pay the State each calendar quarter 
                for--
                          (i) * * *
                          (ii) the administrative costs 
                        incurred by the State to provide food 
                        assistance under the Project that are 
                        authorized under subsections (a)[, (g), 
                        (h)(2), and (h)(3)] and (g) of section 
                        16 equal to the amount that otherwise 
                        would have been paid under such 
                        subsections had the Project not been 
                        implemented, as estimated under a 
                        methodology satisfactory to the 
                        Secretary after negotiations with the 
                        State: Provided, That payments made 
                        under subsection (g) of section 16 
                        shall equal payments that would have 
                        been made if the Project had not been 
                        implemented.

           *       *       *       *       *       *       *


SEC. 28. NUTRITION EDUCATION AND OBESITY PREVENTION GRANT PROGRAM.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Funding.--
          (1) In general.--Of funds made available each fiscal 
        year under section 18(a)(1), the Secretary shall 
        reserve for allocation to State agencies to carry out 
        the nutrition education and obesity prevention grant 
        program under this section, to remain available for 
        obligation for a period of 2 fiscal [years--
                  [(A) for fiscal year 2011, $375,000,000; and
                  [(B) for fiscal year 2012 and each subsequent 
                fiscal year, the applicable amount during the 
                preceding fiscal year, as adjusted to reflect 
                any increases for the 12-month period ending 
                the preceding June 30 in the Consumer Price 
                Index for All Urban Consumers published by the 
                Bureau of Labor Statistics of the Department of 
                Labor.
          [(2) Allocation.--
                  [(A) Initial allocation.--Of the funds set 
                aside under paragraph (1), as determined by the 
                Secretary--
                          [(i) for each of fiscal years 2011 
                        through 2013, 100 percent shall be 
                        allocated to State agencies in direct 
                        proportion to the amount of funding 
                        that the State received for carrying 
                        out section 11(f) (as that section 
                        existed on the day before the date of 
                        enactment of this section) during 
                        fiscal year 2009, as reported to the 
                        Secretary as of February 2010; and
                          [(ii) subject to a reallocation under 
                        subparagraph (B)--
                                  [(I) for fiscal year 2014--
                                          [(aa) 90 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 10 percent 
                                        shall be allocated to 
                                        State agencies based on 
                                        the respective share of 
                                        each State of the 
                                        number of individuals 
                                        participating in the 
                                        supplemental nutrition 
                                        assistance program 
                                        during the 12-month 
                                        period ending the 
                                        preceding January 31;
                                  [(II) for fiscal year 2015--
                                          [(aa) 80 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 20 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb);
                                  [(III) for fiscal year 2016--
                                          [(aa) 70 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 30 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb);
                                  [(IV) for fiscal year 2017--
                                          [(aa) 60 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 40 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb); and
                                  [(V) for fiscal year 2018 and 
                                each fiscal year thereafter--
                                          [(aa) 50 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 50 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb).
                  [(B) Reallocation.--
                          [(i) In general.--If the Secretary 
                        determines that a State agency will not 
                        expend all of the funds allocated to 
                        the State agency for a fiscal year 
                        under paragraph (1) or in the case of a 
                        State agency that elects not to receive 
                        the entire amount of funds allocated to 
                        the State agency for a fiscal year, the 
                        Secretary shall reallocate the 
                        unexpended funds to other States during 
                        the fiscal year or the subsequent 
                        fiscal year (as determined by the 
                        Secretary) that have approved State 
                        plans under which the State agencies 
                        may expend the reallocated funds.
                          [(ii) Effect of additional funds.--
                                  [(I) Funds received.--Any 
                                reallocated funds received by a 
                                State agency under clause (i) 
                                for a fiscal year shall be 
                                considered to be part of the 
                                fiscal year 2009 base 
                                allocation of funds to the 
                                State agency for that fiscal 
                                year for purposes of 
                                determining allocation under 
                                subparagraph (A) for the 
                                subsequent fiscal year.
                                  [(II) Funds surrendered.--Any 
                                funds surrendered by a State 
                                agency under clause (i) shall 
                                not be considered to be part of 
                                the fiscal year 2009 base 
                                allocation of funds to a State 
                                agency for that fiscal year for 
                                purposes of determining 
                                allocation under subparagraph 
                                (A) for the subsequent fiscal 
                                year.
          [(3) Limitation on federal financial participation.--
                  [(A) In general.--Grants awarded under this 
                section shall be the only source of Federal 
                financial participation under this Act in 
                nutrition education and obesity prevention.
                  [(B) Exclusion.--Any costs of nutrition 
                education and obesity prevention in excess of 
                the grants authorized under this section shall 
                not be eligible for reimbursement under section 
                16(a).] years, $375,000,000.

           *       *       *       *       *       *       *

                              ----------                              


LOW-INCOME HOME ENERGY ASSISTANCE ACT OF 1981

           *       *       *       *       *       *       *


TITLE XXVI--LOW-INCOME HOME ENERGY ASSISTANCE

           *       *       *       *       *       *       *


                     APPLICATIONS AND REQUIREMENTS

  Sec. 2605. (a) * * *

           *       *       *       *       *       *       *

  (f)(1) * * *
  (2) For purposes of paragraph (1) of this subsection [and for 
purposes of determining any excess shelter expense deduction 
under section 5(e) of the Food and Nutrition Act of 2008 (7 
U.S.C. 2014(e))]--
          (A) the full amount of such payments or allowances 
        shall be deemed to be expended by such household for 
        heating or cooling expenses, without regard to whether 
        such payments or allowances are provided directly to, 
        or indirectly for the benefit of, such household, 
        except that such payments or allowances shall not be 
        deemed to be expended for purposes of determining any 
        excess shelter expense deduction under section 5(e)(6) 
        of the Food and Nutrition Act of 2008 (7 U.S.C. 
        2014(e)(6)); and

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    The House Agriculture Committee takes seriously its 
oversight role for both sound safety net policies for farmers 
and adequate nutrition programs for low-income households. 
However, the Budget Reconciliation Act of 2012 and the process 
under which it comes before our Committee in no way reflect the 
true gravity of this trust.
    Without the benefit of a single hearing this year, the 
Budget Reconciliation Act of 2012 would make major alterations 
to the largest program within our jurisdiction, threatening the 
welfare of those for whom this program was created. SNAP 
participation has grown from 28 million participants at the 
time of the 2008 Farm Bill to more than 46 million participants 
today. This growth is not the result of any Congressional 
action but rather the growing need due to our ailing economy. 
The Congressional Budget Office estimates that SNAP demand will 
peak in 2013 and then fall, reacting to the nation's economic 
recovery.
    The budget resolution the House passed in March, H. Con 
Res. 112, was not a serious budget document but a political 
exercise that resulted from a partisan division over defense 
cuts. It reflects none of the bipartisanship for which our 
committee is known and is not a legitimate deficit reduction 
measure.
    A serious conversation about getting our nation's fiscal 
house in order cannot occur without putting everything on the 
table, including defense spending and revenue. It is simply 
irresponsible to attempt to balance the budget on the backs of 
the hardworking Americans that rely on the safety net SNAP 
provides.
    The SNAP fraud rate is at an all-time low and is operating 
more efficiently than many other government programs. There may 
be further inefficiencies that can be addressed by this 
Committee, but we have not had the adequate time needed for a 
thorough program review.
    We stand committed to having a serious conversation about 
our deficit reduction and are willing to consider all budget 
areas under this Committee's jurisdiction, however the cuts 
contained in the Budget Reconciliation Act of 2012 would leave 
millions of American families, children and seniors hungry.

                                   Collin Peterson.
                                   Bill Owens.
                                   Leonard Boswell.
                                   Gregorio Kilili Camacho Sablan.
                                   Chellie Pingree.
                                   Jim McGovern.
                                   Marcia Fudge.
                                   Jim Costa.
                                   Terri A. Sewell.
                                   David Scott.
                                   Henry Cuellar.
                                   Kurt Schrader.
                                   Peter Welch.
                                   Tim Walz.
                                   Joe Courtney.
                                   Joe Baca.
             TITLE II--THE COMMITTEE ON ENERGY AND COMMERCE
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                          Committee on Energy and Commerce,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
    Dear Chairman Ryan: Pursuant to section 201(a) of the 
Concurrent Resolution on the Budget for Fiscal Year 2013, I 
hereby transmit these recommendations which have been approved 
by vote of the Committee on Energy and Commerce, and the 
appropriate accompanying material including additional, 
supplemental or dissenting views, to the House Committee on the 
Budget. This submission is in order to comply with 
reconciliation directives included in H. Con. Res. 112, the 
fiscal year 2013 budget resolution and is consistent with 
section 310 of the Congressional Budget and Impoundment Control 
Act of 1974.
            Sincerely,
                                                Fred Upton,
                                                          Chairman.
                           TABLE OF CONTENTS

                               __________
                                                                   Page
Purpose and Summary..............................................    49
Background and Need for Legislation..............................    49
Hearings.........................................................    56
Committee Consideration..........................................    57
Committee Votes..................................................    57
Committee Oversight Findings.....................................    78
Statement of General Performance Goals and Objectives............    78
New Budget Authority, Entitlement Authority, and Tax Expenditures    78
Earmark..........................................................    78
Committee Cost Estimate..........................................    78
Congressional Budget Office Estimate.............................    78
Federal Mandates Statement.......................................    88
Advisory Committee Statement.....................................    88
Constitutional Authority Statement...............................    88
Applicability to Legislative Branch..............................    88
Section-by-Section Analysis of the Legislation...................    88
Changes in Existing Law Made by the Bill, as Reported............    92
Dissenting Views.................................................   108

TITLE II--REPEAL OF CERTAIN ACA FUNDING PROVISIONS; MEDICAID; LIABILITY 
                                 REFORM

                          Purpose and Summary

    The purpose of these Committee Prints is to rein in 
mandatory spending to avoid a debt crisis. The Committee Prints 
also comply with the reconciliation directive included in 
section 201 of H. Con. Res. 112, establishing the budget for 
the United States Government for fiscal year 2013 and setting 
forth appropriate budgetary levels for fiscal years 2014 
through 2022, and is consistent with section 310 of the 
Congressional Budget and Impoundment Control Act of 1974.

                  Background and Need for Legislation

Reining in Irresponsible Spending
    Section 1311(a) of the Patient Protection and Affordable 
Care Act (PPACA) provides the Secretary of Health and Human 
Services (HHS) a direct appropriation of such sums as necessary 
for grants to States to establish exchanges and facilitate the 
purchase of qualified health plans. The size of the direct 
appropriation is solely determined by the Secretary. The 
Secretary can determine the amount of spending and spend the 
funds without further Congressional action. The proposed 
legislation would strike the unlimited direct appropriation and 
rescind any unobligated funds.
    The Congressional Research Service's (CRS) American Law 
Division confirmed these facts in a February 7, 2011 memo, 
stating that ``the total amount of money the Secretary may 
expend for grants to the states under this section is 
indefinite.'' CRS further stated that ``[t]his section thus 
comprises both an authorization and an appropriation of federal 
funds and as such, it does not require any further 
congressional action to constitute an effective 
appropriation.''
    Section 1311(a) funds could be used by States for 
activities related to developing State insurance exchanges, 
which could include hiring and retaining hundreds of employees 
to establish their State exchanges, such as brokers, 
advertisers, and customer service agents. Grants under this 
language can be used to ``facilitate enrollment'' into exchange 
plans. However, this term is undefined in the statute and could 
allow the funds to go towards any activity the Secretary 
determines could ``facilitate'' enrollment. The vague 
definition of ``facilitate'' is especially troubling in light 
of the unlimited appropriation provided to the Secretary.
    Section 1322 of PPACA created the Consumer Operated and 
Oriented Plan (CO-OP) program to provide government-subsidized 
loans to qualified non-profit health insurance plans. The law 
also appropriated $6 billion for startup and solvency loans 
under the program.
    Analysis of the CO-OP program has raised serious concerns 
about the liability that taxpayers face from this PPACA loan 
program. The Office of Management and Budget (OMB) estimates of 
potential taxpayer losses are troubling. In the proposed rule 
for CO-OPs issued on July 20, 2011 (76 FR 43237), OMB estimated 
that up to ``50 percent of all loans'' will not be repaid--
jeopardizing hundreds of millions of taxpayer dollars.
    Some awardees also include unions who appear to fail to 
meet basic eligibility criteria, such as the statutory 
requirement that award recipients not include health insurers 
or related entities in existence before July 16, 2009.
    Partially in response to such concerns, Congress reduced 
the appropriation available for the program to $3.8 billion in 
H.R. 1473, the continuing resolution for fiscal year 2011. 
Given these facts, it is appropriate for Congress to rescind 
the entire unobligated balance available for the program to 
help address runaway federal spending and limit taxpayer losses 
under the program.
    Section 4002 of PPACA created the Prevention and Public 
Health Fund, a $17.75 billion account (fiscal year 2012 to 
fiscal year 2021) administered by the Secretary of HHS to 
provide for ``expanded and sustained national investment in 
prevention and public health programs to improve health and 
help restrain the rate of growth in private and public sector 
health care costs.''
    Section 4002 appropriates $1 billion for fiscal year 2012; 
$1.25 billion for fiscal year 2013; $1.5 billion for fiscal 
year 2014; $2 billion for fiscal year 2015; and each fiscal 
year thereafter in perpetuity. Although the amount of the fund 
was reduced in the Middle Class Tax Relief and Job Creation Act 
passed in February 2012, the fund remains nothing more than a 
slush fund controlled entirely by the Secretary of HHS that can 
be spent without further Congressional oversight and severely 
hampers robust oversight of the program.
    Providing an advanced appropriation limits Congressional 
oversight of spending under the Public Health Service Act and 
results in the Federal funding of signs, bike paths, and dog 
neutering. Rather than provide the Secretary a large 
appropriation with broad discretion, the Committee believes 
Congress should identify worthy public health service programs 
and authorize them at appropriate levels. Congress can then set 
fiscal priorities by subsequently providing funding through the 
appropriations process after weighing the relative value of 
different programs.
Medicaid
    For both the Federal and State governments, Medicaid is the 
largest health care spender of general-revenue funds. The CBO's 
recent estimates show that the Federal government will spend 
over $5 trillion on Medicaid over the next 5 years. As the CMS 
Chief Actuary notes in his 2011 Medicaid Actuarial Report, 
State spending on the program will surpass $2 trillion over the 
same time period.
    Medicaid is also the largest Federal health care program in 
terms of lives covered. In fiscal year 2010, 67.7 million 
people were enrolled in the program at some point during the 
year and at least 26 million more people will be added to the 
program because of the program's expansion in PPACA. While 
Medicaid was originally designed as a safety net, serving just 
4 million people in 1966, by 2020 there could be more than 90 
million Americans. That means at least 1 in 4 Americans will be 
dependent on the government program Medicaid. These statistics 
are alarming and unsustainable given Washington's record debt 
and deficit levels and the increasing burden on States to 
sustain their Medicaid programs.
    Rather than ensuring the Medicaid program remains fiscally 
sustainable, PPACA enacted the largest expansion of the 
entitlement program since its inception in 1965. In fact, half 
of the individuals gaining health care coverage under the new 
health law will obtain it through the government's Medicaid 
program.
    While the dramatic expansion of the Medicaid program in 
PPACA will contribute to a sharp increase in Federal Medicaid 
expenditures over the next 10 years, program integrity remains 
a serious concern. The Committee is committed to ensuring 
greater transparency and accountability in how Federal funds 
are spent in all 50 States and the U.S territories.
    Program integrity can be improved significantly by ensuring 
eligibility review is done properly and consistently. According 
to CMS, Medicaid made nearly $22 billion in improper payments 
in 2011, of which, more than $15 billion was associated with 
eligibility review errors. Policies such as the implementation 
of the burdensome Maintenance of Effort (MOE) on States 
prohibit any changes to eligibility, methods, and procedures 
until after 2014 for adults in Medicaid. For children under 19 
years of age in Medicaid or the Children's Health Insurance 
Program (CHIP), eligibility, methods, and procedures for 
determining eligibility cannot be changed until September 2019.
    Such policies limit a State's ability to ensure greater 
program integrity by limiting new eligibility review standards 
that would ensure the program is used for the truly eligible 
and most vulnerable. In contrast, the creation of the 
Performance Bonus Payments in the Children's Health Insurance 
Program Reauthorization Act of 2009 (CHIPRA), which was signed 
into law by President Obama, rewards States for loosening their 
Medicaid eligibility review procedures. Such financial 
incentives only further weaken the program's integrity and 
exacerbate the existing improper payment rates.
A Broken Medical Liability System
    The Nation's medical liability system imperils patient 
access and imposes tremendous costs on our Nation. It has 
forced doctors out of practicing in certain specialties; it has 
caused trauma centers to close; it has forced pregnant women to 
drive hours to find an obstetrician. This badly broken system 
also imposes tremendous financial burdens: Americans spend over 
$200 billion every year in unnecessary ``health care'' 
costs;\1\ the CBO has reported to the Committee that 
comprehensive medical liability reform will save American 
taxpayers $63.9 billion over 10 years.\2\
---------------------------------------------------------------------------
    \1\PwC's ``The Price of Excess'' (2010): http://www.pwc.com/us/en/
healthcare/publications/the-price-of-excess.jhtml
    \2\CBO Preliminary Estimates of E&C Reconciliation Proposals.
---------------------------------------------------------------------------
    In sharp contrast, States like California and Texas, as 
well as others, have already enacted comprehensive medical 
liability reforms. As discussed below, enacting these reforms 
nationally will decrease the costs of defensive medicine, 
reduce medical liability fears that inhibit quality of care 
improvement, end years of Washington inaction on this recurring 
crisis, and, as shown by the States, increase patient access to 
quality care while reducing costs, including liability 
premiums.
    President Obama has repeatedly cited the importance of 
medical tort reform, but nothing meaningful in this area was 
included in PPACA.
The Costs of Defensive Medicine
    Doctors are sued at an alarming rate (by the age of 55, 61 
percent of doctors have been sued) and forced to practice 
defensive medicine. In fact, a 2005 survey published in the 
Journal of the American Medical Association (AMA) revealed that 
93 percent of doctors said they have practiced defensive 
medicine and 92 percent said they made referrals to specialists 
and/or ordered tests or procedures in part to insulate 
themselves from medical liability.\3\
---------------------------------------------------------------------------
    \3\AMA's ``Medical Liability: By late career, 61% of doctors have 
been sued'': http://www.ama-assn.org/amednews/2010/08/ 16/prl20816.htm.
---------------------------------------------------------------------------
    Part of defensive medicine is called assurance behavior 
where a monetary value is assigned. This occurs when a doctor 
orders a test or procedure where at least some of the 
motivation is to avoid being second-guessed in retrospect and 
possibly named in a medical liability suit. This is not fraud. 
Medicine is not an exact science. No doctor can tell whether 
the patient in front of them is the one who may have the rare 
clinical condition that may have been detected with an 
additional test. Faced with the possibility of a professionally 
devastating malpractice suit, many physicians will order the 
extra test. Sixty percent of malpractice cases are dropped or 
dismissed and never go to court, but it costs a doctor an 
average of $18,000 to defend against a lawsuit. Doctors are 
found not negligent in 90 percent of the cases that do go to 
trial, but each of these cases costs an average of $100,000 to 
defend.\4\
---------------------------------------------------------------------------
    \4\See note 12.
---------------------------------------------------------------------------
    Defensive medicine is not done to increase income. If an 
internist orders a CAT scan, the radiologist gets paid, not the 
internist.
    Medical malpractice premiums written in 2009 totaled 
approximately $10.8 billion.\5\ Indirect costs, particularly 
increased use of tests and procedures by providers to protect 
against future lawsuits (``defensive medicine''), have been 
estimated to be much higher than direct premiums.
---------------------------------------------------------------------------
    \5\NAIC, ``Countrywide Summary of Medical Malpractice Insurance, 
Calendar Years 1991-2009,'' provided to CRS on December 16, 2010.
---------------------------------------------------------------------------
    The Pacific Institute puts the cost of defensive medicine 
at some $200 billion and estimates that these additional 
liability-based medical care costs add at least 3.4 million 
Americans to the rolls of the uninsured.\6\ Nearly half of all 
medical malpractice claims do not involve injury or medical 
error. Likewise, the Manhattan Institute concluded that about 
ten cents of every dollar paid for health care services goes to 
cover malpractice premiums, defensive medicine, and other costs 
associated with excessive litigation.
---------------------------------------------------------------------------
    \6\Lawrence 1. McQuillan, Hovannes Ahramyan and Anthony P. Archie, 
Jackpot Justice: The True Cost of America's Tort System, Pacific 
Research Institute (Mar. 2007).
---------------------------------------------------------------------------
Medical Liability Fears Inhibit Quality of Care Improvements
    Fear of medical liability makes it more difficult to 
improve systems by making doctors reluctant to discuss and 
study errors and ``near misses'' or participate in morbidity 
and mortality conferences if the findings are ``discoverable'' 
in a malpractice claim.
    Another common myth is that a small group of bad doctors 
are responsible for most malpractice cases, and the current 
medical tort system is needed or they will be free to 
repeatedly harm patients through their negligence. According to 
a 2007 analysis of National Practitioner Data Bank (NPDB) files 
by Public Citizen ``[t]he vast majority of doctors--82 
percent--have never had a medical malpractice payment since the 
NPDB was created in 1990. Just 5.9 percent of doctors were 
responsible for 57.8 percent of all malpractice payments since 
1991, according to data from September 1990 through 2005. Just 
2.3 percent of doctors, having three or more malpractice 
payments, were responsible for 32.8 percent of all payments. 
Only 1.1 percent of doctors, having four or more malpractice 
payments, were responsible for 20.2 percent of all 
payments.''\7\
---------------------------------------------------------------------------
    \7\Public Citizen, Congress Watch, The Great Medical Malpractice 
Hoax: NPDB Data Continue to Show Medical Liability System Produces 
Rational Outcomes, (January 2007): http://www.citizen.org/publications/
publicationredirect.cfm?ID=7497.
---------------------------------------------------------------------------
    However, Public Citizen's own report highlights the 
problem. According to the AMA Physician Practice Information 
Survey, 75.4 percent of cardiothoracic surgeons, 68.3 percent 
of general surgeons, 79.1 percent of neurosurgeons, 70.3 
percent of orthopedic surgeons, and 69.6 percent of OB/GYNs 
have been sued.\8\ The numbers do not add up. Either there are 
a lot of frivolous lawsuits or almost all doctors are really 
bad doctors. The truth is that most claims are meritless and do 
not result in a payment, yet most doctors have to defend 
themselves from these unnecessary claims at a substantial cost 
to themselves and the Nation's health care system.
---------------------------------------------------------------------------
    \8\AMA 2007-2008 Physician Practice Information survey.
---------------------------------------------------------------------------
    The medical liability tort system does not improve quality. 
A number of studies have failed to show that the current system 
of medical liability deters medical errors or promotes patient 
safety.\9\ This has been most extensively studied in the 
specialty of obstetrics where the fear of medical liability has 
not been shown to result in fewer complications or cesarean 
sections.\10\ There is evidence, however, that fears of medical 
liability deter doctors from treating high risk patients, 
performing high risk procedures, entering high risk 
specialties, and practicing in states without liability reform.
---------------------------------------------------------------------------
    \9\Mello MM, Brennan TA. Deterrence of medical errors: theory and 
evidence for malpractice reform. Texas Law Review. 2002; 80:1595-638.
    \10\A. Russell Localio, JD, MPH, MS; Ann G. Lawthers, ScD; Joan M. 
Bengtson, MD; Liesi E. Hebert, ScD; Susan L. Weaver; Troyen A. Brennan, 
MD, JD; J. Richard Landis, PhD, Relationship Between Malpractice Claims 
and Cesarean Delivery, JAMA. 1993;269(3):366-373.
---------------------------------------------------------------------------
    This proposal will make it easier to promote efforts at 
improving patient safety and quality of care by allowing 
doctors and hospitals to examine the causes of medical errors 
and make systemic improvements without the fear of litigation 
that exists in States without liability reform.

A Recurring Crisis, Yet Washington Has Failed to Act

    Medical malpractice reform has surfaced as a national issue 
repeatedly over recent decades during periods of ``crisis.'' A 
2004 survey found that three out of four emergency rooms had to 
divert ambulances because of a shortage of specialists due to 
medical liability issues.\11\ The evidence from States like 
California that medical liability reform works has been 
available for over three decades. Unnecessary costs and 
defensive medicine have a negative effect on the Federal health 
care programs of Medicare and Medicaid.\12\
---------------------------------------------------------------------------
    \11\Hospital Emergency Department Administration Survey, ``Federal 
Medical Liability Reform,'' 2004, the Schumacher Group, Alliance of 
Specialty Medicine, July 2005.
    \12\Under Medicare, the federal government pays a percentage of 
doctors' liability premiums through the practice expense component of 
the physician fee schedule. The federal government also incurs costs 
because of defensive medicine.
---------------------------------------------------------------------------
    President Obama has repeatedly expressed his support for 
meaningful medical liability reform. In a 2009 speech before 
the AMA, the President acknowledged that defensive medicine 
leads to more tests and needless costs because doctors must 
protect themselves from frivolous lawsuits.\13\ Again, during a 
speech to a Joint Session of Congress in September 2009, 
President Obama said ``I don't believe malpractice reform is a 
silver bullet, but I've talked to enough doctors to know that 
defensive medicine may be contributing to unnecessary 
costs.''\14\ In his 2011 State of the Union address, President 
Obama again included medical liability reform as part of his 
agenda.\15\
---------------------------------------------------------------------------
    \13\The text of the June 2009 speech can be found here: http://
www.whitehouse.gov/the-press-office/remarks-president-annual-
conference-american-medical-association.
    \14\The text of this address can be found here: http://
www.whitehouse.gov/the-press-office/remarks-president-a-joint-session-
congress-health-care.
    \15\In his January 25, 2011, State of the Union address, President 
Obama specifically called for ``medical malpractice reform to rein in 
frivolous lawsuits.'' On January 27, Republicans on the Committee wrote 
directly to the President seeking his leadership in crafting such 
legislation. There has been no response from the Administration.
---------------------------------------------------------------------------
    A common question from the American people is why there 
were no meaningful medical liability reform provisions in the 
health reform law. An October 2009 survey conducted by the 
Health Coalition on Liability and Access found that 69 percent 
of Americans wanted medical liability reform included in health 
care reform legislation.\16\ One of the most truthful answers 
came from Governor Howard Dean when he commented as follows on 
the House bill (H.R. 3200):
---------------------------------------------------------------------------
    \16\112th Congress Committee on the Judiciary Report on the ``Help 
Efficient, Accessible, Low-Cost, Timely Healthcare Act of 2011.''

          Here's why tort reform is not in the bill. When you 
        go to pass a really enormous bill like that, the more 
        stuff you put in it, the more enemies you make, right? 
        And the reason that tort reform is not in the bill is 
        because the people who wrote it did not want to take on 
        the trial lawyers in addition to everyone else they 
        were taking on. And that is the plain and simple 
        truth.\17\
---------------------------------------------------------------------------
    \17\http://washingtonexaminer.com/blogs/beltway-confidential/2009/
08/dean-says-obamacare-authors-dont-want-challenge-trial-lawyers.

    As Shown by the States, Comprehensive Reform Will Increase 
---------------------------------------------------------------------------
Patient Access to Quality Care While Reducing Costs

    States that have adopted caps have seen tremendous 
benefits. Patients who are harmed are still compensated 100 
percent for economic losses (anything to which a receipt can be 
attached), suffered as the result of a health care injury. 
California's landmark legislation, the Medical Injury 
Compensation Reform Act of 1975 (MICRA) signed into law by 
Governor Jerry Brown (D), helped to stabilize the California 
medical liability insurance market. From 1976 through 2009, 
California's medical liability insurance premiums increased by 
261 percent compared to a total increase of 945 percent for the 
other 49 States.\18\
---------------------------------------------------------------------------
    \18\The American Medical Association's written testimony for 
January 20, 2011, House Judiciary Committee hearing: http://www.ama-
assn.org/ama1/pub/upload/mm/399/ama-statement-medical-liability-reform-
2011.pdf.
---------------------------------------------------------------------------
    Additionally, Texas adopted comprehensive medical 
malpractice reform, including caps on non-economic damages, in 
2003, and these reforms have yielded remarkable outcomes, 
including an increase in new physicians, additional 
obstetricians, and reduced medical liability premiums. From 
2003 through 2009, the Texas Medical Board saw an increase of 
roughly 60 percent in their new physician licensure 
applications.\19\ While other states were losing obstetricians, 
Texas actually gained obstetricians. The number of 
obstetricians in Texas increased by 218 between 2002 and 2009 
to a total of 2,444.\20\ Finally, all major physician liability 
carriers in Texas have reduced their rates resulting in nearly 
all Texas physicians having their premiums lowered by at least 
30 percent and some by well over 40 percent since 2004.\21\
---------------------------------------------------------------------------
    \19\Texas Medical Association's ``Proposition 12 Produces Healthy 
Benefits'': http://www.texmed.org/ Template.aspx?id=5238.
    \20\The chart detailing obstetricians in Texas can be found here: 
http://www.tapa.info/Downloads/Improving_Access/2010_Charts/
06_TAPA_Obstetricians.pdf.
    \21\Texas Medical Association ``Professional Liability Insurance 
Reform'': http://www.texmed.org/Template. aspx?id=780.
---------------------------------------------------------------------------
    Caps on non-economic damages do not deny injured patients 
the ability to have their cases heard. States that have enacted 
caps have not seen a significant reduction in the number of 
claims, only in the number of unpredictable and unreasonably 
large awards for pain and suffering.\22\ States that have not 
enacted reform continue to allow a few patients and their 
attorneys unlimited awards while everyone else is burdened with 
limited health care and rising costs.
---------------------------------------------------------------------------
    \22\In July 2007, a Los Angeles County Court awarded a plaintiff 
over $96 million in damages while abiding by MICRA's $250,000 cap on 
non-economic damages. www.micra.org.
---------------------------------------------------------------------------
    Twenty-eight States have enacted meaningful medical 
liability re-form\23\ that includes, among other provisions, a 
cap on non-economic damages, while twenty-two States continue 
to operate within the national health care system without 
meaningful liability reform. In States with caps on non-
economic damages, liability premiums are 17 percent lower than 
they are in States without such caps.\24\
---------------------------------------------------------------------------
    \23\AANS/CNS PowerPoint Presentation ``The State of Medical 
Liability Reform: Successes and Challenges for the Future'', February 
19, 2010.
    \24\``The Medical Malpractice Crisis': Trends and the Impact of 
State Tort Reforms,'' Kenneth E. Thorpe, (January 21, 2004) at 20-30.
---------------------------------------------------------------------------
    In those States that have enacted meaningful reform, 
malpractice premiums are affordable, defensive medicine costs 
are lower and patients have greater access to care when and 
where they need it. For example, two thorough studies that used 
national data on Medicare populations concluded that States 
with medical liability reforms saw an average reduction of 4.3 
percent in hospital costs for patients in managed care 
programs.\25\ This is not the case in States that have refused 
to enact meaningful reform.
---------------------------------------------------------------------------
    \25\Daniel P. Kessler and Mark B. McClellan, ``Medical Liability, 
Managed Care, and Defensive Medicine,'' National Bureau of Economic 
Research (NBER) Working Paper 7537 (February 2000) at 16.
---------------------------------------------------------------------------
    In States without liability reform, the system does not 
serve anyone except trial lawyers. Injured patients are not 
compensated in a timely or equitable way. They are forced to 
wade through several years of litigation and receive, on 
average, only 46 cents of every dollar awarded while the 
remaining 54 cents goes to their lawyers and other 
administrative fees.\26\
---------------------------------------------------------------------------
    \26\NEJM ``Claims, Errors, and Compensation Payments in Medical 
Malpractice Litigation.'': http://www.nejm.org/doi/full/10.1056/ 
NEJMsa054479.
---------------------------------------------------------------------------
    State reforms show that comprehensive medical liability 
reform, that includes caps on non-economic damage awards, will 
improve patients' access to quality care while reducing the 
overall cost of health care in America.

                                Hearings


ACA Funding Provisions

    The Subcommittee on Health held hearings on Prevention and 
Public Health Funds during the first session of the 112th 
Congress. On March 9, 2011, the Subcommittee held a hearing 
entitled ``Setting fiscal Priorities in Health Care Funding.'' 
The Subcommittee received testimony from the Honorable Earnest 
Istook, Distinguished Fellow, the Heritage Foundation; Dr. John 
C. Goodman, President and CEO, National Center for Policy 
Analysis; and the Honorable Joseph F. Vitale, New Jersey State 
Senate.

Medicaid

    The full Committee and the Subcommittee on Health held 
hearings on Medicaid reform during the first session of the 
112th Congress. On Tuesday, March 1, 2011, the full Committee 
held a hearing entitled ``The Consequences of Obamacare: Impact 
on Medicaid and State Health Care Reform.'' The Committee 
received testimony from Utah Governor Gary R. Hubert, 
Mississippi Governor Haley Barbour, and Massachusetts Governor 
Deval Patrick.

Medical Liability

    The Subcommittee on Health held hearings on Medical 
Liability during the first session of the 112th Congress. On 
April 6, 2011, the Subcommittee held a hearing entitled ``The 
Cost of the Medical Liability System Proposals for Reform, 
including H.R. 5, the Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2011.'' The Subcommittee 
received testimony from Dr. Lisa M. Hollier, MPH, American 
College of Obstetricians and Gynecologists Fellow, Professor 
and Director of the Lyndon B Johnson Residency Program at the 
University of Texas Medical School at Houston; Dr. Allen B. 
Kachalia, Esq., Medical Director of Quality and Safety, Brigham 
and Women's Hospital, Harvard Medical School; and Dr. Troy M. 
Tippetts, Past President, American Association of Neurological 
Surgeons and Past President, Florida Medical Association.

                        Committee Consideration

    On April 24 and 25, 2012, the Committee met in open markup 
session to consider the Committee Prints entitled ``Title I--
Repeal of Certain ACA Funding Provisions,'' ``Title II--
Medicaid,'' and ``Title III--Liability Reform.'' A motion by 
Mr. Upton to transmit the Committee Prints as the 
recommendations of the Committee, and all appropriate 
accompanying material, including additional, supplemental, or 
dissenting views, to the House Committee on the Budget, in 
order to comply with the reconciliation directive included in 
section 201 of H. Con. Res. 112, establishing the budget for 
the United States Government for fiscal year 2013 and setting 
forth appropriate budgetary levels for fiscal years 2014 
through 2022, and consistent with section 310 of the 
Congressional Budget and Impoundment Control Act of 1974, was 
agreed to by a voice vote.

                            Committee Votes

    Clause 3(b) of Rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following are the recorded votes taken on amendments offered to 
the Committee Prints.



                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the oversight findings and 
recommendations of the Committee are reflected in the 
descriptive portions of this report, including the finding that 
reigning in mandatory spending is necessary to avoid a debt 
crisis.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the performance goals and 
objectives of the Committee are reflected in the descriptive 
portions of this report, including the goal of avoiding a debt 
crisis by reigning in mandatory spending.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that the 
Committee Prints would result in no new or increased budget 
authority, entitlement authority, or tax expenditures or 
revenues.

                                Earmark

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI, 
the Committee finds that the Committee Prints contain no 
earmarks, limited tax benefits, or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 27, 2012.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Reconciliation 
Recommendations of the House Committee on Energy and Commerce.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kirstin 
Nelson.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Reconciliation Recommendations of the House Committee on Energy and 
        Commerce

    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of this process, the House 
Committee on Energy and Commerce approved legislation on April 
25, 2012, with a number of provisions that would reduce 
deficits.
    In total, CBO and the staff of the Joint Committee on 
Taxation (JCT) estimate that enacting the legislation would 
reduce deficits by about $2.9 billion over the 2012-2013 
period, by $45.9 billion between 2012 and 2017, and by $113.4 
billion over the 2012-2022 period, assuming enactment on or 
near October 1, 2012. These figures represent the net effect of 
changes in direct spending and revenues as a result of the 
legislation. About $1.4 billion of the reduction for 2012 
through 2022 would be off-budget, from net increases in Social 
Security tax receipts.
    In addition, the Chairman of the House Committee on the 
Budget has directed CBO to prepare estimates assuming a July 1, 
2012, enactment date for this year's reconciliation proposals. 
If the legislation were enacted by that earlier date, some of 
the provisions would result in greater reductions in direct 
spending than those estimated assuming enactment on or near 
October 1, 2012. Under the alternative assumption of a July 1 
enactment date, CBO and JCT estimate that the legislation would 
reduce deficits by $3.9 billion over the 2012-2013 period, by 
$48.0 billion between 2012 and 2017, and by $115.5 billion over 
the 2012-2022 period.
    The Committee's recommendations would make the following 
changes:
     Title I would eliminate funding for certain 
provisions of the Affordable Care Act (ACA), by repealing the 
authority for the Secretary of Health and Human Services (HHS) 
to provide grants to states for establishing health insurance 
exchanges, repealing the Prevention and Public Health Fund, and 
rescinding funding for loans for the Consumer Operated and 
Oriented Plan (CO-OP) program.
     Title II would make changes to Medicaid and the 
Children's Health Insurance Program (CHIP) by limiting states' 
ability to tax health care providers, reducing Medicaid 
payments to states for hospitals that serve a disproportionate 
share of poor and uninsured patients, repealing certain 
requirements that states maintain Medicaid and CHIP eligibility 
rules and procedures, limiting Medicaid payments to U.S. 
territories, and repealing performance bonuses under CHIP.
     Title III would impose limits on medical 
malpractice litigation in state and federal courts by capping 
awards and attorney fees, modifying the statute of limitations 
and the ``collateral source'' rule, and eliminating joint and 
several liability.
    The legislation contains an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA) because it 
would preempt state laws that provide health care providers and 
organizations less protection from liability, loss, or damages. 
CBO estimates the cost of complying with the mandate would be 
small and would fall well below the threshold established in 
UMRA for intergovernmental mandates ($73 million in 2012, 
adjusted annually for inflation).
    The legislation contains several mandates on the private 
sector, including caps on damages and on attorney fees, the 
statute of limitations, and the fair share rule. The cost of 
those mandates would exceed the threshold established in UMRA 
for private-sector mandates ($146 million in 2012, adjusted 
annually for inflation) in four of the first five years in 
which the mandates were effective.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the legislation is shown in the following 
tables. The spending effects of this legislation fall mostly 
within budget functions 550 (health) and 570 (Medicare).
    For purposes of this estimate, CBO assumes that the 
legislation will be enacted on or near October 1, 2012, as 
shown in Table 1. As directed by the Chairman of the House 
Budget Committee, CBO has also prepared a set of estimates 
based on the assumption that the legislation is enacted by July 
1, 2012. Those alternative estimates are presented in Table 2.

   TABLE 1. EFFECTS ON DIRECT SPENDING AND REVENUES FOR RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE, AS APPROVED BY THE COMMITTEE ON APRIL 25, 2012, ASSUMING
                                                                                ENACTMENT AROUND OCTOBER 1, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, in millions of dollars--
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
                                                       2012     2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017   2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Title I--Repeal of Certain ACA Funding Provisions:
    Estimated Budget Authority......................      0     -4,000     -3,860     -5,500     -5,460     -2,280     -1,250     -1,250     -1,500     -1,500     -2,000    -21,100     -28,600
    Estimated Outlays...............................      0       -630     -3,840     -5,960     -5,730     -2,380     -1,090     -1,200     -1,320     -1,450     -1,670    -18,540     -25,270
Title II--Medicaid:
    Estimated Budget Authority......................      0     -9,990     -1,730        110     -1,900     -2,260     -2,050     -2,200     -1,330     -1,400     -5,710    -15,770     -28,460
    Estimated Outlays...............................      0     -2,140     -1,800     -3,190     -2,000     -1,690     -2,050     -2,090     -1,280     -1,400     -5,710    -10,820     -23,350
Title III--Liability Reform:
    Estimated Budget Authority......................      0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
    Estimated Outlays...............................      0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
Total Changes in Direct Spending:
    Estimated Budget Authority......................      0    -14,090     -6,470     -8,460    -12,600    -11,050    -10,280    -10,900    -10,830    -11,470    -16,870    -52,670    -113,020
    Estimated Outlays...............................      0     -2,870     -6,520    -12,220    -12,970    -10,580    -10,120    -10,740    -10,600    -11,420    -16,540    -45,160    -104,580

                                                                  CHANGES IN REVENUES ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Estimated Revenues\a\
    On-Budget.......................................      0        -10          0       -430        750      1,000      1,010      1,180      1,240      1,300      1,380      1,310       7,420
    Off-Budget\b\...................................      0          0       -190       -530       -100        210        330        390        400        420        440       -610       1,370
      Total Changes.................................      0        -10       -190       -960        650      1,210      1,340      1,570      1,640      1,720      1,820        700       8,790

                                                        INCREASE OR DECREASE (-) IN THE DEFICIT ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Net Effect on Deficits:
    On-Budget.......................................      0     -2,860     -6,520    -11,790    -13,720    -11,580    -11,130    -11,920    -11,840    -12,720    -17,920    -46,470    -112,000
    Off-Budget\b\...................................      0          0        190        530        100       -210       -330       -390       -400       -420       -440        610      -1,370
      Total Changes.................................      0     -2,860     -6,330    -11,260    -13,620    -11,790    -11,460    -12,310    -12,240    -13,140    -18,360    -45,860   -113,370
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CBO and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding; ACA = the Affordable Care Act.
\a\Negative numbers denote a reduction in revenues and positive numbers denote an increase in revenues.
\b\All off-budget effects would come from changes in revenues. (Payroll taxes for Social Security are classified as off-budget.)


  TABLE 2.--EFFECTS ON DIRECT SPENDING AND REVENUES FROM RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE, AS APPROVED BY THE COMMITTEE ON APRIL 25, 2012, ASSUMING
                                                   ENACTMENT BY JULY 1, 2012, AS DIRECTED BY THE CHAIRMAN OF THE HOUSE COMMITTEE ON THE BUDGET
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     By fiscal year, in millions of dollars--
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
                                                     2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017   2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT BY JULY 1, 2012

Title I--Repeal of Certain ACA funding
 provisions:
    Estimated Budget Authority..................     -3,960     -1,980     -3,860     -5,500     -5,460     -2,280     -1,250     -1,250     -1,500     -1,500     -2,000    -23,040     -30,540
    Estimated Outlays...........................       -230     -1,230     -4,480     -6,260     -5,830     -2,440     -1,090     -1,200     -1,320     -1,450     -1,670    -20,470     -27,200
Title II--Medicaid:
    Estimated Budget Authority..................     -8,480     -1,690     -1,730        110     -1,900     -2,260     -2,050     -2,200     -1,330     -1,400     -5,710    -15,950     -28,640
    Estimated Outlays...........................       -180     -2,140     -1,800     -3,190     -2,000     -1,690     -2,050     -2,090     -1,280     -1,400     -5,710    -11,000     -23,530
Title III--Liability Reform:
    Estimated Budget Authority..................          0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
    Estimated Outlays...........................          0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
Total Changes in Direct Spending:
    Estimated Budget Authority..................    -12,440     -3,770     -6,470     -8,460    -12,600    -11,050    -10,280    -10,900    -10,830    -11,470    -16,870    -54,790    -115,140
    Estimated Outlays...........................       -410     -3,470     -7,160    -12,520    -13,070    -10,640    -10,120    -10,740    -10,600    -11,420    -16,540    -47,270    -106,690

                                                                     CHANGES IN REVENUES ASSUMING ENACTMENT BY JULY 1, 2012

Estimated Revenues\a\
    On-Budget...................................          0        -10          0       -430        750      1,000      1,010      1,180      1,240      1,300      1,380      1,310       7,420
    Off-Budget\b\...............................          0          0       -190       -530       -100        210        330        390        400        420        440       -610       1,370
      Total Changes.............................          0        -10       -190       -960        650      1,210      1,340      1,570      1,640      1,720      1,820        700       8,790

                                                           INCREASE OR DECREASE (-) IN THE DEFICIT ASSUMING ENACTMENT BY JULY 1, 2012

Net Effect on Deficits:
    On-Budget...................................       -410     -3,460     -7,160    -12,090    -13,820    -11,640    -11,130    -11,920    -11,840    -12,720    -17,920    -48,580    -114,110
    Off-Budget\b\...............................          0          0        190        530        100       -210       -330       -390       -400       -420       -440        610      -1,370
      Total Changes.............................       -410     -3,460     -6,970    -11,560    -13,720    -11,850    -11,460    -12,310    -12,240    -13,140    -18,360    -47,970   -115,480
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CBO and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding; ACA = the Affordable Care Act.
\a\Negative numbers denote a reduction in revenues and positive numbers denote an increase in revenues.
\b\All off-budget effects would come from changes in revenues. (Payroll taxes for Social Security are classified as off-budget.)

    Basis of estimate: In total, CBO and JCT estimate that 
enacting the Energy and Commerce Committee's recommendations 
would reduce direct spending by $104.6 billion, increase 
revenues by $8.8 billion, and reduce deficits by about $113.4 
billion over the 2012-2022 period, assuming enactment on or 
near October 1, 2012 (see Table 1). Assuming enactment by July 
1, 2012, the committee's recommendations are estimated to 
reduce direct spending by $106.7 billion, increase revenues by 
$8.8 billion, and reduce deficits by about $115.5 billion over 
the 2012-2022 period (see Table 2).

Title I--Repeal of Certain ACA Funding Provisions

    Title I of the legislation would repeal several provisions 
of the Affordable Care Act, including grant authority for state 
exchanges, the Prevention and Public Health Fund, and funding 
for loans for the CO-OP program. CBO estimates that enacting 
the provisions in title I would reduce direct spending by $25.3 
billion over the 2012-2022 period, assuming enactment on or 
near October 1, 2012; and by $27.2 billion over the same 
period, assuming enactment by July 1, 2012. In addition, 
enacting title I would reduce revenues by approximately $0.9 
billion over the 2012--2022 period for both October 1, 2012, 
and July 1, 2012, enactment dates.
    State Exchange Grants. The legislation includes a provision 
to eliminate the authority of the Secretary of HHS to provide 
grants to states for setting up health insurance exchanges. 
Section 1311 of the ACA provided for such grants in the amounts 
necessary for planning and establishing health insurance 
exchanges until January 1, 2015. Under current law, CBO 
estimates that $2.7 billion in grants will be provided to 
states over the 2012-2022 period. CBO expects that some of 
those funds will be obligated by the time this legislation is 
enacted and will be disbursed over time even if the legislation 
is enacted. Therefore, eliminating the authority to provide 
grants after the enactment date would generate a reduction in 
the disbursement of grants of $1.4 billion over the 2012-2022 
period, CBO estimates. In addition, the repeal would lead to 
some delay in the establishment of insurance exchanges, 
resulting in changes in insurance coverage and additional 
changes in federal spending primarily for subsidies provided 
through health insurance exchanges. After taking into account 
such changes in coverage, CBO and JCT estimate that enacting 
this provision would reduce direct spending by $14.1 billion 
over the 2012-2022 period and would reduce net revenues by $0.9 
billion over the same period.
    Prevention and Public Health Fund. The ACA established the 
Prevention and Public Health Fund and provided authority for 
federal agencies to award grants from the fund to public and 
private entities for prevention, wellness, and public health 
activities. Federal agencies can award annual grants that total 
$1.0 billion in 2012 rising to $2.0 billion in 2022 and beyond. 
Title I would repeal the Prevention and Public Health Fund and 
rescind any unobligated balances. CBO estimates that enacting 
this provision would reduce direct spending by $10.9 billion 
over the 2012-2022 period.
    Consumer Operated and Oriented Plan Program. Title I also 
would rescind unobligated balances of the CO-OP program. The 
CO-OP program was established by the ACA to provide loans to 
new nonprofit health insurance issuers so that they may offer 
health insurance plans in the individual and small group 
markets. CBO estimates that enacting this provision would 
reduce direct spending by $0.3 billion over the 2012-2022 
period.

Title II--Medicaid and CHIP

    Title II would make several changes to Medicaid and CHIP. 
It would limit states' ability to tax health care providers, 
reduce payments to hospitals that serve a disproportionate 
share of poor and uninsured patients (known as DSH payments), 
repeal Medicaid and CHIP maintenance of effort requirements, 
limit Medicaid payments to the U.S. territories, and repeal the 
authority for HHS to award CHIP performance bonuses.
    CBO estimates that enacting title II would reduce direct 
spending by $23.4 billion over the 2012-2022 period, assuming 
enactment on or near October 1, 2012; and by $23.5 billion over 
the same period, assuming enactment by July 1, 2012. In 
addition, enacting title II would reduce revenues by $0.8 
billion over the 2012-2022 period for both the October 1 and 
July 1 enactment assumptions.
    Revise Provider Tax Threshold. Under current law, states 
may not tax health care providers and return the tax revenues 
to those same providers through higher Medicaid payment rates 
or through other offsets and guarantees (known as a ``hold 
harmless'' arrangement). An exception to this provision is that 
the federal government will not deem a hold harmless 
arrangement to exist if the provider taxes collected from given 
providers are less than 6 percent of the providers' revenues. 
The legislation would lower the allowable percentage threshold 
of provider revenues to 5.5 percent starting in 2013. CBO 
estimates that enacting this provision would reduce direct 
spending by $11.3 billion over the 2012-2022 period.
    Reduce DSH Payments. Under current law, Medicaid provides 
for payments to hospitals that serve a disproportionate share 
of low-income and uninsured individuals. The ACA reduced those 
payments beginning in 2014 and continuing through 2021. 
Payments in 2022 were unaffected. This provision would reduce 
DSH payments in 2022 from $12.1 billion to $7.9 billion, 
bringing those amounts in line with 2021 payments. CBO 
estimates that enacting this provision would reduce direct 
spending by $4.2 billion in 2022.
    Repeal Medicaid and CHIP Maintenance of Effort (MOE) 
Requirements. As a condition of receiving federal Medicaid and 
CHIP payments, states must maintain the eligibility standards, 
methodologies, and procedures that were in place prior to 
enactment of the ACA with respect to children and adults in 
Medicaid and CHIP. The requirements for adults remain in effect 
until state health insurance exchanges are operational while 
the requirements for children remain in effect until 2019. The 
legislation would repeal the MOE requirements for adults and 
children in Medicaid and CHIP. CBO assumes that individuals 
losing Medicaid or CHIP coverage as a result of this provision 
would take up employment-based health insurance, exchange 
coverage, or become uninsured. Those changes in enrollment in 
Medicaid, CHIP, exchanges, and employer-based health insurance 
together would reduce direct spending by approximately $1.4 
billion and reduce revenues by $0.8 billion over the 2012-2022 
period.
    Limit Medicaid Payments to Territories. The legislation 
would repeal provisions enacted under the ACA that increased 
Medicaid payments to the U.S. territories by raising their 
federal matching percentage and their capped allotments under 
the program. Under current law, CBO estimates that total 
Medicaid payments to the U.S. territories will be $12.4 billion 
over the 2012-2022 period with the Commonwealth of Puerto Rico 
expected to receive the majority of those payments. CBO 
estimates that eliminating the increased funding provided in 
the ACA would reduce direct spending by $6.1 billion over the 
2012-2022 period, assuming enactment around October 1, 2012. 
(Assuming enactment by July 1, 2012, savings from this 
provision would be $6.3 billion between 2012 and 2022.)
    Repeal CHIP Performance Bonuses. Under the CHIP statute, 
the Secretary of HHS awards bonus payments to states that meet 
two criteria. First, states must adopt any 5 of 8 specified 
program changes that generally facilitate enrollment in, and 
retention of, Medicaid and CHIP coverage for children. Second, 
states that have made such program changes must achieve 
specified enrollment targets for children's coverage in 
Medicaid. The legislation would repeal the bonus payment 
program as of the date of enactment. In addition, this 
legislation would rescind any unobligated balance remaining in 
the performance bonus fund. CBO estimates that enacting this 
legislation would reduce direct spending by $0.4 billion in 
2013 (with no effect in any other years).

Title III--Liability Reform

    The legislation would establish:
           A three-year statute of limitations for 
        medical malpractice claims, with certain exceptions, 
        from the date of discovery of an injury;
           A cap of $250,000 on awards for noneconomic 
        damages;
           A cap on awards for punitive damages that 
        would be the larger of $250,000 or twice the economic 
        damages, and restrictions on when punitive damages may 
        be awarded;
           Replacement of joint and several liability 
        with a fair-share rule, under which a defendant in a 
        lawsuit would be liable only for the percentage of the 
        final award that was equal to his or her share of 
        responsibility for the injury;
           Sliding-scale limits on the contingency fees 
        that lawyers can charge;
           A safe harbor from punitive damages for 
        products that meet applicable safety requirements 
        established by the Food and Drug Administration; and
           Permission to introduce evidence of income 
        from collateral sources (such as life insurance payouts 
        and health insurance) at trial.
    Over the 2012-2022 period, CBO and JCT estimate that 
enacting title III would reduce direct spending by about $56 
billion and increase federal revenues by about $10.5 billion. 
The combined effect of those changes in direct spending and 
revenues would reduce federal deficits by almost $66.5 billion 
over that period, with changes in off-budget revenues 
accounting for $2.6 billion of that reduction.
    Effects on National Spending for Health Care. CBO reviewed 
recent research on the effects of proposals to limit costs 
related to medical malpractice (``tort reform''), and estimates 
that enacting title III would reduce national health spending 
by about 0.5 percent.\1\ That figure comprises a direct 
reduction in spending for medical liability premiums and an 
additional indirect reduction from slightly less utilization of 
health care services. CBO's estimate takes into account the 
fact that, because many states have already implemented some 
elements of the legislation, a significant fraction of the 
potential cost savings has already been realized. Moreover, the 
estimate assumes that the spending reduction of about 0.5 
percent would be realized over a period of four years, as 
providers gradually change their practice patterns.
---------------------------------------------------------------------------
    \1\See Congressional Budget Office, letter to the Honorable Orrin 
G. Hatch regarding CBO's Analysis of the Effects of Proposals to Limit 
Costs Related to Medical Malpractice, (October 9, 2009). http://
www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort--Reform.pdf.
---------------------------------------------------------------------------
    Revenues. CBO estimates that private health spending would 
be reduced by about 0.5 percent. Much of private-sector health 
care is paid for through employment-based insurance that 
represents nontaxable compensation. In addition, beginning in 
2014, refundable tax credits will be available to certain 
individuals and families to subsidize health insurance 
purchased through new health insurance exchanges. (The portion 
of those tax credits that exceed taxpayers' liabilities are 
classified as outlays, while the portions that reduce 
taxpayers' liabilities are recorded as reductions in revenues.)
    Lower costs for health care arising from enactment of title 
III would lead to an increase in taxable compensation and a 
reduction in subsidies for health insurance purchased through 
an exchange. Those changes would increase federal tax revenues 
by an estimated $10.5 billion over the 2012-2022 period, 
according to estimates by JCT. Social Security payroll taxes, 
which are off-budget, account for $2.6 billion of that increase 
in revenues.
    Direct Spending. CBO estimates that enacting title III 
would reduce direct spending for Medicare, Medicaid, the CHIP, 
the Federal Employees Health Benefits program, the Defense 
Department's TRICARE for Life program, and subsidies for 
enrollees in health insurance exchanges. We estimate those 
reductions would total roughly $56 billion over the 2012-2022 
period.
    For programs other than Parts A and B of Medicare, the 
estimate assumes that federal spending for acute care services 
would be reduced by about 0.5 percent, in line with the 
estimated reductions in the private sector.
    CBO estimates that the reduction in federal spending for 
services covered under Parts A and B of Medicare would be 
larger--about 0.7 percent--than in the other programs or in 
national health spending in general. That estimate is based on 
empirical evidence showing that the impact of tort reform on 
the utilization of health care services is greater for Medicare 
than for the rest of the health care system.\2\
---------------------------------------------------------------------------
    \2\One possible explanation for that disparity is that the bulk of 
Medicare's spending is on a fee-for-service basis, whereas most private 
health care spending occurs through plans that manage care to some 
degree. Such plans limit the use of services that have marginal or no 
benefit to patients (some of which might otherwise be provided as 
``defensive'' medicine), thus leaving less potential for savings from 
the reduction of utilization in those plans than in fee-for-service 
systems.
---------------------------------------------------------------------------
    Estimated impact on state, local, and tribal governments--

Intergovernmental Mandates

    The bill contains an intergovernmental because it would 
preempt state laws that provide health care providers and 
organizations less protection from liability, loss, or damages. 
While the preemption would limit the application of state laws, 
it would impose no duty on states that would result in 
significant additional spending. Consequently, CBO estimates 
that any costs would fall well below the threshold established 
in UMRA for intergovernmental mandates ($73 million in 2012, 
adjusted annually for inflation).

Other Impacts

    The bill would have mixed effects on the budgets of state, 
local, and tribal governments aside from the mandate effects 
noted above. CBO estimates that those governments, as 
employers, would save money as a result of lower health 
insurance premiums precipitated by the bill's liability 
reforms. In addition, state, local, and tribal governments that 
collect income taxes would realize increased tax revenues as a 
result of increases in workers' taxable income. CBO estimates 
that the bill's changes also would lead to reduced state 
spending in Medicaid by $20 billion over the 2012-2022 period. 
The legislation also would limit the amount that states would 
be able to raise through taxes on Medicaid providers, reducing 
one of the means by which states finance their share of 
Medicaid spending.
    Other provisions in the bill would decrease the amount of 
resources that state, local, and tribal governments receive to 
establish health exchanges and to conduct prevention, wellness, 
and public health activities. In total, CBO estimates that the 
decrease in grant aid to states would exceed $12 billion over 
the 2012-2022 period. In addition, CBO estimates that enactment 
of the bill would reduce the amount of Medicaid payments that 
the U.S. territories receive by $6.1 billion over the same 
period.
    Estimated impact on the private sector: The legislation 
contains several mandates on the private sector, including caps 
on damages and on attorney fees, the statute of limitations, 
and the fair share rule.\3\ The cost of those mandates would 
exceed the threshold established in UMRA for private-sector 
mandates ($146 million in 2012, adjusted annually for 
inflation) in four of the first five years in which the 
mandates were effective.
---------------------------------------------------------------------------
    \3\Under the fair share rule, a defendant in a lawsuit would be 
liable only for the percentage of the final award that was equal to his 
or her share of responsibility for the injury.
---------------------------------------------------------------------------
    Previous CBO estimate: On April 26, 2012, CBO transmitted a 
cost estimate for the Help Efficient, Accessible, Low-cost, 
Timely Healthcare Act as approved by the House Committee on the 
Judiciary on April 25, 2012. That legislation is substantially 
similar to title III of this legislation. However, this 
legislation would permit the introduction of evidence of income 
from collateral sources at trial. The version of medical 
liability reform approved by the Committee on the Judiciary did 
not contain that provision. Differences in the CBO cost 
estimates for title III of this legislation and the legislation 
approved by the Committee on the Judiciary reflect that 
difference in the two versions of such liability reform.
    Estimate prepared by: Federal Costs: Sarah Anders, Tom 
Bradley, Jean Hearne, Stuart Hagen, Kirstin Nelson, Lisa 
Ramirez-Branum, and Rob Stewart; Impact on State, Local, and 
Tribal Governments: Lisa Ramirez-Branum; Impact on the Private 
Sector: Stuart Hagen, Jimmy Jin, and Michael Levine.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 7 of Rule XII of the Rules of the House 
of Representatives, the Committee finds that the Constitutional 
authority for this legislation is provided in Article I, 
section 8, clause 3.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


          SUBTITLE A--REPEAL OF CERTAIN ACA FUNDING PROVISIONS

Section 201. Repealing mandatory funding to States to establish 
        American Health Benefit Exchanges

    Section 201 repeals section 1311(a) of the Patient 
Protection and Affordable Care Act (PPACA), which provided the 
Secretary of Health and Human Services (HHS) the authority to 
provide grants to states for activities related to the 
establishment of American Health Benefit Exchanges. The 
subsection also provided to the Secretary an appropriation with 
no monetary cap. Section 101 also rescinds the unobligated 
balance of funds made available under section 1311(a).

Section 202. Repealing Prevention and Public Health Fund

    Section 202 repeals section 4002 of the PPACA, which 
created the Prevention and Public Health Fund. The fund 
provided the Secretary of HHS with a permanent annual 
appropriation to supplement the spending on any program within 
the Public Health Services Act (PHSA). Section 102 also 
rescinds the unobligated balance of funds made available under 
section 4002.

Section 203. Rescinding unobligated balances for CO-OP program

    Section 203 rescinds the unobligated balance of funds made 
available under section 1322(g) of the PPACA related to the 
Consumer Operated and Oriented Plan (CO-OP) program. The CO-OP 
program provides government subsidized loans to qualified 
nonprofit health insurance issuers.

                          SUBTITLE B--MEDICAID

Section 211. Revision of provider tax indirect guaranteed threshold

    Section 211 amends section 1903(w)(4)(C)(ii) of the Social 
Security Act to adjust the provider tax hold harmless threshold 
from 6 to 5.5 percent for portions of fiscal years beginning on 
or after October 1, 2012.

Section 212. Rebasing of State DSH allotments for fiscal year 2022

    Section 212 amends section 1923(f) of the Social Security 
Act to extend the reductions in disproportionate share hospital 
allotments as first proposed in the PPACA into fiscal year 
2022.

Section 213. Repeal of Medicaid and CHIP maintenance of effort 
        requirements under PPACA

    Section 213 amends section 1902 of the Social Security Act 
to repeal certain state Medicaid maintenance of effort 
requirements as enacted by PPACA. Section 204 also amends 
section 2105(d)(3) of the Social Security Act to repeal certain 
State CHIP maintenance of effort requirements as enacted by 
PPACA. Both amendments are effective upon date of enactment.

Section 214. Medicaid payment to territories

    Section 214 amends Section 1108(g) of the Social Security 
Act to repeal the $6.3 billion in additional payments to the 
United States Territories levels as provided in PPACA. Section 
205 also amends Section 1905(b) of the Social Security Act to 
reduce the Federal Medicaid Assistance Payment (FMAP) to the 
territories from 55 percent to 50 percent.

Section 215. Repealing bonus payments for enrollment under Medicaid and 
        CHIP

    Mr. Barton offered an amendment adding section 205 (Mr. 
Barton's amendment was adopted by a roll call vote of 30 yeas 
and 21 nays). Section 205 rescinds the performance bonus 
payments to states that were created in the Children's Health 
Insurance Reauthorization Act of 2009 (CHIPRA). These bonus 
payments are awarded to states that increase their Medicaid 
enrollment above a defined baseline from the prior year and 
loosen eligibility review procedures.

                      SUBTITLE C--LIABILITY REFORM

Section 221. Findings and purpose

    Section 221 states the findings and purpose of the bill.

Section 222. Encouraging speedy resolution of claims

    Section 222 states that a health care lawsuit shall be 
commenced three years after the date of manifestation of injury 
or one year after the claimant discovers, or through the use of 
reasonable diligence should have discovered, the injury, 
whichever occurs first. There is an exception for alleged 
injuries sustained by a minor before the age of 6, in which 
case a health care lawsuit may be commenced by or on behalf of 
the minor until the later of three years from the date of 
manifestation of injury, or the date on which the minor attains 
the age of 8.

Section 223. Compensating patient injury

    Section 223 sets forth guidelines regarding patients' 
ability to recover for certain types of damages. This section 
provides that in any health care lawsuit, nothing in this Act 
shall limit a claimant's recovery for the full amount of 
available economic damages, notwithstanding the limitation on 
non-economic damages. Under this section, there can be no more 
than $250,000 in non-economic damages 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. Future noneconomic damages shall not be discounted to 
present value. This section also provides that each party shall 
be liable for the amount of damages allocated to such party. 
This allocation shall be determined in direct proportion to 
such party's percentage of responsibility for the damages.

Section 224. Maximizing patient recovery

    Section 224 requires that courts supervise the arrangements 
for payment of damages to protect against conflicts of 
interests that may have the effect of reducing the actual 
amount of the award paid to the claimant.
    This section also establishes a sliding fee schedule for 
the payment of attorneys' contingency fees. Payments are 
allocated as follows: 40 percent of the first $50,000 recovered 
by the claimant; 33 1/3 percent of the next $50,000 recovered 
by the claimant; 25 percent of the next $500,000 recovered by 
the claimant; and 15 percent of any amount by which the 
recovery by the claimant(s) is in excess of $600,000.

Section 225. Additional health benefits

    Section 225 ensures that, in any health care lawsuit 
involving injury or wrongful death, a party may introduce 
evidence of collateral source benefits received, or reasonably 
likely to be received, from other parties. This section also 
restricts a provider of collateral source benefits from 
subrogating a claimant's recovery or obtaining any lien or 
credit against the claimant's damage award.

Section 226. Punitive damages

    Section 226 specifies guidelines for awarding punitive 
damages. Under this section, punitive damages may be awarded, 
if otherwise permitted by applicable State or Federal law, 
against any person in a health care lawsuit if it is proven by 
clear and convincing evidence that the person acted with 
malicious intent to injure the claimant, or that the person 
deliberately failed to avoid unnecessary injury that such 
person knew the claimant was substantially certain to suffer.
    This section also sets guidelines for determining the 
amount of punitive damages. The amount of punitive damages 
awarded may be as high as two times the amount of economic 
damages awarded or $250,000, whichever amount is greater.
    In addition, this section shields from punitive damages 
those companies that are fully compliant with all Federal Food, 
Drug, and Cosmetic Act (FFDCA) laws and regulations (in the 
case of biological medical products, full compliance with the 
FFDCA and section 351 of the PHSA.

Section 227. Authorization of payment of future damages to claimants in 
        health care lawsuits

    Section 227 requires the court, at the request of any 
party, to order that the award of future damages equaling or 
exceeding $50,000 be paid by periodic payments.

Section 228. Definitions

    Section 228 defines many of the terms included in the 
legislation.

Section 229. Effect on other laws

    Section 229 states that this legislation does not apply to 
civil actions brought for a vaccine-related injury or death, 
which is covered under provisions of the PHSA. It also states 
that nothing in the Act should affect any defense available to 
a defendant in a health care lawsuit or action under any other 
provision of Federal law.

Section 230. State flexibility and protection of State's rights

    Section 230 specifies many of the rules governing the 
relationship between the HEALTH Act and State and Federal laws. 
Specifically, this section provides that provisions governing 
health care lawsuits outlined in the legislation preempt State 
law to the extent that State law prevents the application of 
these provisions.
    The legislation also supersedes the Federal Tort Claims Act 
(FTCA) to the extent that the FTCA 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 
application of periodic payments of future damages. The FTCA 
also is superseded if it prohibits the introduction of evidence 
regarding collateral source benefits, or mandates or permits 
subrogation or a lien on collateral source benefits.

Section 231. Applicability; effective date

    Section 231 states that the provisions of the legislation 
apply to any health care lawsuit brought in Federal or State 
court, or subject to alternative dispute resolutions system, 
that is initiated on or after the date of the enactment of the 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of the Act is 
governed by the applicable statute of limitations provision in 
effect at the time the injury occurred.

    Changes in Existing Law Made by Title II, as Transmitted by the 
                    Committee on Energy and Commerce

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
title II, as transmitted by the Committee on Energy and 
Commerce, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 
roman):

PATIENT PROTECTION AND AFFORDABLE CARE ACT

           *       *       *       *       *       *       *


TITLE I--QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS

           *       *       *       *       *       *       *


Subtitle D--Available Coverage Choices for All Americans

           *       *       *       *       *       *       *


   PART 2--CONSUMER CHOICES AND INSURANCE COMPETITION THROUGH HEALTH 
                           BENEFIT EXCHANGES

SEC. 1311. AFFORDABLE CHOICES OF HEALTH BENEFIT PLANS.

  [(a) Assistance to States to establish American health 
benefit exchanges.--
          [(1) Planning and establishment grants.--There shall 
        be appropriated to the Secretary, out of any moneys in 
        the Treasury not otherwise appropriated, an amount 
        necessary to enable the Secretary to make awards, not 
        later than 1 year after the date of enactment of this 
        Act, to States in the amount specified in paragraph (2) 
        for the uses described in paragraph (3).
          [(2) Amount specified.--For each fiscal year, the 
        Secretary shall determine the total amount that the 
        Secretary will make available to each State for grants 
        under this subsection.
          [(3) Use of funds.--A State shall use amounts awarded 
        under this subsection for activities (including 
        planning activities) related to establishing an 
        American Health Benefit Exchange, as described in 
        subsection (b).
          [(4) Renewability of grant.--
                  [(A) In general.--Subject to subsection 
                (d)(4), the Secretary may renew a grant awarded 
                under paragraph (1) if the State recipient of 
                such grant--
                          [(i) is making progress, as 
                        determined by the Secretary, toward--
                                  [(I) establishing an 
                                Exchange; and
                                  [(II) implementing the 
                                reforms described in subtitles 
                                A and C (and the amendments 
                                made by such subtitles); and
                          [(ii) is meeting such other 
                        benchmarks as the Secretary may 
                        establish.
                  [(B) Limitation.--No grant shall be awarded 
                under this subsection after January 1, 2015.
          [(5) Technical assistance to facilitate participation 
        in shop exchanges.--The Secretary shall provide 
        technical assistance to States to facilitate the 
        participation of qualified small businesses in such 
        States in SHOP Exchanges.]

           *       *       *       *       *       *       *


  TITLE IV--PREVENTION OF CHRONIC DISEASE AND IMPROVING PUBLIC HEALTH

Subtitle A--Modernizing Disease Prevention and Public Health Systems

           *       *       *       *       *       *       *


[SEC. 4002. PREVENTION AND PUBLIC HEALTH FUND.

  [(a) Purpose.--It is the purpose of this section to establish 
a Prevention and Public Health Fund (referred to in this 
section as the ``Fund''), to be administered through the 
Department of Health and Human Services, Office of the 
Secretary, to provide for expanded and sustained national 
investment in prevention and public health programs to improve 
health and help restrain the rate of growth in private and 
public sector health care costs.
  [(b) Funding.--There are hereby authorized to be 
appropriated, and appropriated, to the Fund, out of any monies 
in the Treasury not otherwise appropriated--
          [(1) for fiscal year 2010, $500,000,000;
          [(2) for each of fiscal years 2012 through 2017, 
        $1,000,000,000;
          [(3) for each of fiscal years 2018 and 2019, 
        $1,250,000,000;
          [(4) for each of fiscal years 2020 and 2021, 
        $1,500,000,000; and
          [(5) for fiscal year 2022, and each fiscal year 
        thereafter, $2,000,000,000.
  [(c) Use of Fund.--The Secretary shall transfer amounts in 
the Fund to accounts within the Department of Health and Human 
Services to increase funding, over the fiscal year 2008 level, 
for programs authorized by the Public Health Service Act, for 
prevention, wellness, and public health activities including 
prevention research, health screenings, and initiatives, such 
as the Community Transformation grant program, the Education 
and Outreach Campaign Regarding Preventive Benefits, and 
immunization programs.
  [(d) Transfer authority.--The Committee on Appropriations of 
the Senate and the Committee on Appropriations of the House of 
Representatives may provide for the transfer of funds in the 
Fund to eligible activities under this section, subject to 
subsection (c).]

           *       *       *       *       *       *       *

                              ----------                              


SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION

Part A--General Provisions

           *       *       *       *       *       *       *


SEC. 1108. ADDITIONAL GRANTS TO PUERTO RICO, THE VIRGIN ISLANDS, GUAM, 
                    AND AMERICAN SAMOA; LIMITATION ON TOTAL PAYMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Medicaid Payments to Territories for Fiscal Year 1998 and 
Thereafter.--
          (1) * * *
          (2) Fiscal year 1999 and thereafter.--Notwithstanding 
        subsection (f) and subject to paragraph (3) and section 
        1323(a)(2) of the Patient Protection and Affordable 
        Care Act [paragraphs (3) and (5)], with respect to 
        fiscal year 1999 and any fiscal year thereafter, the 
        total amount certified by the Secretary under title XIX 
        for payment to--
                  (A) * * *

           *       *       *       *       *       *       *

          (4) Exclusion of certain expenditures from payment 
        limits.--With respect to fiscal years beginning with 
        fiscal year 2009, if Puerto Rico, the Virgin Islands, 
        Guam, the Northern Mariana Islands, or American Samoa 
        qualify for a payment under subparagraph (A)(i), (B), 
        or (F) of section 1903(a)(3) for a calendar quarter of 
        such fiscal year, the payment shall not be taken into 
        account in applying subsection (f) (as increased in 
        accordance with paragraphs (1), (2), [(3), and (4) of 
        this subsection] and (3) of this subsection) to such 
        commonwealth or territory for such fiscal year.
          [(5) Additional increase.--The Secretary shall 
        increase the amounts otherwise determined under this 
        subsection for Puerto Rico, the Virgin Islands, Guam, 
        the Northern Mariana Islands, and American Samoa (after 
        the application of subsection (f) and the preceding 
        paragraphs of this subsection) for the period beginning 
        July 1, 2011, and ending on September 30, 2019, by such 
        amounts that the total additional payments under title 
        XIX to such territories equals $6,300,000,000 for such 
        period. The Secretary shall increase such amounts in 
        proportion to the amounts applicable to such 
        territories under this subsection and subsection (f) on 
        the date of enactment of this paragraph.]

           *       *       *       *       *       *       *


TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *


                   STATE PLANS FOR MEDICAL ASSISTANCE

  Sec. 1902. (a) A State plan for medical assistance must--
          (1) * * *

           *       *       *       *       *       *       *

          [(74) provide for maintenance of effort under the 
        State plan or under any waiver of the plan in 
        accordance with subsection (gg); and]

           *       *       *       *       *       *       *

  (e)(1) * * *

           *       *       *       *       *       *       *

          (14) Income determined using modified adjusted gross 
        income.--
                  (A) In general.--Notwithstanding subsection 
                (r) or any other provision of this title, 
                except as provided in subparagraph (D), for 
                purposes of determining income eligibility for 
                medical assistance under the State plan or 
                under any waiver of such plan and for any other 
                purpose applicable under the plan or waiver for 
                which a determination of income is required, 
                including with respect to the imposition of 
                premiums and cost-sharing, a State shall use 
                the modified adjusted gross income of an 
                individual and, in the case of an individual in 
                a family greater than 1, the household income 
                of such family. A State shall establish income 
                eligibility thresholds for populations to be 
                eligible for medical assistance under the State 
                plan or a waiver of the plan using modified 
                adjusted gross income and household income that 
                are not less than the effective income 
                eligibility levels that applied under the State 
                plan or waiver on the date of enactment of the 
                Patient Protection and Affordable Care Act. 
                [For purposes of complying with the maintenance 
                of effort requirements under subsection (gg) 
                during the transition to modified adjusted 
                gross income and household income, a State 
                shall, working with the Secretary, establish an 
                equivalent income test that ensures individuals 
                eligible for medical assistance under the State 
                plan or under a waiver of the plan on the date 
                of enactment of the Patient Protection and 
                Affordable Care Act, do not lose coverage under 
                the State plan or under a waiver of the plan.] 
                The Secretary may waive such provisions of this 
                title and title XXI as are necessary to ensure 
                that States establish income and eligibility 
                determination systems that protect 
                beneficiaries.

           *       *       *       *       *       *       *

  [(gg) Maintenance of Effort.--
          [(1) General requirement to maintain eligibility 
        standards until state exchange is fully operational.--
        Subject to the succeeding paragraphs of this 
        subsection, during the period that begins on the date 
        of enactment of the Patient Protection and Affordable 
        Care Act and ends on the date on which the Secretary 
        determines that an Exchange established by the State 
        under section 1311 of the Patient Protection and 
        Affordable Care Act is fully operational, as a 
        condition for receiving any Federal payments under 
        section 1903(a) for calendar quarters occurring during 
        such period, a State shall not have in effect 
        eligibility standards, methodologies, or procedures 
        under the State plan under this title or under any 
        waiver of such plan that is in effect during that 
        period, that are more restrictive than the eligibility 
        standards, methodologies, or procedures, respectively, 
        under the plan or waiver that are in effect on the date 
        of enactment of the Patient Protection and Affordable 
        Care Act.
          [(2) Continuation of eligibility standards for 
        children until october 1, 2019.--The requirement under 
        paragraph (1) shall continue to apply to a State 
        through September 30, 2019, with respect to the 
        eligibility standards, methodologies, and procedures 
        under the State plan under this title or under any 
        waiver of such plan that are applicable to determining 
        the eligibility for medical assistance of any child who 
        is under 19 years of age (or such higher age as the 
        State may have elected).
          [(3) Nonapplication.--During the period that begins 
        on January 1, 2011, and ends on December 31, 2013, the 
        requirement under paragraph (1) shall not apply to a 
        State with respect to nonpregnant, nondisabled adults 
        who are eligible for medical assistance under the State 
        plan or under a waiver of the plan at the option of the 
        State and whose income exceeds 133 percent of the 
        poverty line (as defined in section 2110(c)(5)) 
        applicable to a family of the size involved if, on or 
        after December 31, 2010, the State certifies to the 
        Secretary that, with respect to the State fiscal year 
        during which the certification is made, the State has a 
        budget deficit, or with respect to the succeeding State 
        fiscal year, the State is projected to have a budget 
        deficit. Upon submission of such a certification to the 
        Secretary, the requirement under paragraph (1) shall 
        not apply to the State with respect to any remaining 
        portion of the period described in the preceding 
        sentence.
          [(4) Determination of compliance.--
                  [(A) States shall apply modified adjusted 
                gross income.--A State's determination of 
                income in accordance with subsection (e)(14) 
                shall not be considered to be eligibility 
                standards, methodologies, or procedures that 
                are more restrictive than the standards, 
                methodologies, or procedures in effect under 
                the State plan or under a waiver of the plan on 
                the date of enactment of the Patient Protection 
                and Affordable Care Act for purposes of 
                determining compliance with the requirements of 
                paragraph (1), (2), or (3).
                  [(B) States may expand eligibility or move 
                waivered populations into coverage under the 
                state plan.--With respect to any period 
                applicable under paragraph (1), (2), or (3), a 
                State that applies eligibility standards, 
                methodologies, or procedures under the State 
                plan under this title or under any waiver of 
                the plan that are less restrictive than the 
                eligibility standards, methodologies, or 
                procedures, applied under the State plan or 
                under a waiver of the plan on the date of 
                enactment of the Patient Protection and 
                Affordable Care Act, or that makes individuals 
                who, on such date of enactment, are eligible 
                for medical assistance under a waiver of the 
                State plan, after such date of enactment 
                eligible for medical assistance through a State 
                plan amendment with an income eligibility level 
                that is not less than the income eligibility 
                level that applied under the waiver, or as a 
                result of the application of subclause (VIII) 
                of section 1902(a)(10)(A)(i), shall not be 
                considered to have in effect eligibility 
                standards, methodologies, or procedures that 
                are more restrictive than the standards, 
                methodologies, or procedures in effect under 
                the State plan or under a waiver of the plan on 
                the date of enactment of the Patient Protection 
                and Affordable Care Act for purposes of 
                determining compliance with the requirements of 
                paragraph (1), (2), or (3).]

           *       *       *       *       *       *       *


                           PAYMENT TO STATES

  Sec. 1903. (a) * * *

           *       *       *       *       *       *       *

  (w)(1) * * *

           *       *       *       *       *       *       *

  (4) For purposes of paragraph (1)(A)(iii), there is in effect 
a hold harmless provision with respect to a broad-based health 
care related tax imposed with respect to a class of items or 
services if the Secretary determines that any of the following 
applies:
          (A) * * *

           *       *       *       *       *       *       *

          (C)(i) * * *
          (ii) For purposes of clause (i), a determination of 
        the existence of an indirect guarantee shall be made 
        under paragraph (3)(i) of section 433.68(f) of title 
        42, Code of Federal Regulations, as in effect on 
        November 1, 2006, except that for portions of fiscal 
        years beginning on or after January 1, 2008, and before 
        October 1, 2011, and for portions of fiscal years 
        beginning on or after October 1, 2012, ``5.5 percent'' 
        shall be substituted for ``6 percent'' each place it 
        appears.
The provisions of this paragraph shall not prevent use of the 
tax to reimburse health care providers in a class for 
expenditures under this title nor preclude States from relying 
on such reimbursement to justify or explain the tax in the 
legislative process.

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 1905. For purposes of this title--
  (a) * * *
  (b) Subject to subsections (y), (z), and (aa) and section 
1933(d), the term ``Federal medical assistance percentage'' for 
any State shall be 100 per centum less the State percentage; 
and the State percentage shall be that percentage which bears 
the same ratio to 45 per centum 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 (1) the Federal medical assistance 
percentage shall in no case be less than 50 per centum or more 
than 83 per centum, (2) the Federal medical assistance 
percentage for Puerto Rico, the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa [shall be 55 
percent] shall be 50 percent, (3) for purposes of this title 
and title XXI, the Federal medical assistance percentage for 
the District of Columbia shall be 70 percent, and (4) the 
Federal medical assistance percentage shall be equal to the 
enhanced FMAP described in section 2105(b) with respect to 
medical assistance provided to individuals who are eligible for 
such assistance only on the basis of section 
1902(a)(10)(A)(ii)(XVIII). The Federal medical assistance 
percentage for any State shall be determined and promulgated in 
accordance with the provisions of section 1101(a)(8)(B). 
Notwithstanding the first sentence of this section, the Federal 
medical assistance percentage shall be 100 per centum with 
respect to amounts expended as medical assistance for services 
which are received through an Indian Health Service facility 
whether operated by the Indian Health Service or by an Indian 
tribe or tribal organization (as defined in section 4 of the 
Indian Health Care Improvement Act). Notwithstanding the first 
sentence of this subsection, in the case of a State plan that 
meets the condition described in subsection (u)(1), with 
respect to expenditures (other than expenditures under section 
1923) described in subsection (u)(2)(A) or subsection (u)(3) 
for the State for a fiscal year, and that do not exceed the 
amount of the State's available allotment under section 2104, 
the Federal medical assistance percentage is equal to the 
enhanced FMAP described in section 2105(b).

           *       *       *       *       *       *       *


  ADJUSTMENT IN PAYMENT FOR INPATIENT HOSPITAL SERVICES FURNISHED BY 
                    DISPROPORTIONATE SHARE HOSPITALS

  Sec. 1923. (a) * * *

           *       *       *       *       *       *       *

  (f) Limitation on Federal Financial Participation.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) State dsh allotments for fiscal year 2003 and 
        thereafter.--
                  (A) In general.--Except as provided in 
                [paragraphs (6), (7), and (8)] paragraphs (6), 
                (7), (8), and (9) and subparagraph (E), the DSH 
                allotment for any State for fiscal year 2003 
                and each succeeding fiscal year is equal to the 
                DSH allotment for the State for the preceding 
                fiscal year under paragraph (2) or this 
                paragraph, increased, subject to subparagraphs 
                (B) and (C) and paragraph (5), by the 
                percentage change in the consumer price index 
                for all urban consumers (all items; U.S. city 
                average), for the previous fiscal year.

           *       *       *       *       *       *       *

          (9) Rebasing of state dsh allotments for fiscal year 
        2022.--With respect to fiscal 2022, for purposes of 
        applying paragraph (3)(A) to determine the DSH 
        allotment for a State, the amount of the DSH allotment 
        for the State under paragraph (3) for fiscal year 2021 
        shall be treated as if it were such amount as reduced 
        under paragraph (7).
          [(9)] (10) Definition of state.--In this subsection, 
        the term ``State'' means the 50 States and the District 
        of Columbia.

           *       *       *       *       *       *       *


TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM

           *       *       *       *       *       *       *


SEC. 2104. ALLOTMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (n) Child Enrollment Contingency Fund.--
          (1) * * *
          (2) Deposits into fund.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) Availability of excess funds for 
                performance bonuses.--Any amounts in excess of 
                the aggregate cap described in subparagraph (B) 
                for a fiscal year or period shall be made 
                available for purposes of carrying out section 
                2105(a)(3) for any succeeding fiscal year and 
                the Secretary of the Treasury shall reduce the 
                amount in the Fund by the amount so made 
                available.]

           *       *       *       *       *       *       *


SEC. 2105. PAYMENTS TO STATES.

  (a) Payments.--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Performance bonus payment to offset additional 
        medicaid and chip child enrollment costs resulting from 
        enrollment and retention efforts.--
                  [(A) In general.--In addition to the payments 
                made under paragraph (1), for each fiscal year 
                (beginning with fiscal year 2009 and ending 
                with fiscal year 2013), the Secretary shall pay 
                from amounts made available under subparagraph 
                (E), to each State that meets the condition 
                under paragraph (4) for the fiscal year, an 
                amount equal to the amount described in 
                subparagraph (B) for the State and fiscal year. 
                The payment under this paragraph shall be made, 
                to a State for a fiscal year, as a single 
                payment not later than the last day of the 
                first calendar quarter of the following fiscal 
                year.
                  [(B) Amount for above baseline medicaid child 
                enrollment costs.--Subject to subparagraph (E), 
                the amount described in this subparagraph for a 
                State for a fiscal year is equal to the sum of 
                the following amounts:
                          [(i) First tier above baseline 
                        medicaid enrollees.--An amount equal to 
                        the number of first tier above baseline 
                        child enrollees (as determined under 
                        subparagraph (C)(i)) under title XIX 
                        for the State and fiscal year, 
                        multiplied by 15 percent of the 
                        projected per capita State Medicaid 
                        expenditures (as determined under 
                        subparagraph (D)) for the State and 
                        fiscal year under title XIX.
                          [(ii) Second tier above baseline 
                        medicaid enrollees.--An amount equal to 
                        the number of second tier above 
                        baseline child enrollees (as determined 
                        under subparagraph (C)(ii)) under title 
                        XIX for the State and fiscal year, 
                        multiplied by 62.5 percent of the 
                        projected per capita State Medicaid 
                        expenditures (as determined under 
                        subparagraph (D)) for the State and 
                        fiscal year under title XIX.
                  [(C) Number of first and second tier above 
                baseline child enrollees; baseline number of 
                child enrollees.--For purposes of this 
                paragraph:
                          [(i) First tier above baseline child 
                        enrollees.--The number of first tier 
                        above baseline child enrollees for a 
                        State for a fiscal year under title XIX 
                        is equal to the number (if any, as 
                        determined by the Secretary) by which--
                                  [(I) the monthly average 
                                unduplicated number of 
                                qualifying children (as defined 
                                in subparagraph (F)) enrolled 
                                during the fiscal year under 
                                the State plan under title XIX; 
                                exceeds
                                  [(II) the baseline number of 
                                enrollees described in clause 
                                (iii) for the State and fiscal 
                                year under title XIX;
                        but not to exceed 10 percent of the 
                        baseline number of enrollees described 
                        in subclause (II).
                          [(ii) Second tier above baseline 
                        child enrollees.--The number of second 
                        tier above baseline child enrollees for 
                        a State for a fiscal year under title 
                        XIX is equal to the number (if any, as 
                        determined by the Secretary) by which--
                                  [(I) the monthly average 
                                unduplicated number of 
                                qualifying children (as defined 
                                in subparagraph (F)) enrolled 
                                during the fiscal year under 
                                title XIX as described in 
                                clause (i)(I); exceeds
                                  [(II) the sum of the baseline 
                                number of child enrollees 
                                described in clause (iii) for 
                                the State and fiscal year under 
                                title XIX, as described in 
                                clause (i)(II), and the maximum 
                                number of first tier above 
                                baseline child enrollees for 
                                the State and fiscal year under 
                                title XIX, as determined under 
                                clause (i).
                          [(iii) Baseline number of child 
                        enrollees.--Subject to subparagraph 
                        (H), the baseline number of child 
                        enrollees for a State under title XIX--
                                  [(I) for fiscal year 2009 is 
                                equal to the monthly average 
                                unduplicated number of 
                                qualifying children enrolled in 
                                the State plan under title XIX 
                                during fiscal year 2007 
                                increased by the population 
                                growth for children in that 
                                State from 2007 to 2008 (as 
                                estimated by the Bureau of the 
                                Census) plus 4 percentage 
                                points, and further increased 
                                by the population growth for 
                                children in that State from 
                                2008 to 2009 (as estimated by 
                                the Bureau of the Census) plus 
                                4 percentage points;
                                  [(II) for each of fiscal 
                                years 2010, 2011, and 2012, is 
                                equal to the baseline number of 
                                child enrollees for the State 
                                for the previous fiscal year 
                                under title XIX, increased by 
                                the population growth for 
                                children in that State from the 
                                calendar year in which the 
                                respective fiscal year begins 
                                to the succeeding calendar year 
                                (as estimated by the Bureau of 
                                the Census) plus 3.5 percentage 
                                points;
                                  [(III) for each of fiscal 
                                years 2013, 2014, and 2015, is 
                                equal to the baseline number of 
                                child enrollees for the State 
                                for the previous fiscal year 
                                under title XIX, increased by 
                                the population growth for 
                                children in that State from the 
                                calendar year in which the 
                                respective fiscal year begins 
                                to the succeeding calendar year 
                                (as estimated by the Bureau of 
                                the Census) plus 3 percentage 
                                points; and
                                  [(IV) for a subsequent fiscal 
                                year is equal to the baseline 
                                number of child enrollees for 
                                the State for the previous 
                                fiscal year under title XIX, 
                                increased by the population 
                                growth for children in that 
                                State from the calendar year in 
                                which the fiscal year involved 
                                begins to the succeeding 
                                calendar year (as estimated by 
                                the Bureau of the Census) plus 
                                2 percentage points.
                  [(D) Projected per capita state medicaid 
                expenditures.--For purposes of subparagraph 
                (B), the projected per capita State Medicaid 
                expenditures for a State and fiscal year under 
                title XIX is equal to the average per capita 
                expenditures (including both State and Federal 
                financial participation) for children under the 
                State plan under such title, including under 
                waivers but not including such children 
                eligible for assistance by virtue of the 
                receipt of benefits under title XVI, for the 
                most recent fiscal year for which actual data 
                are available (as determined by the Secretary), 
                increased (for each subsequent fiscal year up 
                to and including the fiscal year involved) by 
                the annual percentage increase in per capita 
                amount of National Health Expenditures (as 
                estimated by the Secretary) for the calendar 
                year in which the respective subsequent fiscal 
                year ends and multiplied by a State matching 
                percentage equal to 100 percent minus the 
                Federal medical assistance percentage (as 
                defined in section 1905(b)) for the fiscal year 
                involved.
                  [(E) Amounts available for payments.--
                          [(i) Initial appropriation.--Out of 
                        any money in the Treasury not otherwise 
                        appropriated, there are appropriated 
                        $3,225,000,000 for fiscal year 2009 for 
                        making payments under this paragraph, 
                        to be available until expended.
                          [(ii) Transfers.--Notwithstanding any 
                        other provision of this title, the 
                        following amounts shall also be 
                        available, without fiscal year 
                        limitation, for making payments under 
                        this paragraph:
                                  [(I) Unobligated national 
                                allotment.--
                                          [(aa) Fiscal years 
                                        2009 through 2012.--As 
                                        of December 31 of 
                                        fiscal year 2009, and 
                                        as of December 31 of 
                                        each succeeding fiscal 
                                        year through fiscal 
                                        year 2012, the portion, 
                                        if any, of the amount 
                                        appropriated under 
                                        subsection (a) for such 
                                        fiscal year that is 
                                        unobligated for 
                                        allotment to a State 
                                        under subsection (m) 
                                        for such fiscal year or 
                                        set aside under 
                                        subsection (a)(3) or 
                                        (b)(2) of section 2111 
                                        for such fiscal year.
                                          [(bb) First half of 
                                        fiscal year 2013.--As 
                                        of December 31 of 
                                        fiscal year 2013, the 
                                        portion, if any, of the 
                                        sum of the amounts 
                                        appropriated under 
                                        subsection (a)(16)(A) 
                                        and under section 108 
                                        of the Children's 
                                        Health Insurance 
                                        Reauthorization Act of 
                                        2009 for the period 
                                        beginning on October 1, 
                                        2012, and ending on 
                                        March 31, 2013, that is 
                                        unobligated for 
                                        allotment to a State 
                                        under subsection (m) 
                                        for such fiscal year or 
                                        set aside under 
                                        subsection (b)(2) of 
                                        section 2111 for such 
                                        fiscal year.
                                          [(cc) Second half of 
                                        fiscal year 2013.--As 
                                        of June 30 of fiscal 
                                        year 2013, the portion, 
                                        if any, of the amount 
                                        appropriated under 
                                        subsection (a)(16)(B) 
                                        for the period 
                                        beginning on April 1, 
                                        2013, and ending on 
                                        September 30, 2013, 
                                        that is unobligated for 
                                        allotment to a State 
                                        under subsection (m) 
                                        for such fiscal year or 
                                        set aside under 
                                        subsection (b)(2) of 
                                        section 2111 for such 
                                        fiscal year.
                                  [(II) Unexpended allotments 
                                not used for redistribution.--
                                As of November 15 of each of 
                                fiscal years 2010 through 2013, 
                                the total amount of allotments 
                                made to States under section 
                                2104 for the second preceding 
                                fiscal year (third preceding 
                                fiscal year in the case of the 
                                fiscal year 2006, 2007, and 
                                2008 allotments) that is not 
                                expended or redistributed under 
                                section 2104(f) during the 
                                period in which such allotments 
                                are available for obligation.
                                  [(III) Excess child 
                                enrollment contingency funds.--
                                As of October 1 of each of 
                                fiscal years 2010 through 2013, 
                                any amount in excess of the 
                                aggregate cap applicable to the 
                                Child Enrollment Contingency 
                                Fund for the fiscal year under 
                                section 2104(n).
                          [(iii) Proportional reduction.--If 
                        the sum of the amounts otherwise 
                        payable under this paragraph for a 
                        fiscal year exceeds the amount 
                        available for the fiscal year under 
                        this subparagraph, the amount to be 
                        paid under this paragraph to each State 
                        shall be reduced proportionally.
                  [(F) Qualifying children defined.--
                          [(i) In general.--For purposes of 
                        this subsection, subject to clauses 
                        (ii) and (iii), the term ``qualifying 
                        children'' means children who meet the 
                        eligibility criteria (including income, 
                        categorical eligibility, age, and 
                        immigration status criteria) in effect 
                        as of July 1, 2008, for enrollment 
                        under title XIX, taking into account 
                        criteria applied as of such date under 
                        title XIX pursuant to a waiver under 
                        section 1115.
                          [(ii) Limitation.--A child described 
                        in clause (i) who is provided medical 
                        assistance during a presumptive 
                        eligibility period under section 1920A 
                        shall be considered to be a 
                        ``qualifying child'' only if the child 
                        is determined to be eligible for 
                        medical assistance under title XIX.
                          [(iii) Exclusion.--Such term does not 
                        include any children for whom the State 
                        has made an election to provide medical 
                        assistance under paragraph (4) of 
                        section 1903(v) or any children 
                        enrolled on or after October 1, 2013.
                  [(G) Application to commonwealths and 
                territories.--The provisions of subparagraph 
                (G) of section 2104(n)(3) shall apply with 
                respect to payment under this paragraph in the 
                same manner as such provisions apply to payment 
                under such section.
                  [(H) Application to states that implement a 
                Medicaid expansion for children after fiscal 
                year 2008.--In the case of a State that 
                provides coverage under section 115 of the 
                Children's Health Insurance Program 
                Reauthorization Act of 2009 for any fiscal year 
                after fiscal year 2008--
                          [(i) any child enrolled in the State 
                        plan under title XIX through the 
                        application of such an election shall 
                        be disregarded from the determination 
                        for the State of the monthly average 
                        unduplicated number of qualifying 
                        children enrolled in such plan during 
                        the first 3 fiscal years in which such 
                        an election is in effect; and
                          [(ii) in determining the baseline 
                        number of child enrollees for the State 
                        for any fiscal year subsequent to such 
                        first 3 fiscal years, the baseline 
                        number of child enrollees for the State 
                        under title XIX for the third of such 
                        fiscal years shall be the monthly 
                        average unduplicated number of 
                        qualifying children enrolled in the 
                        State plan under title XIX for such 
                        third fiscal year.
          [(4) Enrollment and retention provisions for 
        children.--For purposes of paragraph (3)(A), a State 
        meets the condition of this paragraph for a fiscal year 
        if it is implementing at least 5 of the following 
        enrollment and retention provisions (treating each 
        subparagraph as a separate enrollment and retention 
        provision) throughout the entire fiscal year:
                  [(A) Continuous eligibility.--The State has 
                elected the option of continuous eligibility 
                for a full 12 months for all children described 
                in section 1902(e)(12) under title XIX under 19 
                years of age, as well as applying such policy 
                under its State child health plan under this 
                title.
                  [(B) Liberalization of asset requirements.--
                The State meets the requirement specified in 
                either of the following clauses:
                          [(i) Elimination of asset test.--The 
                        State does not apply any asset or 
                        resource test for eligibility for 
                        children under title XIX or this title.
                          [(ii) Administrative verification of 
                        assets.--The State--
                                  [(I) permits a parent or 
                                caretaker relative who is 
                                applying on behalf of a child 
                                for medical assistance under 
                                title XIX or child health 
                                assistance under this title to 
                                declare and certify by 
                                signature under penalty of 
                                perjury information relating to 
                                family assets for purposes of 
                                determining and redetermining 
                                financial eligibility; and
                                  [(II) takes steps to verify 
                                assets through means other than 
                                by requiring documentation from 
                                parents and applicants except 
                                in individual cases of 
                                discrepancies or where 
                                otherwise justified.
                  [(C) Elimination of in-person interview 
                requirement.--The State does not require an 
                application of a child for medical assistance 
                under title XIX (or for child health assistance 
                under this title), including an application for 
                renewal of such assistance, to be made in 
                person nor does the State require a face-to-
                face interview, unless there are discrepancies 
                or individual circumstances justifying an in-
                person application or face-to-face interview.
                  [(D) Use of joint application for medicaid 
                and chip.--The application form and 
                supplemental forms (if any) and information 
                verification process is the same for purposes 
                of establishing and renewing eligibility for 
                children for medical assistance under title XIX 
                and child health assistance under this title.
                  [(E) Automatic renewal (use of administrative 
                renewal).--
                          [(i) In general.--The State provides, 
                        in the case of renewal of a child's 
                        eligibility for medical assistance 
                        under title XIX or child health 
                        assistance under this title, a pre-
                        printed form completed by the State 
                        based on the information available to 
                        the State and notice to the parent or 
                        caretaker relative of the child that 
                        eligibility of the child will be 
                        renewed and continued based on such 
                        information unless the State is 
                        provided other information. Nothing in 
                        this clause shall be construed as 
                        preventing a State from verifying, 
                        through electronic and other means, the 
                        information so provided.
                          [(ii) Satisfaction through 
                        demonstrated use of ex parte process.--
                        A State shall be treated as satisfying 
                        the requirement of clause (i) if 
                        renewal of eligibility of children 
                        under title XIX or this title is 
                        determined without any requirement for 
                        an in-person interview, unless 
                        sufficient information is not in the 
                        State's possession and cannot be 
                        acquired from other sources (including 
                        other State agencies) without the 
                        participation of the applicant or the 
                        applicant's parent or caretaker 
                        relative.
                  [(F) Presumptive eligibility for children.--
                The State is implementing section 1920A under 
                title XIX as well as, pursuant to section 
                2107(e)(1), under this title.
                  [(G) Express lane.--The State is implementing 
                the option described in section 1902(e)(13) 
                under title XIX as well as, pursuant to section 
                2107(e)(1), under this title.
                  [(H) Premium assistance subsidies.--The State 
                is implementing the option of providing premium 
                assistance subsidies under section 2105(c)(10) 
                or section 1906A.]

           *       *       *       *       *       *       *

  (d) Maintenance of Effort.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) [Continuation of eligibility standards for 
        children until october 1, 2019] Continuity of 
        coverage.--
                  [(A) In general.--During the period that 
                begins on the date of enactment of the Patient 
                Protection and Affordable Care Act and ends on 
                September 30, 2019, as a condition of receiving 
                payments under section 1903(a), a State shall 
                not have in effect eligibility standards, 
                methodologies, or procedures under its State 
                child health plan (including any waiver under 
                such plan) for children (including children 
                provided medical assistance for which payment 
                is made under section 2105(a)(1)(A)) that are 
                more restrictive than the eligibility 
                standards, methodologies, or procedures, 
                respectively, under such plan (or waiver) as in 
                effect on the date of enactment of that Act. 
                The preceding sentence shall not be construed 
                as preventing a State during such period from--
                          [(i) applying eligibility standards, 
                        methodologies, or procedures for 
                        children under the State child health 
                        plan or under any waiver of the plan 
                        that are less restrictive than the 
                        eligibility standards, methodologies, 
                        or procedures, respectively, for 
                        children under the plan or waiver that 
                        are in effect on the date of enactment 
                        of such Act;
                          [(ii) after September 30, 2015, 
                        enrolling children eligible to be 
                        targeted low-income children under the 
                        State child health plan in a qualified 
                        health plan that has been certified by 
                        the Secretary under subparagraph (C); 
                        or
                          [(iii) imposing a limitation 
                        described in section 2112(b)(7) for a 
                        fiscal year in order to limit 
                        expenditures under the State child 
                        health plan to those for which Federal 
                        financial participation is available 
                        under this section for the fiscal 
                        year.]
                  [(B)] (A) Assurance of exchange coverage for 
                targeted low-income children unable to be 
                provided child health assistance as a result of 
                funding shortfalls.--In the event that 
                allotments provided under section 2104 are 
                insufficient to provide coverage to all 
                children who are eligible to be targeted low-
                income children under the State child health 
                plan under this title, a State shall establish 
                procedures to ensure that such children are 
                screened for eligibility for medical assistance 
                under the State plan under title XIX or a 
                waiver of that plan and, if found eligible, 
                enrolled in such plan or a waiver. In the case 
                of such children who, as a result of such 
                screening, are determined to not be eligible 
                for medical assistance under the State plan or 
                a waiver under title XIX, the State shall 
                establish procedures to ensure that the 
                children are enrolled in a qualified health 
                plan that has been certified by the Secretary 
                under subparagraph (C) and is offered through 
                an Exchange established by the State under 
                section 1311 of the Patient Protection and 
                Affordable Care Act. For purposes of 
                eligibility for premium assistance for the 
                purchase of a qualified health plan under 
                section 36B of the Internal Revenue Code of 
                1986 and reduced cost-sharing under section 
                1402 of the Patient Protection and Affordable 
                Care Act, children described in the preceding 
                sentence shall be deemed to be ineligible for 
                coverage under the State child health plan.
                  [(C)] (B) Certification of comparability of 
                pediatric coverage offered by qualified health 
                plans.--With respect to each State, the 
                Secretary, not later than April 1, 2015, shall 
                review the benefits offered for children and 
                the cost-sharing imposed with respect to such 
                benefits by qualified health plans offered 
                through an Exchange established by the State 
                under section 1311 of the Patient Protection 
                and Affordable Care Act and shall certify those 
                plans that offer benefits for children and 
                impose cost-sharing with respect to such 
                benefits that the Secretary determines are at 
                least comparable to the benefits offered and 
                cost-sharing protections provided under the 
                State child health plan.

           *       *       *       *       *       *       *


SEC. 2111. PHASE-OUT OF COVERAGE FOR NONPREGNANT CHILDLESS ADULTS; 
                    CONDITIONS FOR COVERAGE OF PARENTS.

  (a) * * *
  (b) Rules and Conditions for Coverage of Parents of Targeted 
Low-Income Children.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Outreach or coverage benchmarks.--For purposes of 
        paragraph (2), the outreach or coverage benchmarks 
        described in this paragraph are as follows:
                  (A) Significant child outreach campaign.--The 
                State--
                          (i) was awarded a grant under section 
                        2113 for fiscal year 2011; or
                          [(ii) implemented 1 or more of the 
                        enrollment and retention provisions 
                        described in section 2105(a)(4) for 
                        such fiscal year; or]

           *       *       *       *       *       *       *

                  [(C) State increasing enrollment of low-
                income children.--The State qualified for a 
                performance bonus payment under section 
                2105(a)(3)(B) for the most recent fiscal year 
                applicable under such section.]

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    The Committee's recommendations to the House Budget 
Committee are in response to reconciliation instructions from a 
Republican-proposed budget, H. Con. Res. 112.\1\ This budget 
slashes programs for the working class and poor in order to 
protect the defense industry and tax breaks for millionaires. 
Because Congressman Ryan's budget passed by the Republican 
majority refuses to take a balanced approach and refuses to ask 
millionaires to contribute to deficit reduction, this year's 
budget proposes to cut services that affect the middle class 
and most vulnerable individuals in the country. This unbalanced 
Republican budget would end the Medicare guarantee, cut the 
Medicaid program by 75% by 2050, and destroy jobs.
---------------------------------------------------------------------------
    \1\H. Con. Res. 112.
---------------------------------------------------------------------------
    The reconciliation instructions directed the Energy and 
Commerce Committee to cut $96.7 billion out of programs in its 
jurisdiction over ten years. The Majority chose to comply with 
those instructions by making cuts to Medicaid, public health, 
and the Affordable Care Act. These cuts are in addition to 
draconian cuts proposed in the underlying Republican budget 
resolution and are intended to offset the cost of eliminating 
the sequester on defense spending.
    These cuts proposed by the Majority most adversely affect 
vulnerable low-income Medicaid beneficiaries, would cause 
scores of Americans to lose health insurance coverage, and 
would set back efforts to promote prevention and improve health 
by cutting common sense investments like the Public Health and 
Prevention Fund. Savings are also achieved through wholesale 
and radical changes to the medical malpractice and tort 
liability laws of all 50 states. The Committee's 
recommendations cut health care by $114 billion over the next 
decade, and exceeded the Republican budget resolution's 
instructions by $17 billion.

                                TITLE I

Section 101: Repealing mandatory funding to States to establish 
        American Health Benefit Exchanges
    Section 101 of the reconciliation recommendations from the 
Committee on Energy and Commerce to the House Budget Committee 
repeals mandatory funding provided to states in the Patient 
Protection and Affordable Care Act to establish American Health 
Benefit Exchanges, cutting $14.5 billion over five and ten 
years or reducing the deficit by $15.4 billion over the decade 
when taking into consideration indirect revenue effects.

            Private Insurance Marketplace Prior to Health Reform 
                    Exchanges
    Private health coverage is provided primarily through 
employers. In 2010, about 170 million nonelderly people were 
insured through employer sponsored health insurance.\2\ For the 
smallest firms, those with less than 10 workers, premiums were 
18% higher than those paid by firms with 100 or more workers 
and may not include broker fees.\3\ Increasing costs of health 
insurance have led some small employers to drop coverage, with 
the share of small business employees enrolled in employer-
sponsored coverage decreasing from 43% to 36% from 1999-
2009.\4\
---------------------------------------------------------------------------
    \2\U.S. Census Bureau, Highlights: 2012, (September 14, 2011) 
(online at http://www.census.gov/hhes/www/hlthins/data/incpovhltb/2010/
highlights.html)
    \3\S. Collins, et al, Realizing Health Reform's Potential: Small 
Businesses and the Affordable Care Act of 2010 (September 2010) (online 
at http://www.commonwealthfund.org//media/Files/Publications/
Issue%20Brief/2010/Sep/Small%20Business/
1437_Collins_realizing_hlt_reform_potential_small_business_ACA_ib.pdf).
    \4\HealthCare.gov, Health Insurance Premiums: Past High Costs Will 
Become the Present and Future Without Health Reform (Jan. 28, 2011) 
(online at http://www.healthcare.gov/center/reports/
premiums01282011a.pdf).
---------------------------------------------------------------------------
    People without access to employer-sponsored insurance may 
obtain health insurance on their own, usually through the 
individual health insurance market. Only 14 million nonelderly 
people bought health insurance in the individual or non-group 
market while 50 million people were uninsured.\5\ About half 
the uninsured were self-employed or worked for a small 
business.\6\
---------------------------------------------------------------------------
    \5\Kaiser Family Foundation, Survey of People Who Purchase Their 
Own Insurance (June 2010) (online at http://www.kff.org/kaiserpolls/
upload/8077-R.pdf); and C. DeNavas, et al. Income, Poverty, and Health 
Insurance Coverage in the United States: 2009, U.S. Census Bureau 
(Sept. 2010) (online at http://www.census.gov/prod/2010pubs/p60-
238.pdf).
    \6\Healthcare: Statistics, Small Business and the healthcare 
Crisis, Small Business Majority (online at http://
www.smallbusinessmajority.org/small-business-research/statistics.php) 
(accessed April 25, 2011).
---------------------------------------------------------------------------
    Unlike employer-sponsored group coverage, in which 
eligibility in a group is guaranteed by federal and state laws 
and premiums are generally based on the risks associated with a 
group of beneficiaries, eligibility and initial premiums in the 
individual markets of many states are based largely on an 
individual's health status and risk characteristics.
    The Commonwealth Biennial Health Insurance Survey found 43% 
of adults who shopped for coverage in the individual market 
found it very difficult or impossible to find a plan that fit 
their needs.\7\ More than one-third of applicants were turned 
down by an insurance carrier or were charged a higher premium 
due to a health problem or were offered insurance that did not 
cover that health problem.\8\
---------------------------------------------------------------------------
    \7\S. Collins, et al, Help on the Horizon, Findings from the 
Commonwealth Biennial Health Insurance Survey of 2010 (March 2011) 
(online at http://www.commonwealthfund.org//media/Files/Surveys/2011/
1486Collins_help_on_the_horizon_2010_biennial_survey_report_FINAL_31611.
pdf).
    \8\Id.
---------------------------------------------------------------------------
    Practices of denying sick people insurance, charging them 
more, or offering them coverage that does not cover the 
illnesses they had when they sought insurance protect insurer 
risk pools and help lower premiums. But they are detrimental to 
a vibrant, healthy, and financially secure marketplace. These 
practices limit meaningful access to coverage for people who 
have developed health problems and results in uncertainty in 
coverage for those who receive insurance. They also hamper 
movement from jobs where insurance is offered to self-
employment or employment in a small business, resulting in job 
lock.

            American Health Benefit Exchanges
    The enactment of the Affordable Care Act (ACA) in March 
2010 started to put the American people back in charge of their 
health care by requiring insurance companies to be more 
transparent and accountable for their costs and actions. This 
law ended many of the worst insurance industry abuses in 2010, 
including arbitrary recessions of coverage when a person gets 
sick and denials of insurance for children with pre-existing 
conditions.\9\ In 2014, additional insurance reforms will bring 
Americans new rights and benefits and increase the quality of 
their health care and lower their costs. These reforms include 
no discrimination in premiums based on gender, no denials for 
pre-existing conditions for anyone, coverage of basic set of 
benefits and services, and no annual and lifetime limits on 
coverage for essential health benefits.\10\
---------------------------------------------------------------------------
    \9\The Patient Protection and Affordable Care Act is comprised of 
two public laws, The Patient Protection and Affordable Care Act, Public 
Law 111-148, and the Health Care Education and Reconciliation Act of 
2010, Public Law 111-152.
    \10\Id.
---------------------------------------------------------------------------
    The successes of these reforms rely on the new health 
insurance exchange marketplaces that will be established in 
2014 as required by the ACA. An exchange is a mechanism for 
organizing the health insurance marketplace to help consumers 
and small businesses shop for coverage in a way that permits 
easy comparison of available plan options based on price, 
benefits and services, and quality. Exchanges will provide a 
transparent, competitive marketplace for individuals and small 
businesses to buy coverage.
    The new marketplace will provide families and businesses 
advantages of pooling risk that were previously only available 
to the largest employers by creating a single risk pool within 
the individual and small business exchanges.\11\ By pooling 
people together, reducing transaction costs, and increasing 
transparency, exchanges create more efficient and competitive 
markets for individuals and small employers. The new 
marketplace keeps intact America's employer-based system while 
expanding access to tens of millions of people. Tax credits 
will make coverage more affordable for low- and middle-income 
families and eligible small businesses.
---------------------------------------------------------------------------
    \11\Section 1312(c) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    Beginning with an open enrollment period in 2013, exchanges 
will help individuals and small employers shop for, select, and 
enroll in high-quality, affordable private health plans that 
fit their needs at competitive prices. Exchanges will assist 
eligible individuals to receive premium tax credits or coverage 
through other federal or state health care programs.\12\ By 
providing one-stop shopping, exchanges will make purchasing 
health insurance easier and more transparent. Health plans 
offered in exchanges shall be required to be transparent and 
make disclosures of claims payment policies, enrollment and 
disenrollment data, data on denied claims, information on cost 
sharing and coverage, and more.\13\
---------------------------------------------------------------------------
    \12\Section 1311(b) and 1311(d)(4) of The Patient Protection and 
Affordable Care Act, Public Law 111-148 and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152.
    \13\Section 1311(e)(3) of The Patient Protection and Affordable 
Care Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    When fully implemented, health plans offered through 
exchanges will compete based on price and quality rather than 
market segmentation and risk selection. This directly relates 
with prohibition on medical underwriting and rate reforms that 
would also take effect in 2014.\14\ The non-partisan 
Congressional Budget Office (CBO) estimated that by 2022, 
approximately 26 million people will purchase their health 
insurance through exchanges.\15\
---------------------------------------------------------------------------
    \14\The Kaiser Family Foundation, Focus on Health Reform, (April 
2010) (online at http://www.kff.org/healthreform/upload/7908-02.pdf).
    \15\Congressional Budget Office, Health Insurance Exchanges: CBO's 
March 2012 Baseline, March 13, 2012.
---------------------------------------------------------------------------
            State versus Federal Exchanges
    The ACA requires that exchanges be developed and 
operational in every state for individual and small businesses 
by January 1, 2014.\16\ A state is first given the opportunity 
to set up a state exchange and can apply for grants for the 
establishment of this exchange. If the state does not elect to 
set up a state exchange, the Secretary of Health and Human 
Services (the Secretary) will set one up in the state for 
individuals and small businesses.
---------------------------------------------------------------------------
    \16\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    The state has significant flexibility in the type of 
exchange it would operate if it elects to establish a state 
exchange. The state could determine which insurers are 
permitted to offer products in the exchange. It could determine 
the variety of plans that could be offered, for example whether 
consumer driven health plans and health savings accounts are 
offered. The state could determine the governance structure. 
The state could determine whether to merge the individual and 
small group markets. The state could determine whether 
employers with over 50 employees are permitted into the 
exchange to purchase insurance over time. The state could 
determine their financing mechanism that will be used to 
operate the exchange in the future. The state could determine 
whether the exchange will be an active purchaser in selecting 
health plans to get the best price and quality for it's 
citizens. The state could determine the role brokers and agents 
will play in helping consumers enroll in qualified health plans 
in the exchange. The state could determine how involved the 
exchange will be in enforcing health insurance market standards 
as a part of their certification in tandem with the state 
health insurance commissioner.
    If the state does not elect to set up an exchange, which 
some states will not, the federal government will make these 
decisions and establish and operate an exchange in that non-
electing state.

            Oversight of Exchanges
    An exchange may operate in multiple states, if each state 
agrees to the operation of the exchange and if the Secretary 
approves.\17\ A state may have more than one exchange, called 
subsidiary exchanges, if each serves a geographically distinct 
area and the area served is adequately large.\18\ If the 
Secretary determines before 2013 that a state will not have an 
exchange operational by 2014 or will not be able to implement 
the standards, the Secretary is required (directly or through 
an agreement with a non-profit entity) to establish and operate 
an exchange in the state and to implement the standards.\19\
---------------------------------------------------------------------------
    \17\Section 1311(f) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
    \18\Id.
    \19\Section 1321 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    The Secretary, in coordination with the HHS Inspector 
General, will have authority to investigate exchanges. 
Exchanges will be subject to annual HHS audits.\20\ If the 
Secretary finds serious misconduct, payment otherwise due to 
the exchange may be rescinded, up to 1% of such payments, until 
corrective actions are taken that are deemed adequate by the 
Secretary.\21\ Payments made under the exchange provisions of 
the ACA are subject to the False Claims Act.\22\ The Government 
Accountability Office is required to review the operations and 
administration of the exchange.\23\ In addition, the Committee 
on Energy and Commerce, the Committee on Oversight and 
Government Reform, other congressional committees, and others 
can provide oversight of the implementation of the activities 
and expenditures under section 1311 of the Affordable Care 
Act.\24\
---------------------------------------------------------------------------
    \20\Section 1313 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
    \21\Id.
    \22\Id.
    \23\Id.
    \24\Id.
---------------------------------------------------------------------------
            Funding for Exchanges
    Section 1311 of the ACA requires the Secretary, within one 
year of enactment, to award grants to states to plan and 
establish exchanges.\25\ By January 1, 2014, each state must 
have an exchange to facilitate access to qualified health 
plans. The grants are provided to states making progress in 
establishing an exchange, implementing ACA's private health 
insurance market reforms, and meeting other benchmarks. 
However, no grant may be awarded after January 1, 2015, and 
after this date, operations of the exchange must be self-
sustaining using assessments on insurers or some other way to 
generate funds to support their operations.\26\ In addition, 
the grants must be used solely for the activities and functions 
listed in section 1311.\27\
---------------------------------------------------------------------------
    \25\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
    \26\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
    \27\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    Thus far, the Center for Consumer Information and Insurance 
Oversight (CCIIO) has awarded over $600 million in exchange 
planning grants and early innovator grants to 49 states and the 
District of Columbia along with four territories.\28\ States 
may use the exchange planning and establishment grants for a 
number of important planning activities, including research of 
their insurance markets, efforts to obtain the legislative 
authority to create exchanges, and steps to establish the 
governing structures of exchanges.\29\ States can use the early 
innovator grants to develop model Information Technology (IT) 
systems to operate the functions of the exchange.\30\ Such 
systems can be combined with state Medicaid systems and others, 
but all monies for the development of combined technology must 
be allocated according to the different programs. According to 
November 3, 2010, guidance from CMS, ``State Exchange grants 
will provide 100 percent support for Exchange IT infrastructure 
and . . . 90 percent matching rate will be available for the 
Exchange-related eligibility system changes as well as for 
those Medicaid system changes not directly related to the 
Exchanges.''
---------------------------------------------------------------------------
    \28\U.S. Department of Health and Human Services, Creating a New 
Competitive Marketplace: Health Insurance Exchange Establishment Grants 
Awards List (Jan. 24, 2012) online at
http://www.healthcare.gov/news/factsheets/2011/05/
exchanges05232011a.html).
    \29\U.S. Department of Health and Human Services, News Release: HHS 
Announces New Resources to Help States Implement Affordable Care Act 
(Jan. 20, 2011) online at http://www.hhs.gov/news/press/2011pres/01/
20110120b.html).
    \30\Healthcare.gov, States Leading the Way on Implementation: HHS 
Awards ``Early Innovator'' Grants to Seven States (online at http://
www.healthcare.gov/news/factsheets/Exchanges02162011a.html) (accessed 
April 8, 2011).
---------------------------------------------------------------------------
            Structure of Funding
    The structure of the funding for the establishment of 
exchanges has been criticized as being an open ended mandatory 
funding stream. However, mandatory time limited funding is 
consistent with previous laws passed by both parties.
    Having a mandatory and stable stream of funding for this 
central feature of the health insurance reforms is critical. 
Senator Harkin stated, in testimony for the record, that ``[T]o 
ensure the success of the Affordable Care Act, we needed to 
guarantee that reliable and predictable funding would be 
available for key programs. As the Chairman of both the Senate 
Committee on Health, Education, Labor, and Pensions and the 
Appropriations Subcommittee for Labor, Health and Human 
Services, and Education, I understand the implications of this 
guarantee--that Congress should mandate appropriations for 
certain programs in the Affordable Care Act that are 
fundamental to its success. This is a process that Congress has 
done many times in the past in various areas and there has been 
no controversy. It is now clear that those who want to repeal 
the Act are seeking to starve these important elements of funds 
in an effort to derail health reform.''
    In fact, in this regard, the Affordable Care Act was little 
different from other laws passed by Congress in recent years. 
It included a mix of discretionary program authorizations and 
mandatory spending.\31\ That mandatory spending was well-
documented at the time of passage and included in each CBO 
score of the legislation from the summer of 2009 through 
passage in March 2010.
---------------------------------------------------------------------------
    \31\Mandatory spending (also called direct spending) encompasses 
all spending not passed in the annual appropriations bills.
---------------------------------------------------------------------------
    Two examples of laws considered by the Energy and Commerce 
Committee when it was last under the control of Republicans in 
the 108th and 109th Congresses illustrate how Congress has 
previously used mandatory appropriations. These laws are the 
Medicare Prescription Drug Improvement and Modernization Act 
(P.L. No. 108-173) and the Deficit Reduction Act (P.L. No. 109-
171), both of which were spearheaded by Republican 
congressional leadership. These laws contained billions of 
dollars of mandatory appropriations funding a wide array of 
government activities.\32\
---------------------------------------------------------------------------
    \32\Committee on Energy and Commerce, Democratic Staff of Henry A. 
Waxman, Ranking Member, The Pius Proposal to Block Mandatory Funding in 
the Affordable Care Act, March 2011.
---------------------------------------------------------------------------
    The Medicare Prescription Drug Improvement and 
Modernization Act (P.L. No. 108-173) included specific 
mandatory appropriations, including an open ended but time 
limited mandatory appropriation for a drug assistance program. 
That program, like the exchange grants, served as a bridge 
until the full Medicare prescription drug benefit became 
effective.

            Analysis and Impact of H.R. 1213
    H.R. 1213 repeals the mandatory funding provided to states 
under the ACA to establish exchanges. This denies states the 
necessary funding to establish the new health insurance 
marketplace and undermines the work they have already done to 
implement exchanges. This legislation would rescind unobligated 
funds and would prohibit further funding, limiting states' 
ability to advance on the establishment of their exchanges.
    According to testimony for the record from Alan Weil, 
Executive Director of the National Academy for State Health 
Policy, ``[S]tates are doing their best to comply with the 
federal law and to implement the law in a manner that conforms 
to their own needs. Federal support for those activities is 
critical. One likely consequence of reduced federal funding is 
poor implementation, with state officials on the hook for 
failures that are not of their own making. Another likely 
consequence is states deciding to cede authority for 
implementation to the federal government--a decision most 
states would strongly prefer not to make.''
    Current budget deficits in most states have created 
difficult economic environments to establish state-based 
exchanges. Without grants from the Department of Health and 
Human Services, states will be forced to pay for exchange 
activities, along with outreach and education activities, on 
their own if they wish to establish a state run exchange. 
Exchange grants provide states the financial security needed to 
avoid wrestling with budget issues and worrying about self-
sustainability before January 1, 2015. The inevitable result of 
enactment of this legislation is that a number of states that 
would prefer to run their own exchanges will be unable to do 
so, and the default to federal control will be more likely to 
occur. Yet states are best positioned to establish the new 
marketplace for their residents.
    Already most states and the District of Columbia have shown 
an interest in setting up an exchange marketplace or sharing 
that responsibility with the federal government. A repeal of 
the exchange grants is effectively taking away from states the 
ability to set up exchanges or run important functions within a 
shared exchange.
    Numerous groups have expressed their opposition to these 
proposals including the American Hospital Association, the 
American Heart Association, the American Cancer Society--Cancer 
Action Network, American Federation of Teachers, Easter Seals, 
Main Street Alliance, National Alliance on the Mental Illness, 
National Partnership for Women and Families, Paralyzed Veterans 
of America, National Disability Rights Network, and AARP among 
others.

            Amendments
    Congressman Pallone offered an amendment to allow a state 
to receive exchange establishment grants if the governor of a 
state certifies that the state does not want the federal 
government to establish and operate an exchange within the 
state and wants to have the state establish and operate the 
exchange. The amendment was defeated on a party line vote.
    Congress members Schakowsky, Gonzalez, and Eshoo offered 
additional amendment having to do with retaining funds for the 
purposes of helping small business get health insurance if they 
choose to offer it, ensuring qualified health plans do not have 
annual or lifetime limits on coverage, and providing authority 
to deny or modify excessive or unjustified premium increases by 
insurance companies. All amendments were defeated.

Section 102: Repealing Prevention and Public Health Fund

    Section 102 of the Committee Prints\33\ is identical to 
H.R. 1217, legislation to repeal the Prevention and Public 
Health Fund, as reported by the Committee on April 11, 
2011,\34\ and passed by the House on April 13, 2011.\35\ Like 
H.R. 1217 itself, Section 102 should not become law.
---------------------------------------------------------------------------
    \33\Hereinafter cited as Section 102.
    \34\House Committee on Energy and Commerce, To Repeal the 
Prevention and Public Health Fund, 112th Cong. (2011) (H. Rept. 112-
57).
    \35\Congressional Record, H2633-2646 (Apr. 13, 2011).
---------------------------------------------------------------------------
    Enacted in 2010, the ACA\36\ expands access to health care 
for over 30 million Americans and improves health benefits for 
millions more who are already insured.\37\
---------------------------------------------------------------------------
    \36\The ACA is comprised of two public laws, Public Law No. 111-148 
and Public Law No. 111-152.
    \37\Congressional Budget Office, Updated Estimates for the 
Insurance Coverage Provisions of the Affordable Care Act (Mar. 2012) 
(online at www.cbo.govisitesidefault/files/cbofiles/attachments/03-13-
Coverage%20Estimates.pdf).
---------------------------------------------------------------------------
    But as valuable as it is, health insurance cannot do 
everything necessary to make our nation healthy. Even if other 
parts of the ACA make it possible for virtually everyone to be 
insured, there will still be a major role for public health. 
Moreover, there will be an ongoing need for funding for these 
public health activities.
    ``Public health'' includes many different things:
     It is working with groups and whole communities to 
improve health, often more effectively than could be done 
between an individual provider and patient. Fluoridation of 
water for a town is, for instance, vastly better than simply 
filling every citizen's cavities. Exercise programs to prevent 
obesity are better than having to treat diabetes among people 
who become obese.
     It is tailoring health insurance and health care 
to prevent and diagnose disease early rather than simply 
treating it in its later stages. Immunizations are always 
better than outbreaks. Screening for hypertension is better 
than simply waiting for strokes.
     It is providing for safety-net services where the 
insurance market alone fails to do so. Community health 
centers, HIV-service providers, and breast and cervical cancer 
screening programs provide care to people who might not 
otherwise be able to find a provider. Health professions 
education programs can add to the primary care workforce when 
the market might produce only specialists. (Such programs will 
be even more necessary once the insurance expansion provisions 
of the ACA are implemented.)
     And, least glamorous but crucial, it is the 
infrastructure of daily disease control and health promotion. 
Closing down unsanitary restaurants is better than treating 
food poisoning. Compiling and studying epidemic trends can 
prevent major waves of disease.
    The case might be made clearer by analogy: No community 
would be well-served if all its homeowners had fire insurance 
but there were no fire departments, firefighters, fire 
hydrants, smoke detectors, or indoor sprinklers. That very 
well-insured town would still burn to the ground. Insurance is 
necessary, but it is nowhere near sufficient.
    The ACA addresses both approaches, with insurance and with 
public health. This required going beyond the investments in 
the law to provide health insurance to also include provisions 
to make significant public health investments.
    It would be insufficient simply to authorize future 
appropriations for these activities while providing mandatory 
spending for coverage initiatives. While the Committees on 
Appropriations of both the House and the Senate have shown 
ongoing and great leadership in these public health programs, 
the budget allocations for them have been too tight to allow 
significant new initiatives of these sorts. Consequently, the 
ACA provides as firm a funding and organizational base for 
these services as possible--mandatory spending--because they 
are essential in making insurance efficient and productive and 
in making the nation healthier.
    Among those programs designated for mandatory spending in 
the ACA is the Prevention and Public Health Fund (the Fund). 
Its purpose is ``to provide for expanded and sustained national 
investment in prevention and public health programs.''\38\ It 
is the first and only federal program with dedicated, ongoing 
resources specifically designed to improve the public's health, 
and in turn, to make the United States a healthier nation.
---------------------------------------------------------------------------
    \38\ACA, Section 4002.
---------------------------------------------------------------------------
    The Fund is administered by the Secretary of the Department 
of Health and Human Services (HHS) and may be used to support 
``programs authorized by the Public Health Service Act, for 
prevention, wellness, and public health activities.''\39\ When 
the Fund was initially created, it provided $5 billion in 
mandatory spending for these activities over the period FY 2010 
through FY 2014 and $2 billion in mandatory spending each 
fiscal year thereafter (for a total of $15 billion for FY 2010 
through FY 2019, and $17.75 billion for FY 2012 through FY 
2021).
---------------------------------------------------------------------------
    \39\Id.
---------------------------------------------------------------------------
    Recent legislation has reduced these authorized funding 
levels by $6.25 billion for FY 2012 through FY 2021,\40\ making 
it even more imperative to maintain both the Fund's mandatory 
spending mechanism and its currently-authorized spending 
amounts. Such resources are necessary to address the perpetual 
underfunding of prevention activities which by some estimates, 
account for only 3% of national health expenditures.\41\ This 
view is supported by an Institute of Medicine (IOM) report 
released earlier this month that reaffirms the importance of 
building upon existing streams of public health funding--
including the Prevention and Public Health Fund--to ensure our 
nation has an adequate infrastructure to improve health 
outcomes and to carry out other critical public health 
functions.\42\
---------------------------------------------------------------------------
    \40\Middle Class Tax Relief and Job Creation Act of 2012, Public 
Law No. 112-96.
    \41\Centers for Medicare and Medicaid Services, National Health 
Expenditure Data (online at www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/index.html?redirect=/NationalHealthExpendData/
) (accessed Apr. 18, 2012).
    \42\Institute of Medicine, For the Public's Health: Investing in a 
Healthier Future (Apr. 10, 2012) (online at www.iom.edu/Reports/2012/
For-the-Publics-Health-Investing-in-a-Healthier-Future.aspx).
---------------------------------------------------------------------------
    Support for prevention has long been on a bipartisan basis. 
Members of this Committee from both sides of the aisle and 
across the political spectrum have spoken strongly in favor of 
this public health function.\43\ Beyond the halls of Congress, 
this support is also widespread. A public opinion survey by 
Trust for America's Health and the Robert Wood Johnson 
Foundation found that 71% of Americans favored an increased 
investment in disease prevention.\44\ And nearly 800 national, 
state, and local organizations support the Fund as a primary 
vehicle for making public health investments that would not 
only help to improve the public's health, but also create jobs 
and lower long-term health care costs.\45\
---------------------------------------------------------------------------
    \43\See, e.g., comments made by Rep. Pitts during the Committee 
markup of Section 102, House Committee on Energy and Commerce, Markup 
on Proposed Matters for Inclusion in Reconciliation Recommendations, 
112th Cong., p. 90 (Apr. 25, 2012) (transcript of the proceeding):
     Rep. Pitts: ``The goals of the Fund are laudable and there 
is no doubt that we must focus on preventing disease rather than simply 
treating people once they have begun ill.''
    See also comments made by Reps. Pitts, Murphy, Matsui, and Cassidy 
in support of prevention efforts during the Committee markup of H.R. 
1217, House Committee on Energy and Commerce, Business Meeting to 
Markup H.R. 1217, To Repeal the Prevention and Public Health Fund, 
112th Cong., p. 242 (Apr. 5, 2011) (transcript of the proceeding):
     Rep. Pitts: ``I am not against prevention and wellness'';
     Rep. Murphy: ``I believe all of us are pretty strongly in 
favor of anything that has to do with prevention'';
     Rep. Matsui: ``We are talking about having healthier 
Americans. . . . ``[M]ost people here truly believe that prevention is 
probably the best way to do this''; and
     Rep. Cassidy: ``I strongly believe in many aspects of 
preventative medicine...''.
    \44\See http://healthyamericans.org/newsroom/releases/
?releaseid=198 for a description of the poll's complete findings.
    \45\Letter from Jeffrey Levi, PhD, Executive Director, Trust for 
America's Health (on behalf of 760 health-related organizations) to 
Chairman Fred Upton and Ranking Member Henry Waxman (Apr. 23, 2012) (on 
line at http://healthyamericans.org/health-issues/wp-content/uploads/
2012/04/Fund-Reconciliation-EC-April2012.pdf).
---------------------------------------------------------------------------
            Prevention Fund Dollars at Work
    The Prevention and Public Health Fund is one of a number of 
ACA initiatives that is already in place. Currently, all 50 
states and the District of Columbia are receiving Fund 
support.\46\
---------------------------------------------------------------------------
    \46\For a description of these activities and state-by-state 
information on the Fund, see Department of Health and Human Services, 
The Affordable Care Act's Prevention and Public Health Fund in Your 
State (online at www.healthcare.gov/news/factsheets/2011/02/
prevention02092011a.html) (accessed Apr. 27, 2012).
---------------------------------------------------------------------------
    In FY 2011, 61 states and communities serving approximately 
120 million Americans received funding to implement evidence-
based, community programs designed to reduce tobacco use, 
promote healthy living, prevent and control high blood pressure 
and high cholesterol, and address health disparities.\47\ 
Twenty percent of funds went to support rural and frontier 
populations. The Fund has also been used to provide flu shots 
and other immunizations; improve HIV/AIDS prevention through 
testing and linkages to care; expand mental health and injury 
prevention programs; train the public health workforce; and 
strengthen the public health infrastructure necessary to track 
and respond to disease outbreaks and disasters.\48\
---------------------------------------------------------------------------
    \47\HHS, The Community Transformation Grants Program (online at 
http://www.healthcare.gov/news/factsheets/2011/09/
community09272011a.html) (accessed Apr. 27, 2012).
    \48\Supra note 14.
---------------------------------------------------------------------------
    In general, the Fund is intended to provide support for 
programs generated at the local or community-based level. This 
is as it should be--communities know best what public health 
challenges they face and what interventions are most likely to 
work.

            Prevention Dollars Produce High Value Outcomes
    Preventable diseases cost the United States significant 
resources--in terms of unnecessary deaths, lost productivity, 
and enormous amounts of money. Indeed, over half of the deaths 
in this country are due to preventable causes such as tobacco 
use, diet and activity patterns, and alcohol use.\49\ Chronic 
diseases consume an estimated 75% of the nation's $2 trillion 
health care spending each year\50\, and cost employers $1,685 
for each employee each year, or $225.8 billion annually in lost 
productivity.\51\ Obesity alone costs $147 billion each 
year.\52\ A stable, ongoing investment in prevention can help 
alleviate each of these burdens.
---------------------------------------------------------------------------
    \49\McGinnis JM and Foege WH, Actual Causes of Death in the United 
States, JAMA, 270(18): 2207-2212 (Nov. 10, 1993).
    \50\Centers for Disease Control and Prevention, Chronic Disease: 
The Power to Prevent, the Call to Control, At-A-Glance (2009).
    \51\Centers for Disease Control and Prevention, Worker Productivity 
(online at www.cdc.gov/workplacehealthpromotion/businesscase/reasons/
productivity.html) (accessed Apr. 27, 2012).
    \52\Finkelstein EA, Trogdon JG, Cohen JW, et al., Annual Medical 
Spending Attributable to Obesity: Payer- and Service-Specific 
Estimates, Health Affairs, 28(5): w822-w831 (2009).
---------------------------------------------------------------------------
    It is true that some life-saving prevention interventions 
actually involve expenditures. But so do most life-saving drugs 
and devices. We provide mandatory funding for drugs and devices 
through programs such as Medicare and Medicaid because steady 
and secure funding for these programs ensures that more 
Americans can live longer and healthier lives. Prevention 
efforts can also reduce the number of deaths and promote the 
health of Americans and should, therefore, also be supported 
through the mandatory spending mechanism.
    Some forms of prevention do, of course, save money--
immunizations, for example, are among our most cost-effective 
public health investments. Community-based interventions can be 
cost-effective as well. According to the researchers at the New 
York Academy of Medicine, an investment of $10 per person per 
year in proven community-based interventions to increase 
physical activity, improve nutrition, and prevent smoking can 
save the country more than $16 billion each year--a return of 
$5.60 for every $1 invested.\53\ The Urban Institute estimates 
that certain proven community-based diabetes prevention 
programs can save as much as $191 billion over 10 years.\54\ A 
recent Trust for America's Health report concludes that a 
reduction of body mass index rates (the measure for obesity) 
nationwide that meets the HHS target of 5% would save over $158 
billion in 10 years.\55\
---------------------------------------------------------------------------
    \53\Levi, J. et al., Prevention for a Healthier America: 
Investments in Disease Prevention Yield Significant Savings, Stronger 
Communities, Trust for America's Health (Feb. 2009) (online at: http://
healthyamericans.org/reports/prevention08/Prevention08.pdf).
    \54\Berenson, R. et al., How We Can Pay for Health Reform, Urban 
Institute and Robert Wood Johnson Foundation (July 2009) (online at: 
http://urban.org/uploadedpdf/411932_howwecanpay.pdf).
    \55\Trust for America's Health, Bending the Obesity Cost Curve: 
Reducing Obesity Rates by Five Percent Could Lead to More Than $29 
Billion in Health Care Savings in Five Years (Jan. 2012) (online at 
http://healthyamericans.org/assets/files/
TFAH%2020120besityBrief06.pdf).
---------------------------------------------------------------------------
            Mandatory Spending
    Despite the good and important work being done through the 
Fund, the health care savings it may help to produce, and the 
chronic underfunding of prevention activities in the past, 
Republicans are determined to bring the Fund to an end. They 
assert two principal arguments for their opposition to it: (1) 
the Fund's funding mechanism--mandatory spending; and (2) the 
Secretary's authority to determine how the Fund's monies will 
be allocated. The two arguments are interrelated; taken 
together, they present a misleading analysis of how the Fund is 
intended to operate.
    ACA Section 4002(b) provides for mandatory funding for the 
Fund. It authorizes to be appropriated and appropriates 
specified funding levels for FY 2010 and beyond. ACA Section 
4002(d) addresses the role of the congressional appropriations 
committees in specifying how the appropriated funds are to be 
used. This section clearly states that these committees have 
explicit authority to allocate monies from the Fund (in 
accordance with the Fund's purpose to support prevention and 
other public health activities). Senator Harkin (author of ACA 
Section 4002) addressed this very issue in a letter to the 
Committee, making it clear that it is the job of congressional 
appropriators to make the resource allocation decisions.\56\
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    \56\Testimony of Senator Tom Harkin (submitted for the record), 
Subcommittee on Health, Committee on Energy and Commerce, Hearing on 
Setting Fiscal Priorities in Health Care Funding, 112th Cong. (Mar. 9, 
2011) (stating, ``Contrary to misperceptions that it evades the 
appropriations process, the Fund was established . . . in such a way 
that appropriators direct how monies from the Funds are spent'').
---------------------------------------------------------------------------
    It is only when Congress fails to pass an HHS 
appropriations bill (or does not allocate the Fund in an 
appropriations bill) that the HHS Secretary would have the 
authority to designate which public health programs or 
activities would receive Fund support. While it is true that 
the Secretary has already exercised this authority, it is also 
true that she has deferred spending these monies when requested 
to do so by Congress.\57\
---------------------------------------------------------------------------
    \57\See the letter from Senator Tom Harkin, Chairman, Senate 
Committee on Health, Education, Labor, and Pensions and Chairman, 
Senate Subcommittee on Labor, Health and Human Services, Education, and 
Related Agencies, Committee on Appropriations to HHS Secretary Kathleen 
Sebelius (Jan. 4, 2011) in which he requested that the Secretary 
allocate monies in accordance with the prevention and public health 
priorities set forth in the proposed FY 2011 omnibus, year-long 
continuing resolution, including the Community Transformation Grants 
Program and tobacco prevention and control. The Secretary subsequently 
announced a spending plan for FY 2011 which closely tracked Chairman 
Harkin's request. (see HHS press release on line at www.hhs.gov/news/
press/2011pres/02/20110209b.html). At the request of Rep. Denny Rehberg 
and Rep. Harold Rogers, the Secretary delayed allocation of resources 
from the Fund for FY 2011. (Letter from Chairman Denny Rehberg, Chair, 
House Committee on Appropriations and Chairman Harold Rogers, Chair, 
Subcommittee on Labor, Health and Human Services, Education, and 
Related Agencies, House Committee on Appropriations to HHS Secretary 
Kathleen Sebelius (Mar. 2, 2011)).
---------------------------------------------------------------------------
    Contrary to what Republicans have suggested, monies from 
the Fund have been allocated and are being used in accordance 
with both the Fund's purpose\58\ and the public health needs of 
the country as well as HHS rules and regulations.\59\
---------------------------------------------------------------------------
    \58\The Section on Background and Need for Legislation for the 
majority views of this Committee report (Committee Prints: Proposed 
Matters for Inclusion in Reconciliation Recommendations) states the 
Fund has been used for dog neutering. HHS and CDC have confirmed that 
this statement is not accurate (e-mail from HHS to Democratic Staff, 
House Committee on Energy and Commerce (Apr. 25, 2012)). See also 
comments made by Rep. Schakowsky during the Committee markup on Section 
102, House Committee on Energy and Commerce, Committee Prints: Proposed 
Matters for Inclusion in Reconciliation Recommendations, 112th Cong., 
p. 233 (Apr. 25, 2012) (transcript of the proceeding).
    \59\The Section on Background and Need for Legislation for the 
majority views of this Committee report (Committee Prints: Proposed 
Matters for Inclusion in Reconciliation Recommendations) states that 
the Fund has been used to support construction activities. HHS guidance 
for the administration of Fund grants provides that ``recipients may 
not use funding for construction.'' (HHS, Public Prevention Health 
Fund: National Dissemination and Support for Community Transformation 
Grants (online at www.grants.gov/search/
search.do?oppId=99853&mode=VIEW) (accessed Apr. 27, 2012). To our 
knowledge, this prohibition has not been violated.
---------------------------------------------------------------------------
    These points aside, we believe Republican arguments that 
have been made to end the Fund have been completely undermined 
by their own actions in recent weeks. During debate on Section 
102, Republicans asserted the annual appropriations process is 
a more appropriate way to fund programs and activities 
supported by the Fund.\60\ Yet, last month they voted 
overwhelmingly to reduce discretionary spending by $19 billion 
for FY 2013--an amount below the limits they supported in the 
Budget Control Act\61\ and voted earlier this month to endorse 
the Appropriations Committee recommendation to cut health, 
education, and labor programs by more than 40%.\62\
---------------------------------------------------------------------------
    \60\See, e.g., comments made by Rep. Guthrie (pp. 74-75) and Rep. 
Cassidy (pp. 99-100) during the Committee markup on Section 102, House 
Committee on Energy and Commerce, Committee Prints: Proposed Matters 
for Inclusion in Reconciliation Recommendations, 112th Cong., (Apr. 25, 
2012) (transcript of the proceeding).
    \61\U.S. House of Representatives, Roll Call Vote on Agreeing to H. 
Con. Res. 112 (March 29, 2012) (228 yeas, 191 nays).
    \62\House Committee on Appropriations, Report on the Suballocation 
of Budget Allocations for Fiscal Year 2013, 112th Cong. (Apr. 25, 2012) 
(online at http://appropriations.house.gov/UploadedFiles/FY13-
FULLCOMMITTEE302b.pdf).
---------------------------------------------------------------------------
            An Anti-Health Reform Ideological Agenda
    In light of both the Fund's purpose and track record to 
date, it comes as a great disappointment that Republicans have 
continued to target this program for elimination.\63\ Surely, 
this is not because of Republican assertions about the merits 
of discretionary spending versus mandatory spending or the need 
to protect Congress's prerogative to fund or not to fund health 
programs. Congress, Republicans and Democrats alike, makes 
those kinds of choices--often difficult choices--all of the 
time.\64\ And given traditional bi-partisan support for 
prevention activities, Republican opposition cannot be based on 
the substance of the program.
---------------------------------------------------------------------------
    \63\In addition to passage of H.R. 1217 on Apr. 13, 2011 
(Congressional Record, H2633-2646), House Republicans passed 
legislation (H.R. 3630) to reduce authorized Fund amounts by $11 
billion over 10 years--more than 60% of its funding--as part of the 
payroll extenders legislation (Congressional Record, H8762-8824 (Dec. 
13, 2011)). And despite the threat of a Presidential veto (Executive 
Office of the President, Office of Management and Budget, Statement of 
Administration Policy: H.R. 4628, Interest Rate Reduction Act (Apr. 27, 
2012)), House Republicans also voted to eliminate the Fund as part of 
H.R. 4628 on Apr. 27, 2012, the day this report is scheduled to be 
filed.
    \64\For examples of various federal programs that are supported 
through mandatory spending, see Committee on Energy and Commerce, 
Democratic Staff, The Pitts Proposal to Block Mandatory Funding in the 
Affordable Care Act (Mar. 9, 2011) (online at: http://
democrats.energycommerce.house.gov/sites/default/files/image_uploads/
Fact%20Sheet_03.09.11.pdf).
---------------------------------------------------------------------------
    Pure and simple, Section 102 represents the Republicans' 
unending attack to disrupt, dismantle, and ultimately destroy 
the ACA--even those programs that have been funded and are up 
and running, and even those that make good health policy sense, 
in or out of the health reform law.\65\ What they have not been 
able to achieve whole cloth\66\, Republicans are now attempting 
to do piece by piece. Section 102 puts the Prevention and 
Public Health Fund in the frontline of this ongoing assault.
---------------------------------------------------------------------------
    \65\Efforts in the House of Representatives to repeal or otherwise 
destroy individual parts of the ACA include: H.R. 5, Protecting Access 
to Healthcare Act (passed the House on Mar. 22, 2012 (Congressional 
Record H1453-1490; H1501-1519)); H.R. 1173, Fiscal Responsibility and 
Retirement Security Act of 2011 (passed the House on Feb. 1, 2012 
(Congressional Record H322-354)); H.R. 358, Protect Life Act (passed 
the House on Oct. 13, 2011 (Congressional Record, H6885-6903)); H.R. 
1214, To Repeal Mandatory Funding for School-Based Health Center 
Construction (passed the House on May 4, 2011 (Congressional Record 
H2969-2977)); H.R. 1216, To Convert Funding for Graduate Medical 
Education in Qualified Teaching Centers from Direct Appropriations to 
an Authorization of Appropriations (passed the House on May 25, 2011 
(Congressional Record H3361-3388; H3396-3401; H3430-3434)); and H.R. 
1217, To Repeal the Prevention and Public Health Fund) (passed the 
House on Apr. 13, 2011 (Congressional Record H2633-2647)). To date, 
none of these bills has been considered by the Senate.
    \66\Although the House of Representatives has passed legislation to 
repeal the ACA, that legislation will not become law since the Senate 
has defeated the proposal. (H.R. 2 passed the House of Representatives 
in January 2011 (Congressional Record, H322-323 (Jan. 11, 2011)). The 
Senate defeated a similar proposal a month later. (Congressional Record 
S475 (Feb. 2, 2011)). In any case, President Obama has made clear that 
he will veto any such legislation (Executive Office of the President, 
Office of Management and Budget, Statement of Administration Policy: 
H.R. 2, Repealing the Affordable Care Act (Jan. 6, 2011) (online at 
www.whitehouse.gov/sites/default/files/omb/legislative/sap/112/
saphr2r_20110106.pdf).
---------------------------------------------------------------------------
    In our view, this is not where the Prevention and Public 
Health Fund should be. Rather, is should remain exactly where 
it is at the forefront of helping to realign the nation's 
approach to health and health care, making Americans healthier 
and more productive.

Section 103: Rescinding unobligated balances for CO-OP program

    This provision repeals all unobligated appropriations made 
under section 1322 of the Affordable Care Act, the Federal 
Program to Assist Establishment and Operation of Nonprofit, 
Member-Run, Health Insurance Issuers--also known as the 
Consumer Oriented and Operated Plans, or ``CO-OPs.'' The CO-OP 
program offers low-interest loans to eligible private, 
nonprofit groups to help set up and maintain health plans.\67\ 
Starting on January 1, 2014, CO-OPs will be able to offer 
health plans in the individual and small group insurance 
marketplaces in and outside the exchange.
---------------------------------------------------------------------------
    \67\Terry Gardiner, et. al., Realizing Health Reform's Potential: 
Innovative Strategies to Help Affordable Consumer Operated and Oriented 
Plans (CO-OPs) Compete in New Insurance Marketplaces, (April 2012) (on-
line at http://www.commonwealthfund.org//media/Files/
Publicationsassue%20Brief/2012/Apr/1591_Gardiner_innovative 
strategies_help_coops.pdf.
---------------------------------------------------------------------------
    A CO-OP is a nonprofit health insurer that is directed by 
its customers, uses profits for customers' benefit, and is 
designed to offer individuals and small businesses affordable, 
customer-friendly, and high-quality health insurance options. 
Specifically, health cooperatives are governed by their members 
and are focused on coordinating care and coverage for their 
beneficiaries. The most successful examples include 
HealthPartners in Minnesota, with 1.5 million members, and 
Group Health Cooperative in Washington State, with 700,000 
members. Independent studies have placed these cooperatives in 
the ranks of the highest-performing health plans in the country 
in terms of providing value and quality care to their 
customers.\68\
---------------------------------------------------------------------------
    \68\Section 1322 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    CO-OPs may operate locally, state-wide, or in multiple 
states. CO-OPs must be licensed as issuers in each state in 
which they operate and are subject to state laws and 
regulations that apply to all similarly situated issuers.
    When passed, the CO-OP loan program had $6 billion 
available to support loans.\69\ The amounts available were cut 
by $2.2 billion by section 1857 of the Department of Defense 
and Full-Year Continuing Appropriations Act of 2011. This 
amount was further cut in the Consolidated Appropriations Act 
of 2012 by $400 million.
---------------------------------------------------------------------------
    \69\Section 1322 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    Thus, the CO-OP loan program has a $3.4 billion 
appropriation to support loans. Entities can apply for a start-
up loan that must be repaid in five years or for solvency loans 
that must be repaid, with interest, in 15 years from the date 
of disbursement.
    The first round of applications was due on October 17, 
2011, and to date, a total of ten non-profits offering coverage 
in ten states have been awarded $845 million. These states 
include Maine, Oregon, South Carolina, Iowa, Nebraska, Montana, 
New Jersey, New Mexico, New York, and Wisconsin. A list of the 
awardees is available at: http://www.healthcare.govinews/
factsheets/2012/02/coops02212012a.html.
    A second round of applications was due on January 3, 2012, 
and there will be subsequent quarterly application deadlines 
through December 31, 2012. Awards are announced on a rolling 
basis.

                                TITLE II

    The provisions of title II would cut the Medicaid program 
by more than $24 billion over ten years. These proposals do 
nothing to improve quality or access to care; one section of 
this title would cause more than 300,000 children to lose 
coverage and allow states to cut one-third of the people 
covered by Medicaid and Children's Health Insurance Program 
(CHIP) off the programs. Numerous groups have expressed their 
opposition to these proposals including the National Governor's 
Association, the National Association of Community Health 
Centers, the Association of Community Affiliated Plans, 
American Academy of Pediatrics, the National Rural Health 
Association, Asian and Pacific Islander American Health Forum, 
and Families USA among others.

Section 201. Medicaid provider tax threshold

    This proposal would interfere with states' ability to fund 
Medicaid at a time when states, nearly universally, are 
struggling with budget challenges by limiting the amount of 
state Medicaid funds that can be raised by provider taxes. The 
Congressional Budget Office indicates this proposal would cut 
$11.3 billion in funding out of Medicaid over the next ten 
years. This restriction on states' ability to raise state 
Medicaid funding will result in cuts to Medicaid coverage, 
benefits, or provider payment rates.
    It is important to note that provider taxes are supported 
by states and by providers because states use the money from 
these legitimate and permissible taxes to increase Medicaid 
provider payments, protect quality, and fund critical benefits 
and coverage for millions of Americans.
    The score from the Congressional Budget Office only 
reflects the federal funding cut from the Medicaid program. The 
total funding cut from the program will be significantly 
greater than $11 billion. For a state in which the federal 
government and the state each bear 50% of Medicaid costs to 
achieve $1 in federal savings, total Medicaid expenditures in 
the state would have to fall by $2. To generate $11 billion in 
federal savings, this proposal would require more than $18.9 
billion in cuts to state Medicaid programs.
    Mr. Pallone offered an amendment that would protect state 
provider taxes that are used to fund quality nursing home care. 
Currently, at least 19 states have provider taxes on nursing 
facilities that would be affected by the Republican proposal to 
infringe on states' rights. Those states are Arkansas, 
California, Connecticut, Florida, Georgia, Idaho, Indiana, 
Maine, Maryland, Mississippi, Missouri, Nevada, New York, North 
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, and Vermont.
    This amendment was supported by the American Health Care 
Association (AHCA), which wrote, ``On behalf of the American 
Health Care Association, the nation's largest association 
representing providers of quality long term care, we would like 
to express our support for the 'Protecting State Autonomy to 
Fund Quality Health Care' amendment. . . . It is essential to 
preserve states' ability to utilize this important funding 
mechanism. Your amendment is critical to nursing facilities 
because nearly 65% of our residents rely on Medicaid to pay for 
their care. You are to be commended for your leadership and 
commitment to America's seniors.''\70\
---------------------------------------------------------------------------
    \70\American Health Care Association letter to Congressman Pallone, 
April 24, 2012.
---------------------------------------------------------------------------
    Mr. Pallone's amendment was defeated by a vote of 21-29. 
With Medicaid expected to cover 17 million more Americans by 
2021 as a result of health reform, we should not be making it 
harder for states to provide coverage through Medicaid. But 
that is exactly what this Republican bill would do.

Section 202. Rebasing State DSH allotments for fiscal year 2022

    The Medicaid disproportionate share hospital program (DSH) 
has been critical for America's safety net hospitals. The 
program provides support to hospitals to help cover the cost of 
care to the uninsured and to help make up for Medicaid payment 
shortfalls.
    In the ACA, Congress reduced aggregate Medicaid DSH 
allotments by $0.5 billion in 2014, $0.6 billion in each of 
2015 and 2016, $1.8 billion in 2017, $5 billion in 2018, $5.6 
billion in 2019, and $4 billion in 2020. Congress extended the 
$4 billion reduction for aggregate DSH allotments for one 
additional year--through 2021--in the Middle Class Tax Relief 
and Job Creation Act of 2012.\71\ Section 202 would reduce the 
state disproportionate share hospital allotments to $4 billion 
for 2022. The President's FY 2013 budget proposed to rebase DSH 
allotments for 2021, but not for 2022.
---------------------------------------------------------------------------
    \71\Public Law No. 112-96.
---------------------------------------------------------------------------
    The National Association of Public Hospitals (NAPH), which 
represents the nation's largest metropolitan safety net 
hospitals, reports that without Medicaid DSH and other safety 
net financing payments, its members would have seen a negative 
12% margin in 2009. DSH payments help these facilities make 
ends meet. NAPH writes, ``Drastic cuts to the Medicaid Program 
will only shift the cost burden to states, hospitals and other 
providers, and low-income beneficiaries ultimately hurting 
patients.''\72\
---------------------------------------------------------------------------
    \72\National Association of Public Hospitals and Health Systems 
letter to Chairman Upton and Ranking Member Waxman, April 24, 2012.
---------------------------------------------------------------------------
    The situation that these safety net hospitals will be 
facing ten years in the future is impossible to predict. It is 
irresponsible for Congress to cut payments to these critical 
providers so far into the future. Worse yet, cuts are being 
made for the sole purposes of extended or protecting tax breaks 
for the wealthiest and protecting the defense industry from 
cuts.
    Mr. Engel offered an amendment to strike section 202, 
protecting DSH funding for safety net hospitals in the future. 
This amendment was defeated on a party line vote.

Section 203: Repeal of Medicaid and CHIP maintenance of effort 
        requirements under ACA

    The Affordable Care Act is about shared responsibility 
towards a healthier nation. Individuals, employers, and the 
federal and the state governments share that responsibility. 
The Medicaid and CHIP maintenance of effort is the state's 
responsibility requirement and protects access to healthcare 
for the most vulnerable populations.
    This state responsibility provision requires that states 
not reduce coverage under Medicaid or CHIP through the state 
plan or waiver (until it expires) by implementing new 
eligibility reductions or changes to eligibility methodologies 
or procedures that would have the effect of reducing coverage 
beyond those that were in place at the time of the enactment of 
the Affordable Care Act.\73\ The requirements are in place for 
Medicaid until the Secretary determines that the state 
exchanges are fully operational, which is expected to be 
January 1, 2014.\74\ The requirements are in place for CHIP 
through September 30, 2019.\75\
---------------------------------------------------------------------------
    \73\Section 2001(b) and Section 2101(b) of The Patient Protection 
and Affordable Care Act, Public Law 111-148 and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152.
    \74\Section 2001(b) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
    \75\Section 2101(b) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    The provision reduces spending by $1.4 billion over ten 
years, decreasing the deficit by only $600 million when the 
indirect revenue effects are considered.
            Effect on Coverage
    Section 203 would eliminate these protections for coverage 
and allow states to lower the eligibility standards they 
themselves enacted and cut people off their Medicaid and CHIP 
programs including low-income pregnant women, children, 
seniors, and individuals with disabilities living in their 
homes and in the community upon enactment.
    According to CBO, this will cause at least 100,000 low-
income pregnant women, children, seniors, and individuals with 
disabilities living in their homes and in the community to lose 
insurance in 2013, and cause at least 300,000 children in 
working families to lose insurance coverage in 2015. Becoming 
uninsured has dire consequences. According to the Institute of 
Medicine, uninsured children are 20 to 30% more likely to lack 
immunizations, prescription medications, asthma care, and basic 
dental care and are more likely than insured children to miss 
school due to health problems. Uninsured adults are 25% more 
likely to die prematurely than insured adults overall, and with 
serious conditions such as heart disease, diabetes, or cancer, 
their risk of premature death can be 40% to 50% higher.
    The number of people in jeopardy of losing insurance is far 
greater than CBO's projections of what states might do--one-
third of the Medicaid and CHIP beneficiaries would be at risk 
if this provision passed into law. That includes 14.1 million 
children, 8 million adults, 2.8 million low-income seniors, and 
2.3 million individuals with disabilities according to 
Georgetown University Center for Children and Families.\76\
---------------------------------------------------------------------------
    \76\The Center for Children and Families, Georgetown University 
Health Policy Institute, Eliminating Medicaid and CHIP Stability 
Provisions (MOE): What's at Stake for Children and Families, February 
2011.
---------------------------------------------------------------------------
            Exception in Cases of State Budget Deficits
    States are exempted from these stability requirements for 
nonpregnant, nondisabled adults with incomes above 133% of the 
federal poverty level starting in January 2011 if the state 
certifies that it is experiencing a budget deficit or will 
experience a deficit in the following year.\77\ This exception 
recognizes the difficult budget situations facing a number of 
states.
---------------------------------------------------------------------------
    \77\Section 2001(b) and Section 2101(b) of The Patient Protection 
and Affordable Care Act, Public Law 111-148 and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
            The Maintenance of Effort and Program Integrity
    The maintenance of effort requirements allow states to make 
changes to their enrollment policies and procedures to be 
responsive to loopholes that emerge that subvert Medicaid 
eligibility rules. In a letter to Ranking Member Waxman, former 
CMS Administrator Don Berwick says, ``the MOE provisions do not 
hinder States in their efforts to fight fraud and abuse in the 
Medicaid and CHIP programs.''\78\
---------------------------------------------------------------------------
    \78\Letter from CMS Administrator Don Berwick to Congressman Henry 
Waxman, July 21, 2012.
---------------------------------------------------------------------------
    However, CMS has to be cautious that states are actually 
addressing a documented program integrity issue with any 
proposed changes to eligibility standards. Otherwise a state 
could be erecting a barrier to Medicaid eligibility in 
violation of law.
    According to the Centers for Medicare and Medicaid 
Services, ``[There is extensive evidence that eligibility 
methods and procedures are strong determinants of whether 
eligible individuals can actually gain and retain coverage. Our 
experience working with States suggests States can meet their 
program integrity objectives consistent with the MOE 
provisions.''\79\
---------------------------------------------------------------------------
    \79\Centers for Medicaid, CHIP and Survey and Certification, SMDL# 
11-009, August 5, 2011.
---------------------------------------------------------------------------
            Medicaid and the Economy
    Cutting Medicaid eligibility is not saving money; it is 
abdicating responsibility and shifting costs to beneficiaries 
and providers while undermining the economic recovery. Cutting 
eligibility will undermine all the progress made in the last 
few years and turn back the clock on the money invested in 
covering kids. Children's coverage levels are the highest ever 
due to Medicaid and CHIP where 22 million or 28% of all 
children are covered.
    In addition, every one dollar cut from Medicaid means up to 
$2.76 cut from the state economy.\80\ Loss of federal Medicaid 
dollars means loss of healthcare jobs and healthcare economic 
activity--moving states in exactly the wrong direction from 
economic recovery.
---------------------------------------------------------------------------
    \80\Kaiser Commission on Medicaid and the Uninsured, The Role of 
Medicaid in State Economies: A Look at the Research, (January 2009) 
(on-line at http://www.kff.org/medicaid/upload/7075_02.pdf).
---------------------------------------------------------------------------
            Amendments
    Congresswoman Baldwin offered an amendment to repeal this 
provision citing the number of people, including 300,000 
children, who would lose insurance coverage as a result of this 
provision. Congressman Markey offered an amendment focused on 
the effects of this amendment on disabled children, seniors, 
and widows. Both were defeated on a party line vote.

Section 204: Medicaid payments to territories

    The Territories (American Samoa, Guam, the Northern Mariana 
Islands, Puerto Rico, and the U.S. Virgin Islands) operate 
under different rules for their Medicaid program than the 50 
states and the District of Columbia. The Territories are not 
required to cover the same eligibility groups and use different 
financial standards in determining eligibility compared to the 
states. Medicaid programs in the Territories are also subject 
to annual federal spending caps. All five territories typically 
exhaust their caps prior to the end of the fiscal year. Once 
the cap is reached, the Territories assume the full costs of 
Medicaid services or, in some instances, may suspend services 
or cease payments to providers until the next fiscal year. The 
Territories receive a 55% federal matching rate.
    Section 204 of the Republican proposal would repeal 
paragraph (5) of section 1108(g) of the Social Security Act, 
which provided $6.3 billion in additional Medicaid funding for 
the Territories. Thus far, more than $300 million in additional 
funding has been provided to the Territories for 2011 and 2012 
through this additional funding stream, which is outside of the 
capped allotment.
    The Republican cuts to Medicaid in the Territories would 
make it more difficult for the Territories to support health 
coverage under Medicaid. Already, the Medicaid program in these 
areas is underfunded compared with the need. For example, if 
Puerto Rico's matching rate were calculated according to the 
formula used for the 50 states, its matching rate would be 83%, 
not the 55% in current law. Residents in these areas have much 
less access to private insurance than people in the rest of the 
United States; for example in Puerto Rico, only 42% have 
private insurance, compared to 65.8% in the United States 
overall.\81\
---------------------------------------------------------------------------
    \81\Center on Budget and Policy Priorities, House Bill Would Cut 
Medicaid Funding For Puerto Rico by About $5.5 Billion Through 2020, 
(April 25, 2012).
---------------------------------------------------------------------------
    This funding provided to the Territories through the 
Affordable Care Act would help reduce the federal Medicaid 
funding shortfalls, allowing these areas to better serve low-
income residents' health and long-term care needs. As a result 
of past funding inequalities, the Territories have been unable 
to serve their low income residents to the same extent as 
states on the mainland. For example, Puerto Rico's Medicaid 
income eligibility limit for parents in a family of four is 
effectively just 36% of the poverty line, compared to 63% for 
working parents in the median U.S. state. Puerto Rico covers 
children in families of four up to 71% of the poverty line; 
today, in nearly all states, Medicaid and CHIP cover children 
up to at least 200% of the poverty line.\82\
---------------------------------------------------------------------------
    \82\Id.
---------------------------------------------------------------------------
    Representative Christensen offered an amendment in 
Committee to strike this section of the Republican bill. In a 
letter to Representative Upton dated April 20, she joined the 
other Territorial Representatives in writing, ``As a result of 
chronic underfunding by the federal government, too many 
patients in the territories receive inadequate care, too many 
providers in the territories are not adequately compensates for 
their services, and too much of the financial burden associated 
with health care delivery must be borne by the territorial 
governments themselves.''\83\ Representative Christensen's 
amendment was defeated on a party line vote.
---------------------------------------------------------------------------
    \83\Letter from Representatives Pierluisi, Christensen, Bordallo, 
Faleomavaega to Chairman Upton, April 20, 2012.
---------------------------------------------------------------------------
            Barton Amendment to Repeal the CHIP Performance Bonus 
                    Payments
    In addition to the proposed $24 billion cuts to the 
Medicaid program in the underlying committee print, Congressman 
Barton offered another amendment to rescind $8.3 billion in 
performance bonus payments authorized in the CHIP.
    When the CHIP was reauthorized in 2009, the law included 
special incentive payments--a performance bonus program--to 
encourage states to find and enroll all eligible children.
    These performance bonus payments help offset the costs 
states incur when they enroll lower income children in 
Medicaid. In order to qualify for the bonus payments, states 
have to streamline their enrollment systems by implementing 5 
of 8 enrollment ``best practices,'' and surpass an enrollment 
target for covering children in Medicaid. These best practices 
are things like 12 month continuous eligibility, use of a joint 
application for Medicaid and CHIP, and express lane 
eligibility.
    The number of children with health insurance has climbed 
over the past three years since this program was created in the 
CHIP reauthorization. Prior to the reauthorization, 91% of all 
children had health insurance. By 2011 an additional 1.2 
million children had coverage, bringing children's coverage 
levels to 93%.\84\
---------------------------------------------------------------------------
    \84\ASPE Issue Brief, ``1.2 Million Children Gain Insurance Since 
Reauthorization of Children's Health Insurance Program,'' December 22, 
2011.
---------------------------------------------------------------------------
    States have continued to make significant progress in 
simplifying their programs and covering more children--despite 
the budgetary challenges many states are facing. That is why 
this bonus money is so important. These children that are being 
helped are in the poorest, lowest income families. They are 
children who, without Medicaid coverage, are unlikely to get 
their medical needs met.
    The performance bonus program is set to end in 2013, even 
though CHIP is authorized through 2015. Mr. Barton's amendment 
would eliminate the funding in the successful performance bonus 
program in 2013. Eliminating the program, rather than 
continuing it, will hurt states' efforts to improve children's 
coverage.
    Each year, progress in enrolling eligible but uninsured 
children has increased. Only 10 states received bonuses 
(totaling $37 million) in the first year, 2009. This past year, 
2011, 23 states received a total of $296 million in bonus 
payments.
    Maryland, Virginia, Wisconsin, Colorado and Oregon were the 
top recipients in 2011 of the bonus funding for their success 
in reaching eligible but unenrolled children. This past year, a 
number of states qualified for the bonus payments for the first 
time--Connecticut, Georgia, Montana, North Carolina, North 
Dakota, South Carolina, and Virginia.\85\ States are beginning 
to get the streamlined procedures in place that will help boost 
enrollment of eligible children.
---------------------------------------------------------------------------
    \85\CHIPRA Performance Bonuses: A History (FY 2009-FY2011), (on-
line at www.insurekidsnow.gov)
---------------------------------------------------------------------------
    Mr. Sarbanes offered a second degree amendment to the 
amendment offered by Mr. Barton. This amendment is exactly the 
kind of policy that this Committee would pursue if the 
Republican leadership was interested in making progress in 
reducing the number of uninsured and covering all children to 
give them a healthy start.
    Mr. Sarbanes' amendment would ensure that the Children's 
Health Insurance Program Reauthorization Act (CHIPRA) 
performance bonus program, currently slated to end in 2013, 
could continue through the life of the CHIP program. It would 
ensure that the performance bonus money remains available for 
states that have success in finding and enrolling eligible 
children in health insurance coverage. As a result of efforts 
by Maryland under the performance bonus program, Mr. Sarbanes' 
home state enrolled an additional 41,000 children in Medicaid 
in 2011. Twenty-two other states have received CHIP performance 
bonus payments by simplifying their programs in order to enroll 
more low-income children than projected in Medicaid. Mr. 
Sarbanes' second degree amendment was defeated on a party line 
vote.
            Baldwin Amendment on Medicare Negotiation of Prescription 
                    Drug Prices
    Congresswoman Baldwin's amendment repeals the prohibition 
on the Secretary from negotiating prescription drug prices for 
the seniors in the Medicare program and requires the Secretary 
to negotiate and get the best prices she can on behalf of the 
nearly 50 million people in Medicare. The amendment was ruled 
out of order as being non-germane.

                               TITLE III

    Title III of the Committee Prints\86\ is identical to H.R. 
5, the Help Efficient, Accessible, Low-Cost, Timely Healthcare 
(HEALTH) Act of 2011,\87\ as reported by the Committee on May 
23, 2011.\88\ Like H.R. 5 itself, Title III should not and will 
not become law.\89\ And for good reason. It is one-sided. It 
will not ``fix'' the problems it purports to address. And in 
one-fell swoop, it completely up-ends literally centuries of 
state law. Pure and simple--and contrary to the argument put 
forth by the bill's leading sponsor, H.R. 5/Title III is not 
``meaningful [medical malpractice] reform.''\90\
---------------------------------------------------------------------------
    \86\Hereinafter cited as Title III.
    \87\Hereinafter cited as the HEALTH Act.
    \88\House Committee on Energy and Commerce, HEALTH Act, 112th Cong. 
(May 23, 2011), (H. Rept. 112-39, Part 2).
    \89\A slightly different version of the Health Act passed the House 
of Representatives on Mar. 22, 2012 as part of the Protecting Access to 
Health Care (PATH) Act (Congressional Record, H1517-1519). To date, the 
Senate has not acted on this legislation and is not expected to do so.
    \90\Rep. Phil Gingrey, The HEALTH Act: A Real Reform Option (online 
at: http://gingrey.house.gov/News/DocumentSingle.aspx?DocumentD=240791 
(accessed on May 19, 2011).
---------------------------------------------------------------------------
    This is not to suggest that medical malpractice is not a 
problem in this country. It is. On this point members on all 
sides of the issue agree.\91\ But it is also complex and 
complicated and therefore, deserving of a very thoughtful and 
measured response. H.R. 5/Title III is anything but that.
---------------------------------------------------------------------------
    \91\See, e.g., remarks of Rep. Frank Pallone (p. 12); Rep. Joe 
Pitts (p. 18); and Rep. Michael Burgess (p. 29) during the Committee 
markup of H.R. 5 (House Committee on Energy and Commerce, Markup on 
H.R. 5, HEALTH Act, 112th Cong. (May 10, 2011) (transcript of the 
proceeding) and Ranking Member Henry Waxman (House Committee on Energy 
and Commerce, Markup on HR. 5, HEALTH Act, 112th Cong., p. 21 (May 11, 
2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    Congresses of the past share this belief. Indeed, since the 
107th Congress, legislation identical or similar to H.R. 5/
Title III has repeatedly failed to reach the President's 
desk.\92\ Its failure to become law under Democratic or 
Republican Congresses and Presidents alike is itself a verdict 
on its merits and efficacy.
---------------------------------------------------------------------------
    \92\House Committee on the Judiciary, HEALTH Act, Dissenting Views, 
112th Cong., p. 88 (Mar. 17, 2011) (H. Rept. No. 112-39, Part 1).
---------------------------------------------------------------------------
    We do not believe the case has been made for this House, 
for this Congress, or for this President to follow a different 
course of action. While the current state-based system for 
dealing with medical malpractice is far from perfect, in our 
view, it is the framework through which appropriate 
modifications and improvements should be developed and 
implemented. A ``one-size-fits-all'' approach--the very vision 
of H.R. 5/Title III--not only tears this system down; it also 
imposes upon the states, a new, untried, and untested legal 
structure with little regard for the potential consequences.
    There are many particulars in the legislation and the 
arguments of its advocates to which we object. The views 
expressed here focus only on those specifics that received 
extensive attention during the Committee's consideration of the 
legislation:
           the mis-representation of the California law 
        upon which H.R. 5/Title III is supposedly based;
           H.R. 5/Title III's wholesale preemption of 
        state medical malpractice law;
           its broad and expansive scope that goes 
        beyond traditional medical malpractice; and
           its unparalleled protections for 
        manufacturers of drugs and medical devices approved by 
        the Food and Drug Administration (FDA).
    As such, and in recognition of the thorough and thoughtful 
analysis of all aspects of the legislation by those members of 
the Committee on the Judiciary opposed to the legislation, as 
well as our shared jurisdiction with that committee over H.R. 
5/Title III, we incorporate by reference herein the dissenting 
views included in the report filed by the Committee on the 
Judiciary on H.R. 5.\93\ We concur in those views and stand 
with these colleagues in wholly rejecting this legislation.
---------------------------------------------------------------------------
    \93\House Committee on the Judiciary, HEALTH Act, Dissenting Views, 
112th Cong., pp. 88-120 (Mar. 17, 2011) (H. Rept. No. 112-39, Part 1).
---------------------------------------------------------------------------

Background and Overview

    A medical malpractice claim is an allegation of harm or 
injury caused by a health care provider. A medical malpractice 
lawsuit is a civil (i.e., non-criminal) action in which an 
individual making such an allegation seeks damages against 
those health care providers the individual believes is legally 
responsible or liable for the harm or injury that has occurred. 
Medical malpractice liability arises when a health care 
provider engages in negligence or an intentional 
wrongdoing.\94\ ``The general difference between an action 
based in negligence and one based in intentional tort 
[wrongdoing] is that a `medical procedure poorly performed 
might constitute negligence, while a medical procedure 
correctly performed that was not consented to might constitute 
an intentional tort.'''\95\
---------------------------------------------------------------------------
    \94\See Garner, BA (editor-in-chief), Black's Law Dictionary (9th 
ed. 2009), (``malpractice: medical malpractice'') (available online at: 
http://www.westlaw.com); and Keeton, WP, Dobbs, DB, Keeton, RE, and 
Owen, DG, Prosser and Keeton on Torts (5th ed. 2004), pp. 185-187 (West 
Group, Hornbook Series).
    \95\Congressional Research Service, Medical Malpractice Liability 
Reform: Legal Issues and 50-State Surveys on Tort Reform Proposals, 
Rept. No. R41661, p. 2 (Mar. 28, 2011).
---------------------------------------------------------------------------
    Traditionally, the principals of medical malpractice 
liability and the procedures for the conduct of medical 
malpractice lawsuits have been governed by state law.\96\ In 
fact, it has always been that way.
---------------------------------------------------------------------------
    \96\Id. at Summary.
---------------------------------------------------------------------------
    Periodically, however, Congress has engaged in a debate 
about various aspects of medical malpractice, generally in 
response to sharply rising medical malpractice insurance 
premiums for physicians as well as reports of activities 
strongly associated with such increases--the difficulty of 
doctors in some specialties obtaining any malpractice coverage 
at all and the decision of many physicians to leave the 
practice of medicine altogether because the insurance they 
could secure was too expensive.\97\ Reform the system and 
premium charges will subsequently fall, resulting in good 
things for doctors, for their patients, and for the nation's 
health care bill--so the argument has gone. This flawed logic 
apparently failed to sway past Congresses, which chose not to 
act upon it.
---------------------------------------------------------------------------
    \97\Congressional Research Service, Medical Malpractice: Background 
and Legislation in the 112th Congress, Rept. No. R41693, p. 1 (Apr. 26, 
2011) (report updated Mar. 16, 2012).
---------------------------------------------------------------------------
    Sponsors of the HEALTH Act/Title III have put forth the 
same defective reasoning, stating that H.R. 5/Title III ``will 
. . . bring down the cost of medical malpractice insurance 
which will reduce the overall cost of health care in this 
country,''\98\ and making lower malpractice insurance premiums 
one of the driving forces behind the legislation.\99\ Yet, data 
indicate that today, the overall medical liability insurance 
market is not in crisis.\100\ They also show it is the direct 
regulation of insurance companies--and not a cap on non-
economic damages (one of the core elements of H.R. 5/Title 
III)--that is responsible for the reductions in insurance 
premiums that have been seen.\101\
---------------------------------------------------------------------------
    \98\Remarks of Rep. Phil Gingrey, House Committee on Energy and 
Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., p. 151 (May 11, 
2011) (transcript of the proceeding).
    \99\HEALTH Act, Section (2)(b)(2); Title III, Section 301(b)(2).
    \100\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, p. 
1 (Apr. 26, 2011) (report updated Mar. 16, 2012); Testimony of Joanne 
Doroshow, Executive Director, Center for Justice & Democracy, House 
Committee on Energy and Commerce, Hearing on the Cost of the Medical 
Liability System Proposals for Reform, Including H.R. 5, HEALTH Act, 
112th Cong., p. 25 (Apr. 6, 2011) (transcript of the proceeding).
    \101\This is precisely what happened in the state of California. 
After the state's cap on non-economic damages for medical malpractice 
cases was enacted in 1975 as part of MICRA, malpractice premium rates 
rose by some 450%. They only dropped in 1988 when state Proposition 103 
was passed, setting up a state regulatory process for insurance rates. 
(Testimony of Joanne Doroshow, Executive Director, Center for Justice & 
Democracy, House Committee on Energy and Commerce, Hearing on the Cost 
of the Medical Liability System Proposals for Reform, Including H.R. 5, 
HEALTH Act, 112th Cong., p. 51 (Apr. 6, 2011) (transcript of the 
proceeding)).
---------------------------------------------------------------------------
    Nor is there compelling evidence that H.R. 5/Title III will 
achieve the other major goals articulated by its 
advocates\102\--to eliminate the practice of so-called 
defensive medicine;\103\ to ``put the focus back on 
patients'';\104\ and to significantly reduce health care 
costs.\105\
---------------------------------------------------------------------------
    \102\HEALTH Act, Section (2)(b); Title III, Section 301(b).
    \103\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, pp. 
4-5; 7 (Apr. 26, 2011) (report updated Mar. 16, 2012); Testimony of 
Allen B. Kachalia, MD, JD, Medical Director, Brigham and Women's 
Hospital (p. 34) and Joanne Doroshow, Executive Director, Center for 
Justice & Democracy (p. 70), House Committee on Energy and Commerce, 
Hearing on the Cost of the Medical Liability System Proposals for 
Reform, Including H.R. 5, Health Act, 112th Cong. (Apr. 6, 2011) 
(transcript of the proceeding).
    \104\Rep. Phil Gingrey, The HEALTH Act: A Real Reform Option 
(online at: http://gingrey.house.gov/News/
DocumentSingle.aspx?DocumentID=240791 (accessed on May 19, 2011). See 
Testimony of Allen B. Kachalia, MD, JD, Medical Director, Brigham and 
Women's Hospital, House Committee on Energy and Commerce, Hearing on 
the Cost of the Medical Liability System Proposals for Reform, 
Including H.R. 5, HEALTH Act, 112th Cong., p. 34 (Apr. 6, 2011) 
(transcript of the proceeding). See also the 2009 letter to Senator 
Orrin Hatch from the Congressional Budget Office (CBO) on the effects 
of medical malpractice reform in which CBO stated that ``. . . imposing 
limits on [the right to sue for damages that result from negligent 
health care] might be expected to have a negative impact on health 
outcomes.'' (Letter from Douglas W. Elmendorf, Director, Congressional 
Budget Office to Senator Orrin G. Hatch, p. 5 (Oct. 9, 2009) (online 
at: http://cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort_Reform.pdf)).
    \105\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, pp. 
4-5 (Apr. 26, 2011) (report updated Mar. 16, 2012).
---------------------------------------------------------------------------
    Despite the poor prognosis for success of the approach 
taken by H.R. 5/Title III, and as previously acknowledged, we 
believe medical malpractice is a very real and significant 
concern that requires appropriate attention. Malpractice 
insurance premiums remain high in some parts of the 
country.\106\ The justice system does not always work as it 
should. Many legitimate malpractice cases are never filed and 
when they are, in some instances, severely injured individuals 
do not receive just compensation; in others, damages appear to 
be excessive.\107\ These issues can and should be addressed in 
the proper forum.
---------------------------------------------------------------------------
    \106\See, e.g., Testimony of Troy M. Tippetts, MD, Past President, 
American Association of Neurological Surgeons, House Committee on 
Energy and Commerce, Hearing on the Cost of the Medical Liability 
System Proposals for Reform, Including H.R. 5, HEALTH Act of 2011, 
112th Cong., p. 115-116 (Apr. 6, 2011) (transcript of the proceeding); 
and comments of Rep. Tim Murphy during the Committee markup of H.R. 5 
(Remarks of Rep. Tim Murphy, House Committee on Energy and Commerce, 
Markup on H.R. 5, HEALTH Act, 112th Cong., p. 43 (May 11, 2011) 
(transcript of the proceeding)).
    \107\Testimony of Allen B. Kachalia, MD, JD, Medical Director of 
Quality and Safety, Brigham and Women's Hospital, House Committee on 
Energy and Commerce, Hearing on the Cost of the Medical Liability 
System Proposals for Reform, Including H.R. 5, HEALTH Act, 112th Cong., 
p. 32 (Apr. 6, 2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    But beyond all this lies the root problem of medical 
malpractice--medical errors. As summarized succinctly by 
Congressional Research Service experts, ``medical errors can 
lead to injury, and injury is the medical basis on which a 
malpractice claim is made.''\108\ Such mistakes appear to be at 
an all-time high. For example, a recent study from the leading 
journal Health Affairs indicates that the number of confirmed 
serious, adverse events occurring in hospitalized patients is 
at least ten times higher than previously reported, with such 
events taking place in one-third of hospital admissions.\109\
---------------------------------------------------------------------------
    \108\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, p. 
6 (Apr. 26, 2011) (report updated Mar. 16, 2012).
    \109\Classen DC, Resar R, Griffin F, Federico F, Frankel T, Kimmel 
N, Whittington JC, Frankel A, Seger A and James BC, `Global Trigger 
Tool' Shows That Adverse Events in Hospitals May Be Ten Times Greater 
Than Previously Measured, Health Affairs, 30, No. 4 (2011):581-589.
---------------------------------------------------------------------------
    H.R. 5/Title III makes no attempt to address this 
fundamental issue. Shockingly, other than improving the 
exchange of information, reducing medical errors and improving 
patient care is not even listed among the purposes of the 
legislation.\110\ Moreover, proponents of the HEALTH Act/Title 
III specifically rejected an amendment offered at the Committee 
markup on H.R. 5 that would have included the achievement of 
these goals in that section of the bill.\111\
---------------------------------------------------------------------------
    \110\HEALTH Act, Section 2(b); Title III, Section 301(b).
    \111\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 201-207; 229-237 (amendment offered by 
Rep. Ed Towns) (May 11, 2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    This makes no sense given that experts on all sides of the 
malpractice issue agree: We must address medical mismanagement 
as part of any fundamental reform of our health care 
system.\112\
---------------------------------------------------------------------------
    \112\``Reform should address how well the malpractice system 
improves the quality of care that we provide. After all, this is one of 
the system's main goals.'' (Testimony of Allen B. Kachalia, MD, JD, 
Medical Director of Quality and Safety, Brigham and Women's Hospital, 
House Committee on Energy and Commerce, Hearing on the Cost of the 
Medical Liability System Proposals for Reform, Including H.R. 5, HEALTH 
Act, 112th Cong., p. 33 (Apr. 6, 2011) (transcript of the proceeding)).
---------------------------------------------------------------------------
    The ACA\113\ takes on this challenge. It includes several 
provisions designed to improve patient safety and reduce 
unnecessary medical errors.\114\ The Administration has already 
begun to use these authorities to address patient safety in a 
significant fashion.\115\ When fully implemented and evaluated, 
theses types of measures are expected to have a positive impact 
on the medical malpractice situation as it exists today.
---------------------------------------------------------------------------
    \113\The ACA is comprised of two public laws, P.L. 111-148 and P.L. 
111-152.
    \114\See, e.g., ACA Section 2702 (Medicaid payment adjustment for 
health care-acquired conditions); Section 3001 (hospital value-based 
purchasing program); Section 3008 (Medicare payment adjustment for 
conditions acquired in hospitals); Section 3011 (national strategy to 
improve health care quality); Section 3012 (interagency working group 
on health care quality); Section 3013 (quality measure development); 
Section 3014 (quality measurement); Section 3015 (quality data 
collection; public reporting); Section 3021 (Center for Medicare and 
Medicaid Innovation); Section 3025 (hospital readmissions reduction 
program); Section 3026 (community-based care transitions program); 
Section 3501 (health care delivery system research; quality improvement 
technical assistance); Section 3503 (medication management services in 
treatment of chronic disease); and Section 3508 (demonstration program 
to integrate quality improvement and patient safety training into 
clinical education of health professionals).
    \115\For a description of these initiatives, see HHS, Partnership 
for Patients: Better Care, Lower Costs (Dec. 14, 2011) (online at 
http://www.healthcare.gov/news/factsheets/partnership041220112.html).
---------------------------------------------------------------------------
    In the meantime and in recognition of the immediate desire 
to address a number of medical malpractice concerns, the ACA 
also provides $50 million for demonstration projects to allow 
states to develop, implement, and evaluate alternatives to 
current malpractice litigation practices and procedures.\116\ 
HHS is now in the process of implementing such projects. In 
addition, the President's budget proposal for FY 2013 calls for 
$250 million in state medical malpractice demonstration 
projects to be administered by the Department of Justice.\117\ 
This demonstration project approach to malpractice reform has 
also been endorsed by a 2010 study on behalf of the Medicare 
Payment Advisory Commission (MedPAC).\118\
---------------------------------------------------------------------------
    \116\AACA, Section 10607.
    \117\U.S. Department of Justice, FY 2013 Performance Budget, Office 
of Justice Programs (Feb. 2012) (online at: http://www.justice.gov/jmd/
2013justification/pdf/fy13-ojp-justific ation.pdf).
    \118\Mello MM, Kachalia A, Evaluation of Options for Medical 
Malpractice System Reform, MedPAC, No. 10-2 (Apr. 2010).
---------------------------------------------------------------------------
    We believe these efforts, combined with those designed to 
improve patient outcomes, form the basis for real and truly 
meaningful medical malpractice reform that can have a 
substantial impact on health care costs. They should be given 
every opportunity to proceed and succeed. As currently 
structured, H.R. 5/Title III cannot produce the same results. 
In our view, then, once again, the legislation should be turned 
back and put aside.

H.R. 5/Title III is not MICRA

    Since its introduction, proponents of the HEALTH Act/Title 
III have suggested that it is modeled on the Medical Injury 
Compensation Reform Act (MICRA),\119\ medical malpractice 
legislation that was enacted in California in 1975.\120\ At 
best, this is an unintentional misreading of the California 
law; at worse, it is an attempt to mislead members into 
believing that a vote for H.R. 5/Title III is a vote for MICRA. 
As the plain language of H.R. 5/Title III makes clear, this is 
simply not true.
---------------------------------------------------------------------------
    \119\M1CRA is codified at different sections within the California 
Code. See Cal. Business and Professions Code, Section 6146; Cal. Civil 
Code, Sections 3333.1 and 3333.2; and Cal. Code of Civil Procedure, 
Section 667.7.
    \120\See, e.g., Section on Background and Need for Legislation for 
this Committee report (Committee Prints: Proposed Matters for Inclusion 
in Reconciliation Recommendations); Internal Memorandum from Committee 
Staff to Members of the House Committee on Energy and Commerce, Full 
Committee Markup on May 10-11, 2011, p. 5., in which Committee staff 
state: ``H.R. 5 mirrors the provisions of MICRA .   . ''; and comments 
of Rep. Joe Pitts during the Committee markup of H.R. 5. (Remarks of 
Rep. Joe Pitts, House Committee on Energy and Commerce, Markup on H.R. 
5, HEALTH Act, 112th Cong., pp. 18-19 (May 10, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    The differences between MICRA and H.R. 5/Title III on a 
number of key issues are stark and important:

 MICRA applies only to cases involving a doctor, a nurse, or a 
        hospital (and similar health care providers)

    The Health Act/Title III is breathtaking in its scope. Its 
provisions--including caps on noneconomic and punitive 
damages--cover all ``health care lawsuits,'' providing 
protections not only for physicians and hospitals, but also for 
nursing homes, insurance companies, health maintenance 
organizations, medical device manufacturers, and pharmaceutical 
companies.\121\ This approach goes far beyond what is typically 
contemplated as a medical malpractice case.
---------------------------------------------------------------------------
    \121\HEALTH Act, Section 9(9); Title III, Section 308(9).
---------------------------------------------------------------------------

  MICRA applies only to cases of professional negligence and 
        not other causes of action. 

    H.R. 5/Title III takes in all ``health care liability 
actions . . . regardless of the theory of liability'' on which 
a lawsuit is based.\122\ This includes cases of intentional 
wrongdoing--cases in which a patient does not consent to a 
medical or health care service--as well as negligence.
---------------------------------------------------------------------------
    \122\HEALTH Act, Section 9(8); Title III, Section 308(8)
---------------------------------------------------------------------------

  MICRA does not include any limitations on claims brought 
        against pharmaceutical and medical device companies.

    Except in rare instances, the HEALTH Act/Title III provides 
complete immunity from punitive damages to manufacturers of 
drugs and devices that have been approved by the FDA or that 
are generally recognized as being safe and effective in 
accordance with FDA standards.\123\ Such blanket immunity is 
virtually unprecedented.\124\
---------------------------------------------------------------------------
    \123\HEALTH Act, Section 7(c); Title III, Section 306(c).
    \124\Generally speaking, punitive damages cannot be assessed 
against vaccine manufacturers under the National Vaccine Injury 
Compensation Program (established in Title 21 of the Public Health 
Service Act) in those vaccine injury cases in which an injured person 
rejects compensation and elects to file a lawsuit in court. However, as 
discussed in these views on the issue of states' rights, we believe the 
Compensation Program is a unique and special initiative, completely 
distinguishable from the HEALTH Act/Title III.
---------------------------------------------------------------------------

  MICRA does not cap punitive damages or require special action 
        before punitive damages can be awarded.

    H.R. 5/Title III includes a cap on punitive damages--
$250,000 or twice the amount of noneconomic damages, whichever 
is greater.\125\ Moreover, H.R. 5/Title III establishes special 
procedures and conditions that must be met before punitive 
damages can be sought in a lawsuit,\126\ making it far more 
difficult for such damages to be awarded.
---------------------------------------------------------------------------
    \125\HEALTH Act, Section 7(b)(2); Title III, Section 306(b)(2).
    \126\HEALTH Act, Section 7(a); Title III, Section 306(a).
---------------------------------------------------------------------------

  MICRA restricts its limitations on attorney contingency fees 
        only to cases brought against health care providers.

    The HEALTH Act/Title III imposes limits on contingency fees 
for attorneys involved in a much broader spectrum cases, 
including those in which a claim is brought against a 
pharmaceutical or medical device manufacturer.\127\ Such 
limits, in effect, create hurdles for an injured party to 
obtain the best possible legal representation.
---------------------------------------------------------------------------
    \127\HEALTH Act, Section 5; Title III, Section 304.
---------------------------------------------------------------------------
    These dramatic differences between the two pieces of 
legislation--along with others--illustrate just how misguided 
and deceptive it is to assert that H.R. 5/Title III is a MICRA 
look-alike. Moreover, these distinctions highlight the extreme 
nature of H.R. 5/Title III. Indeed, the HEALTH Act/Title III 
not only goes far beyond what is covered and considered by 
MICRA; it is, in fact, a constellation of reforms that when 
taken together in a single package, constitutes a radical 
transformation of the nation's tort system and not simply 
medical malpractice reform. Such transformation is neither 
necessary nor warranted and certainly is not what MICRA stands 
for.

H.R. 5/Title III Is an assault on States' rights

    At its core, H.R. 5/Title III is a wholesale refutation of 
the federalist approach to medical malpractice liability under 
which states have traditionally developed their own law and 
established their own rules to govern these kinds of 
cases.\128\ Every state is affected by the legislation and, 
despite suggestions to the contrary, no state will be able to 
keep its current malpractice law intact.\129\
---------------------------------------------------------------------------
    \128\States have traditionally set their own rules and procedures 
for dealing with other health-related matters, e.g., licensure of 
medical professionals and the regulation of health insurance.
    \129\``I have heard or been briefed that Section 11 [state 
flexibility] of H.R. 5 does protect the states' rights, but if you read 
it, it is extremely restrictive, and most states that have medical 
liability or medical malpractice reform laws will have this federal law 
supersede it. Read Section 11. It is a one size fits all.'' (Remarks of 
Rep. Lee Terry, House Committee on Energy and Commerce, Markup on H.R. 
5, HEALTH Act, 112th Cong., p. 26 (May 10, 2011) (transcript of the 
proceeding)).
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    Such action is troubling on many fronts. Of greatest 
concern perhaps--beyond the bill's direct and unjustified 
attack on states' rights--is the magnitude of what is 
contemplated under the legislation.
    In one form or another, all 50 states have addressed the 
issue of medical malpractice liability and no two states have 
come out in exactly the same place. Instead, each state has 
developed a process and set of procedures for medical 
malpractice cases that best meet the needs of its citizens and 
own legal system. Thus, for example, some states have enacted 
caps on damages in malpractice cases; other states have laws or 
even constitutional provisions that specifically prohibit them. 
The same can be said for many of the other reforms included in 
the HEALTH Act/Title III such as those related to joint and 
several liability, statutes of limitations, attorney 
contingency fees, and periodic payments for awards.\130\
---------------------------------------------------------------------------
    \130\Congressional Research Service, Medical Malpractice Liability 
Reform: Legal Issues and 50-State Surveys on Tort Reform Proposals, 
Rept. No. R41661 (Mar. 29, 2011).
---------------------------------------------------------------------------
    No state, however, has attempted to capture every action 
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''\131\ under the umbrella 
of a single medical malpractice reform initiative. No state, 
then--not a single one--has in place the ``new world'' 
malpractice order set out in H.R. 5/Title III.
---------------------------------------------------------------------------
    \131\HEALTH Act, Section 9(7); Title III, Section 308(7).
---------------------------------------------------------------------------
    The sweep of H.R. 5/Title III is simply stunning. In short, 
advocates of the HEALTH Act/Title III would have the federal 
government strike down the medical malpractice law of all 50 
states\132\ and replace it with their own, uniform, first-of-a-
kind version of what that law should be. It comes as no 
surprise, then, that the bipartisan National Conference of 
State Legislatures strongly opposes the legislation and 
concludes that ``federal malpractice legislation is 
unnecessary.''\133\
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    \132\The HEALTH Act/Title III allows for only two exceptions under 
which state law would not be preempted: (a) state law that provides 
greater procedural or substantive protections for health care providers 
and organizations than those found in the legislation (HEALTH Act, 
Section 11(b)(2)); Title III, Section 310(b)(2)); and (b) state law 
that specifies an exact dollar figure for a cap on either non-economic 
or punitive damage--such figures would remain untouched, regardless of 
their amount (HEALTH Act, Section 11(c); Title III, Section 3120(c)). 
The former demonstrates the one-sided approach of the HEALTH Act/Title 
III--state laws that protect health care providers and organizations 
are preserved while state laws that protect patients and consumers are 
tossed out.
    \133\Letter from Assemblyman William Horne (NV) and Rep. Jerry 
Madden (TX), National Conference of State Legislatures, to Rep. Joe 
Pitts and Rep. Frank Pallone (Apr. 4, 2011) (online at: http://
www.ncsl.org/default.aspx?tabid=22497).
---------------------------------------------------------------------------
    The inconsistency of this vision cannot go unmentioned. By 
and large, proponents of H.R. 5/Title III are the very same 
Committee members who have staunchly spoken out in favor of 
states' rights--at times even with respect to medical 
malpractice law.\134\ Yet, in this instance, they have squarely 
turned their backs on this principle. This reincarnation is 
stunning as well.\135\
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    \134\See, e.g., the debate over the amendment offered by Rep. Tammy 
Baldwin during the Committee markup of both H.R. 5 and Title III. The 
text of that amendment reads: ``Nothing in this Act shall be construed 
to modify or preempt any substantive or procedural state law governing 
medical malpractice or medical liability cases or to impair state 
authority regarding legal standards or procedures used in medical 
malpractice or medical product liability cases.'' This language is 
identical to that found in Section 2(c) of H.R. 816, Provider Shield 
Act of 2011, introduced by Rep. Phil Gingrey, the primary sponsor of 
H.R. 5/Title III, in February 2011. Yet Rep. Gingrey, along with two 
other co-sponsors of H.R. 816, Reps. Tim Murphy and Michael Burgess--as 
well as other proponents of the HEALTH Act/Title III--voted against the 
Baldwin amendment. (House Committee on Energy and Commerce, Markup on 
Committee Prints: Proposed Matters for Inclusion in Reconciliation 
Recommendations, 112 Cong., pp. 218-225; 353-360; Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 6-65 (amendment offered by Rep. Tammy 
Baldwin) (May 11, 2011) (transcript of the proceedings)). These members 
went on to reject a narrower amendment to carve out and preserve only 
state constitutional provisions that address medical malpractice 
liability. (House Committee on Energy and Commerce, Markup on Committee 
Prints: Proposed Matters for Inclusion in Reconciliation 
Recommendations, 112 Cong., pp. 226-235; 360-374; House Committee on 
Energy and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., pp. 66-
88 (amendment offered by Rep. John Barrow) (May 11, 2011) (transcript 
of the proceedings)).
    During the markup on H.R. 5 Rep. Lee Terry emphasized how support 
for H.R. 5 is inconsistent with support for states' rights: ``It seems 
ironic to me that as someone who passionately opposed the 
nationalization of our health care based on the fact that this was 
extreme federalism and usurps states' rights that now, because it is 
politically expedient for us on this side of the aisle, that we are now 
engaging in that same philosophical conduct.'' (Remarks of Rep. Lee 
Terry, House Committee on Energy and Commerce, Markup on H.R. 5, HEALTH 
Act, 112th Cong., p. 26 (May 10, 2011) (transcript of the proceeding)). 
Rep. Terry's point is underscored in an op-ed piece against H.R. 5, 
penned by Professor Randy Barnett of Georgetown University Law Center 
at the very time the Committee report on H.R. 5 was filed. Professor 
Barnett is a well-known and ardent opponent of the ACA who has twice 
this year testified against the law before Congress, co-authored the 
National Federation of Independent Business's amicus brief on the 
constitutionality of the Act for the 11th Circuit Court of Appeals, and 
has appeared with Republicans to promote its repeal. In his op-ed 
piece, Professor Barnett states:

      But tort law--the body of rules by which persons seek 
      damages for injuries to their person and property--has 
      always been regulated by the states, not the federal 
      government. Tort law is at the heart of what is called the 
      `police power' of states. . . . Indeed, if Congress can now 
      regulate tort law, which has always been at the core of 
      state powers, then Congress, and not the states, has a 
      general police power. . . . While I strongly support 
      reforming our malpractice laws to protect honest doctors 
      from false claims and out-of-control state juries, this 
      reform must come at the state level, as it has in recent 
      years. Constitutional law professors have long cynically 
      ridiculed a `fair-weather federalism' that is abandoned 
      whenever it is inconvenient to someone's policy 
      preferences. If House Republicans ignore their pledge to 
      America to assess the Constitution themselves, and invade 
      the powers `reserved for the states' affirmed by the Tenth 
---------------------------------------------------------------------------
      Amendment, they will prove my colleagues right.

    Barnett, R, Tort Reform and the GOP's Fair-Weather Federalism, 
Washington Examiner (May 21, 2011). It is also noteworthy that during 
Committee consideration of H.R. 5, one proponent of the bill pointed to 
the efforts of Mississippi Governor Haley Barbour in enacting a 
``comprehensive tort reform law that has significantly reshaped our 
[Mississippi] medical liability system'' as a model Congress should 
``emulate.'' (Remarks of Rep. Gregg Harper, House Committee on Energy 
and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., p. 47 (May 10, 
2011) (transcript of the proceeding)). Yet Governor Barbour is on 
record before the Committee in opposing federal legislation that would 
preempt state medical malpractice law. (Committee on Energy and 
Commerce, Hearing on the Consequences of Obamacare: Impact on Medicaid 
and State Health Care Reform, 112th Cong., p. 111 (Mar. 1, 2011) 
(transcript of the proceeding)).
    \135\We are compelled to comment as well on the inconsistency 
concerning the assertions of H.R. 5/Title III advocates regarding the 
legislation's constitutional authority. They cite Article I, Section 8, 
Clause 3 of the Constitution as the basis for the legislation, stating 
that ``health-care related lawsuits are activities that affect 
interstate commerce'' and argue that such lawsuits contribute to the 
high costs of health care. (Statement of Rep. Phil Gingrey, 
Congressional Record, H434 (Jan. 24, 2011)). Yet, for the past two 
years, supporters of the HEALTH Act/Title III have argued precisely the 
opposite with respect to the ACA--that its provisions violate the 
Constitution's Commerce Clause even though they too are designed to 
address the high costs of health care.
---------------------------------------------------------------------------
    HEALTH Act/Title III proponents cite two statutes in 
support of their federalist approach to medical malpractice 
reform\136\--the Federal Torts Claim Act (FTCA)\137\ and the 
National Childhood Vaccine Injury Act\138\--as examples of 
congressional intervention in medical malpractice liability. We 
submit that neither law is on point.
---------------------------------------------------------------------------
    \136\See, e.g., the comments of Rep. Brian Bilbray (pp. 23-24); 
Rep. Phil Gingrey (p. 25); and Rep. Bill Cassidy (pp. 31-32) on this 
point during the Committee markup on H.R. 5 (House Committee on Energy 
and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., (May 11, 2011) 
(transcript of the proceeding)).
    \137\United States Code, Title 28, Chapter 171.
    \138\Public Health Service Act, Title 21, Subtitle 2.
---------------------------------------------------------------------------
    Enacted in 1946, the FTCA was established to provide a 
mechanism through which the federal government could be sued 
and held liable for damages in civil or tort actions. (Until 
then, under our traditional common law borrowed from the 
British, the government enjoyed sovereign immunity, meaning 
that it could never be held liable for claims, regardless of 
its degree of culpability.) The FTCA partially waives the 
government's sovereign immunity by authorizing civil suits 
(with some exceptions) to be brought against the United States 
and making federal employees acting within the scope of their 
employment immune from liability--that is, it makes the United 
States liable for torts of its employees to the extent private 
employers are liable under state law for the torts of their 
employees.
    In contrast to the HEALTH Act/Title III, the FTCA does not 
create federal tort law; it simply makes the federal government 
subject to state tort law. The law of the state in which the 
misconduct occurs governs both the substantive and procedural 
aspects of FTCA cases.
    Congress can, however, place limitations on its waiver of 
sovereign immunity. It has, for example, not waived sovereign 
immunity for punitive damages, so no individual can collect 
such damages from the federal government. Under the FTCA 
specifically, Congress has capped attorney fees and requires 
that individuals seeking redress against the federal government 
first file an administrative claim with the appropriate federal 
agency before bringing a lawsuit in federal court. But once 
that lawsuit is initiated, state law will fully apply, 
including state law regarding the award of non-economic 
damages.\139\ Under H.R. 5/Title III, a completely different 
set of rules--those established under the legislation--would be 
used instead.\140\
---------------------------------------------------------------------------
    \139\The following example illustrates how the FTCA interacts with 
state law. A doctor employed by a federally-qualified health center in 
Delaware commits medical malpractice on one of the center's patients. 
Since the doctor is a federal employee, the patient cannot sue either 
the health center or the doctor directly, but can file a claim against 
the federal government under the procedures set forth in the FTCA. 
Under those procedures, the patient must first file an administrative 
claim with HHS. If the patient is not satisfied with the determination 
made by HHS, she may then file a medical malpractice cause of action 
against the government in the U.S. District Court of Delaware. That 
action will be based on Delaware state law which does not cap non-
economic damages.
    \140\See HEALTH Act, Section 9(8); Title III, Section 308(8) which 
defines ``health care liability action'' to include malpractice cases 
brought in federal as well as state court. Moreover, the HEALTH Act/
Title III specifically supersedes provisions of the FTCA related to 
damages, attorney contingency fees, statutes of limitations, and 
periodic payments of awards. (HEALTH Act, Section 11(a); Title III, 
Section 310(a)).
---------------------------------------------------------------------------
    The National Childhood Vaccine Injury Act does not work 
either as a justification for H.R. 5/Title III. Created in 
1986, this statute established a new ``no-fault'' system to 
compensate individuals who have been injured by vaccines 
routinely administered to children. Unlike H.R. 5/Title III, 
the scope of this law is quite narrow and targeted. It was 
enacted to address two very specific and overriding concerns 
with which the federal government has a direct interest: ``(a) 
the inadequacy--from both the perspective of vaccine-injured 
persons as well as vaccine manufacturers--of the [then current] 
approach to compensating those who have been damaged by a 
vaccine; and (b) the instability and unpredictability of the 
childhood vaccine market.''\141\ As discussed in our 
Introduction to these dissenting views, we do not believe 
supporters of H.R. 5/Title III have made the same kind of 
compelling argument to rationalize direct federal intervention 
into the issue of medical malpractice liability. Nor do we 
believe that the legislation is designed to adequately address 
that problem.
---------------------------------------------------------------------------
    \141\House Committee on Energy and Commerce, National Childhood 
Vaccine Injury Act of 1986, 99th Cong., p. 7 (Sept. 26, 1986) (H. Rept. 
99-908, Part 1).
---------------------------------------------------------------------------
    But beyond their differences in purpose and scope is the 
primary substantive distinction between H.R. 5/Title III and 
the vaccine compensation law. Under the National Childhood 
Vaccine Injury Act, injured patients who meet the relevant and 
relatively generous eligibility criteria are awarded 
compensation from a fund supported by a federal tax on 
specified vaccines. Those who are dissatisfied with their 
awards may take their claim to court.
    It is true that such claims are litigated under special 
rules and limitations that, like the HEALTH Act/Title III, 
affect state tort law. But those rules and limitations must be 
understood in the context of the larger National Childhood 
Vaccine Injury Program which, as previously noted, makes 
federally supported compensation--including economic and non-
economic damages--available to injured persons. H.R. 5/Title 
III does not, of course, include a compensation component; it 
merely changes the rules under which compensation can be 
awarded, making it far more difficult for justice to be best 
served. The difference between the two pieces of legislation in 
this regard could not be more profound.
    In sum, H.R. 5/Title III is unprecedented in its approach 
to, and in its reach and impact on, state medical malpractice 
liability law--for no justified end. And there is no relevant 
federal statute which legitimately serves as its prototype. In 
our view, then, this legislation--on these grounds alone--
should be rejected.

H.R. 5/Title III reaches too far and protects too many

    As described in our Background and Overview to these 
dissenting views, medical malpractice typically refers to 
negligent wrongdoing by health professionals, resulting in harm 
to a patient. As we also discussed, H.R. 5/Title III goes well 
beyond this understanding to include all health care liability 
actions involving ``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.''\142\ 
Such a broad, expansive and sweeping perspective of medical 
malpractice is not to be found in the law books of any of the 
50 states. H.R. 5/Title III simply goes too far.
---------------------------------------------------------------------------
    \142\HEALTH Act, Section 9(7); Title III, Section 308(7).
---------------------------------------------------------------------------
    Three areas that H.R. 5/Title III touches directly received 
considerable attention during the Committee's initial 
deliberations over the legislation:
           the HEALTH Act/Title III's inclusion of 
        intentional torts;
           its protections for nursing homes; and
           the inclusion of lawsuits involving FDA-
        approved drugs and medical devices.
    Here we address the first two issues; the last is discussed 
separately in the section, H.R. 5/Title III Is An Unwarranted 
Windfall for Pharmaceutical and Medical Device Companies.

Intentional harms

    In the context of medical malpractice, an intentional tort 
or wrongdoing occurs when a patient does not consent to a 
procedure or service--even if it is performed or provided 
correctly. In such cases, the health care provider is 
``generally alleged to have intentionally acted in a fashion 
that ultimately caused harm to the patient.''\143\ Intentional 
torts include claims such as assault, sexual assault and rape, 
battery, false imprisonment (unlawfully holding someone against 
her or his will), invasion of privacy, conversion (theft), 
misrepresentation, and fraud.\144\
---------------------------------------------------------------------------
    \143\Congressional Research Service, Medical Malpractice Liability 
Reform: Legal Issues and 50-State Surveys on Tort Reform Proposals, 
Rept. No. R41661, p. 2 (Mar. 28, 2011).
    \144\See Garner, BA (editor-in-chief), Black's Law Dictionary (9th 
ed. 2009) (``battery: tort''); (``tort: intentional tort'') (available 
online at: http://www.westlaw.com); and Keeton, WP, Dobbs, DB, Keeton, 
RE, and Owen, DG, Prosser and Keeton on Torts (5th ed. 2004), pp. 33-54 
(West Group, Hornbook Series).
---------------------------------------------------------------------------
    Except in those instances in which a claim is based upon 
criminal liability,\145\ the HEALTH Act/Title III affords its 
liability protections to those who have committed these and 
similar kinds of acts, including conduct that results in 
egregious injury or even death to patients. Nothing in the 
Committee's deliberations over H.R. 5/Title III--not a shred of 
testimony presented at the Health Subcommittee hearing or any 
point of debate made during the Committee markup of either H.R. 
5 or Title III--documents or justifies this position. This is 
yet another example of how extreme H.R. 5/Title III is in its 
approach to medical malpractice reform.
---------------------------------------------------------------------------
    \145\HEALTH Act, Section 9(7); Title III, Section 308(7).
---------------------------------------------------------------------------
    Consider these real world examples:
     Dr. Ben D. Ramaley, a Connecticut obstetrician/
gynecologist, substituted his own sperm for that of a patient's 
husband during an artificial insemination procedure. The couple 
went on to have a set of twins, only to learn after their birth 
and a subsequent paternity test that the treating physician 
(and not the husband) was the biological father. The state's 
Department of Public Health fined the doctor $10,000 for 
``using the wrong man's sperm'' in the procedure, but allowed 
him to keep an unrestricted license to practice medicine. The 
couple's medical malpractice lawsuit against the physician was 
settled, but there is no record of Dr. Ramaley's ever facing 
criminal charges.\146\
---------------------------------------------------------------------------
    \146\Greenwich Times, Doctor Uses Wrong Man's Sperm to Produce 
Twins (Nov. 12, 2009) (online at: http://www.ctpost.com/default/
article/Doctor-uses-wrong-man-s-sperm-to-produce-twins-215345.php).
---------------------------------------------------------------------------
     Dr. Kermit Gosnell, a Pennsylvania physician, 
performed late term abortions on minority and low-income 
women--many of whom were pregnant for the first time--without 
informing the mothers he was doing so. He falsified ultrasounds 
used to determine the duration of the pregnancy and taught his 
staff to hold the probe in such a way that the fetuses looked 
smaller. Few, if any, of the women who were sedated during the 
procedure knew that their babies had been delivered alive. And 
because they were misled about the length of their pregnancies, 
none of them was given the opportunity to make an informed 
choice about what to do about their pregnancy. Dr. Gosnell is 
now facing criminal charges, but has not yet been found guilty 
of any crime. At least 46 lawsuits have been filed against him 
in the past.\147\
---------------------------------------------------------------------------
    \147\MSNBC, `House of Horrors' Alleged at Abortion Clinic (Jan. 19, 
2011) (online at: http:www.msnbc.msn.com/id41154527/ns/us_news-
crime_and_courts/t/house-horrors-alleged-abortion-clinic/); ABC News, 
Alleged Victim Calls Philadelphia Abortion Doc Kermit Gosnell a 
`Monster' (Jan. 25, 2011) (online at: http://abcnews.go.com/US/alleged-
victim-calls-philadelphia-abortion-doctor-kermit-gosnell/
story?id=12731387).
---------------------------------------------------------------------------
     Mildred Taylor, who suffered from Alzheimer's 
disease, but was otherwise healthy, was a resident at the 
Prestige Assisted Living facility in Marysville, California. On 
June 24, 2004, the wheelchair-bound, 98-year old was falsely 
imprisoned when she was left outside overnight by facility 
staff. No one made any attempt to find her, even though staff 
knew she was not in her room. No one called Ms. Taylor's family 
and no one contacted the police to report her missing. She was 
not found until the next morning when her body temperature had 
dropped to 93 degrees and her right leg had become severely 
swollen. Ms. Taylor remained bed-ridden and debilitated until 
her death less than one month later. The California Department 
of Social Services cited Prestige for violating Ms. Taylor's 
rights, but did not even fine the company.\148\
---------------------------------------------------------------------------
    \148\Appeal Democrat, Suit Filed in Death of Patient (June 9, 2005) 
(online at: http://www.appeal-democrat. com/news/prestige-15049-taylor-
lawsuit.html).
---------------------------------------------------------------------------
    In each of these cases, a ``health good or service''--as 
that term is defined in H.R. 5/Title III\149\--was provided, 
arguably bringing them within the purview of the legislation. 
In the instance of Mildred Taylor, we think our position is 
made even stronger by the comments found in the majority views 
of the Committee report on H.R. 5 that the term ``health care 
goods and services'' is intended to include those ``involving 
the assessment or care of the health of human beings'' as well 
as the ``monitoring, supervision, and provision of direct 
assistance to claimants.''\150\
---------------------------------------------------------------------------
    \149\HEALTH Act, Section 9(12); Title III, Section 308(12).
    \150\House Committee on Energy and Commerce, HEALTH Act, 112th 
Cong., p. 28 (H. Rept. 112-39, Part 2).
---------------------------------------------------------------------------
    Supporters of the HEALTH Act/Title III point to the 
legislation's exclusion of actions constituting criminal 
liability as the basis for arguing that examples such as these 
and those discussed during the Committee markup on H.R. 5\151\ 
would fall outside the reach of H.R. 5/Title III. But 
intentional tort is not the same as criminal liability. In 
criminal cases, individuals must be selected for prosecution, 
tried in a court of law, and successfully convicted using a 
standard of proof that is appropriately high--proof beyond a 
reasonable doubt. In contrast, many incidents of intentional 
tort--even if they meet the elements of a crime--are never 
reported, let alone prosecuted.\152\ Indeed, Dr. Ramaley does 
not appear to ever have faced criminal charges; Dr. Gosnell has 
not yet been convicted of anything.\153\ And it is unclear how 
an entity such as a nursing home could be charged with a crime 
in case like Mildred Taylor's. We submit that under H.R. 5/
Title III, these health care providers could escape significant 
civil liability as wel1.\154\
---------------------------------------------------------------------------
    \151\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 103-106 (May 11, 2011) (transcript of the 
proceeding).
    \152\This is especially true with regard to sexual assaults. See 
U.S. Department of Justice, Bureau of Justice Statistics, Rape and 
Sexual Assault: Reporting to the Police and Medical Attention, 1992-
2000 (Aug. 2002) (online at: http://bjs.ojp.usdoj.gov/content/pub/pdf/
rsarp00.pdf).
    \153\NBC 10 Philadelphia, Gosnell in Court on Drug Charges (Apr. 
26, 2012) (online at www.nbcphiladelphia.com/news/local/Gosnell-Pill-
Mill-Abortion-Doctor-149141535.html).
    \154\This argument made by H.R. 5/Title III advocates is undercut 
further by the very language of the legislation which lists among the 
factors to be considered in determining punitive damages ``any criminal 
penalties imposed on [a party] as a result of the conduct complained of 
. . .'' (HEALTH Act, Section 7(b)(1)(E); Title III, Section 
306((b)(1)(E)). If criminal acts are outside the scope of H.R. 5/Title 
III, how can such acts be taken into account in determining punitive 
damages under the legislation?
---------------------------------------------------------------------------
    Advocates of H.R. 5/Title III also maintain that even in 
the absence of criminal activity, cases like these are not 
protected under the legislation because they are extreme and 
non-therapeutic in nature and thus do not meet the definition 
of a health care good or service.\155\ We struggle to find text 
in the legislation that supports this argument. At the very 
least, the language is ambiguous on the point. Regardless, 
there is no bright line here. Consider, for example, the 
situation in which a psychiatrist has consensual sex with a 
patient because he believes--and convinces the patient--that 
this is the best way to ``treat'' her emotional problems. Do 
the protections of H.R. 5/Title III apply in any subsequent 
malpractice lawsuit brought by the patient? Again, based upon 
the text of the legislation, we believe the answer is unclear 
at best.
---------------------------------------------------------------------------
    \155\House Committee on Energy and Commerce, Markup of H.R. 5, 
HEALTH Act, 112th Cong., pp. 196-199 (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    Supporters of the HEALTH Act/Title III argue further that 
the availability of punitive damages in cases in which 
``malicious intent to injure''\156\ occur should address any 
concerns we have about the inclusion of intentional torts in 
this legislation because, in their view, such actions are de 
facto, ones of this character.\157\ We are not comforted at all 
by this assertion; indeed, we believe it is Orwellian.
---------------------------------------------------------------------------
    \156\HEALTH Act, Section 7(a); Title III, Section 306(a).
    \157\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 193-194 (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    The purpose of the provisions of H.R. 5/Title III on 
punitive damages is to limit them or cut them out altogether. 
Although ``malicious intent to injure'' is one ground upon 
which an injured person may seek punitive damages, the punitive 
damages procedural hurdles\158\ and monetary limits in the 
bill--$250,000 or two times the amount of economic damages 
awarded\159\--still apply. Moreover, this argument ignores 
other features of the legislation that may adversely affect an 
individual who has experienced an intentional tort and seeks 
compensation for the wrong that has occurred.\160\ In sum, we 
believe it is unconscionable for the federal government to 
place these kinds of restrictions on anyone--such as those 
individuals described in the cases above--who have been injured 
as a result of an intentional tort.
---------------------------------------------------------------------------
    \158\HEALTH Act, Section 7(a); Title III, Section 306(a).
    \159\HEALTH Act Section 7(b)(2); Title III, Section 306(b)(2).
    \160\Such an example is the elimination of the legal standard of 
joint and several liability which allows injured persons to sue all 
responsible parties and recover from each one in proportion to the 
degree of fault, or to sue any one party and recover the entire amount 
of damages. (HEALTH Act, Section 4(d); Title III, Section 303(d)).
---------------------------------------------------------------------------
    We find these provisions of the legislation particularly 
troublesome because during the debate over the issue of 
intentional torts during the markup of H.R. 5, there appeared 
to be consensus among the members who participated that these 
activities are not the stuff of traditional medical malpractice 
cases. And so it was especially disappointing that an amendment 
to clarify and resolve the matter was not adopted. Under that 
amendment, intentional torts would be removed from the scope of 
the bill.\161\ Much to our amazement and consternation, the 
amendment was resoundly defeated, keeping intact liability 
protections for actions that--regardless of one's position on 
medical malpractice reform--never should have been a part of 
the HEALTH Act/Title III in the first place.
---------------------------------------------------------------------------
    \161\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 190-200; 222-229 (amendment offered by 
Ranking Member Henry Waxman) (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------

Nursing homes and other health care entities

    H.R. 5/Title III covers lawsuits brought against not only 
providers such as physicians or hospitals--the typical medical 
malpractice situation--but also cases involving ``health care 
organizations,'' including nursing homes, health maintenance 
organizations (HMOs), and health insurance companies.\162\ As 
such, these entities are entitled to the liability protections 
afforded under the bill, including the caps on non-economic and 
punitive damages.
---------------------------------------------------------------------------
    \162\HEALTH Act, Sections 9(7) and 9(10); Title III, Section 308(7) 
and 308(10).
---------------------------------------------------------------------------
    We have found no credible evidence to support the inclusion 
of these entities within the range of the HEALTH Act/Title III. 
Nursing homes, HMOs, and insurance companies were not even 
discussed during the Health Subcommittee hearing on the 
legislation. And the debate in the Committee markup on H.R. 5 
did nothing to persuade us to see the need to include these 
organizations within the realm of ``medical malpractice 
reform.''
    In fact, our concern over the inclusion of these businesses 
in H.R. 5/Title III has only grown. This is especially true 
with respect to nursing homes which continue to be the subject 
of countless cases of negligence and even intentional 
wrongdoing. According to a Government Accountability Office 
(GAO) report on this topic, the proportion of nursing homes 
with serious quality problems remains unacceptably high, 
despite a decline in the incidence of such reported problems. 
Actual harm or more serious deficiencies were cited for 20% or 
some 3500 nursing homes during an 18-month period.\163\ A more 
recent GAO report concludes that serious care problems in 
nursing homes continue to be of concern.\164\ These findings 
were reinforced by the several examples provided during the 
debate over this issue in the Committee markup on H.R. 5.\165\
---------------------------------------------------------------------------
    \163\GAO, Nursing Home Quality: Prevalence of Serious Problems, 
While Declining, Reinforces Importance of Enhanced Oversight, pp. 3-4, 
GA0-03-561 (July 2003).
    \164\GAO, High-Risk Series: An Update, p. 159, GA0-11-278 (Feb. 
2011).
    \165\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 103-105 (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    Supporters of the legislation contend that liability 
protections are necessary for nursing homes to decrease their 
liability costs and increase access to liability insurance 
coverage.\166\ But a 2010 study conducted by the same firm 
whose work was cited in support of this argument during the 
Committee markup of H.R. 5 suggests that these issues have been 
largely resolved. In fact, according to this study, the average 
annual loss (i.e., expenses related to liability insurance 
claims) per nursing home bed decreased from $1,710 in 2001 to 
$1,270 in 2009.\167\ And an article in Insurance Journal on the 
study concluded that ``liability insurance pricing and 
availability for long term care providers are good and getting 
better'' and attributed this trend to a new-found emphasis on 
quality of care.\168\
---------------------------------------------------------------------------
    \166\See, e.g., the comments of Rep. Pete Olson during the markup 
of H.R. 5 on this point. (Remarks of Rep. Pete Olson, House Committee 
on Energy and Commerce, Markup of H.R.. 5, HEALTH Act, 112th Cong., pp. 
106-108; 110-113 (May 11, 2011) (transcript of the proceeding)).
    \167\Aon Risk Solutions, 2010 Long Term Care General Liability and 
Professional Liability Actuarial Analysis (Aug. 2010) (online at: 
http://img.en25.com/Web/A0N/LTC%20Benchmark%20Study_2010_FINAL.pdf).
    \168\Insurance Journal, Growth, Stability and Changes in Store for 
Long Term Care Market (Nov. 14, 2010) (online at: http://
www.insurancejournal.com/magazines/mag-features/2010/11/14/160493.htm).
---------------------------------------------------------------------------
    With regard to the impact of tort reform on these promising 
results, study documents observe that ``while long term care 
liability costs are stable across much of the nation, Arkansas, 
Tennessee, and West Virginia are experiencing high expenses--
known as loss costs--related to insurance claims.''\169\ In the 
context of the HEALTH Act/Title III, it is worth noting that 
two of these states--Arkansas and West Virginia--have both 
enacted some form of tort reform;\170\ yet, according to this 
study, the insurance market in these states remains turbulent. 
This suggests that such reform is not the cure-all advocates of 
H.R. 5/Title III would have us believe.
---------------------------------------------------------------------------
    \169\Aon Risk Solutions, Highest Long Term Care Liability Costs in 
Arkansas, Tennessee and West Virginia: Aon Study Costs Across the Rest 
of the Nation Remain Stable (Aug. 5, 2010) (online at: http://
ir.aon.com/phoenix.zhtml?c=105697&p=irol-
newsArticle&ID=1457169&highlight=).
    \170\Insurance Journal, Growth, Stability and Changes in Store for 
Long Term Care Market (Nov. 14, 2010) (online at: http://
www.insurancejournal.com/magazines/mag-features/2010/11/14/
160493.htm)).
---------------------------------------------------------------------------
    Thus, we remain unconvinced that nursing homes (or any 
other health care organization)\171\ should receive the 
unprecedented protections provided to them under the HEALTH 
Act/Title III. In this respect, too, the legislation is 
unnecessarily and inappropriately broad in its scope and 
therefore, should be rejected.
---------------------------------------------------------------------------
    \171\Physician groups supporting H.R. 5/Title III have in the past 
argued fervently in favor of ensuring that HMOs are held fully 
accountable for injuries that occur to their patients. (See, e.g., the 
position of the American Medical Association on this issue. (American 
Medical News, Both Sides Ready for HMO Liability Fight (Feb. 2004) (on 
line at: http://www.ama-assn.org/amednews/2004/02/16/gvsb0216.htm)). 
Their endorsement of the legislation would appear to undercut that 
concern.
---------------------------------------------------------------------------

H.R. 5/Title III is an unwarranted windfall for pharmaceutical and 
        medical device companies

    H.R. 5/Title III sweeps so-called ``medical products,'' or 
FDA-approved drugs, biologics, and devices into its overly 
broad span. Lawsuits involving drugs and medical devices are 
not the kind of cases that are traditionally considered medical 
malpractice cases, which are ostensibly the subject of the 
legislation. A typical ``medical malpractice'' lawsuit is one 
filed by an injured patient against his or her treating 
physician. In contrast, cases involving medical products are 
filed by patients who are injured--and often killed--by 
defective drugs and medical devices against large, extremely 
well-resourced pharmaceutical or medical device companies.\172\
---------------------------------------------------------------------------
    \172\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including H.R. 5, HEALTH Act, 
112th Cong., p. 5 (Apr. 6, 2011).
---------------------------------------------------------------------------
    The primary rationales advanced by supporters of the 
legislation\173\ simply do not apply to lawsuits relating to 
FDA-approved drugs and medical devices. For instance, 
proponents of the HEALTH Act/Title III argue that it is 
necessary to curtail the practice of defensive medicine.\174\ 
They claim the legislation will bring down the cost of medical 
malpractice insurance\175\ and also fix doctor shortages caused 
by liability exposure.\176\
---------------------------------------------------------------------------
    \173\As discussed in the Background and Overview section of these 
dissenting views, we do not believe H.R. 5/Title III will achieve any 
of the primary goals set forth by its supporters.
    \174\See, e.g., the comments of Rep. Joe Pitts during the Committee 
markup of H.R. 5. (Remarks of Rep. Joe Pitts, House Committee on Energy 
and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., p. 18 (May 9, 
2011) (transcript of the proceeding)).
    \175\See, e.g., the comments of Rep. Phil Gingrey during the 
Committee markup of H.R. 5. (Remarks of Rep. Phil Gingrey, House 
Committee on Energy and Commerce, Markup on H.R. 5, HEALTH Act, 112th 
Cong., p. 151 (May 10, 2011) (transcript of the proceeding)).
    \176\See, e.g., comments of Rep. Olson (pp. 214-215; 225) and Rep. 
Gingrey (p. 221) during the markup of Title III (House Committee on 
Energy and Commerce, Markup on Committee Prints: Proposed Matters for 
Inclusion in Reconciliation Recommendations, 112 Cong.) and comments of 
Rep. Tim Murphy during the Health Subcommittee hearing on H.R. 5. 
(House Committee on Energy and Commerce, Subcommittee on Health, 
Hearing on The Cost of Medical Liability System Proposals for Reform, 
Including H.R. 5, HEALTH Act, 112th Cong., pp. 101; 104 (Apr. 6, 2011). 
(transcript of the proceedings).
---------------------------------------------------------------------------
    Absolutely no justification has been asserted during the 
Committee's deliberations on the legislation for H.R. 5/Title 
III's inclusion of medical products. On the contrary, there was 
much debate about the danger and inappropriateness of covering 
drugs and devices, particularly during the testimony of 
Professor Brian Wolfman at the Health Subcommittee's hearing on 
H.R. 5.\177\
---------------------------------------------------------------------------
    \177\House Committee on Energy and Commerce, Subcommittee on 
Health, Hearing on The Cost of Medical Liability System Proposals for 
Reform, Including H.R. 5, HEALTH Act, 112th Cong., pp. 51-52; 104-107; 
117-121 (Apr. 6, 2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    In our view, the HEALTH Act/Title III will have an 
especially devastating impact on patients injured by defective 
or inadequately labeled drugs and devices. For instance, in 
addition to failing to fully compensate victims of dangerous 
drugs and devices for their non-economic damages, H.R. 5/Title 
III's $250,000 cap on non-economic damages would make it very 
difficult for these individuals to retain competent counsel who 
would be willing to take on the typical large, and well endowed 
pharmaceutical or medical device company.\178\ Most individuals 
who are injured by these products cannot begin to pay for the 
out-of-pocket expenses necessary to finance a potentially 
massive lawsuit against a drug or device manufacturer.\179\ 
Instead, they rely upon a contingency system in which an 
attorney is willing to represent them in exchange for a certain 
percentage of any final recovery in the case.\180\ Particularly 
in cases that are complex and difficult or include very well-
financed defendants, a limit of $250,000 in non-economic 
damages would be insufficient to enable most attorneys to 
afford the protracted litigation process such cases 
involve.\181\
---------------------------------------------------------------------------
    \178\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including H.R. 5, HEALTH Act, 
112th Cong., p. 5 (Apr. 6, 2011).
    \179\Id.
    \180\Id.
    \181\Id.
---------------------------------------------------------------------------
    In his testimony at the Health Subcommittee hearing on H.R. 
5, Professor Wolfman provided a disturbing illustration of this 
concern.\182\ He described a conversation he had with the 
attorney who represented Diana Levine, the injured party 
(plaintiff) in the 2009 U.S. Supreme Court case, Wyeth v. 
Levine.\183\ Ms. Levine brought a lawsuit against Wyeth, one of 
the country's largest pharmaceutical companies, having lost her 
arm by amputation after receiving an inadequately labeled Wyeth 
drug.\184\ After years of litigation, Ms. Levine's case was 
eventually heard by the Supreme Court, which affirmed that 
persons injured by an inadequately labeled FDA-approved drug 
can sue the manufacturer of that product.\185\
---------------------------------------------------------------------------
    \182\Id. at 12.
    \183\Wyeth v. Levine, 129 S.Ct. 1187 (2009).
    \184\Id.
    \185\Id.
---------------------------------------------------------------------------
    Subsequent to the Court's decision, Professor Wolfman spoke 
with Ms. Levine's lawyer. Professor Wolfman asked the attorney 
if he would have taken the Levine case if there had been a 
$250,000 limit on non-economic damages; after a long pause, the 
attorney hesitantly responded ``no.''\186\ Unquestionably, 
then, had the provisions of H.R. 5/Title III been in place 
during the litigation, Ms. Levine might well have lost out in 
securing the stellar and long-term representation she was able 
to obtain under current law. Thus, as the Levine case clearly 
demonstrates, the adverse effects of the kinds of caps found in 
the HEALTH Act/Title III go beyond simply imposing an 
artificial dollar amount on damages.
---------------------------------------------------------------------------
    \186\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including HR. 5, HEALTH Act, 
112th Cong., p. 12 (Apr. 6, 2011).
---------------------------------------------------------------------------
    The limits H.R. 5/Title III puts on attorney contingency 
fees would only exacerbate this problem. With draconian caps on 
the amount that an attorney could collect through his or her 
contingency contracts in place, most plaintiffs' attorneys 
would be financially unable to take on complex product 
liability cases involving drugs and devices.\187\ Mr. Wolfman's 
testimony about his conversation with the attorney in the 
Levine case underscores this point as well.
---------------------------------------------------------------------------
    \187\Id. at 19.
---------------------------------------------------------------------------
    As introduced, H.R. 5 would also abolish punitive damages 
in cases pertaining to FDA-approved drugs and devices, except 
in the most limited circumstances.\188\ Specifically, H.R. 5 
would prohibit punitive damages in cases in which a drug or 
device either received FDA approval or is ``generally 
recognized among qualified experts as safe and 
effective.''\189\
---------------------------------------------------------------------------
    \188\Under Section 7(c)(4) of the HEALTH Act, punitive damages may 
be awarded in such cases only when a person: (a) before or after 
premarket approval, clearance, or licensure of the medical product at 
issue, knowingly misrepresented to or withheld from the FDA information 
that is required to be submitted under the Federal Food, Drug, and 
Cosmetic Act or section 351 of the Public Health Service Act 
(regulation of biological products) that is material and is causally 
related to the harm which the injured party allegedly suffered; or (b) 
made an illegal payment to an official of the FDA for the purpose of 
either securing or maintaining approval, clearance, or licensure of 
such medical product.
    \189\H.R. 5, Section 7(c)(1)(A)(ii); Title III, Section 
306(c)(1)(A)(ii).
---------------------------------------------------------------------------
    Because much information is gained about the safety and 
effectiveness of drugs and devices after they are on the market 
and in use by a broad population of people, it is misguided to 
tie the availability of punitive damages to these products' 
initial FDA approval. Indeed, most product liability lawsuits 
regarding drug safety relate to information that was not 
presented to the FDA at the time of the drug's approval.\190\ 
But under the HEALTH Act/Title III, even a manufacturer that 
fails to exercise due diligence and investigate reports of a 
safety problem could be immunized from punitive damages.
---------------------------------------------------------------------------
    \190\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including HR. 5, HEALTH Act, 
112th Cong., p. 20 (Apr. 6, 2011).
---------------------------------------------------------------------------
    Although an amendment was adopted during the Committee 
markup of H.R. 5 that would permit an award of punitive damages 
in cases in which the defendant caused the drug or device to be 
misbranded or adulterated,\191\ H.R. 5/Title III would still 
have the effect of severely restricting the availability of 
punitive damages in lawsuits involving medical products.
---------------------------------------------------------------------------
    \191\House Committee on Energy and Commerce, Markup of HR. 5, 
HEALTH Act, 112th Cong., pp. 162-164 (amendment offered by Rep. John 
Dingell) (May 11, 2011) (transcript of the proceeding). That amendment 
is included in Title III as Section 306(c)(4)(C).
---------------------------------------------------------------------------
    Punitive damages have a unique and specific function: They 
serve to punish exceptionally outrageous, deliberate, or 
harmful misconduct, and to deter both the wrongdoer and others 
from engaging in similar misconduct in the future.\192\ By 
severely limiting punitive damages in drug and device cases, 
H.R. 5/Title III places all of us in danger because in effect, 
it removes the most potent and effective means of deterring bad 
actors. There is simply no justification for this drastic 
action.
---------------------------------------------------------------------------
    \192\Testimony of Joanne Doroshow, Executive Director, Center for 
Justice & Democracy, House Committee on Energy and Commerce, 
Subcommittee on Health, Hearing on The Cost of Medical Liability System 
Proposals for Reform, Including HR. 5, HEALTH Act, 112th Cong., p. 32 
(Apr. 6, 2011).
---------------------------------------------------------------------------
    This is especially true in light of FDA's recognition of 
the valuable role state-based litigation plays in complementing 
the agency's regulation of drugs and medical devices.\193\ FDA 
is on record in finding that drug and device lawsuits help to 
uncover post-market safety risks that are unknown to the agency 
at the time of approval. Indeed, as a former FDA chief counsel 
has stated: ``FDA regulation of a device cannot anticipate and 
protect against all safety risks to individual consumers. Even 
the most thorough regulation of a product such as an important 
medical device may fail to identify potential problems 
presented by the product. Regulation cannot protect against all 
possible injuries that might result over time.''\194\
---------------------------------------------------------------------------
    \193\Kessler, D and Vladeck D, A Critical Examination of the FDA's 
Efforts to Preempt Failure-to-Warn Claims, Georgetown Law Journal, 
96:461, 463 (Jan. 2008) (online at: http://
www.georgetownlawjournal.org/issues/pdf/96-2/Kessler&Vladeck.PDF).
    \194\Porter, MJ, The Lohr Decision: FDA Perspective and Position, 
Food & Drug Law Journal, 52:7, 11 (Jan. 1997).
---------------------------------------------------------------------------
    Drug and medical device manufacturers will always be better 
positioned and better equipped than the FDA to know the safety 
profile of their products, since they develop and manufacture 
the products, typically receive safety reports about the 
products first, and are required to alert the FDA to any 
product-related risks they uncover. FDA, on the other hand, is 
responsible for overseeing the safety of hundreds of thousands 
of drugs and medical devices. The U.S. Supreme Court recognized 
this reality in Wyeth v. Levine, in which it found: ``The FDA 
has limited resources to monitor the 11,000 drugs on the 
market, and manufacturers have superior access to information 
about their drugs, especially in the post-marketing phase as 
new risks emerge.''\195\ Simply put: H.R. 5/Title III would 
weaken the tort system's critically important layer of consumer 
protection.
---------------------------------------------------------------------------
    \195\Wyeth v. Levine, 129 S. Ct. 1187 (2009).
---------------------------------------------------------------------------
    For these reasons and more, it is irresponsible--even 
dangerous--to sweep drug and medical device cases within the 
scope of the HEALTH Act/Title III. In our view, such lawsuits 
should continue to stand on their own--subject to the 
substantive and procedural law that now governs them--so as to 
help ensure that these products remain as safe as possible 
while at the same time, providing the opportunity for adequate 
compensation for those individuals who have been harmed.

                               CONCLUSION

    Our colleagues on the Committee on the Judiciary who also 
filed dissenting views on H.R. 5 have summed up our own views 
quite well:
          Collectively, the `reforms' proposed by H.R. 5 would 
        limit a patient's ability to recover compensation for 
        damages caused by medical negligence, defective 
        products, and irresponsible insurance practices. In 
        addition to raising core issues of fairness, H.R. 5 
        preempts the law in all 50 states, with little regard 
        for the consequences. The legislation was designed more 
        than 20 years ago to resolve an insurance `crisis', but 
        all available evidence shows that the insurance market 
        is not in crisis today. H.R. 5 does not make insurance 
        more available, does not cut spending to any 
        appreciable degree, and does not address issues of 
        access to justice or patient safety. Because H.R. 5 
        solves few problems facing Americans and exacerbates 
        many real ones, we believe the Congress should reject 
        this bill.\196\
---------------------------------------------------------------------------
    \196\House Committee on the Judiciary, HEALTH Act, Dissenting 
Views, 112th Cong., p. 118 (Mar. 17, 2011) (H. Rept. No. 112-39, Part 
1).
---------------------------------------------------------------------------
    We concur in this assessment of the HEALTH Act/Title III 
and join with these colleagues in opposing this legislation.

                                   Henry A. Waxman,
                                           Ranking Member.
                                   Frank Pallone, Jr.,
                                           Ranking Member, Subcommittee 
                                               on Health.
             TITLE III--THE COMMITTEE ON FINANCIAL SERVICES
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                           Committee on Financial Services,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on Budget,
Washington, DC.
    Dear Chairman Ryan: Pursuant to section 201 (a) of the 
Concurrent Resolution on the Budget for Fiscal Year 2013 (H. 
Con. Res. 112), I hereby transmit to the Committee on the 
Budget the recommendations which were approved by vote of the 
Committee on Financial Services on April 18, 2012, and the 
appropriate accompanying material including dissenting views. 
This submission is for the purpose of complying with the 
reconciliation directives included in H. Con. Res. 112, and is 
consistent with section 310 of the Congressional Budget and 
Impoundment Control Act of 1974.
    If you have any questions, please do not hesitate to have 
your staff contact Natalie McGarry of my staff. Thank you for 
your attention to this matter.
            Sincerely,
                                            Spencer Bachus,
                                                          Chairman.
                           TABLE OF CONTENTS

                               __________
                                                                   Page
Purpose and Summary..............................................   154
    Subtitle A--Orderly Liquidation Fund.........................   154
    Subtitle B--Home Affordable Modification Program.............   154
    Subtitle C--Bureau of Consumer Financial Protection..........   155
    Subtitle D--Flood Insurance Reform...........................   155
    Subtitle E--Office of Financial Research.....................   155
Background and Need for Legislation..............................   155
    Subtitle A--Orderly Liquidation Fund.........................   155
    Subtitle B--Home Affordable Modification Program.............   156
    Subtitle C--Bureau of Consumer Financial Protection..........   157
    Subtitle D--Flood Insurance Reform...........................   158
    Subtitle E--Office of Financial Research.....................   159
Hearings.........................................................   160
    Subtitle A--Orderly Liquidation Fund.........................   160
    Subtitle B--Home Affordable Modification Program.............   160
    Subtitle C--Bureau of Consumer Financial Protection..........   160
    Subtitle D--Flood Insurance Reform...........................   161
    Subtitle E--Office of Financial Research.....................   162
Committee Consideration..........................................   163
Committee Votes..................................................   163
Constitutional Authority Statement...............................   169
    Subtitle A--Orderly Liquidation Fund.........................   169
    Subtitle B--Home Affordable Modification Program.............   169
    Subtitle C--Bureau of Consumer Financial Protection..........   169
    Subtitle D--Flood Insurance Reform...........................   169
    Subtitle E--Office of Financial Research.....................   169
Committee Oversight Findings.....................................   169
Performance Goals and Objectives.................................   170
    Subtitle A--Orderly Liquidation Fund.........................   170
    Subtitle B--Home Affordable Modification Program.............   170
    Subtitle C--Bureau of Consumer Financial Protection..........   170
    Subtitle D--Flood Insurance Reform...........................   170
    Subtitle E--Office of Financial Research.....................   171
New Budget Authority, Entitlement Authority, and Tax Expenditures   171
Committee Cost Estimate..........................................   171
Congressional Budget Office Estimate.............................   171
Federal Mandates Statement.......................................   182
Advisory Committee Statement.....................................   182
    Subtitle A--Orderly Liquidation Fund.........................   182
    Subtitle B--Home Affordable Modification Program.............   182
    Subtitle C--Bureau of Consumer Financial Protection..........   182
    Subtitle D--Flood Insurance Reform...........................   182
    Subtitle E--Office of Financial Research.....................   183
Applicability to Legislative Branch..............................   183
    Subtitle A--Orderly Liquidation Fund.........................   183
    Subtitle B--Home Affordable Modification Program.............   183
    Subtitle C--Bureau of Consumer Financial Protection..........   183
    Subtitle D--Flood Insurance Reform...........................   183
    Subtitle E--Office of Financial Research.....................   183
Earmark Identification...........................................   183
    Subtitle A--Orderly Liquidation Fund.........................   183
    Subtitle B--Home Affordable Modification Program.............   183
    Subtitle C--Bureau of Consumer Financial Protection..........   183
    Subtitle D--Flood Insurance Reform...........................   184
    Subtitle E--Office of Financial Research.....................   184
Section-by-Section Analysis of the Legislation...................   184
    Subtitle A--Orderly Liquidation Fund.........................   184
    Subtitle B--Home Affordable Modification Program.............   184
    Subtitle C--Bureau of Consumer Financial Protection..........   185
    Subtitle D--Flood Insurance Reform...........................   185
    Subtitle E--Office of Financial Research.....................   191
Changes in Existing Law..........................................   191
Dissenting Views.................................................   358

                          Purpose and Summary

    On March 29, 2012, the House passed the concurrent 
resolution on the budget for fiscal year 2013, H. Con. Res. 
112, by a vote of 228 yeas to 191 nays. That budget resolution 
instructed the Committee on Financial Services to submit 
legislative recommendations to the Committee on the Budget that 
reduce the deficit by $3 billion for fiscal years 2012 and 
2013, $16.7 billion for fiscal years 2012 through 2017, and 
$29.8 billion for fiscal years 2012 through 2022. To fulfill 
the instructions set forth in H. Con. Res. 112, the Committee 
on Financial Services recommends the following legislation, set 
forth in Title III, to the Budget Committee:

                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Subtitle A would repeal Title II of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act) 
(P.L. 111-203). The Congressional Budget Office (CBO) estimates 
that Subtitle A would reduce direct spending by $3.383 billion 
for fiscal years 2012 and 2013, $13.585 billion for fiscal 
years 2012 through 2017, and $22 billion for fiscal years 2012 
through 2022.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Subtitle B--previously introduced as H.R. 839, the HAMP 
Termination Act, and passed by the House--would terminate the 
authority of the Treasury Department to provide any new 
assistance to homeowners under the Home Affordable Modification 
Program (HAMP) authorized under Title I of the Emergency 
Economic Stabilization Act (12 U.S.C. 5230), while preserving 
any assistance already provided to HAMP participants on a 
permanent or trial basis. Subtitle B also provides for a study 
by the Treasury Department to identify best practices for 
making existing mortgage assistance programs available to 
veterans, active duty military personnel, and their relatives. 
The CBO estimates that Subtitle B would reduce direct spending 
by $617 million for fiscal years 2012 and 2013, $2.624 billion 
for fiscal years 2012 through 2017, and $2.838 billion for 
fiscal years 2012 through 2022.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Subtitle C would eliminate the direct funding of the 
Consumer Financial Protection Bureau (CFPB) by the Federal 
Reserve and instead fund the CFPB through Congressional 
appropriations. Subtitle C would authorize the appropriation of 
$200 million to fund the CFPB for fiscal years 2012 and 2013, 
and would repeal the Consumer Financial Protection Fund and the 
Consumer Financial Civil Penalty Fund. The CBO estimates that 
Subtitle C would reduce direct spending by $381 million for 
fiscal years 2012 and 2013, $2.435 billion for fiscal years 
2012 through 2017, and $5.387 billion for fiscal years 2012 
through 2022.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Subtitle D--previously introduced as H.R. 1309, the Flood 
Insurance Reform Act of 2011 and passed by the House--would 
reauthorize the National Flood Insurance Program (NFIP) through 
September 30, 2016, and amend the National Flood Insurance Act 
to ensure the immediate and near-term fiscal and administrative 
health of the NFIP. Subtitle D would ensure the NFIP's 
continued viability by encouraging broader participation in the 
program, increasing financial accountability, eliminating 
unnecessary rate subsidies, and updating the program to meet 
the needs of the 21st century. The key provisions of Subtitle D 
include: (1) a five-year reauthorization of the NFIP; (2) a 
three-year delay in the mandatory purchase requirement for 
certain properties in newly designated Special Flood Hazard 
Areas (SFHAs); (3) a phase-in of full-risk, actuarial rates for 
areas newly designated as Special Flood Hazard; (4) a 
reinstatement of the Technical Mapping Advisory Council; and 
(5) an emphasis on greater private sector participation in 
providing flood insurance coverage. The CBO estimates that 
Subtitle D would reduce direct spending by $880 million for 
fiscal years 2012 through 2017, and $4.9 billion for fiscal 
years 2012 through 2022.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Subtitle E would eliminate the Office of Financial Research 
(OFR), an office within the Department of the Treasury which 
was established by the Dodd-Frank Act. The CBO estimates that 
Subtitle E would reduce direct spending by $270 million over 
the next ten years.

                  Background and Need for Legislation


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Title II of the Dodd-Frank Act establishes a so-called 
Orderly Liquidation Authority (OLA) that grants the Federal 
Deposit Insurance Corporation (FDIC) the authority to resolve 
large non-bank financial institutions. Title II authorizes the 
FDIC to act as the receiver for the failing institution. Title 
II further authorizes the FDIC to borrow from the Treasury an 
amount equal to up to 10% of the institution's total assets in 
the 30 days immediately following the FDIC's appointment as 
receiver, and after 30 days, the FDIC can borrow up to 90% of 
the firm's total assets. The FDIC can then use those funds to 
pay off the creditors of a failed firm. Proponents of Title II 
have asserted that taxpayer funds would not be used to 
liquidate a failed firm, pointing to provisions that 
contemplate recouping the costs of the liquidation from large 
financial institutions through post hoc assessments. Despite 
these assertions, CBO has estimated that Title II will cost 
taxpayers $22 billion between 2012 and 2022. Repealing Title II 
thus relieves taxpayers of the burden of bailing out the 
creditors of large financial institutions, thereby reducing 
moral hazard by making it clear that creditors--rather than 
taxpayers--will bear the costs of failure. Repealing Title II 
would not only restore market discipline, according to the CBO 
it would also achieve savings for the purposes of deficit 
reduction of $3.383 billion in FY 2012-13, $13.585 billion in 
FY 2012-17, and $22 billion in FY 2012-22.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    The standalone version of Subtitle B, H.R. 839, the HAMP 
Termination Act, was introduced by Congressman Patrick McHenry 
and Chairman Bachus to terminate new mortgage modification 
activities under the HAMP. Created under the auspices of 
Section 109 of the Troubled Asset Relief Program (TARP) enacted 
in 2008 (P.L. 110-343), HAMP is a federally-funded mortgage 
modification program that provides financial incentives to 
participating mortgage servicers to modify the mortgages of 
eligible homeowners.
    As the signature piece of the Administration's overall 
Making Home Affordable initiative on foreclosure prevention, 
HAMP has been both costly and ineffective. According to the 
Treasury Department, as of March 1, 2012, the Administration 
has obligated $29.88 billion to HAMP, although thus far it has 
only disbursed $2.54 billion. Overall, the Administration has 
obligated $45.60 billion of TARP dollars to the Making Home 
Affordable initiative, which also includes the Hardest Hit Fund 
and the FHA Refinance program.
    By any objective measure, HAMP and these other programs 
have failed to produce their promised results. The 
Administration originally projected that Making Home Affordable 
would help 7 to 9 million homeowners, yet foreclosures have 
remained elevated and the number of families assisted by the 
program--approximately 1.8 million--has fallen far short of 
projections. There were roughly 1.1 million completed 
foreclosures in 2010 and 830,000 more completed foreclosures in 
2011. As of February 2012, more than 1.3 million mortgages in 
the United States were 90 days or more delinquent and around 12 
percent of the loans outstanding in the market were delinquent 
in some way.
    HAMP itself, which was initially projected to modify 3 to 4 
million loans, has begun only 1.99 million cumulative trial 
modifications according to program performance data through 
February 2012. Of those trial modifications, only 782,609 (39 
percent) have transitioned to active permanent modifications 
along with only 68,539 active trial loans. Meanwhile, nearly 
half of the trial modifications started (957,677) were 
cancelled in the trial or permanent modification stage.
    Additional concerns have been raised about the benefit to 
participants of a mortgage modification program that gives 
borrowers a false sense of hope as they struggle to keep their 
homes. The Special Inspector General for the Troubled Asset 
Relief Program (SIGTARP) has testified before Congress that 
HAMP is a program that ``benefits only a small portion of 
distressed homeowners, offers others little more than false 
hope, and in certain cases causes more harm than good.'' In 
those cases, HAMP harms those borrowers who provisionally make 
reduced loan payments during a trial period but do not qualify 
for permanent modifications. When they are rejected from the 
program, these borrowers are told that they owe back payments, 
interest, and fees; sometimes they are asked to make up these 
deficiencies in a lump-sum payment. For some borrowers, that 
reversal constitutes their last gasp, as their increased 
indebtedness and tarnished credit rating preclude them from 
qualifying for a private-sector proprietary loan modification 
program which might have helped them retain their home.
    In addition to its high cost and poor track record, HAMP 
has also been plagued by poor administration and resistance to 
proper oversight since its inception, placing taxpayers at 
risk. For example, the Government Accountability Office (GAO) 
has cited the Treasury Department for not having ``fully 
implemented all of our prior recommendations to increase the 
transparency, accountability, and consistency of the program.'' 
The Congressional Oversight Panel for TARP has noted that 
``despite repeated urgings from the Panel, Treasury has failed 
to collect and analyze data that would explain HAMP's 
shortcomings, and it does not even have a way to collect data 
for many of HAMP's add-on programs.'' The SIGTARP has added 
that HAMP ``has been beset by problems from the outset and, 
despite frequent retooling, continues to fall dramatically 
short of any meaningful standard of success.''
    HAMP, for all its good intentions, has thus far impeded the 
recovery of the housing market and prolonged economic 
uncertainty. Enacting Subtitle B would not only end this 
costly, ineffective, injurious, and poorly run program, 
according to the CBO it would also achieve savings for the 
purposes of deficit reduction of $617 million in FY 2012-13, 
$2.624 billion in FY 2012-17, and $2.838 billion in FY 2012-22.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Title X of the Dodd-Frank Act created the CFPB as an 
independent agency housed within the Federal Reserve System, 
and charged it with regulating ``the offering and provision of 
consumer financial products or services'' under the federal 
consumer financial laws. The Dodd-Frank Act authorizes the CFPB 
to fund itself by drawing money from the Federal Reserve to the 
extent the CFPB's Director deems ``necessary.'' The Federal 
Reserve does not oversee the agency or exercise any authority 
over it, but the Federal Reserve must transfer to the CFPB 
whatever funds its Director requests, up to the following fixed 
percentages of the Federal Reserve's 2009 operating expenses: 
11 percent in fiscal year 2012, or $547.8 million; 12 percent 
in fiscal year 2013, or $597.6 million; and 12 percent each 
fiscal year thereafter, subject to annual adjustments for 
inflation. These funds--diverted from the Federal Reserve to 
the CFPB--would otherwise have been forwarded from the Federal 
Reserve to the Treasury, where they could have been used to pay 
for other expenditures or to reduce the debt.
    Given that the CFPB's funding is not appropriated by 
Congress, many observers have raised concerns about the lack of 
transparency in the CFPB's funding and expenditures and 
Congress's ability to exercise oversight of the CFPB. In light 
of these concerns, Subtitle C would end the direct funding of 
the CFPB by the Federal Reserve and repealing the Consumer 
Financial Protection Fund and the Consumer Financial Civil 
Penalty Fund. Subtitle C would subject the CFPB to regular 
appropriations and authorize an appropriation of $200 million 
to fund the CFPB for fiscal years 2012 and 2013. Subtitle C 
would thus make the CFPB accountable to Congress and make its 
funding transparent. Moreover, Subtitle C would achieve savings 
for the purposes of deficit reduction of $381 million in FY 
2012-13, $2.435 billion in FY 2012-17, and $5.387 billion in FY 
2012-22, according to CBO.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Recognizing that the private sector lacked the capacity to 
manage flood risk, in 1968 Congress created the NFIP to address 
that risk and ease the burden on taxpayers for flood losses 
paid out in the form of post-disaster relief following annual 
flooding and severe flooding following hurricanes. The NFIP is 
administered by the Federal Emergency Management Agency (FEMA), 
which is housed in the Department of Homeland Security. The 
NFIP manages the risk posed by floods in three ways: (i) 
identifying flood hazards; (ii) managing the use of land in 
floodplains (e.g., by establishing land use controls and 
setting building codes); and (iii) providing insurance 
protection. The NFIP plays a crucial role: without the flood 
insurance provided by the NFIP, homebuyers or businesses cannot 
close real estate transactions on properties located in areas 
that have been designated as Special Flood Hazard Areas 
(SFHAs).
    Although the NFIP generated premium income of approximately 
$3.3 billion in 2010, those premiums cannot make up for losses 
that the NFIP sustained in earlier years. The 2005 hurricane 
season resulted in significant claims against the NFIP, and 
annual premium income could not cover them. To pay these 
claims, the NFIP borrowed from the U.S. Treasury. Before 2005, 
the NFIP's borrowing authority was limited by statute to $1.5 
billion. To make up the shortfall that resulted from the 2005 
hurricane season, Congress increased the NFIP's borrowing 
authority three times between September 2005 and January 2007, 
raising it from $1.5 billion to $20.8 billion. As of February 
29, 2012, the NFIP owed $17.775 billion to the U.S. Treasury.
    Notwithstanding the importance of the NFIP to those that 
live and do business in SFHAs, Congress has not passed a long-
term NFIP reauthorization and reform bill since 2004 (P.L. 108-
264). During the 110th Congress, the House and Senate each 
passed significant reform measures but could not agree on final 
legislation. Since September 2008, the NFIP has been extended 
on a short-term basis 16 times. During that same time period, 
the NFIP's authorization has lapsed three times. In 2011, after 
several short-term extensions and three temporary lapses, 
Congress extended the NFIP through May 31, 2012. These short-
term extensions and lapses have created needless uncertainty in 
the residential and commercial real estate sectors in 
communities across the country. Private insurance companies 
that voluntarily participate in the NFIP find it difficult to 
continue participating, given the uncertainty of the NFIP 
authorization.
    Since 2006, the GAO has identified the NFIP as ``high-
risk'' because of inadequate management and insufficient funds. 
To reauthorize this much-needed program while addressing the 
weaknesses that make it difficult for the NFIP to return to 
solvency, Subtitle D institutes reforms that will improve the 
NFIP's financial stability, reduce the burden on taxpayers, and 
facilitate the creation of a private market that eliminates 
taxpayer risk over the long-term. In addition, the CBO 
estimates that Subtitle D would achieve savings for the 
purposes of deficit reduction of $880 million in FY 2012-17 and 
$4.9 billion in FY 2012-22.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    The Dodd-Frank Act established the OFR as an office within 
the Department of the Treasury and charged the OFR with 
supporting the Financial Stability Oversight Council (FSOC) by 
collecting information; standardizing the types and formats of 
data reported and collected; performing applied research and 
long-term research; developing tools for risk measurement and 
monitoring; and making the results of its activities available 
to financial regulatory agencies.
    Congress does not appropriate the OFR's funding. Through 
July 2012, the OFR is funded by the Federal Reserve. Following 
that, the OFR will fund itself and the FSOC by levying 
assessments on bank holding companies with total consolidated 
assets of $50 billion or more and nonbank financial companies 
supervised by the Federal Reserve. In FY 2011, the OFR's total 
expenses were $14,249,000. In FY 2012, the OFR's expenses are 
projected to total $122,626,000, funded from both transfers 
from the Federal Reserve and assessments on financial 
institutions: $91,742,000 in transfers and $119,000,000 in 
assessments. In FY 2013, the OFR is expected to spend 
$157,745,000 and bring in $168,000,000 in assessments.
    The Dodd-Frank Act empowers the OFR to demand ``all data 
necessary'' from financial companies, including banks, hedge 
funds, private equity firms, and brokerages. Such data would 
include sensitive, non-public information such as the 
identities of counterparties for credit default swaps, as well 
as information about individual loans such as interest rate and 
maturity. Because much of the information collected by the OFR 
is likely to be duplicative of information requested by other 
financial regulatory agencies, it will drive up compliance 
costs, which could further reduce the availability of credit 
and increase the cost of financial services for businesses and 
consumers. The CBO has estimated that Subtitle E would reduce 
direct spending by $270 million over the next ten years.

                                Hearings


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    On June 14, 2011, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled ``Does 
the Dodd-Frank Act End `Too Big to Fail'?'' This was a two-
panel hearing, and the following witnesses testified:

Panel One

     Mr. Michael H. Krimminger, General Counsel, 
Federal Deposit Insurance Corporation
     Ms. Christy Romero, Acting Special Inspector 
General, Office of the Special Inspector General, Troubled 
Asset Relief Program

Panel Two

     Mr. Stephen J. Lubben, Daniel J. Moore Professor 
of Law, Seton Hall University School of Law
     The Honorable Michael Barr, Professor of Law, 
University of Michigan Law School

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    On March 2, 2011, the Subcommittee on Insurance, Housing 
and Community Opportunity held a hearing titled ``Legislative 
Proposals to End Taxpayer Funding for Ineffective Foreclosure 
Mitigation Programs.'' This was a one-panel hearing, and the 
following witnesses testified:
     The Honorable Neil M. Barofsky, Special Inspector 
General for the Troubled Asset Relief Program, Office of the 
Special Inspector General
     The Honorable David Stevens, Assistant Secretary 
for Housing and Commissioner of the Federal Housing 
Administration, Department of Housing and Urban Development
     The Honorable Mercedes M. Marquez, Assistant 
Secretary, Community Planning and Development, Department of 
Housing and Urban Development
     Mr. Matthew J. Scire, Director, Financial Markets 
and Community Investment, U.S. Government Accountability Office
     Ms. Katie Jones, Analyst in Housing Policy, 
Congressional Research Service, Library of Congress

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    The Subcommittee on Financial Institutions and Consumer 
Credit held a hearing on March 16, 2011, titled ``Oversight of 
the Consumer Financial Protection Bureau.'' The sole witness at 
this hearing was:
     Ms. Elizabeth Warren, Special Advisor to the 
Secretary of the Treasury for the Consumer Financial Protection 
Bureau, Department of the Treasury
    On April 6, 2011, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled 
``Legislative Proposals to Improve the Structure of the 
Consumer Financial Protection Bureau.'' This was a one-panel 
hearing, and the following witnesses testified:
     Ms. Leslie R. Andersen, President and Chief 
Executive Officer, Bank of Bennington on behalf of the American 
Bankers Association
     Ms. Lynette W. Smith, President and Chief 
Executive Officer, Washington Gas Light FCU on behalf of the 
National Association of Federal Credit Unions
     Mr. Jess Sharp, Executive Director, Center for 
Capital Markets Competitiveness, U.S. Chamber of Commerce
     Mr. Hilary Shelton, Director, NAACP Washington 
Bureau and Senior VP for Advocacy and Policy, NAACP
     Mr. Noah H. Wilcox, President and Chief Executive 
Officer, Grand Rapids State Bank on behalf of the Independent 
Community Bankers of America
     Mr. Rod Staatz, President and Chief Executive 
Officer, SECU of Maryland on behalf of the Credit Union 
National Association
     Mr. Richard Hunt, President, Consumer Bankers 
Association
     Prof. Adam J. Levitin, Georgetown University Law 
Center
    On November 2, 2011, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled ``The 
Consumer Financial Protection Bureau: The First 100 Days.'' The 
sole witness at this hearing was:
     Mr. Raj Date, Special Advisor to the Secretary of 
the Treasury, The Consumer Financial Protection Bureau
    On February 8, 2012, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled 
``Legislative Proposals to Promote Accountability and 
Transparency at the Consumer Financial Protection Bureau.'' 
This was a one-panel hearing and the following witnesses 
testified:
     Mr. Michael J. Hunter, Chief Operating Officer, 
American Bankers Association
     Mr. Andrew J. Pincus, Partner, Mayer Brown LLP, on 
behalf of the U.S. Chamber of Commerce
     Mr. Chris Stinebert, President and Chief Executive 
Officer, American Financial Services Association
     Mr. Arthur E. Wilmarth, Jr., Professor of Law, The 
George Washington University
    On February 15, 2012, the Subcommittee on Oversight and 
Investigations held a hearing titled ``Budget Hearing--Consumer 
Financial Protection Bureau.'' The sole witness at this hearing 
was:
     The Honorable Richard Cordray, The Consumer 
Financial Protection Bureau
    On March 29, 2012, the Committee on Financial Services held 
a hearing titled ``The Semi-Annual Report of the Consumer 
Financial Protection Bureau.'' The sole witness at this hearing 
was:
     The Honorable Richard Cordray, The Consumer 
Financial Protection Bureau

                   SUBTITLE D--FLOOD INSURANCE REFORM

    On March 11, 2011, the Subcommittee on Insurance, Housing 
and Community Opportunity held a hearing titled ``Legislative 
Proposals to Reform the National Flood Insurance Program.'' 
This was a two-panel hearing, and the following witnesses 
testified:

Panel One

     Ms. Orice Williams Brown, Managing Director, 
Government Accountability Office
     Ms. Sally McConkey, Vice Chair, Association of 
State Flood Plain Managers and Manager, Coordinated Hazard 
Assessment and Mapping Program, Illinois State Water Survey

Panel Two

     Mr. Stephen Ellis, on behalf of the SmarterSafer 
Coalition, and Vice President, Taxpayers for Common Sense, 
Washington, D.C.
     Mr. Terry Sullivan, Chair, Committee on Flood 
Insurance, National Association of REALTORS' and 
Owner, Sullivan Realty, Spokane, Washington
     Mr. Spencer Houldin, Chair, Government Affairs 
Committee, Independent Insurance Agents and Brokers of America 
and President, Ericson Insurance Services, Washington Depot, 
Connecticut
     Mr. Franklin Nutter, President, Reinsurance 
Association of America, Washington, D.C.
     Ms. Sandra G. Parrillo, Chair, National 
Association of Mutual Insurance Companies and President and CEO 
of Providence Mutual Fire Insurance Company, Warwick, Rhode 
Island
     Ms. Donna Jallick, on behalf of the Property 
Casualty Insurers Association of America, and Vice President, 
Flood Operations, Harleysville Insurance, Harleysville, 
Pennsylvania
     Mr. Barry Rutenberg, First Vice Chairman, National 
Association of Home Builders, Washington, D.C.
    On April 1, 2011, the Subcommittee on Insurance, Housing 
and Community Opportunity held a hearing titled ``Legislative 
Proposals to Reform the National Flood Insurance Program, Part 
II.'' The sole witness at this hearing was:
     The Honorable W. Craig Fugate, Administrator, 
Federal Emergency Management Agency.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    On July 14, 2011, the Subcommittee on Oversight and 
Investigations Credit held a hearing titled ``Oversight of the 
Office of Financial Research and the Financial Stability 
Oversight Council.'' This was a two-panel hearing and the 
following witnesses testified:

Panel One

     The Honorable Richard Berner, Counselor to the 
Secretary of the Treasury

Panel Two

     Dr. Nassim N. Taleb, Distinguished Professor, New 
York University Polytechnic Institute
     Mr. Dilip Krishna, Vice President of Financial 
Services, Teradata Corporation
     Mr. Alan Paller, Director of Research, SANS 
Institute
     Dr. John Lietchy, Professor of Marketing and 
Statistics, Director of the Center for the Study of Global 
Financial Stability, Pennsylvania State University

                        Committee Consideration

    The Committee on Financial Services met in open session on 
April 18, 2012, and ordered the Committee Print of budget 
reconciliation legislative recommendations of the Committee on 
Financial Services, as amended, transmitted to the Committee on 
the Budget by a record vote of 31 yeas and 26 nays (Record vote 
no. FC-76).

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Chairman Bachus to order the Committee Print, as 
amended, transmitted to the Committee on the Budget was agreed 
to by a record vote of 31 yeas and 26 nays (Record vote no. FC-
76). The names of Members voting for and against follow:

                                              RECORD VOTE NO. FC-76
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................        X   ........  .........  Mr. Frank (MA)...  ........        X   .........
Mr. Hensarling.................        X   ........  .........  Ms. Waters.......  ........        X   .........
Mr. King (NY)..................        X   ........  .........  Mrs. Maloney.....  ........        X   .........
Mr. Royce......................        X   ........  .........  Mr. Gutierrez....  ........        X   .........
Mr. Lucas......................        X   ........  .........  Ms. Velazquez....  ........        X   .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........  ........        X   .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....  ........        X   .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......  ........        X   .........
Mrs. Biggert...................        X   ........  .........  Mr. Meeks........  ........        X   .........
Mr. Gary G. Miller (CA)........        X   ........  .........  Mr. Capuano......  ........        X   .........
Mrs. Capito....................        X   ........  .........  Mr. Hinojosa.....  ........        X   .........
Mr. Garrett....................        X   ........  .........  Mr. Clay.........  ........        X   .........
Mr. Neugebauer.................        X   ........  .........  Mrs. McCarthy      ........        X   .........
                                                                 (NY).
Mr. McHenry....................        X   ........  .........  Mr. Baca.........  ........        X   .........
Mr. Campbell...................        X   ........  .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................        X   ........  .........  Mr. Miller (NC)..  ........        X   .........
Mr. McCotter...................        X   ........  .........  Mr. David Scott    ........        X   .........
                                                                 (GA).
Mr. McCarthy (CA)..............        X   ........  .........  Mr. Al Green (TX)  ........        X   .........
Mr. Pearce.....................        X   ........  .........  Mr. Cleaver......  ........        X   .........
Mr. Posey......................        X   ........  .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Ellison......  ........        X   .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................        X   ........  .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......  ........        X   .........
Mr. Duffy......................        X   ........  .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................        X   ........  .........  Mr. Peters.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................        X   ........  .........
Mr. Dold.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Mr. Grimm......................        X   ........  .........
Mr. Canseco....................        X   ........  .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    During consideration of the Committee Print by the 
Committee, the following amendments were considered:
    1. An amendment offered by Ms. Moore, no. 1, to strike 
Subtitle A, was not agreed to by a record vote of 23 yeas and 
29 nays (Record vote no. FC-69).

                                              RECORD VOTE NO. FC-69
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......  ........  ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........  ........  ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........  ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......  ........  ........  .........
Mr. Westmoreland...............  ........  ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    2. An amendment offered by Mr. Frank and Mr. Gutierrez, no. 
2, to impose a $30 billion special assessment on certain 
financial institutions to be deposited in a Taxpayer Protection 
and Financial Stability Fund, was not agreed to by a record 
vote of 22 yeas and 33 nays (Record vote no. FC-70).

                                              RECORD VOTE NO. FC-70
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........  ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........  ........  .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    3. An amendment offered by Mrs. Maloney, no. 3, to strike 
Subtitle C, was not agreed to by a record vote of 26 yeas and 
29 nays (Record vote no. FC-71).

                                              RECORD VOTE NO. FC-71
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........  ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........  ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    4. An amendment offered by Mr. Frank, no. 4, to fund the 
Federal Reserve's non-monetary policy functions through 
Congressional appropriations, was not agreed to by a record 
vote of 24 yeas and 33 nays (Record vote no. FC-72).

                                              RECORD VOTE NO. FC-72
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......  ........        X   .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    5. Am amendment offered by Mr. Miller of N.C., no. 5, to 
fund the Office of the Comptroller of the Currency through 
Congressional appropriations, was not agreed to by a record 
vote of 22 yeas and 35 nays (Record Vote no. FC-73).

                                              RECORD VOTE NO. FC-73
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........  ........        X   .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......  ........        X   .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    6. An amendment offered by Mr. Miller of N.C., no. 8, to 
establish a fund, paid for by certain financial institutions, 
to cover costs that Fannie Mae and Freddie Mac may incur in 
connection with mortgages they own or guarantee and which they 
purchased from an ``underperforming'' servicer, was not agreed 
to by a record vote of 21 yeas and 36 nays (Record vote no. FC-
74).

                                              RECORD VOTE NO. FC-74
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......  ........        X   .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......  ........        X   .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    7. An amendment offered by Mr. Miller of N.C., no. 12, to 
define breaches of representations and warranties made in 
connection with the sale of a mortgage asset to Fannie Mae and 
Freddie Mac as violations of the False Claims Act, was not 
agreed to by a record vote of 26 yeas and 31 nays (Record vote 
no. FC-75).

                                              RECORD VOTE NO. FC-75
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The following amendments were also considered by the 
Committee:
    1. An amendment offered by Mr. Perlmutter and Mrs. 
McCarthy, no. 6, to reauthorize the Export-Import Bank of the 
United States, was offered and withdrawn.
    2. An amendment offered by Mr. Canseco, no. 7, to repeal 
Title I, Subtitle B of the Dodd-Frank Act, which established 
the Office of Financial Research, was agreed to by voice vote.
    3. An amendment offered by Mr. Miller of N.C., no. 9, to 
prohibit mortgage servicers and their affiliates from owning or 
holding interests in mortgage loans secured by the same 
property that is subject to the mortgage loan serviced by the 
servicer, was ruled non-germane.
    4. An amendment offered by Mr. Perlmutter, no. 10, to 
legalize, license, and regulate Internet gambling, was offered 
and withdrawn.
    5. An amendment offered by Mr. Miller of N.C., no. 11, to 
authorize the Federal Housing Finance Authority to acquire 
certain second mortgages by right of eminent domain, was 
offered and withdrawn.

                   Constitutional Authority Statement


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states; and Clause 1 of Section 8 of Article 
I of the Constitution, under which Congress has the power 
relating to the general welfare of the United States.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to repeal the Title II of 
the Dodd-Frank Act, which would reduce direct spending by $22 
billion, according to CBO.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to terminate the 
authority of the Treasury Department to provide new assistance 
to homeowners under HAMP under Title I of the Emergency 
Economic Stabilization Act (12 U.S.C. 5230), while preserving 
any assistance already provided to HAMP participants on a 
permanent or trial basis. Enactment of these provisions would 
reduce direct spending by $2.838 billion over ten years, 
according to CBO.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to eliminate direct 
funding of the CFPB by the Federal Reserve and instead 
recommend that the CFPB be subjected to the annual 
Congressional appropriations process. The provisions of this 
Subtitle would also authorize $200 million to be appropriated 
to fund the CFPB for fiscal years 2012 and 2013, and would 
repeal the Consumer Financial Protection Fund and the Consumer 
Financial Civil Penalty Fund. Enactment of these provisions 
would reduce direct spending by $5.387 billion over ten years, 
according to CBO.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to reauthorize the NFIP 
through September 30, 2016, and amend the National Flood 
Insurance Act to ensure the immediate and near-term fiscal and 
administrative health of the NFIP. The provisions of this 
Subtitle also ensure the NFIP's continued viability by 
encouraging broader participation in the program, increasing 
financial accountability, eliminating unnecessary rate 
subsidies, and updating the program to meet the needs of the 
21st century. The key provisions of Subtitle D include: (1) a 
five-year reauthorization of the NFIP; (2) a three-year delay 
in the mandatory purchase requirement for certain properties in 
newly designated Special Flood Hazard Areas (SFHAs); (3) a 
phase-in of full-risk, actuarial rates for areas newly 
designated as Special Flood Hazard; (4) a reinstatement of the 
Technical Mapping Advisory Council; and (5) an emphasis on 
greater private sector participation in providing flood 
insurance coverage. Enactment of these provisions would reduce 
direct spending by $4.9 billion over ten years, according to 
CBO.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to eliminate the OFR, an 
office within the Department of the Treasury established by the 
Dodd-Frank Act. According to CBO, eliminating the OFR would 
reduce direct spending by approximately $270 million over the 
next ten years.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 24, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Reconciliation 
Recommendations of the House Committee on Financial Services.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Daniel 
Hoople.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Reconciliation recommendations of the House Committee on Financial 
        Services

    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of this process, the House 
Committee on Financial Services was instructed to recommend 
changes to current law that would reduce the deficit by $29.8 
billion for fiscal years 2012 through 2022.
    CBO estimates that the reconciliation recommendations 
approved by the Committee on Financial Services on April 18, 
2012, would reduce direct spending by $40.9 billion and 
revenues by $10.6 billion over the 2012-2022 period, assuming 
enactment on or near October 1, 2012. Taken together, CBO 
estimates that enacting the recommendations would reduce budget 
deficits by $30.4 billion over the 2012-2022 period, assuming 
enactment on or near October 1, 2012.
    In addition, the Chairman of the House Committee on the 
Budget has directed CBO to prepare estimates assuming a July 1, 
2012, enactment date for this year's reconciliation proposals. 
If the legislation were enacted by that earlier date, some of 
the Financial Services Committee's recommendations would result 
in greater budgetary savings than those estimated assuming an 
October 1 enactment date. Under the alternative assumption of a 
July 1 enactment date, CBO estimates that the Financial 
Services proposals would reduce deficits by $4.4 billion over 
the 2012-2013 period and $31.1 billion over the 2012-2022 
period.
    The committee's recommendations would make the following 
changes:
      Subtitle A would repeal the authority provided to 
the Federal Deposit Insurance Corporation (FDIC) in the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Public 
Law 111-203) to liquidate large, systemically important 
financial companies in default or in danger of default.
      Subtitle B would terminate the authority of the 
Secretary of the Treasury to provide new assistance under the 
Home Affordable Modification Program (HAMP).
      Subtitle C would terminate transfers of funds 
from the Federal Reserve for expenses of the Bureau of Consumer 
Financial Protection (CFPB) and authorize appropriations for 
the CFPB for fiscal years 2012 and 2013.
      Subtitle D would reauthorize the National Flood 
Insurance Program (NFIP) of the Federal Emergency Management 
Agency (FEMA) through 2016 and amend the program to increase 
premiums charged to certain policyholders.
      Subtitle E would eliminate the Office of 
Financial Research (OFR), established in the Dodd-Frank Wall 
Street Reform and Consumer Protection Act.
    In addition to the changes in direct spending and revenues, 
CBO estimates that implementing the committee's recommendations 
would cost $766 million over the 2012-2017 period, assuming 
appropriation of the necessary amounts. That estimate includes 
funding for the CFPB, the Financial Stability Oversight 
Council, and flood mapping and mitigation efforts under the 
National Flood Insurance Program (NFIP).
    The legislation would impose intergovernmental and private-
sector mandates, as defined in the Unfunded Mandates Reform Act 
(UMRA), on public and private mortgage lenders. Because the 
mandates would require only small changes in existing industry 
practice, CBO expects the cost to comply with the mandates 
would be small relative to the annual thresholds established in 
UMRA for intergovernmental and private-sector mandates ($73 
million and $146 million in 2012, respectively, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
impact on direct spending and revenues of the recommendations 
of the House Committee on Financial Services is shown in the 
following tables. Table 1 summarizes those effects assuming 
that the committee recommendations are enacted around October 
1, 2012, and Table 2 displays the budgetary impact assuming 
those recommendations are enacted by July 1, 2012. (Potential 
effects on discretionary spending are not shown in Tables 1 and 
2, but those effects are mentioned in a footnote in each 
table.) The spending effects of this legislation fall within 
budget functions 370 (commerce and housing credit) and 450 
(community and regional development).

   TABLE 1. EFFECTS ON DIRECT SPENDING AND REVENUES FOR RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES, AS APPROVED BY THE COMMITTEE ON APRIL 18, 2012, ASSUMING
                                                                                ENACTMENT AROUND OCTOBER 1, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             By fiscal year, in millions of dollars--
                                                                --------------------------------------------------------------------------------------------------------------------------------
                                                                  2012    2013      2014      2015      2016      2017      2018      2019      2020      2021      2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT AROUND OCTOBER 1, 2012a

Orderly Liquidation Authority:
    Estimated Budget Authority 0...............................      0    -2,350    -3,365    -3,725    -3,360    -2,745    -2,985    -3,180    -3,370    -3,536    -3,704    -15,545    -32,320
    Estimated Outlays..........................................      0    -2,350    -3,365    -3,725    -3,360    -2,745    -2,985    -3,180    -3,370    -3,536    -3,704    -15,545    -32,320
Home Affordable Modification Program:
    Estimated Budget Authority.................................      0      -414      -573      -428      -351      -297      -202        -6         0         0         0     -2,063     -2,271
    Estimated Outlays..........................................      0      -414      -573      -428      -351      -297      -202        -6         0         0         0     -2,063     -2,271
Bureau of Consumer Financial Protection:
    Estimated Budget Authority.................................      0      -448      -495      -509      -524      -539      -557      -575      -593      -611      -631     -2,515     -5,482
    Estimated Outlays..........................................      0      -381      -488      -507      -522      -537      -554      -572      -590      -608      -628     -2,435     -5,387
National Flood Insurance Program:
    Estimated Budget Authority.................................      0         0       -60      -150       210         0         0         0         0         0         0          0          0
    Estimated Outlays..........................................      0         0       -60      -150       210         0         0         0         0         0         0          0          0
Office of Financial Research:
    Estimated Budget Authority.................................      0       -71       -93       -95       -97       -99      -101      -103      -105      -107      -108       -455       -979
    Estimated Outlays..........................................      0       -62       -93       -95       -97       -99      -101      -103      -105      -107      -108       -446       -970
    Total Changes:
        Estimated Budget Authority.............................      0    -3,283    -4,586    -4,907    -4,122    -3,680    -3,845    -3,864    -4,068    -4,254    -4,443    -20,578    -41,052
        Estimated Outlays......................................      0    -3,207    -4,579    -4,905    -4,120    -3,678    -3,842    -3,861    -4,065    -4,251    -4,440    -20,489    -40,948

                                                                  CHANGES IN REVENUES ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Orderly Liquidation Authority..................................      0         0      -180      -405      -645      -905    -1,135    -1,355    -1,570    -1,770    -1,905     -2,135     -9,870
Office of Financial Research...................................      0       -67       -68       -69       -70       -71       -72       -73       -74       -75       -76       -345       -715
                                                                --------------------------------------------------------------------------------------------------------------------------------
    Total Changes..............................................      0       -67      -248      -474      -715      -976    -1,207    -1,428    -1,644    -1,845    -1,981     -2,480    -10,585

                                           NET DEFICIT REDUCTION (-) ASSUMING ENACTMENT OF DIRECT SPENDING AND REVENUE CHANGES AROUND OCTOBER 1, 2012

Net Effect on Deficit..........................................      0    -3,140    -4,331    -4,431    -3,405    -2,702    -2,635    -2,433    -2,421    -2,406    -2,459    -18,009    -30,363
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Memorandum:

Change in Net Income to the National Flood Insurance Program:b
    Estimated Budget Authority.................................      0         0        60       150       265       405       580       775       830       890       945        880      4,900
    Estimated Outlays..........................................      0         0        60       150       265       405       580       775       830       890       945        880     4,900
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Estimates are relative to CBO's March 2012 baseline; components may not sum to totals because of rounding.
aIn addition, CBO estimates that implementing the Financial Services Committee's recommendations would cost $766 million over the 2012-2017 period, assuming appropriation of the necessary
  amounts. That estimate includes funding for the Bureau of Consumer Financial Protection, the Financial Stability Oversight Council, and for mapping and mitigation efforts under the National
  Flood Insurance Program.
bThe proposed language would raise premiums for certain subsidized flood insurance policies, increasing net income to the National Flood Insurance Program by $4.9 billion. However, because
  many policies would continue to be subsidized and the program would continue to face significant interest costs for borrowing over the past decade, CBO expects that additional receipts
  collected under this legislation would be spent to cover future program shortfalls, resulting in no net effect on the budget over the 2012-2022 period.


   TABLE 2. EFFECTS ON DIRECT SPENDING AND REVENUES FROM RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES, AS APPROVED BY THE COMMITTEE ON APRIL 18, 2012, ASSUMING
                                                   ENACTMENT BY JULY 1, 2012, AS DIRECTED BY THE CHAIRMAN OF THE HOUSE COMMITTEE ON THE BUDGET
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           By fiscal year, in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                2012      2013      2014      2015      2016      2017      2018      2019      2020      2021      2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT BY JULY 1, 2012a

Orderly Liquidation Authority:
    Estimated Budget Authority..............................      -585    -2,838    -3,046    -3,550    -3,270    -2,756    -2,990    -3,185    -3,375    -3,540    -3,705    -16,045    -32,840
    Estimated Outlays.......................................      -585    -2,838    -3,046    -3,550    -3,270    -2,756    -2,990    -3,185    -3,375    -3,540    -3,705    -16,045    -32,840
Home Affordable Modification Program:
    Estimated Budget Authority..............................         0      -617      -687      -522      -427      -371      -209        -6         0         0         0     -2,624     -2,839
    Estimated Outlays.......................................         0      -617      -687      -522      -427      -371      -209        -6         0         0         0     -2,624     -2,839
Bureau of Consumer Financial Protection:
    Estimated Budget Authority..............................         0      -448      -495      -509      -524      -539      -557      -575      -593      -611      -631     -2,515     -5,482
    Estimated Outlays.......................................         0      -381      -488      -507      -522      -537      -554      -572      -590      -608      -628     -2,435     -5,387
National Flood Insurance Program:
    Estimated Budget Authority..............................         0         0       -60      -150       210         0         0         0         0         0         0          0          0
    Estimated Outlays.......................................         0         0       -60      -150       210         0         0         0         0         0         0          0          0
Office of Financial Research:
    Estimated Budget Authority..............................         0       -91       -93       -95       -97       -99      -101      -103      -105      -107      -108       -475       -999
    Estimated Outlays.......................................         0       -74       -93       -95       -97       -99      -101      -103      -105      -107      -108       -458       -982
    Total Changes:
        Estimated Budget Authority..........................      -585    -3,994    -4,381    -4,826    -4,108    -3,765    -3,857    -3,869    -4,073    -4,258    -4,444    -21,659    -42,160
        Estimated Outlays...................................      -585    -3,910    -4,374    -4,824    -4,106    -3,763    -3,854    -3,866    -4,070    -4,255    -4,441    -21,562    -42,048

                                                                     CHANGES IN REVENUES ASSUMING ENACTMENT BY JULY 1, 2012

Orderly Liquidation Authority...............................         0       -35      -230      -455      -690      -940    -1,175    -1,390    -1,600    -1,785    -1,920     -2,350    -10,220
Office of Financial Research................................       -15       -67       -68       -69       -70       -71       -72       -73       -74       -75       -76       -360       -730
                                                             -----------------------------------------------------------------------------------------------------------------------------------
    Total Changes...........................................       -15      -102      -298      -524      -760    -1,011    -1,247    -1,463    -1,674    -1,860    -1,996     -2,710    -10,950

                                              NET DEFICIT REDUCTIONS (-) ASSUMING ENACTMENT OF DIRECT SPENDING AND REVENUE CHANGES BY JULY 1, 2012

Net Effect on Deficit.......................................      -570    -3,808    -4,076    -4,300    -3,346    -2,752    -2,607    -2,403    -2,396    -2,395    -2,445    -18,852    -31,098
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  Memorandum:

Change in Net Income to the National Flood Insurance
 Programb
    Estimated Budget Authority..............................         0         0        60       150       265       405       580       775       830       890       945        880      4,900
    Estimated Outlays.......................................         0         0        60       150       265       405       580       775       830       890       945        880     4,900
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding.
aIn addition, CBO estimates that implementing the Financial Services Committee's recommendations would cost $766 million over the 2012-2017 period, assuming appropriation of the necessary
  amounts. That estimate includes funding for the Bureau of Consumer Financial Protection, the Financial Stability Oversight Council, and for mapping and mitigation efforts under the National
  Flood Insurance Program.
bThe proposed language would raise premiums for certain subsidized flood insurance policies, increasing net income to the National Flood Insurance Program by $4.9 billion. However, because
  many policies would continue to be subsidized and the program would continue to face significant interest costs for borrowing over the past decade, CBO expects that additional receipts
  collected under this legislation would be spent to cover future program shortfalls, resulting in no net effect on the budget over the 2012-2022 period.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes the recommendations will be enacted on or near October 
1, 2012, as shown in Table 1. As directed by the Chairman of 
the House Committee on the Budget, CBO has also prepared a set 
of estimates based on the assumption that the recommendations 
are enacted by July 1, 2012. Those estimates are shown in Table 
2.

Changes in direct spending and revenues

    Five provisions in the committee's recommendations would 
reduce direct spending by $40.9 billion over the 2012-2022 
period, assuming enactment around October 1, 2012, and by $42.0 
billion over that period, assuming enactment by July 1, 2012.
    Orderly Liquidation Authority. Subtitle A would repeal the 
authority of the FDIC to liquidate large, systemically 
important financial companies (excluding insured depository 
institutions, which can be resolved using other authorities of 
the agency) that are in default or in danger of default.
    Under current law, if a financial company is determined to 
be in default or in danger of default and if its liquidation 
under applicable federal and state bankruptcy laws would have a 
significant impact on the nation's financial stability, the 
FDIC may be appointed as receiver of the failing company. As 
receiver, the FDIC would liquidate the company in an orderly 
manner with the goal of minimizing both losses to the 
receivership and disruption to the financial system. Any losses 
incurred by the receivership, including administrative costs, 
would be recouped through proceeds from asset sales and 
assessments on large bank holding companies and other nonbank 
financial companies supervised by the Federal Reserve. All of 
these transactions would be recorded in the federal budget on a 
cash basis through the Orderly Liquidation Fund (OLF).
    CBO's most recent baseline estimates for the cash flows of 
the OLF project net outlays of more than $30 billion to resolve 
failing companies and revenues from assessments of nearly $15 
billion over the 2012-2022 period to begin the recovery of 
those costs; under current law, the remainder of the costs 
would be recovered after 2022. Those baseline projections 
reflect expected values of the estimated net costs of 
liquidating one or more financial companies and the subsequent 
assessments collected to begin to recoup those costs over that 
period. CBO expects that the probability that the federal 
government would have to liquidate a financial institution in 
any given year is relatively small;\1\ however, the potential 
cash flows if the orderly liquidation authority is used would 
probably be large. As such, actual outlays and revenues will 
probably vary significantly from the above estimates (in fact, 
in many years, it is likely that no spending or revenues will 
be recorded in the budget).
---------------------------------------------------------------------------
    \1\CBO does not alter the probabilities used to calculate the 
expected values based on the current or expected future status of the 
financial system. Recognizing that certain economic and financial 
events are inherently unpredictable, those probabilities reflect CBO's 
best judgment on the basis of historical experience and do not vary 
from year to year.
---------------------------------------------------------------------------
    Because CBO assumes some small probability of a large 
financial event in every year of the projection period and 
because the majority of spending for an orderly liquidation 
would precede the recoupment of expenses, a snapshot of 
projected cash flows in any given 10-year period will reflect 
net increases in the federal deficit under current law. For 
that reason, the proposed repeal of the orderly liquidation 
authority would result in decreases in the deficit, on a cash 
basis, over the same period. (As noted above, the recoupment of 
expenses will ultimately equal the expenses, but not within the 
10-year period.)
    In addition, any assessments levied under current law to 
offset costs of the OLF will become additional business 
expenses for the large financial companies required to pay 
them. Those additional expenses would result in decreases in 
taxable income elsewhere in the economy, which would produce a 
loss of government revenue from payroll and income taxes 
(estimated to vary between 24 percent and 30 percent of the 
additional expenses during the 2013-2022 period\2\). By 
eliminating the orderly liquidation authority (and thus, any 
assessments that would be collected), expected taxable incomes 
of large financial companies would increase, resulting in 
additional revenues from payroll and income taxes. (CBO's 
estimates do not incorporate any effects of the elimination of 
the orderly liquidation authority on the probability of a 
financial crisis or economic slump--both because the agency is 
unable to assess those effects, and because standard estimating 
conventions for legislation hold aggregate economic conditions 
unchanged.)
---------------------------------------------------------------------------
    \2\Percentages used to estimate income and payroll tax offsets can 
be found at: Joint Committee on Taxation, The Income and Payroll Tax 
Offset to Changes in Excise Tax Revenues for 2012-2022 (JCX-23-12), 
March 6, 2012.
---------------------------------------------------------------------------
    Assuming enactment around October 1, 2012, CBO estimates 
that eliminating the FDIC's orderly liquidation authority would 
result in a net decrease in the federal deficit of $22.5 
billion over the 2012-2022 period (or $22.6 billion if enacted 
by July 1, 2012).
    Home Affordable Modification Program. Subtitle B of the 
committee's recommendations would terminate the Department of 
Treasury's Home Affordable Modification Program (HAMP) that 
aims to help homeowners facing the possibility of foreclosure 
by subsidizing loan modifications as well as other foreclosure 
alternatives.
    HAMP funds are used to cover costs incurred to modify 
mortgages that are not owned or guaranteed by the government-
sponsored enterprises (GSEs) Fannie Mae or Freddie Mac. 
Generally, the program provides incentive payments to mortgage 
servicers, investors, and eligible homeowners to either reduce 
a homeowner's mortgage payment to 31 percent of their monthly 
income or to sell their house outside of foreclosure. Through 
February 29, 2012, approximately 974,000 mortgages have been 
modified through HAMP. Servicers and borrowers currently have 
until December 31, 2013, to modify mortgages through the 
program.
    CBO estimates that the committee's recommendation would 
prevent the Treasury from making payments for approximately 
150,000 new modifications of non-GSE mortgages assuming an 
October 1, 2012, effective date. (The cost of modifications 
entered into prior to enactment would continue to be paid by 
the Treasury.) Based on data provided by the Office of the 
Special Inspector General for the Troubled Asset Relief 
Program, CBO estimates that such modifications cost about 
$15,000 on average. As a result, CBO estimates that the 
provisions would reduce direct spending by $2.3 billion over 
the 2012-2022 period, assuming an October 1, 2012, effective 
date (or $2.8 billion assuming enactment by July 1, 2012).
    National Flood Insurance Program. Subtitle D would 
authorize the NFIP to enter into and renew flood insurance 
policies through fiscal year 2016. The committee's 
recommendations also would make a number of changes that would 
affect the financial status of the program, including: 
increasing premiums for some subsidized policyholders, offering 
temporary discounted premiums for properties that are newly 
mapped into a flood plain, and requiring the capitalization of 
a reserve fund for use during higher-than-average loss years.
    The changes made by the bill would improve the financial 
condition of the NFIP and reduce its need to borrow from the 
Treasury--a source of direct spending--by a total of $210 
million in 2014 and 2015, CBO estimates. Because the NFIP would 
continue to operate with insurance premiums that are not 
sufficient, in the aggregate, to cover all expected costs after 
the committee's recommendations were enacted, CBO estimates 
that reduced borrowing in 2014 and 2015 would be offset by 
increased borrowing in 2016 (when we expect the program would 
exhaust its remaining borrowing authority under this proposal), 
resulting in no net effect on direct spending over the next 10 
years.
    Section 507(b) of H. Con. Res. 112 requires that CBO 
estimate the change in net income to the NFIP if the 
committee's recommendations were enacted. CBO estimates that 
the proposed changes in subtitle D would increase net income to 
the NFIP by $4.9 billion over the 2012-2022 period (as shown in 
the memorandum to tables 1 and 2), mostly because of increases 
in premiums for subsidized policyholders (some of which would 
be retained by private insurers which sell the insurance 
policies). Increased premiums to the program would not result 
in a net reduction in CBO's estimate of the deficit, however, 
because we expect that this additional income would be used to 
fulfill obligations to policyholders that would otherwise be 
delayed, resulting in no net impact on direct spending over the 
five- and ten-year projection periods.
    Bureau of Consumer Financial Protection. The Dodd-Frank 
Wall Street Reform and Consumer Financial Protection Act 
established the Bureau of Consumer Financial Protection (CFPB) 
to enforce certain federal laws. The annual operating costs of 
the CFPB, an autonomous agency within the Federal Reserve, are 
paid through transfers from the earnings of the Federal Reserve 
and are recorded as expenditures in the federal budget. 
Subtitle C would change that funding mechanism by terminating 
the transfers from the Federal Reserve and authorizing the 
appropriation of $200 million for each of fiscal years 2012 and 
2013 for the agency's operations. CBO estimates that the CFPB 
will spend $310 million in fiscal year 2012, and that outlays 
will average about $545 million per year over the 2013-2022 
period.
    CBO estimates that enacting this change to the method of 
funding the agency would reduce direct spending by $5.4 billion 
over the 2012-2022 period, assuming enactment at any point 
between July 1, 2012, and October 1, 2012.
    Office of Financial Research. Subtitle E would eliminate 
the Office of Financial Research (OFR), which was established 
to support the Financial Stability Oversight Council (FSOC) by 
collecting information on financial markets and providing 
independent research on financial stability issues.
    Under current law, the OFR is authorized to collect fees to 
offset its expenses, which also include the operating costs of 
the FSOC and certain costs incurred by the FDIC to implement 
the orderly liquidation authority. Those fees are recorded in 
the budget as revenues. Subtitle E would terminate the 
authority to collect those fees as well as spending for all of 
the activities associated with the OFR. Based on information 
from the OFR, CBO estimates that spending by the OFR will 
average about $100 million per year over the 2013-2022 period, 
and that fee collections will average about $72 million per 
year over the same period, net of effects on payroll and income 
taxes.
    Thus, enacting this provision would reduce budget deficits 
by $255 million over the 2012-2022 period if enacted around 
October 1, 2012 (or $252 million if enacted by July 1, 2012), 
CBO estimates.

Spending subject to appropriation

    CBO estimates that implementing the committee 
recommendations would have a discretionary cost of $766 million 
over the 2013-2017 period, assuming appropriation of the 
necessary amounts, to fund activities of the CFPB and the FSOC, 
as well as mapping and mitigation efforts under the NFIP.
    Bureau of Consumer Financial Protection. Subtitle C would 
change the method for funding the CFPB. Under current law, the 
bureau's operating costs are covered by amounts transferred 
from the earnings of the Federal Reserve; the recommendation 
would terminate those transfers and authorize the appropriation 
of $200 million each year for 2012 and 2013.
    Based on information from the CFPB as well as historical 
spending patterns, CBO estimates that $325 million, an amount 
similar to what CBO estimates the agency will spend in 2012, 
would be sufficient for the CFPB to execute its statutory 
oversight and enforcement activities in 2013. CBO believes that 
the agency could not continue its mission with an appropriation 
of only $200 million in 2013, because the committee 
recommendations would not diminish the agency's 
responsibilities. Therefore, CBO estimates that implementing 
subtitle C would cost $325 million over the 2013-2017 period, 
assuming appropriation of the necessary amounts for 2013 and 
assuming enactment anytime between July 1, 2012, and October 1, 
2012.
    Financial Stability Oversight Council. Under current law, 
the activities of the FSOC are funded through the Office of 
Financial Research, which, as noted earlier, would be 
eliminated under subtitle E. Based on information from the OFR, 
CBO estimates that continuing the activities of the FSOC would 
cost about $10 million per year. Therefore, implementing 
subtitle E would cost $49 million over the 2013-2017 period, 
assuming appropriation of the necessary amounts and assuming 
enactment anytime between July 1, 2012, and October 1, 2012.
    Flood Mapping and Mitigation Programs. The committee 
recommendations would direct FEMA to implement new standards 
for flood insurance rate maps. The agency would have 10 years 
to incorporate the new standards, subject to the availability 
of appropriated funds. Based on the costs of FEMA's current map 
modernization program and the estimated costs of new updates, 
CBO estimates that implementing this provision would cost $254 
million over the next five years.
    Subtitle D also would authorize the appropriation of $40 
million a year above amounts already authorized in current law 
for grants to mitigate future flood damages. Such amounts would 
come from the National Flood Insurance Fund, but would be 
subject to future appropriation actions. Based on historical 
expenditure patterns of FEMA's flood mitigation programs, CBO 
estimates that implementing this provision would cost $138 
million over the next five years.
    Intergovernmental and private-sector impact: The 
legislation would impose intergovernmental and private-sector 
mandates, as defined in UMRA, on public and private mortgage 
lenders. Because the mandates would require only small changes 
in existing industry practice, CBO expects that the cost to 
comply with the mandates would be small relative to the annual 
thresholds established in UMRA for intergovernmental and 
private-sector mandates ($73 million and $146 million in 2012, 
respectively, adjusted annually for inflation).

Flood insurance

    Current law prohibits lenders from making loans for real 
estate in areas at high risk for flood damage unless the 
property is covered by flood insurance. This bill would require 
lenders to accept flood insurance from a private company if the 
policy fulfills all federal requirements for flood insurance. 
Under current law, lenders also are required to purchase flood 
insurance on behalf of the homeowner if, at any time during the 
life of a loan, they determine that a homeowner does not have a 
current policy in place. The bill would require lenders to 
terminate those policies within 30 days of being notified that 
the homeowner has purchased another policy. Lenders also would 
have to refund any premium payments and fees made by the 
homeowner for the time when both policies were in effect. Based 
on information from industry sources and on current industry 
practice, CBO estimates that the cost to public and private 
mortgage lenders of complying with those mandates would be 
small.

Disclosure requirements

    Current law requires mortgage lenders that make federally 
related mortgages (as defined in 12 U.S.C. 2602) to provide a 
good-faith estimate of the amount or range of charges the 
borrower is likely to incur for specific settlement services. 
The bill would require those lenders to include specific 
information about the availability of flood insurance in each 
good-faith estimate. The mandate would require small changes in 
existing disclosure requirements. Consequently, CBO estimates 
that the cost of the mandate to public and private mortgage 
lenders would be small.

Other impacts

    State, local, and tribal governments would benefit if funds 
authorized to be appropriated for mitigation and outreach 
activities related to flood hazards were made available. Any 
costs to those governments, including matching funds, would be 
incurred voluntarily.
    Previous CBO estimates: On March 11, 2011, CBO transmitted 
a cost estimate for H.R. 839, the HAMP Termination Act of 2011, 
as ordered reported by the House Committee on Financial 
Services on March 9, 2011. Differences in the estimated costs 
of subtitle B and H.R. 839 reflect differences in effective 
dates and administrative changes that have been made to the 
HAMP programs.
    On June 8, 2011, CBO transmitted a cost estimate for H.R. 
1309, the Flood Insurance Reform Modernization Act, as ordered 
reported by the House Committee on Financial Services on May 
13, 2011. Differences in the estimated costs of subtitle D and 
H.R. 1309 reflect differences in the effective dates as well as 
the requirement that the NFIP establish a reserve fund, which 
was included in the recommendation, but not in the committee-
reported version of H.R. 1309.
    Estimate prepared by: Federal Costs: Orderly Liquidation 
Authority and the NFIP: Daniel Hoople; Bureau of Consumer 
Financial Protection and Office of Financial Research: Susan 
Willie; Home Affordable Modification Program: Chad Chirico.
    Impact on State, local, and tribal governments: Elizabeth 
Cove Delisle and Melissa Merrell.
    Impact on the private sector: Vi Nguyen and Paige Piper/
Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Section 346 of Subtitle D creates a new Technical Mapping 
Advisory Council within the meaning of section 5(b) of the 
Federal Advisory Committee Act.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

                  Applicability to Legislative Branch


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    The Committee finds that Subtitle A does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    The Committee finds that Subtitle B does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    The Committee finds that Subtitle C does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    The Committee finds that Subtitle D does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    The Committee finds that Subtitle E does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

                         Earmark Identification


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Subtitle A does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Subtitle B does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Subtitle C does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Subtitle D does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Subtitle E does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

Section 311. Repeal of Liquidation Authority

    Section 311 repeals Title II of the Dodd-Frank Act, and 
makes conforming amendments to the Dodd-Frank Act and the 
Federal Deposit Insurance Act.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

Section 321. Short title

    This section establishes the short title of the Subtitle, 
the ``The HAMP Termination Act of 2012.''

Section 322. Congressional findings

    This section sets forth several Congressional findings 
regarding HAMP, including the purpose of the program, the 
number of active permanent mortgage modifications made under 
the program, the harms sustained by homeowners as a result of 
HAMP modification cancellations, the cost of the program, and 
the savings that will be achieved by terminating the program.

Section 323. Termination of authority

    This section amends Section 120 of the Emergency Economic 
Stabilization Act of 2008 to terminate the authority of the 
Treasury Department to provide new assistance to homeowners 
under the HAMP. It also preserves the Treasury Department's 
authority to continue to provide assistance to homeowners who 
have already been extended an offer to participate in HAMP on a 
permanent or trial basis.
    Further, this section directs the Treasury Secretary to 
conduct a study to determine the extent to which ``covered 
homeowners'' use HAMP. ``Covered homeowners'' are defined as 
individuals who are active duty members of the U.S. armed 
forces and their spouses or parents, veterans of the U.S. armed 
forces, and individuals eligible to receive a Gold Star lapel 
button under 10 U.S.C. 1126 as the widow, parent, or next of 
kin of a fallen member of the U.S. armed forces. The Treasury 
Secretary is then required to report to Congress on the study 
and to identify any best practices that could be applied to 
existing mortgage assistance programs available to covered 
homeowners within 90 days of enactment of this Subtitle.
    Finally, this section requires the Treasury Secretary to 
publish in a prominent location on the Treasury Department's 
website, in a noticeable font, a statement that HAMP has been 
terminated and inviting borrowers who are having trouble paying 
their mortgages and who need help in communicating with their 
lenders or servicers to contact their Member of Congress for 
assistance in reaching the lender or servicer for the purpose 
of negotiating or acquiring a loan modification.

Section 324. Sense of Congress

    This section establishes the sense of Congress that banks 
should be encouraged to work with homeowners to provide loan 
modifications to those that are eligible, as well as to work 
and to assist homeowners and prospective homeowners with 
foreclosure prevention programs and information on loan 
modifications.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

Section 331. Bringing the Bureau of Consumer Financial Protection into 
        the regular appropriations process

    Section 331 amends Section 1017 of the Dodd-Frank Act by 
terminating the CFPB's authority to determine its own budget 
and draw that amount from the Federal Reserve System. This 
section authorizes $200 million in appropriations to fund the 
CFPB for fiscal years 2012 and 2013. This section also 
eliminates the Consumer Financial Protection Fund and the 
Consumer Financial Civil Penalty Fund.

                   SUBTITLE D--FLOOD INSURANCE REFORM

Section 341. Short title and Table of Contents

    This section establishes the short title of the Subtitle, 
the ``Flood Insurance Reform Act of 2012.''

Section 342. Extensions

    This section reauthorizes the NFIP and its financing 
through September 30, 2016.

Section 343. Mandatory purchase

    Temporary Mandatory Purchase Suspensions--Under the NFIP, 
federally regulated lenders are obligated to require flood 
insurance on any mortgage issued or guaranteed by the federal 
government in a Special Flood Hazard Area in a community that 
participates in the NFIP. This section allows the mandatory 
purchase requirement to be suspended on a community-by-
community basis for one year at the request of a local 
governing authority if FEMA finds at least one of the following 
conditions apply to the community: (1) it has never been mapped 
as a high-risk area; (2) it is taking specific steps to rebuild 
or repair a dam or levee that has been decertified and is 
making adequate progress in securing financial commitments and 
completing that work; or (3) it has filed a formal appeal of 
the accuracy of a dam or levee decertification or flood risk 
map revision. This suspension could be extended for a maximum 
of two additional one-year periods (for a total of three years) 
for all qualifying communities at FEMA's discretion. For 
certain qualifying communities determined by FEMA to be making 
more than adequate progress in the construction of their flood 
protection systems, FEMA may, at its discretion, further extend 
the suspension of the mandatory purchase requirement for 
existing mortgages for a maximum of two additional one-year 
periods (for a total of five years).
    Termination of Force-Placed Insurance--Mortgage lenders and 
servicers must terminate any force-placed insurance and refund 
any premiums paid for coverage overlap periods once property 
owners have obtained their required flood insurance.
    Equal Treatment of Private Flood Insurance--To encourage 
greater private sector participation, this section requires 
lenders to accept non-NFIP backed flood insurance coverage 
provided by a private entity if that coverage meets the same 
requirements as NFIP-backed flood insurance.

Section 344. Reforms of coverage terms

    Minimum Deductibles--Minimum deductibles are set at $1,000 
for properties with full-risk rates and at $2,000 for 
properties with discounted rates.
    Maximum Coverage Limits--Limits would be indexed for 
inflation, starting in 2012.
    Optional Coverage for Additional Living Expenses/Business 
Interruption (ALE/BI)--FEMA would be authorized to offer 
optional coverage for additional living expenses ($5,000 
maximum) and coverage for the interruption of business 
operations ($20,000 maximum) if FEMA: (1) charges full-risk 
rates for such coverage; (2) finds that a competitive private 
market for such coverage does not exist; and (3) certifies that 
the NFIP can offer such coverage without borrowing additional 
funds from the Treasury.
    Installment Payments--Policyholders would be allowed to pay 
their premiums for one-year policies in installments.
    Flood in Progress Protections--New policyholders would not 
have their coverage limited by a FEMA-determined flood-in-
progress exclusion if they have not sustained any actual damage 
or loss to their property within the initial 30-day waiting 
period required under a standard flood insurance policy before 
flood coverage can go into effect.

Section 345. Reforms of premium rates

    Annual Limit on Premium Rate Increases--The annual cap on 
premium rate increases would be increased from 10 percent to 20 
percent.
    Five Year Phase-in of Full-Risk Rates for Newly-Mapped 
Areas--For primary residence properties mapped into a mandatory 
purchase area, initial rates would be set at 20 percent of 
full-risk rates and increase by 20 percent each year for four 
years thereafter.
    Full-Risk Rates for Certain Subsidized Properties--Full 
actuarial rates would be phased-in for roughly 350,000 
properties currently receiving NFIP subsidies including: 
commercial properties, second and vacation homes, homes sold to 
new owners, homes substantially damaged or improved, Severe 
Repetitive Loss Properties (SRLPs) with multiple flood claims, 
and property owners who allowed their policies to lapse by 
choice.
    Use of State and Local Funding Considerations in Setting 
Flood Rates--FEMA would be required to update its standards for 
evaluating eligibility for special flood insurance rates by 
considering several factors, including state and local funding 
of flood control projects and other flood control 
reconstruction and improvement projects.

Section 346. Technical Mapping Advisory Council

    This section establishes a new Technical Mapping Advisory 
Council made up of federal, state, and local experts, with an 
adequate number of representatives from states at a high-risk 
for flooding, to review flood hazard risk mapping standards and 
propose new mapping standards to FEMA. The Council has 12 
months to develop and submit to FEMA and Congress its proposed 
new mapping standards, during which time FEMA is prohibited 
from making effective any new or updated flood insurance rate 
maps based on its current mapping standards.

Section 347. FEMA incorporation of New Mapping Protocols

    This section requires FEMA to update its flood maps 
according to the Technical Mapping Advisory Council's 
recommendations within six months of receiving those 
recommendations, or report to Congress why it rejected them.

Section 348. Treatment of levees

    This section prohibits FEMA from issuing or updating flood 
insurance maps that do not factor in the actual protection 
afforded by existing levees regardless of their FEMA 
accreditation status (i.e., FEMA's maps must award partial 
credit to existing dams and levees).

Section 349. Privatization initiatives

    This section requires FEMA and the GAO to report on various 
privatization initiatives, including options to begin 
privatizing the NFIP over time; determining the capacity of 
private insurers, reinsurers, and financial markets to 
underwrite NFIP flood risk; and assessing new ways to 
strengthen the NFIP's ability to pay claims without having to 
borrow from the Treasury.

Section 350. FEMA annual report on insurance program

    This section requires FEMA to report annually to Congress 
on the status of the NFIP with detailed information about the 
financial status of the program.

Section 351. Mitigation assistance

    This section amends the current planning assistance grants 
program to authorize $90 million in financial assistance for 
FEMA to (1) make assistance grants available to states and 
communities for flood mitigation activities, particularly 
activities that reduce flood damage to severe repetitive loss 
structures; and (2) make direct grants available to property 
owners for flood mitigation activities. To become eligible for 
mitigation assistance, states must develop a new multi-hazard 
mitigation plan that examines the reduction of flood losses, 
including the demolition and rebuilding of properties, and 
requires states and communities to use mitigation assistance in 
a manner that is consistent with activities outlined in their 
mitigation plan. In awarding grants, FEMA may approve only 
mitigation activities that it determines are technically 
feasible, cost-effective and represent savings to the NFIP, 
with a priority given to mitigation activities that will result 
in savings for the NFIP.

Section 352. Notification to homeowners regarding mandatory purchase 
        requirement applicability and rate phase-ins

    This section establishes an annual notification process to 
inform individuals who reside in an area having special flood 
hazards that they are subject to the mandatory purchase 
requirement and provide estimates of what other homeowners in 
similar areas pay for their flood insurance.

Section 353. Notification of Congress regarding the establishment of 
        flood map changes

    This section requires FEMA to notify Members of the House 
and Senate whose districts or states are affected when it 
changes or updates floodplain areas or flood risk zones.

Section 354. Notification and appeals process for map changes based on 
        flood elevations

    This section requires FEMA, when establishing new flood 
maps based on elevation, to provide written notification by 
first class mail of the proposed change and the appeals process 
to each effected property owner with, copies of the new maps to 
the chief executive officer of each community affected, and to 
publish notice of the proposed change and the appeals process 
in the Federal Register and a prominent local newspaper.

Section 355. Notification to tenants of the availability of contents 
        insurance

    This section requires FEMA to develop a notice to landlords 
to inform tenants if they live in an area having special flood 
hazards and details about NFIP insurance for the contents of 
their apartment.

Section 356. Notification to policy holders regarding direct management 
        of policy by FEMA

    This section requires FEMA to annually notify all holders 
of policies transferred to the NFIP Direct program of their 
options to purchase flood insurance directly from another WYO 
insurance company.

Section 357--Notice of the availability of flood insurance and escrow 
        in RESPA good faith estimate

    This section amends the Real Estate Settlement Procedures 
Act (RESPA) to disclose as part of RESPA's good faith estimate 
that flood insurance is generally available from the NFIP for 
all homes, and that the escrowing of flood insurance payments 
is required for many loans and may be an option available under 
other loans.

Section 358--Reimbursement for costs incurred by homeowners and 
        communities obtaining letters of map amendment or revision

    This section allows homeowners or communities to be 
reimbursed for certain costs associated with a successful 
challenge to a bona fide mapping error made by FEMA resulting 
in a Letter of Map Amendment (LOMA) or Letter of Map Revision 
(LOMR), not including legal fees.

Section 359--Enhanced communication to communities with non-updated 
        flood maps

    This section requires FEMA, when establishing new flood 
maps, to communicate with communities whose flood insurance 
rate maps that have not been updated in 20 or more years to 
help resolve outstanding flooding issues, provide technical 
assistance, and disseminate information to reduce the 
prevalence of outdated maps in flood-prone areas.

Section 360--Notification to residents newly included in flood hazard 
        areas

    This section requires FEMA to provide to each property 
owner newly mapped into a special flood hazard area with a copy 
of the revised or updated flood insurance map that affects that 
owner's property, as well as the appeals process to challenge 
that mapping determination.

Section 361--Treatment of swimming pool enclosures outside of hurricane 
        season

    This section allows certain properties with swimming pools 
that are enclosed with non-supporting breakaway walls outside 
of hurricane season (November 20 through June 1) to be eligible 
for participation in the NFIP.

Section 362--Information regarding multiple perils claims

    This section allows NFIP policyholders who also have non-
NFIP wind or other homeowners insurance coverage and sustain 
damage to property covered under both policies to request the 
damage estimate, proofs of loss, and any expert or engineering 
reports used to determine the cause of the damage from FEMA and 
their NFIP-participating WYO insurance company.

Section 363--FEMA authority to reject the transfer of policies to NFIP 
        direct

    This section authorizes FEMA to refuse to accept the future 
transfer of any flood insurance policies from a WYO company to 
its NFIP Direct policy servicing program.

Section 364--Media notification of proposed map changes and extended 
        appeals process

    This section requires FEMA to notify local television and 
radio stations of proposed changes to flood maps. This section 
also requires FEMA to grant property owners a 90-day extension 
of the existing appeals process period if their community 
certifies to FEMA that there are affected property owners who 
were unaware of the expiration of the appeals process period 
and that the community will use that 90-day period to inform 
affected property owners about the availability of the appeals 
process.

Section 365--Establishment of a Reserve Fund for the NFIP

    This section establishes a National Flood Insurance Reserve 
Fund within the Treasury Department where the NFIP would be 
required to maintain a reserve ratio balance of at least 1 
percent of the sum of the total potential loss exposure of all 
outstanding flood insurance policies in force the prior fiscal 
year. FEMA is authorized to establish and adjust the amount of 
aggregate annual insurance premiums it collects to maintain or 
achieve that reserve ratio. Starting in 2012, FEMA would be 
required to transfer to the Fund at least 7.5 percent of the 
amount needed to achieve its 1 percent reserve ratio balance 
each year until the full 1 percent reserve ratio is achieved. 
FEMA would also be required to submit a report to Congress for 
any year in which it cannot achieve a 1 percent reserve ratio.

Section 366--CDBG eligibility for flood insurance outreach activities 
        and community building code administration grants

    This section allows communities to use Community 
Development Block Grant (CDBG) funds for local building code 
enforcement, as long as local matching funds are provided. It 
also allows CDBG funds to be used by local governments for 
flood risk outreach and education activities.

Section 367--Technical corrections

    This section makes a technical correction to the underlying 
National Flood Insurance Act of 1968 and the Flood Disaster 
Protection Act of 1973 to update references in those statutes 
to the head of FEMA as its ``Administrator'' rather than its 
``Director.''

Section 368--Requiring competition for NFIP policies

    To address the rapid increase in the number of policies 
administered under FEMA's NFIP Direct policy servicing program, 
FEMA would be required to report to Congress within 90 days on 
the procedures and policies it can implement to limit the size 
of NFIP Direct to no more than 10 percent of all flood 
insurance policies, and then implement those size reduction 
procedures and policies--without preventing agents handling 
policies transitioned out of the NFIP Direct from continuing to 
sell or service those policies--within one year of issuing that 
report.

Section 369--Studies of voluntary community-based flood insurance 
        options

    This section directs FEMA and GAO to conduct a study to 
assess options, methods, and strategies for offering voluntary 
community-based flood insurance policies, and to report their 
findings to Congress within 18 months of enactment of this 
subtitle.

Section 370--Report on inclusion of building codes in floodplain 
        management criteria

    This section directs FEMA to study the impact, 
effectiveness, and feasibility of including widely used and 
nationally recognized building codes as part of its floodplain 
management criteria, and report its findings to Congress within 
6 months of enactment of this subtitle.

Section 371--Study on graduated risk

    This section requires the National Academy of Sciences to 
study methods for understanding graduated risk for properties 
and residential and commercial structures behind levees and 
report its findings to Congress within one year of enactment of 
this subtitle.

Section 372--Report on flood-in-progress determination

    This section directs FEMA to review its processes and 
procedures for issuing a flood-in-progress determination and 
providing public notification of that determination, and report 
the results of that review to Congress within 6 months of 
enactment of this subtitle.

Section 373--Study on Repaying flood insurance debt

    This section requires FEMA to report to Congress within 6 
months of enactment of this subtitle on its plan to repay all 
outstanding sums previously borrowed from the Treasury, with 
interest, over the next 10 years.

Section 374--No cause of action

    This section specifies that no cause of action against the 
federal government exists for failure to comply with any 
notification requirement under this Act.

Section 375--State and local requests for the Corps of Engineers to 
        evaluate Corps-constructed levees

    This section permits state and local governments to request 
the Army Corps of Engineers to evaluate their locally-operated 
levee systems, provided that the levee was constructed by the 
Corps and that the requesting state or local government agrees 
to fully reimburse the Corps for all costs associated with the 
evaluation.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

Section 381. Repeal of the Office of Financial Research

    Section 381 repeals Title I, Subtitle B of the Dodd-Frank 
Act, which establishes the OFR as an office within the 
Department of the Treasury.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

       DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT


SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) * * *
  (b) Table of Contents.--The table of contents for this Act is 
as follows:

Sec. 1. Short title; table of contents.
     * * * * * * *

                      TITLE I--FINANCIAL STABILITY

     * * * * * * *

            Subtitle A--Financial Stability Oversight Council

     * * * * * * *
[Sec. 118. Council funding.]
     * * * * * * *

                [Subtitle B--Office of Financial Research

[Sec. 151. Definitions.
[Sec. 152. Office of Financial Research established.
[Sec. 153. Purpose and duties of the Office.
[Sec. 154. Organizational structure; responsibilities of primary 
          programmatic units.
[Sec. 155. Funding.
[Sec. 156. Transition oversight.]
     * * * * * * *

                [TITLE II--ORDERLY LIQUIDATION AUTHORITY

[Sec. 201. Definitions.
[Sec. 202. Judicial review.
[Sec. 203. Systemic risk determination.
[Sec. 204. Orderly liquidation of covered financial companies.
[Sec. 205. Orderly liquidation of covered brokers and dealers.
[Sec. 206. Mandatory terms and conditions for all orderly liquidation 
          actions.
[Sec. 207. Directors not liable for acquiescing in appointment of 
          receiver.
[Sec. 208. Dismissal and exclusion of other actions.
[Sec. 209. Rulemaking; non-conflicting law.
[Sec. 210. Powers and duties of the Corporation.
[Sec. 211. Miscellaneous provisions.
[Sec. 212. Prohibition of circumvention and prevention of conflicts of 
          interest.
[Sec. 213. Ban on certain activities by senior executives and directors.
[Sec. 214. Prohibition on taxpayer funding.
[Sec. 215. Study on secured creditor haircuts.
[Sec. 216. Study on bankruptcy process for financial and nonbank 
          financial institutions
[Sec. 217. Study on international coordination relating to bankruptcy 
          process for nonbank financial institutions]

           *       *       *       *       *       *       *


TITLE I--FINANCIAL STABILITY

           *       *       *       *       *       *       *


SEC. 102. DEFINITIONS.

  (a) In General.--For purposes of this title, unless the 
context otherwise requires, the following definitions shall 
apply:
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Office of financial research.--The term ``Office 
        of Financial Research'' means the office established 
        under section 152.]

           *       *       *       *       *       *       *


           Subtitle A--Financial Stability Oversight Council

SEC. 111. FINANCIAL STABILITY OVERSIGHT COUNCIL ESTABLISHED.

  (a) * * *
  (b) Membership.--The Council shall consist of the following 
members:
          (1) * * *
          (2) Nonvoting members.--The nonvoting members, who 
        shall serve in an advisory capacity as a nonvoting 
        member of the Council, shall be--
                  [(A) the Director of the Office of Financial 
                Research;]
                  [(B)] (A) the Director of the Federal 
                Insurance Office;
                  [(C)] (B) a State insurance commissioner, to 
                be designated by a selection process determined 
                by the State insurance commissioners;
                  [(D)] (C) a State banking supervisor, to be 
                designated by a selection process determined by 
                the State banking supervisors; and
                  [(E)] (D) a State securities commissioner (or 
                an officer performing like functions), to be 
                designated by a selection process determined by 
                such State securities commissioners.

           *       *       *       *       *       *       *

  (c) Terms; Vacancy.--
          (1) Terms.--The independent member of the Council 
        shall serve for a term of 6 years, and each nonvoting 
        member described in [subparagraphs (C), (D), and (E)] 
        subparagraphs (B), (C), and (D) of subsection (b)(2) 
        shall serve for a term of 2 years.

           *       *       *       *       *       *       *


SEC. 112. COUNCIL AUTHORITY.

  (a) Purposes and Duties of the Council.--
          (1) * * *
          (2) Duties.--The Council shall, in accordance with 
        this title--
                  (A) collect information from member agencies, 
                other Federal and State financial regulatory 
                agencies, the Federal Insurance Office and, if 
                necessary to assess risks to the United States 
                financial system, [direct the Office of 
                Financial Research to] collect information from 
                bank holding companies and nonbank financial 
                companies;
                  [(B) provide direction to, and request data 
                and analyses from, the Office of Financial 
                Research to support the work of the Council;]
                  [(C)] (B) monitor the financial services 
                marketplace in order to identify potential 
                threats to the financial stability of the 
                United States;
                  [(D)] (C) to monitor domestic and 
                international financial regulatory proposals 
                and developments, including insurance and 
                accounting issues, and to advise Congress and 
                make recommendations in such areas that will 
                enhance the integrity, efficiency, 
                competitiveness, and stability of the U.S. 
                financial markets;
                  [(E)] (D) facilitate information sharing and 
                coordination among the member agencies and 
                other Federal and State agencies regarding 
                domestic financial services policy development, 
                rulemaking, examinations, reporting 
                requirements, and enforcement actions;
                  [(F)] (E) recommend to the member agencies 
                general supervisory priorities and principles 
                reflecting the outcome of discussions among the 
                member agencies;
                  [(G)] (F) identify gaps in regulation that 
                could pose risks to the financial stability of 
                the United States;
                  [(H)] (G) require supervision by the Board of 
                Governors for nonbank financial companies that 
                may pose risks to the financial stability of 
                the United States in the event of their 
                material financial distress or failure, or 
                because of their activities pursuant to section 
                113;
                  [(I)] (H) make recommendations to the Board 
                of Governors concerning the establishment of 
                heightened prudential standards for risk-based 
                capital, leverage, liquidity, contingent 
                capital, resolution plans and credit exposure 
                reports, concentration limits, enhanced public 
                disclosures, and overall risk management for 
                nonbank financial companies and large, 
                interconnected bank holding companies 
                supervised by the Board of Governors;
                  [(J)] (I) identify systemically important 
                financial market utilities and payment, 
                clearing, and settlement activities (as that 
                term is defined in title VIII);
                  [(K)] (J) make recommendations to primary 
                financial regulatory agencies to apply new or 
                heightened standards and safeguards for 
                financial activities or practices that could 
                create or increase risks of significant 
                liquidity, credit, or other problems spreading 
                among bank holding companies, nonbank financial 
                companies, and United States financial markets;
                  [(L)] (K) review and, as appropriate, may 
                submit comments to the Commission and any 
                standard-setting body with respect to an 
                existing or proposed accounting principle, 
                standard, or procedure;
                  [(M)] (L) provide a forum for--
                          (i) * * *

           *       *       *       *       *       *       *

                  [(N)] (M) annually report to and testify 
                before Congress on--
                          (i) * * *

           *       *       *       *       *       *       *

  (d) Authority To Obtain Information.--
          (1) In general.--The Council may receive, and may 
        request the submission of, any data or information from 
        [the Office of Financial Research, member agencies, 
        and] member agencies and the Federal Insurance Office, 
        as necessary--
                  (A) * * *

           *       *       *       *       *       *       *

          (2) Submissions by the office and member agencies.--
        Notwithstanding any other provision of law, [the Office 
        of Financial Research, any member agency, and] any 
        member agency and the Federal Insurance Office, are 
        authorized to submit information to the Council.
          (3) Financial data collection.--
                  (A) In general.--The Council [, acting 
                through the Office of Financial Research,] may 
                require the submission of periodic and other 
                reports from any nonbank financial company or 
                bank holding company for the purpose of 
                assessing the extent to which a financial 
                activity or financial market in which the 
                nonbank financial company or bank holding 
                company participates, or the nonbank financial 
                company or bank holding company itself, poses a 
                threat to the financial stability of the United 
                States.
                  (B) Mitigation of report burden.--Before 
                requiring the submission of reports from any 
                nonbank financial company or bank holding 
                company that is regulated by a member agency or 
                any primary financial regulatory agency, the 
                Council[, acting through the Office of 
                Financial Research,] shall coordinate with such 
                agencies and shall, whenever possible, rely on 
                information available from [the Office of 
                Financial Research or] such agencies.
                  (C) Mitigation in case of foreign financial 
                companies.--Before requiring the submission of 
                reports from a company that is a foreign 
                nonbank financial company or foreign-based bank 
                holding company, the Council shall[, acting 
                through the Office of Financial Research,] to 
                the extent appropriate, consult with the 
                appropriate foreign regulator of such company 
                and, whenever possible, rely on information 
                already being collected by such foreign 
                regulator, with English translation.

           *       *       *       *       *       *       *

          (5) Confidentiality.--
                  (A) In general.--The Council[, the Office of 
                Financial Research,] and the other member 
                agencies shall maintain the confidentiality of 
                any data, information, and reports submitted 
                under this title.

           *       *       *       *       *       *       *


SEC. 116. REPORTS.

  (a) In General.--Subject to subsection (b), the Council[, 
acting through the Office of Financial Research,] may require a 
bank holding company with total consolidated assets of 
$50,000,000,000 or greater or a nonbank financial company 
supervised by the Board of Governors, and any subsidiary 
thereof, to submit certified reports to keep the Council 
informed as to--
          (1) * * *

           *       *       *       *       *       *       *

  (b) Use of Existing Reports.--
          (1) In general.--For purposes of compliance with 
        subsection (a), the Council[, acting through the Office 
        of Financial Research,] shall, to the fullest extent 
        possible, use--
                  (A) * * *

           *       *       *       *       *       *       *


[SEC. 118. COUNCIL FUNDING.

  [Any expenses of the Council shall be treated as expenses of, 
and paid by, the Office of Financial Research.]

           *       *       *       *       *       *       *


               [Subtitle B--Office of Financial Research

[SEC. 151. DEFINITIONS.

  [For purposes of this subtitle--
          [(1) the terms ``Office'' and ``Director'' mean the 
        Office of Financial Research established under this 
        subtitle and the Director thereof, respectively;
          [(2) the term ``financial company'' has the same 
        meaning as in title II, and includes an insured 
        depository institution and an insurance company;
          [(3) the term ``Data Center'' means the data center 
        established under section 154;
          [(4) the term ``Research and Analysis Center'' means 
        the research and analysis center established under 
        section 154;
          [(5) the term ``financial transaction data'' means 
        the structure and legal description of a financial 
        contract, with sufficient detail to describe the rights 
        and obligations between counterparties and make 
        possible an independent valuation;
          [(6) the term ``position data''--
                  [(A) means data on financial assets or 
                liabilities held on the balance sheet of a 
                financial company, where positions are created 
                or changed by the execution of a financial 
                transaction; and
                  [(B) includes information that identifies 
                counterparties, the valuation by the financial 
                company of the position, and information that 
                makes possible an independent valuation of the 
                position;
          [(7) the term ``financial contract'' means a legally 
        binding agreement between 2 or more counterparties, 
        describing rights and obligations relating to the 
        future delivery of items of intrinsic or extrinsic 
        value among the counterparties; and
          [(8) the term ``financial instrument'' means a 
        financial contract in which the terms and conditions 
        are publicly available, and the roles of one or more of 
        the counterparties are assignable without the consent 
        of any of the other counterparties (including common 
        stock of a publicly traded company, government bonds, 
        or exchange traded futures and options contracts).

[SEC. 152. OFFICE OF FINANCIAL RESEARCH ESTABLISHED.

  [(a) Establishment.--There is established within the 
Department of the Treasury the Office of Financial Research.
  [(b) Director.--
          [(1) In general.--The Office shall be headed by a 
        Director, who shall be appointed by the President, by 
        and with the advice and consent of the Senate.
          [(2) Term of service.--The Director shall serve for a 
        term of 6 years, except that, in the event that a 
        successor is not nominated and confirmed by the end of 
        the term of service of a Director, the Director may 
        continue to serve until such time as the next Director 
        is appointed and confirmed.
          [(3) Executive level.--The Director shall be 
        compensated at Level III of the Executive Schedule.
          [(4) Prohibition on dual service.--The individual 
        serving in the position of Director may not, during 
        such service, also serve as the head of any financial 
        regulatory agency.
          [(5) Responsibilities, duties, and authority.--The 
        Director shall have sole discretion in the manner in 
        which the Director fulfills the responsibilities and 
        duties and exercises the authorities described in this 
        subtitle.
  [(c) Budget.--The Director, in consultation with the 
Chairperson, shall establish the annual budget of the Office.
  [(d) Office Personnel.--
          [(1) In general.--The Director, in consultation with 
        the Chairperson, may fix the number of, and appoint and 
        direct, all employees of the Office.
          [(2) Compensation.--The Director, in consultation 
        with the Chairperson, shall fix, adjust, and administer 
        the pay for all employees of the Office, without regard 
        to chapter 51 or subchapter III of chapter 53 of title 
        5, United States Code, relating to classification of 
        positions and General Schedule pay rates.
          [(3) Comparability.--Section 1206(a) of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 
        1989 (12 U.S.C. 1833b(a)) is amended--
                  [(A) by striking ``Finance Board,'' and 
                inserting ``Finance Board, the Office of 
                Financial Research, and the Bureau of Consumer 
                Financial Protection''; and
                  [(B) by striking ``and the Office of Thrift 
                Supervision,''.
          [(4) Senior executives.--Section 3132(a)(1)(D) of 
        title 5, United States Code, is amended by striking 
        ``and the National Credit Union Administration;'' and 
        inserting ``the National Credit Union Administration, 
        the Bureau of Consumer Financial Protection, and the 
        Office of Financial Research;''.
  [(e) Assistance From Federal Agencies.--Any department or 
agency of the United States may provide to the Office and any 
special advisory, technical, or professional committees 
appointed by the Office, such services, funds, facilities, 
staff, and other support services as the Office may determine 
advisable. Any Federal Government employee may be detailed to 
the Office without reimbursement, and such detail shall be 
without interruption or loss of civil service status or 
privilege.
  [(f) Procurement of Temporary and Intermittent Services.--The 
Director may procure temporary and intermittent services under 
section 3109(b) of title 5, United States Code, at rates for 
individuals which do not exceed the daily equivalent of the 
annual rate of basic pay prescribed for Level V of the 
Executive Schedule under section 5316 of such title.
  [(g) Post-employment Prohibitions.--The Secretary, with the 
concurrence of the Director of the Office of Government Ethics, 
shall issue regulations prohibiting the Director and any 
employee of the Office who has had access to the transaction or 
position data maintained by the Data Center or other business 
confidential information about financial entities required to 
report to the Office from being employed by or providing advice 
or consulting services to a financial company, for a period of 
1 year after last having had access in the course of official 
duties to such transaction or position data or business 
confidential information, regardless of whether that entity is 
required to report to the Office. For employees whose access to 
business confidential information was limited, the regulations 
may provide, on a case-by-case basis, for a shorter period of 
post-employment prohibition, provided that the shorter period 
does not compromise business confidential information.
  [(h) Technical and Professional Advisory Committees.--The 
Office, in consultation with the Chairperson, may appoint such 
special advisory, technical, or professional committees as may 
be useful in carrying out the functions of the Office, and the 
members of such committees may be staff of the Office, or other 
persons, or both.
  [(i) Fellowship Program.--The Office, in consultation with 
the Chairperson, may establish and maintain an academic and 
professional fellowship program, under which qualified 
academics and professionals shall be invited to spend not 
longer than 2 years at the Office, to perform research and to 
provide advanced training for Office personnel.
  [(j) Executive Schedule Compensation.--Section 5314 of title 
5, United States Code, is amended by adding at the end the 
following new item:Director of the Office of Financial 
Research.''.

[SEC. 153. PURPOSE AND DUTIES OF THE OFFICE.

  [(a) Purpose and Duties.--The purpose of the Office is to 
support the Council in fulfilling the purposes and duties of 
the Council, as set forth in subtitle A, and to support member 
agencies, by--
          [(1) collecting data on behalf of the Council, and 
        providing such data to the Council and member agencies;
          [(2) standardizing the types and formats of data 
        reported and collected;
          [(3) performing applied research and essential long-
        term research;
          [(4) developing tools for risk measurement and 
        monitoring;
          [(5) performing other related services;
          [(6) making the results of the activities of the 
        Office available to financial regulatory agencies; and
          [(7) assisting such member agencies in determining 
        the types and formats of data authorized by this Act to 
        be collected by such member agencies.
  [(b) Administrative Authority.--The Office may--
          [(1) share data and information, including software 
        developed by the Office, with the Council, member 
        agencies, and the Bureau of Economic Analysis, which 
        shared data, information, and software--
                  [(A) shall be maintained with at least the 
                same level of security as is used by the 
                Office; and
                  [(B) may not be shared with any individual or 
                entity without the permission of the Council;
          [(2) sponsor and conduct research projects; and
          [(3) assist, on a reimbursable basis, with financial 
        analyses undertaken at the request of other Federal 
        agencies that are not member agencies.
  [(c) Rulemaking Authority.--
          [(1) Scope.--The Office, in consultation with the 
        Chairperson, shall issue rules, regulations, and orders 
        only to the extent necessary to carry out the purposes 
        and duties described in paragraphs (1), (2), and (7) of 
        subsection (a).
          [(2) Standardization.--Member agencies, in 
        consultation with the Office, shall implement 
        regulations promulgated by the Office under paragraph 
        (1) to standardize the types and formats of data 
        reported and collected on behalf of the Council, as 
        described in subsection (a)(2). If a member agency 
        fails to implement such regulations prior to the 
        expiration of the 3-year period following the date of 
        publication of final regulations, the Office, in 
        consultation with the Chairperson, may implement such 
        regulations with respect to the financial entities 
        under the jurisdiction of the member agency. This 
        paragraph shall not supersede or interfere with the 
        independent authority of a member agency under other 
        law to collect data, in such format and manner as the 
        member agency requires.
  [(d) Testimony.--
          [(1) In general.--The Director of the Office shall 
        report to and testify before the Committee on Banking, 
        Housing, and Urban Affairs of the Senate and the 
        Committee on Financial Services of the House of 
        Representatives annually on the activities of the 
        Office, including the work of the Data Center and the 
        Research and Analysis Center, and the assessment of the 
        Office of significant financial market developments and 
        potential emerging threats to the financial stability 
        of the United States.
          [(2) No prior review.--No officer or agency of the 
        United States shall have any authority to require the 
        Director to submit the testimony required under 
        paragraph (1) or other congressional testimony to any 
        officer or agency of the United States for approval, 
        comment, or review prior to the submission of such 
        testimony. Any such testimony to Congress shall include 
        a statement that the views expressed therein are those 
        of the Director and do not necessarily represent the 
        views of the President.
  [(e) Additional Reports.--The Director may provide additional 
reports to Congress concerning the financial stability of the 
United States. The Director shall notify the Council of any 
such additional reports provided to Congress.
  [(f) Subpoena.--
          [(1) In general.--The Director may require from a 
        financial company, by subpoena, the production of the 
        data requested under subsection (a)(1) and section 
        154(b)(1), but only upon a written finding by the 
        Director that--
                  [(A) such data is required to carry out the 
                functions described under this subtitle; and
                  [(B) the Office has coordinated with the 
                relevant primary financial regulatory agency, 
                as required under section 154(b)(1)(B)(ii).
          [(2) Format.--Subpoenas under paragraph (1) shall 
        bear the signature of the Director, and shall be served 
        by any person or class of persons designated by the 
        Director for that purpose.
          [(3) Enforcement.--In the case of contumacy or 
        failure to obey a subpoena, the subpoena shall be 
        enforceable by order of any appropriate district court 
        of the United States. Any failure to obey the order of 
        the court may be punished by the court as a contempt of 
        court.

[SEC. 154. ORGANIZATIONAL STRUCTURE; RESPONSIBILITIES OF PRIMARY 
                    PROGRAMMATIC UNITS.

  [(a) In General.--There are established within the Office, to 
carry out the programmatic responsibilities of the Office--
          [(1) the Data Center; and
          [(2) the Research and Analysis Center.
  [(b) Data Center.--
          [(1) General duties.--
                  [(A) Data collection.--The Data Center, on 
                behalf of the Council, shall collect, validate, 
                and maintain all data necessary to carry out 
                the duties of the Data Center, as described in 
                this subtitle. The data assembled shall be 
                obtained from member agencies, commercial data 
                providers, publicly available data sources, and 
                financial entities under subparagraph (B).
                  [(B) Authority.--
                          [(i) In general.--The Office may, as 
                        determined by the Council or by the 
                        Director in consultation with the 
                        Council, require the submission of 
                        periodic and other reports from any 
                        financial company for the purpose of 
                        assessing the extent to which a 
                        financial activity or financial market 
                        in which the financial company 
                        participates, or the financial company 
                        itself, poses a threat to the financial 
                        stability of the United States.
                          [(ii) Mitigation of report burden.--
                        Before requiring the submission of a 
                        report from any financial company that 
                        is regulated by a member agency, any 
                        primary financial regulatory agency, a 
                        foreign supervisory authority, or the 
                        Office shall coordinate with such 
                        agencies or authority, and shall, 
                        whenever possible, rely on information 
                        available from such agencies or 
                        authority.
                          [(iii) Collection of financial 
                        transaction and position data.--The 
                        Office shall collect, on a schedule 
                        determined by the Director, in 
                        consultation with the Council, 
                        financial transaction data and position 
                        data from financial companies.
                  [(C) Rulemaking.--The Office shall promulgate 
                regulations pursuant to subsections (a)(1), 
                (a)(2), (a)(7), and (c)(1) of section 153 
                regarding the type and scope of the data to be 
                collected by the Data Center under this 
                paragraph.
          [(2) Responsibilities.--
                  [(A) Publication.--The Data Center shall 
                prepare and publish, in a manner that is easily 
                accessible to the public--
                          [(i) a financial company reference 
                        database;
                          [(ii) a financial instrument 
                        reference database; and
                          [(iii) formats and standards for 
                        Office data, including standards for 
                        reporting financial transaction and 
                        position data to the Office.
                  [(B) Confidentiality.--The Data Center shall 
                not publish any confidential data under 
                subparagraph (A).
          [(3) Information security.--The Director shall ensure 
        that data collected and maintained by the Data Center 
        are kept secure and protected against unauthorized 
        disclosure.
          [(4) Catalog of financial entities and instruments.--
        The Data Center shall maintain a catalog of the 
        financial entities and instruments reported to the 
        Office.
          [(5) Availability to the council and member 
        agencies.--The Data Center shall make data collected 
        and maintained by the Data Center available to the 
        Council and member agencies, as necessary to support 
        their regulatory responsibilities.
          [(6) Other authority.--The Office shall, after 
        consultation with the member agencies, provide certain 
        data to financial industry participants and to the 
        general public to increase market transparency and 
        facilitate research on the financial system, to the 
        extent that intellectual property rights are not 
        violated, business confidential information is properly 
        protected, and the sharing of such information poses no 
        significant threats to the financial system of the 
        United States.
  [(c) Research and Analysis Center.--
          [(1) General duties.--The Research and Analysis 
        Center, on behalf of the Council, shall develop and 
        maintain independent analytical capabilities and 
        computing resources--
                  [(A) to develop and maintain metrics and 
                reporting systems for risks to the financial 
                stability of the United States;
                  [(B) to monitor, investigate, and report on 
                changes in systemwide risk levels and patterns 
                to the Council and Congress;
                  [(C) to conduct, coordinate, and sponsor 
                research to support and improve regulation of 
                financial entities and markets;
                  [(D) to evaluate and report on stress tests 
                or other stability-related evaluations of 
                financial entities overseen by the member 
                agencies;
                  [(E) to maintain expertise in such areas as 
                may be necessary to support specific requests 
                for advice and assistance from financial 
                regulators;
                  [(F) to investigate disruptions and failures 
                in the financial markets, report findings, and 
                make recommendations to the Council based on 
                those findings;
                  [(G) to conduct studies and provide advice on 
                the impact of policies related to systemic 
                risk; and
                  [(H) to promote best practices for financial 
                risk management.
  [(d) Reporting Responsibilities.--
          [(1) Required reports.--Not later than 2 years after 
        the date of enactment of this Act, and not later than 
        120 days after the end of each fiscal year thereafter, 
        the Office shall prepare and submit a report to 
        Congress.
          [(2) Content.--Each report required by this 
        subsection shall assess the state of the United States 
        financial system, including--
                  [(A) an analysis of any threats to the 
                financial stability of the United States;
                  [(B) the status of the efforts of the Office 
                in meeting the mission of the Office; and
                  [(C) key findings from the research and 
                analysis of the financial system by the Office.

[SEC. 155. FUNDING.

  [(a) Financial Research Fund.--
          [(1) Fund established.--There is established in the 
        Treasury of the United States a separate fund to be 
        known as the ``Financial Research Fund''.
          [(2) Fund receipts.--All amounts provided to the 
        Office under subsection (c), and all assessments that 
        the Office receives under subsection (d) shall be 
        deposited into the Financial Research Fund.
          [(3) Investments authorized.--
                  [(A) Amounts in fund may be invested.--The 
                Director may request the Secretary to invest 
                the portion of the Financial Research Fund that 
                is not, in the judgment of the Director, 
                required to meet the needs of the Office.
                  [(B) Eligible investments.--Investments shall 
                be made by the Secretary in obligations of the 
                United States or obligations that are 
                guaranteed as to principal and interest by the 
                United States, with maturities suitable to the 
                needs of the Financial Research Fund, as 
                determined by the Director.
          [(4) Interest and proceeds credited.--The interest 
        on, and the proceeds from the sale or redemption of, 
        any obligations held in the Financial Research Fund 
        shall be credited to and form a part of the Financial 
        Research Fund.
  [(b) Use of Funds.--
          [(1) In general.--Funds obtained by, transferred to, 
        or credited to the Financial Research Fund shall be 
        immediately available to the Office, and shall remain 
        available until expended, to pay the expenses of the 
        Office in carrying out the duties and responsibilities 
        of the Office.
          [(2) Fees, assessments, and other funds not 
        government funds.--Funds obtained by, transferred to, 
        or credited to the Financial Research Fund shall not be 
        construed to be Government funds or appropriated 
        moneys.
          [(3) Amounts not subject to apportionment.--
        Notwithstanding any other provision of law, amounts in 
        the Financial Research Fund shall not be subject to 
        apportionment for purposes of chapter 15 of title 31, 
        United States Code, or under any other authority, or 
        for any other purpose.
  [(c) Interim Funding.--During the 2-year period following the 
date of enactment of this Act, the Board of Governors shall 
provide to the Office an amount sufficient to cover the 
expenses of the Office.
  [(d) Permanent Self-funding.--Beginning 2 years after the 
date of enactment of this Act, the Secretary shall establish, 
by regulation, and with the approval of the Council, an 
assessment schedule, including the assessment base and rates, 
applicable to bank holding companies with total consolidated 
assets of 50,000,000,000 or greater and nonbank financial 
companies supervised by the Board of Governors, that takes into 
account differences among such companies, based on the 
considerations for establishing the prudential standards under 
section 115, to collect assessments equal to the total expenses 
of the Office.

[SEC. 156. TRANSITION OVERSIGHT.

  [(a) Purpose.--The purpose of this section is to ensure that 
the Office--
          [(1) has an orderly and organized startup;
          [(2) attracts and retains a qualified workforce; and
          [(3) establishes comprehensive employee training and 
        benefits programs.
  [(b) Reporting Requirement.--
          [(1) In general.--The Office shall submit an annual 
        report to the Committee on Banking, Housing, and Urban 
        Affairs of the Senate and the Committee on Financial 
        Services of the House of Representatives that includes 
        the plans described in paragraph (2).
          [(2) Plans.--The plans described in this paragraph 
        are as follows:
                  [(A) Training and workforce development 
                plan.--The Office shall submit a training and 
                workforce development plan that includes, to 
                the extent practicable--
                          [(i) identification of skill and 
                        technical expertise needs and actions 
                        taken to meet those requirements;
                          [(ii) steps taken to foster 
                        innovation and creativity;
                          [(iii) leadership development and 
                        succession planning; and
                          [(iv) effective use of technology by 
                        employees.
                  [(B) Workplace flexibility plan.--The Office 
                shall submit a workforce flexibility plan that 
                includes, to the extent practicable--
                          [(i) telework;
                          [(ii) flexible work schedules;
                          [(iii) phased retirement;
                          [(iv) reemployed annuitants;
                          [(v) part-time work;
                          [(vi) job sharing;
                          [(vii) parental leave benefits and 
                        childcare assistance;
                          [(viii) domestic partner benefits;
                          [(ix) other workplace flexibilities; 
                        or
                          [(x) any combination of the items 
                        described in clauses (i) through (ix).
                  [(C) Recruitment and retention plan.--The 
                Office shall submit a recruitment and retention 
                plan that includes, to the extent practicable, 
                provisions relating to--
                          [(i) the steps necessary to target 
                        highly qualified applicant pools with 
                        diverse backgrounds;
                          [(ii) streamlined employment 
                        application processes;
                          [(iii) the provision of timely 
                        notification of the status of 
                        employment applications to applicants; 
                        and
                          [(iv) the collection of information 
                        to measure indicators of hiring 
                        effectiveness.
  [(c) Expiration.--The reporting requirement under subsection 
(b) shall terminate 5 years after the date of enactment of this 
Act.
  [(d) Rule of Construction.--Nothing in this section may be 
construed to affect--
          [(1) a collective bargaining agreement, as that term 
        is defined in section 7103(a)(8) of title 5, United 
        States Code, that is in effect on the date of enactment 
        of this Act; or
          [(2) the rights of employees under chapter 71 of 
        title 5, United States Code.]

Subtitle C--Additional Board of Governors Authority for Certain Nonbank 
Financial Companies and Bank Holding Companies

           *       *       *       *       *       *       *


SEC. 165. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS FOR NONBANK 
                    FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF 
                    GOVERNORS AND CERTAIN BANK HOLDING COMPANIES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Resolution Plan and Credit Exposure Reports.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) No limiting effect.--A resolution plan submitted 
        in accordance with this subsection shall not be binding 
        on a bankruptcy court[, a receiver appointed under 
        title II,] or any other authority that is authorized or 
        required to resolve the nonbank financial company 
        supervised by the Board, any bank holding company, or 
        any subsidiary or affiliate of the foregoing.

           *       *       *       *       *       *       *


                [TITLE II--ORDERLY LIQUIDATION AUTHORITY

[SEC. 201. DEFINITIONS.

  [(a) In General.--In this title, the following definitions 
shall apply:
          [(1) Administrative expenses of the receiver.--The 
        term ``administrative expenses of the receiver'' 
        includes--
                  [(A) the actual, necessary costs and expenses 
                incurred by the Corporation as receiver for a 
                covered financial company in liquidating a 
                covered financial company; and
                  [(B) any obligations that the Corporation as 
                receiver for a covered financial company 
                determines are necessary and appropriate to 
                facilitate the smooth and orderly liquidation 
                of the covered financial company.
          [(2) Bankruptcy code.--The term ``Bankruptcy Code'' 
        means title 11, United States Code.
          [(3) Bridge financial company.--The term ``bridge 
        financial company'' means a new financial company 
        organized by the Corporation in accordance with section 
        210(h) for the purpose of resolving a covered financial 
        company.
          [(4) Claim.--The term ``claim'' means any right to 
        payment, whether or not such right is reduced to 
        judgment, liquidated, unliquidated, fixed, contingent, 
        matured, unmatured, disputed, undisputed, legal, 
        equitable, secured, or unsecured.
          [(5) Company.--The term ``company'' has the same 
        meaning as in section 2(b) of the Bank Holding Company 
        Act of 1956 (12 U.S.C. 1841(b)), except that such term 
        includes any company described in paragraph (11), the 
        majority of the securities of which are owned by the 
        United States or any State.
          [(6) Court.--The term ``Court'' means the United 
        States District Court for the District of Columbia, 
        unless the context otherwise requires.
          [(7) Covered broker or dealer.--The term ``covered 
        broker or dealer'' means a covered financial company 
        that is a broker or dealer that--
                  [(A) is registered with the Commission under 
                section 15(b) of the Securities Exchange Act of 
                1934 (15 U.S.C. 78o(b)); and
                  [(B) is a member of SIPC.
          [(8) Covered financial company.--The term ``covered 
        financial company''--
                  [(A) means a financial company for which a 
                determination has been made under section 
                203(b); and
                  [(B) does not include an insured depository 
                institution.
          [(9) Covered subsidiary.--The term ``covered 
        subsidiary'' means a subsidiary of a covered financial 
        company, other than--
                  [(A) an insured depository institution;
                  [(B) an insurance company; or
                  [(C) a covered broker or dealer.
          [(10) Definitions relating to covered brokers and 
        dealers.--The terms ``customer'', ``customer name 
        securities'', ``customer property'', and ``net equity'' 
        in the context of a covered broker or dealer, have the 
        same meanings as in section 16 of the Securities 
        Investor Protection Act of 1970 (15 U.S.C. 78lll).
          [(11) Financial company.--The term ``financial 
        company'' means any company that--
                  [(A) is incorporated or organized under any 
                provision of Federal law or the laws of any 
                State;
                  [(B) is--
                          [(i) a bank holding company, as 
                        defined in section 2(a) of the Bank 
                        Holding Company Act of 1956 (12 U.S.C. 
                        1841(a));
                          [(ii) a nonbank financial company 
                        supervised by the Board of Governors;
                          [(iii) any company that is 
                        predominantly engaged in activities 
                        that the Board of Governors has 
                        determined are financial in nature or 
                        incidental thereto for purposes of 
                        section 4(k) of the Bank Holding 
                        Company Act of 1956 (12 U.S.C. 1843(k)) 
                        other than a company described in 
                        clause (i) or (ii); or
                          [(iv) any subsidiary of any company 
                        described in any of clauses (i) through 
                        (iii) that is predominantly engaged in 
                        activities that the Board of Governors 
                        has determined are financial in nature 
                        or incidental thereto for purposes of 
                        section 4(k) of the Bank Holding 
                        Company Act of 1956 (12 U.S.C. 1843(k)) 
                        (other than a subsidiary that is an 
                        insured depository institution or an 
                        insurance company); and
                  [(C) is not a Farm Credit System institution 
                chartered under and subject to the provisions 
                of the Farm Credit Act of 1971, as amended (12 
                U.S.C. 2001 et seq.), a governmental entity, or 
                a regulated entity, as defined under section 
                1303(20) of the Federal Housing Enterprises 
                Financial Safety and Soundness Act of 1992 (12 
                U.S.C. 4502(20)).
          [(12) Fund.--The term ``Fund'' means the Orderly 
        Liquidation Fund established under section 210(n).
          [(13) Insurance company.--The term ``insurance 
        company'' means any entity that is--
                  [(A) engaged in the business of insurance;
                  [(B) subject to regulation by a State 
                insurance regulator; and
                  [(C) covered by a State law that is designed 
                to specifically deal with the rehabilitation, 
                liquidation, or insolvency of an insurance 
                company.
          [(14) Nonbank financial company.--The term ``nonbank 
        financial company'' has the same meaning as in section 
        102(a)(4)(C).
          [(15) Nonbank financial company supervised by the 
        board of governors.--The term ``nonbank financial 
        company supervised by the Board of Governors'' has the 
        same meaning as in section 102(a)(4)(D).
          [(16) SIPC.--The term ``SIPC'' means the Securities 
        Investor Protection Corporation.
  [(b) Definitional Criteria.--For purpose of the definition of 
the term ``financial company'' under subsection (a)(11), no 
company shall be deemed to be predominantly engaged in 
activities that the Board of Governors has determined are 
financial in nature or incidental thereto for purposes of 
section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)), if the consolidated revenues of such company from 
such activities constitute less than 85 percent of the total 
consolidated revenues of such company, as the Corporation, in 
consultation with the Secretary, shall establish by regulation. 
In determining whether a company is a financial company under 
this title, the consolidated revenues derived from the 
ownership or control of a depository institution shall be 
included.

[SEC. 202. JUDICIAL REVIEW.

  [(a) Commencement of Orderly Liquidation.--
          [(1) Petition to district court.--
                  [(A) District court review.--
                          [(i) Petition to district court.--
                        Subsequent to a determination by the 
                        Secretary under section 203 that a 
                        financial company satisfies the 
                        criteria in section 203(b), the 
                        Secretary shall notify the Corporation 
                        and the covered financial company. If 
                        the board of directors (or body 
                        performing similar functions) of the 
                        covered financial company acquiesces or 
                        consents to the appointment of the 
                        Corporation as receiver, the Secretary 
                        shall appoint the Corporation as 
                        receiver. If the board of directors (or 
                        body performing similar functions) of 
                        the covered financial company does not 
                        acquiesce or consent to the appointment 
                        of the Corporation as receiver, the 
                        Secretary shall petition the United 
                        States District Court for the District 
                        of Columbia for an order authorizing 
                        the Secretary to appoint the 
                        Corporation as receiver.
                          [(ii) Form and content of order.--The 
                        Secretary shall present all relevant 
                        findings and the recommendation made 
                        pursuant to section 203(a) to the 
                        Court. The petition shall be filed 
                        under seal.
                          [(iii) Determination.--On a strictly 
                        confidential basis, and without any 
                        prior public disclosure, the Court, 
                        after notice to the covered financial 
                        company and a hearing in which the 
                        covered financial company may oppose 
                        the petition, shall determine whether 
                        the determination of the Secretary that 
                        the covered financial company is in 
                        default or in danger of default and 
                        satisfies the definition of a financial 
                        company under section 201(a)(11) is 
                        arbitrary and capricious.
                          [(iv) Issuance of order.--If the 
                        Court determines that the determination 
                        of the Secretary that the covered 
                        financial company is in default or in 
                        danger of default and satisfies the 
                        definition of a financial company under 
                        section 201(a)(11)--
                                  [(I) is not arbitrary and 
                                capricious, the Court shall 
                                issue an order immediately 
                                authorizing the Secretary to 
                                appoint the Corporation as 
                                receiver of the covered 
                                financial company; or
                                  [(II) is arbitrary and 
                                capricious, the Court shall 
                                immediately provide to the 
                                Secretary a written statement 
                                of each reason supporting its 
                                determination, and afford the 
                                Secretary an immediate 
                                opportunity to amend and refile 
                                the petition under clause (i).
                          [(v) Petition granted by operation of 
                        law.--If the Court does not make a 
                        determination within 24 hours of 
                        receipt of the petition--
                                  [(I) the petition shall be 
                                granted by operation of law;
                                  [(II) the Secretary shall 
                                appoint the Corporation as 
                                receiver; and
                                  [(III) liquidation under this 
                                title shall automatically and 
                                without further notice or 
                                action be commenced and the 
                                Corporation may immediately 
                                take all actions authorized 
                                under this title.
                  [(B) Effect of determination.--The 
                determination of the Court under subparagraph 
                (A) shall be final, and shall be subject to 
                appeal only in accordance with paragraph (2). 
                The decision shall not be subject to any stay 
                or injunction pending appeal. Upon conclusion 
                of its proceedings under subparagraph (A), the 
                Court shall provide immediately for the record 
                a written statement of each reason supporting 
                the decision of the Court, and shall provide 
                copies thereof to the Secretary and the covered 
                financial company.
                  [(C) Criminal penalties.--A person who 
                recklessly discloses a determination of the 
                Secretary under section 203(b) or a petition of 
                the Secretary under subparagraph (A), or the 
                pendency of court proceedings as provided for 
                under subparagraph (A), shall be fined not more 
                than 250,000, or imprisoned for not more than 5 
                years, or both.
          [(2) Appeal of decisions of the district court.--
                  [(A) Appeal to court of appeals.--
                          [(i) In general.--Subject to clause 
                        (ii), the United States Court of 
                        Appeals for the District of Columbia 
                        Circuit shall have jurisdiction of an 
                        appeal of a final decision of the Court 
                        filed by the Secretary or a covered 
                        financial company, through its board of 
                        directors, notwithstanding section 
                        210(a)(1)(A)(i), not later than 30 days 
                        after the date on which the decision of 
                        the Court is rendered or deemed 
                        rendered under this subsection.
                          [(ii) Condition of jurisdiction.--The 
                        Court of Appeals shall have 
                        jurisdiction of an appeal by a covered 
                        financial company only if the covered 
                        financial company did not acquiesce or 
                        consent to the appointment of a 
                        receiver by the Secretary under 
                        paragraph (1)(A).
                          [(iii) Expedition.--The Court of 
                        Appeals shall consider any appeal under 
                        this subparagraph on an expedited 
                        basis.
                          [(iv) Scope of review.--For an appeal 
                        taken under this subparagraph, review 
                        shall be limited to whether the 
                        determination of the Secretary that a 
                        covered financial company is in default 
                        or in danger of default and satisfies 
                        the definition of a financial company 
                        under section 201(a)(11) is arbitrary 
                        and capricious.
                  [(B) Appeal to the supreme court.--
                          [(i) In general.--A petition for a 
                        writ of certiorari to review a decision 
                        of the Court of Appeals under 
                        subparagraph (A) may be filed by the 
                        Secretary or the covered financial 
                        company, through its board of 
                        directors, notwithstanding section 
                        210(a)(1)(A)(i), with the Supreme Court 
                        of the United States, not later than 30 
                        days after the date of the final 
                        decision of the Court of Appeals, and 
                        the Supreme Court shall have 
                        discretionary jurisdiction to review 
                        such decision.
                          [(ii) Written statement.--In the 
                        event of a petition under clause (i), 
                        the Court of Appeals shall immediately 
                        provide for the record a written 
                        statement of each reason for its 
                        decision.
                          [(iii) Expedition.--The Supreme Court 
                        shall consider any petition under this 
                        subparagraph on an expedited basis.
                          [(iv) Scope of review.--Review by the 
                        Supreme Court under this subparagraph 
                        shall be limited to whether the 
                        determination of the Secretary that the 
                        covered financial company is in default 
                        or in danger of default and satisfies 
                        the definition of a financial company 
                        under section 201(a)(11) is arbitrary 
                        and capricious.
  [(b) Establishment and Transmittal of Rules and Procedures.--
          [(1) In general.--Not later than 6 months after the 
        date of enactment of this Act, the Court shall 
        establish such rules and procedures as may be necessary 
        to ensure the orderly conduct of proceedings, including 
        rules and procedures to ensure that the 24-hour 
        deadline is met and that the Secretary shall have an 
        ongoing opportunity to amend and refile petitions under 
        subsection (a)(1).
          [(2) Publication of rules.--The rules and procedures 
        established under paragraph (1), and any modifications 
        of such rules and procedures, shall be recorded and 
        shall be transmitted to--
                  [(A) the Committee on the Judiciary of the 
                Senate;
                  [(B) the Committee on Banking, Housing, and 
                Urban Affairs of the Senate;
                  [(C) the Committee on the Judiciary of the 
                House of Representatives; and
                  [(D) the Committee on Financial Services of 
                the House of Representatives.
  [(c) Provisions Applicable to Financial Companies.--
          [(1) Bankruptcy code.--Except as provided in this 
        subsection, the provisions of the Bankruptcy Code and 
        rules issued thereunder or otherwise applicable 
        insolvency law, and not the provisions of this title, 
        shall apply to financial companies that are not covered 
        financial companies for which the Corporation has been 
        appointed as receiver.
          [(2) This title.--The provisions of this title shall 
        exclusively apply to and govern all matters relating to 
        covered financial companies for which the Corporation 
        is appointed as receiver, and no provisions of the 
        Bankruptcy Code or the rules issued thereunder shall 
        apply in such cases, except as expressly provided in 
        this title.
  [(d) Time Limit on Receivership Authority.--
          [(1) Baseline period.--Any appointment of the 
        Corporation as receiver under this section shall 
        terminate at the end of the 3-year period beginning on 
        the date on which such appointment is made.
          [(2) Extension of time limit.--The time limit 
        established in paragraph (1) may be extended by the 
        Corporation for up to 1 additional year, if the 
        Chairperson of the Corporation determines and certifies 
        in writing to the Committee on Banking, Housing, and 
        Urban Affairs of the Senate and the Committee on 
        Financial Services of the House of Representatives that 
        continuation of the receivership is necessary--
                  [(A) to--
                          [(i) maximize the net present value 
                        return from the sale or other 
                        disposition of the assets of the 
                        covered financial company; or
                          [(ii) minimize the amount of loss 
                        realized upon the sale or other 
                        disposition of the assets of the 
                        covered financial company; and
                  [(B) to protect the stability of the 
                financial system of the United States.
          [(3) Second extension of time limit.--
                  [(A) In general.--The time limit under this 
                subsection, as extended under paragraph (2), 
                may be extended for up to 1 additional year, if 
                the Chairperson of the Corporation, with the 
                concurrence of the Secretary, submits the 
                certifications described in paragraph (2).
                  [(B) Additional report required.--Not later 
                than 30 days after the date of commencement of 
                the extension under subparagraph (A), the 
                Corporation shall submit a report to the 
                Committee on Banking, Housing, and Urban 
                Affairs of the Senate and the Committee on 
                Financial Services of the House of 
                Representatives describing the need for the 
                extension and the specific plan of the 
                Corporation to conclude the receivership before 
                the end of the second extension.
          [(4) Ongoing litigation.--The time limit under this 
        subsection, as extended under paragraph (3), may be 
        further extended solely for the purpose of completing 
        ongoing litigation in which the Corporation as receiver 
        is a party, provided that the appointment of the 
        Corporation as receiver shall terminate not later than 
        90 days after the date of completion of such 
        litigation, if--
                  [(A) the Council determines that the 
                Corporation used its best efforts to conclude 
                the receivership in accordance with its plan 
                before the end of the time limit described in 
                paragraph (3);
                  [(B) the Council determines that the 
                completion of longer-term responsibilities in 
                the form of ongoing litigation justifies the 
                need for an extension; and
                  [(C) the Corporation submits a report 
                approved by the Council not later than 30 days 
                after the date of the determinations by the 
                Council under subparagraphs (A) and (B) to the 
                Committee on Banking, Housing, and Urban 
                Affairs of the Senate and the Committee on 
                Financial Services of the House of 
                Representatives, describing--
                          [(i) the ongoing litigation 
                        justifying the need for an extension; 
                        and
                          [(ii) the specific plan of the 
                        Corporation to complete the litigation 
                        and conclude the receivership.
          [(5) Regulations.--The Corporation may issue 
        regulations governing the termination of receiverships 
        under this title.
          [(6) No liability.--The Corporation and the Deposit 
        Insurance Fund shall not be liable for unresolved 
        claims arising from the receivership after the 
        termination of the receivership.
  [(e) Study of Bankruptcy and Orderly Liquidation Process for 
Financial Companies.--
          [(1) Study.--
                  [(A) In general.--The Administrative Office 
                of the United States Courts and the Comptroller 
                General of the United States shall each monitor 
                the activities of the Court, and each such 
                Office shall conduct separate studies regarding 
                the bankruptcy and orderly liquidation process 
                for financial companies under the Bankruptcy 
                Code.
                  [(B) Issues to be studied.--In conducting the 
                study under subparagraph (A), the 
                Administrative Office of the United States 
                Courts and the Comptroller General of the 
                United States each shall evaluate--
                          [(i) the effectiveness of chapter 7 
                        or chapter 11 of the Bankruptcy Code in 
                        facilitating the orderly liquidation or 
                        reorganization of financial companies;
                          [(ii) ways to maximize the efficiency 
                        and effectiveness of the Court; and
                          [(iii) ways to make the orderly 
                        liquidation process under the 
                        Bankruptcy Code for financial companies 
                        more effective.
          [(2) Reports.--Not later than 1 year after the date 
        of enactment of this Act, in each successive year until 
        the third year, and every fifth year after that date of 
        enactment, the Administrative Office of the United 
        States Courts and the Comptroller General of the United 
        States shall submit to the Committee on Banking, 
        Housing, and Urban Affairs and the Committee on the 
        Judiciary of the Senate and the Committee on Financial 
        Services and the Committee on the Judiciary of the 
        House of Representatives separate reports summarizing 
        the results of the studies conducted under paragraph 
        (1).
  [(f) Study of International Coordination Relating to 
Bankruptcy Process for Financial Companies.--
          [(1) Study.--
                  [(A) In general.--The Comptroller General of 
                the United States shall conduct a study 
                regarding international coordination relating 
                to the orderly liquidation of financial 
                companies under the Bankruptcy Code.
                  [(B) Issues to be studied.--In conducting the 
                study under subparagraph (A), the Comptroller 
                General of the United States shall evaluate, 
                with respect to the bankruptcy process for 
                financial companies--
                          [(i) the extent to which 
                        international coordination currently 
                        exists;
                          [(ii) current mechanisms and 
                        structures for facilitating 
                        international cooperation;
                          [(iii) barriers to effective 
                        international coordination; and
                          [(iv) ways to increase and make more 
                        effective international coordination.
          [(2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Comptroller General of the 
        United States shall submit to the Committee on Banking, 
        Housing, and Urban Affairs and the Committee on the 
        Judiciary of the Senate and the Committee on Financial 
        Services and the Committee on the Judiciary of the 
        House of Representatives and the Secretary a report 
        summarizing the results of the study conducted under 
        paragraph (1).
  [(g) Study of Prompt Corrective Action Implementation by the 
Appropriate Federal Agencies.--
          [(1) Study.--The Comptroller General of the United 
        States shall conduct a study regarding the 
        implementation of prompt corrective action by the 
        appropriate Federal banking agencies.
          [(2) Issues to be studied.--In conducting the study 
        under paragraph (1), the Comptroller General shall 
        evaluate--
                  [(A) the effectiveness of implementation of 
                prompt corrective action by the appropriate 
                Federal banking agencies and the resolution of 
                insured depository institutions by the 
                Corporation; and
                  [(B) ways to make prompt corrective action a 
                more effective tool to resolve the insured 
                depository institutions at the least possible 
                long-term cost to the Deposit Insurance Fund.
          [(3) Report to council.--Not later than 1 year after 
        the date of enactment of this Act, the Comptroller 
        General shall submit a report to the Council on the 
        results of the study conducted under this subsection.
          [(4) Council report of action.--Not later than 6 
        months after the date of receipt of the report from the 
        Comptroller General under paragraph (3), the Council 
        shall submit a report to the Committee on Banking, 
        Housing, and Urban Affairs of the Senate and the 
        Committee on Financial Services of the House of 
        Representatives on actions taken in response to the 
        report, including any recommendations made to the 
        Federal primary financial regulatory agencies under 
        section 120.

[SEC. 203. SYSTEMIC RISK DETERMINATION.

  [(a) Written Recommendation and Determination.--
          [(1) Vote required.--
                  [(A) In general.--On their own initiative, or 
                at the request of the Secretary, the 
                Corporation and the Board of Governors shall 
                consider whether to make a written 
                recommendation described in paragraph (2) with 
                respect to whether the Secretary should appoint 
                the Corporation as receiver for a financial 
                company. Such recommendation shall be made upon 
                a vote of not fewer than \2/3\ of the members 
                of the Board of Governors then serving and \2/
                3\ of the members of the board of directors of 
                the Corporation then serving.
                  [(B) Cases involving brokers or dealers.--In 
                the case of a broker or dealer, or in which the 
                largest United States subsidiary (as measured 
                by total assets as of the end of the previous 
                calendar quarter) of a financial company is a 
                broker or dealer, the Commission and the Board 
                of Governors, at the request of the Secretary, 
                or on their own initiative, shall consider 
                whether to make the written recommendation 
                described in paragraph (2) with respect to the 
                financial company. Subject to the requirements 
                in paragraph (2), such recommendation shall be 
                made upon a vote of not fewer than \2/3\ of the 
                members of the Board of Governors then serving 
                and \2/3\ of the members of the Commission then 
                serving, and in consultation with the 
                Corporation.
                  [(C) Cases involving insurance companies.--In 
                the case of an insurance company, or in which 
                the largest United States subsidiary (as 
                measured by total assets as of the end of the 
                previous calendar quarter) of a financial 
                company is an insurance company, the Director 
                of the Federal Insurance Office and the Board 
                of Governors, at the request of the Secretary 
                or on their own initiative, shall consider 
                whether to make the written recommendation 
                described in paragraph (2) with respect to the 
                financial company. Subject to the requirements 
                in paragraph (2), such recommendation shall be 
                made upon a vote of not fewer than \2/3\ of the 
                Board of Governors then serving and the 
                affirmative approval of the Director of the 
                Federal Insurance Office, and in consultation 
                with the Corporation.
          [(2) Recommendation required.--Any written 
        recommendation pursuant to paragraph (1) shall 
        contain--
                  [(A) an evaluation of whether the financial 
                company is in default or in danger of default;
                  [(B) a description of the effect that the 
                default of the financial company would have on 
                financial stability in the United States;
                  [(C) a description of the effect that the 
                default of the financial company would have on 
                economic conditions or financial stability for 
                low income, minority, or underserved 
                communities;
                  [(D) a recommendation regarding the nature 
                and the extent of actions to be taken under 
                this title regarding the financial company;
                  [(E) an evaluation of the likelihood of a 
                private sector alternative to prevent the 
                default of the financial company;
                  [(F) an evaluation of why a case under the 
                Bankruptcy Code is not appropriate for the 
                financial company;
                  [(G) an evaluation of the effects on 
                creditors, counterparties, and shareholders of 
                the financial company and other market 
                participants; and
                  [(H) an evaluation of whether the company 
                satisfies the definition of a financial company 
                under section 201.
  [(b) Determination by the Secretary.--Notwithstanding any 
other provision of Federal or State law, the Secretary shall 
take action in accordance with section 202(a)(1)(A), if, upon 
the written recommendation under subsection (a), the Secretary 
(in consultation with the President) determines that--
          [(1) the financial company is in default or in danger 
        of default;
          [(2) the failure of the financial company and its 
        resolution under otherwise applicable Federal or State 
        law would have serious adverse effects on financial 
        stability in the United States;
          [(3) no viable private sector alternative is 
        available to prevent the default of the financial 
        company;
          [(4) any effect on the claims or interests of 
        creditors, counterparties, and shareholders of the 
        financial company and other market participants as a 
        result of actions to be taken under this title is 
        appropriate, given the impact that any action taken 
        under this title would have on financial stability in 
        the United States;
          [(5) any action under section 204 would avoid or 
        mitigate such adverse effects, taking into 
        consideration the effectiveness of the action in 
        mitigating potential adverse effects on the financial 
        system, the cost to the general fund of the Treasury, 
        and the potential to increase excessive risk taking on 
        the part of creditors, counterparties, and shareholders 
        in the financial company;
          [(6) a Federal regulatory agency has ordered the 
        financial company to convert all of its convertible 
        debt instruments that are subject to the regulatory 
        order; and
          [(7) the company satisfies the definition of a 
        financial company under section 201.
  [(c) Documentation and Review.--
          [(1) In general.--The Secretary shall--
                  [(A) document any determination under 
                subsection (b);
                  [(B) retain the documentation for review 
                under paragraph (2); and
                  [(C) notify the covered financial company and 
                the Corporation of such determination.
          [(2) Report to congress.--Not later than 24 hours 
        after the date of appointment of the Corporation as 
        receiver for a covered financial company, the Secretary 
        shall provide written notice of the recommendations and 
        determinations reached in accordance with subsections 
        (a) and (b) to the Majority Leader and the Minority 
        Leader of the Senate and the Speaker and the Minority 
        Leader of the House of Representatives, the Committee 
        on Banking, Housing, and Urban Affairs of the Senate, 
        and the Committee on Financial Services of the House of 
        Representatives, which shall consist of a summary of 
        the basis for the determination, including, to the 
        extent available at the time of the determination--
                  [(A) the size and financial condition of the 
                covered financial company;
                  [(B) the sources of capital and credit 
                support that were available to the covered 
                financial company;
                  [(C) the operations of the covered financial 
                company that could have had a significant 
                impact on financial stability, markets, or 
                both;
                  [(D) identification of the banks and 
                financial companies which may be able to 
                provide the services offered by the covered 
                financial company;
                  [(E) any potential international 
                ramifications of resolution of the covered 
                financial company under other applicable 
                insolvency law;
                  [(F) an estimate of the potential effect of 
                the resolution of the covered financial company 
                under other applicable insolvency law on the 
                financial stability of the United States;
                  [(G) the potential effect of the appointment 
                of a receiver by the Secretary on consumers;
                  [(H) the potential effect of the appointment 
                of a receiver by the Secretary on the financial 
                system, financial markets, and banks and other 
                financial companies; and
                  [(I) whether resolution of the covered 
                financial company under other applicable 
                insolvency law would cause banks or other 
                financial companies to experience severe 
                liquidity distress.
          [(3) Reports to congress and the public.--
                  [(A) In general.--Not later than 60 days 
                after the date of appointment of the 
                Corporation as receiver for a covered financial 
                company, the Corporation shall file a report 
                with the Committee on Banking, Housing, and 
                Urban Affairs of the Senate and the Committee 
                on Financial Services of the House of 
                Representatives--
                          [(i) setting forth information on the 
                        financial condition of the covered 
                        financial company as of the date of the 
                        appointment, including a description of 
                        its assets and liabilities;
                          [(ii) describing the plan of, and 
                        actions taken by, the Corporation to 
                        wind down the covered financial 
                        company;
                          [(iii) explaining each instance in 
                        which the Corporation waived any 
                        applicable requirements of part 366 of 
                        title 12, Code of Federal Regulations 
                        (or any successor thereto) with respect 
                        to conflicts of interest by any person 
                        in the private sector who was retained 
                        to provide services to the Corporation 
                        in connection with such receivership;
                          [(iv) describing the reasons for the 
                        provision of any funding to the 
                        receivership out of the Fund;
                          [(v) setting forth the expected costs 
                        of the orderly liquidation of the 
                        covered financial company;
                          [(vi) setting forth the identity of 
                        any claimant that is treated in a 
                        manner different from other similarly 
                        situated claimants under subsection 
                        (b)(4), (d)(4), or (h)(5)(E), the 
                        amount of any additional payment to 
                        such claimant under subsection (d)(4), 
                        and the reason for any such action; and
                          [(vii) which report the Corporation 
                        shall publish on an online website 
                        maintained by the Corporation, subject 
                        to maintaining appropriate 
                        confidentiality.
                  [(B) Amendments.--The Corporation shall, on a 
                timely basis, not less frequently than 
                quarterly, amend or revise and resubmit the 
                reports prepared under this paragraph, as 
                necessary.
                  [(C) Congressional testimony.--The 
                Corporation and the primary financial 
                regulatory agency, if any, of the financial 
                company for which the Corporation was appointed 
                receiver under this title shall appear before 
                Congress, if requested, not later than 30 days 
                after the date on which the Corporation first 
                files the reports required under subparagraph 
                (A).
          [(4) Default or in danger of default.--For purposes 
        of this title, a financial company shall be considered 
        to be in default or in danger of default if, as 
        determined in accordance with subsection (b)--
                  [(A) a case has been, or likely will promptly 
                be, commenced with respect to the financial 
                company under the Bankruptcy Code;
                  [(B) the financial company has incurred, or 
                is likely to incur, losses that will deplete 
                all or substantially all of its capital, and 
                there is no reasonable prospect for the company 
                to avoid such depletion;
                  [(C) the assets of the financial company are, 
                or are likely to be, less than its obligations 
                to creditors and others; or
                  [(D) the financial company is, or is likely 
                to be, unable to pay its obligations (other 
                than those subject to a bona fide dispute) in 
                the normal course of business.
          [(5) GAO review.--The Comptroller General of the 
        United States shall review and report to Congress on 
        any determination under subsection (b), that results in 
        the appointment of the Corporation as receiver, 
        including--
                  [(A) the basis for the determination;
                  [(B) the purpose for which any action was 
                taken pursuant thereto;
                  [(C) the likely effect of the determination 
                and such action on the incentives and conduct 
                of financial companies and their creditors, 
                counterparties, and shareholders; and
                  [(D) the likely disruptive effect of the 
                determination and such action on the reasonable 
                expectations of creditors, counterparties, and 
                shareholders, taking into account the impact 
                any action under this title would have on 
                financial stability in the United States, 
                including whether the rights of such parties 
                will be disrupted.
  [(d) Corporation Policies and Procedures.--As soon as is 
practicable after the date of enactment of this Act, the 
Corporation shall establish policies and procedures that are 
acceptable to the Secretary governing the use of funds 
available to the Corporation to carry out this title, including 
the terms and conditions for the provision and use of funds 
under sections 204(d), 210(h)(2)(G)(iv), and 210(h)(9).
  [(e) Treatment of Insurance Companies and Insurance Company 
Subsidiaries.--
          [(1) In general.--Notwithstanding subsection (b), if 
        an insurance company is a covered financial company or 
        a subsidiary or affiliate of a covered financial 
        company, the liquidation or rehabilitation of such 
        insurance company, and any subsidiary or affiliate of 
        such company that is not excepted under paragraph (2), 
        shall be conducted as provided under applicable State 
        law.
          [(2) Exception for subsidiaries and affiliates.--The 
        requirement of paragraph (1) shall not apply with 
        respect to any subsidiary or affiliate of an insurance 
        company that is not itself an insurance company.
          [(3) Backup authority.--Notwithstanding paragraph 
        (1), with respect to a covered financial company 
        described in paragraph (1), if, after the end of the 
        60-day period beginning on the date on which a 
        determination is made under section 202(a) with respect 
        to such company, the appropriate regulatory agency has 
        not filed the appropriate judicial action in the 
        appropriate State court to place such company into 
        orderly liquidation under the laws and requirements of 
        the State, the Corporation shall have the authority to 
        stand in the place of the appropriate regulatory agency 
        and file the appropriate judicial action in the 
        appropriate State court to place such company into 
        orderly liquidation under the laws and requirements of 
        the State.

[SEC. 204. ORDERLY LIQUIDATION OF COVERED FINANCIAL COMPANIES.

  [(a) Purpose of Orderly Liquidation Authority.--It is the 
purpose of this title to provide the necessary authority to 
liquidate failing financial companies that pose a significant 
risk to the financial stability of the United States in a 
manner that mitigates such risk and minimizes moral hazard. The 
authority provided in this title shall be exercised in the 
manner that best fulfills such purpose, so that--
          [(1) creditors and shareholders will bear the losses 
        of the financial company;
          [(2) management responsible for the condition of the 
        financial company will not be retained; and
          [(3) the Corporation and other appropriate agencies 
        will take all steps necessary and appropriate to assure 
        that all parties, including management, directors, and 
        third parties, having responsibility for the condition 
        of the financial company bear losses consistent with 
        their responsibility, including actions for damages, 
        restitution, and recoupment of compensation and other 
        gains not compatible with such responsibility.
  [(b) Corporation as Receiver.--Upon the appointment of the 
Corporation under section 202, the Corporation shall act as the 
receiver for the covered financial company, with all of the 
rights and obligations set forth in this title.
  [(c) Consultation.--The Corporation, as receiver--
          [(1) shall consult with the primary financial 
        regulatory agency or agencies of the covered financial 
        company and its covered subsidiaries for purposes of 
        ensuring an orderly liquidation of the covered 
        financial company;
          [(2) may consult with, or under subsection 
        (a)(1)(B)(v) or (a)(1)(L) of section 210, acquire the 
        services of, any outside experts, as appropriate to 
        inform and aid the Corporation in the orderly 
        liquidation process;
          [(3) shall consult with the primary financial 
        regulatory agency or agencies of any subsidiaries of 
        the covered financial company that are not covered 
        subsidiaries, and coordinate with such regulators 
        regarding the treatment of such solvent subsidiaries 
        and the separate resolution of any such insolvent 
        subsidiaries under other governmental authority, as 
        appropriate; and
          [(4) shall consult with the Commission and the 
        Securities Investor Protection Corporation in the case 
        of any covered financial company for which the 
        Corporation has been appointed as receiver that is a 
        broker or dealer registered with the Commission under 
        section 15(b) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78o(b)) and is a member of the Securities 
        Investor Protection Corporation, for the purpose of 
        determining whether to transfer to a bridge financial 
        company organized by the Corporation as receiver, 
        without consent of any customer, customer accounts of 
        the covered financial company.
  [(d) Funding for Orderly Liquidation.--Upon its appointment 
as receiver for a covered financial company, and thereafter as 
the Corporation may, in its discretion, determine to be 
necessary or appropriate, the Corporation may make available to 
the receivership, subject to the conditions set forth in 
section 206 and subject to the plan described in section 
210(n)(9), funds for the orderly liquidation of the covered 
financial company. All funds provided by the Corporation under 
this subsection shall have a priority of claims under 
subparagraph (A) or (B) of section 210(b)(1), as applicable, 
including funds used for--
          [(1) making loans to, or purchasing any debt 
        obligation of, the covered financial company or any 
        covered subsidiary;
          [(2) purchasing or guaranteeing against loss the 
        assets of the covered financial company or any covered 
        subsidiary, directly or through an entity established 
        by the Corporation for such purpose;
          [(3) assuming or guaranteeing the obligations of the 
        covered financial company or any covered subsidiary to 
        1 or more third parties;
          [(4) taking a lien on any or all assets of the 
        covered financial company or any covered subsidiary, 
        including a first priority lien on all unencumbered 
        assets of the covered financial company or any covered 
        subsidiary to secure repayment of any transactions 
        conducted under this subsection;
          [(5) selling or transferring all, or any part, of 
        such acquired assets, liabilities, or obligations of 
        the covered financial company or any covered 
        subsidiary; and
          [(6) making payments pursuant to subsections (b)(4), 
        (d)(4), and (h)(5)(E) of section 210.

[SEC. 205. ORDERLY LIQUIDATION OF COVERED BROKERS AND DEALERS.

  [(a) Appointment of SIPC as Trustee.--
          [(1) Appointment.--Upon the appointment of the 
        Corporation as receiver for any covered broker or 
        dealer, the Corporation shall appoint, without any need 
        for court approval, the Securities Investor Protection 
        Corporation to act as trustee for the liquidation under 
        the Securities Investor Protection Act of 1970 (15 
        U.S.C. 78aaa et seq.) of the covered broker or dealer.
          [(2) Actions by sipc.--
                  [(A) Filing.--Upon appointment of SIPC under 
                paragraph (1), SIPC shall promptly file with 
                any Federal district court of competent 
                jurisdiction specified in section 21 or 27 of 
                the Securities Exchange Act of 1934 (15 U.S.C. 
                78u, 78aa), an application for a protective 
                decree under the Securities Investor Protection 
                Act of 1970 (15 U.S.C. 78aaa et seq.) as to the 
                covered broker or dealer. The Federal district 
                court shall accept and approve the filing, 
                including outside of normal business hours, and 
                shall immediately issue the protective decree 
                as to the covered broker or dealer.
                  [(B) Administration by sipc.--Following entry 
                of the protective decree, and except as 
                otherwise provided in this section, the 
                determination of claims and the liquidation of 
                assets retained in the receivership of the 
                covered broker or dealer and not transferred to 
                the bridge financial company shall be 
                administered under the Securities Investor 
                Protection Act of 1970 (15 U.S.C. 78aaa et 
                seq.) by SIPC, as trustee for the covered 
                broker or dealer.
                  [(C) Definition of filing date.--For purposes 
                of the liquidation proceeding, the term 
                ``filing date'' means the date on which the 
                Corporation is appointed as receiver of the 
                covered broker or dealer.
                  [(D) Determination of claims.--As trustee for 
                the covered broker or dealer, SIPC shall 
                determine and satisfy, consistent with this 
                title and with the Securities Investor 
                Protection Act of 1970 (15 U.S.C. 78aaa et 
                seq.), all claims against the covered broker or 
                dealer arising on or before the filing date.
  [(b) Powers and Duties of SIPC.--
          [(1) In general.--Except as provided in this section, 
        upon its appointment as trustee for the liquidation of 
        a covered broker or dealer, SIPC shall have all of the 
        powers and duties provided by the Securities Investor 
        Protection Act of 1970 (15 U.S.C. 78aaa et seq.), 
        including, without limitation, all rights of action 
        against third parties, and shall conduct such 
        liquidation in accordance with the terms of the 
        Securities Investor Protection Act of 1970 (15 U.S.C. 
        78aaa et seq.), except that SIPC shall have no powers 
        or duties with respect to assets and liabilities 
        transferred by the Corporation from the covered broker 
        or dealer to any bridge financial company established 
        in accordance with this title.
          [(2) Limitation of powers.--The exercise by SIPC of 
        powers and functions as trustee under subsection (a) 
        shall not impair or impede the exercise of the powers 
        and duties of the Corporation with regard to--
                  [(A) any action, except as otherwise provided 
                in this title--
                          [(i) to make funds available under 
                        section 204(d);
                          [(ii) to organize, establish, 
                        operate, or terminate any bridge 
                        financial company;
                          [(iii) to transfer assets and 
                        liabilities;
                          [(iv) to enforce or repudiate 
                        contracts; or
                          [(v) to take any other action 
                        relating to such bridge financial 
                        company under section 210; or
                  [(B) determining claims under subsection (e).
          [(3) Protective decree.--SIPC and the Corporation, in 
        consultation with the Commission, shall jointly 
        determine the terms of the protective decree to be 
        filed by SIPC with any court of competent jurisdiction 
        under section 21 or 27 of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78u, 78aa), as required by 
        subsection (a).
          [(4) Qualified financial contracts.--Notwithstanding 
        any provision of the Securities Investor Protection Act 
        of 1970 (15 U.S.C. 78aaa et seq.) to the contrary 
        (including section 5(b)(2)(C) of that Act (15 U.S.C. 
        78eee(b)(2)(C))), the rights and obligations of any 
        party to a qualified financial contract (as that term 
        is defined in section 210(c)(8)) to which a covered 
        broker or dealer for which the Corporation has been 
        appointed receiver is a party shall be governed 
        exclusively by section 210, including the limitations 
        and restrictions contained in section 210(c)(10)(B).
  [(c) Limitation on Court Action.--Except as otherwise 
provided in this title, no court may take any action, including 
any action pursuant to the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78aaa et seq.) or the Bankruptcy Code, to 
restrain or affect the exercise of powers or functions of the 
Corporation as receiver for a covered broker or dealer and any 
claims against the Corporation as such receiver shall be 
determined in accordance with subsection (e) and such claims 
shall be limited to money damages.
  [(d) Actions by Corporation as Receiver.--
          [(1) In general.--Notwithstanding any other provision 
        of this title, no action taken by the Corporation as 
        receiver with respect to a covered broker or dealer 
        shall--
                  [(A) adversely affect the rights of a 
                customer to customer property or customer name 
                securities;
                  [(B) diminish the amount or timely payment of 
                net equity claims of customers; or
                  [(C) otherwise impair the recoveries provided 
                to a customer under the Securities Investor 
                Protection Act of 1970 (15 U.S.C. 78aaa et 
                seq.).
          [(2) Net proceeds.--The net proceeds from any 
        transfer, sale, or disposition of assets of the covered 
        broker or dealer, or proceeds thereof by the 
        Corporation as receiver for the covered broker or 
        dealer shall be for the benefit of the estate of the 
        covered broker or dealer, as provided in this title.
  [(e) Claims Against the Corporation as Receiver.--Any claim 
against the Corporation as receiver for a covered broker or 
dealer for assets transferred to a bridge financial company 
established with respect to such covered broker or dealer--
          [(1) shall be determined in accordance with section 
        210(a)(2); and
          [(2) may be reviewed by the appropriate district or 
        territorial court of the United States in accordance 
        with section 210(a)(5).
  [(f) Satisfaction of Customer Claims.--
          [(1) Obligations to customers.--Notwithstanding any 
        other provision of this title, all obligations of a 
        covered broker or dealer or of any bridge financial 
        company established with respect to such covered broker 
        or dealer to a customer relating to, or net equity 
        claims based upon, customer property or customer name 
        securities shall be promptly discharged by SIPC, the 
        Corporation, or the bridge financial company, as 
        applicable, by the delivery of securities or the making 
        of payments to or for the account of such customer, in 
        a manner and in an amount at least as beneficial to the 
        customer as would have been the case had the actual 
        proceeds realized from the liquidation of the covered 
        broker or dealer under this title been distributed in a 
        proceeding under the Securities Investor Protection Act 
        of 1970 (15 U.S.C. 78aaa et seq.) without the 
        appointment of the Corporation as receiver and without 
        any transfer of assets or liabilities to a bridge 
        financial company, and with a filing date as of the 
        date on which the Corporation is appointed as receiver.
          [(2) Satisfaction of claims by sipc.--SIPC, as 
        trustee for a covered broker or dealer, shall satisfy 
        customer claims in the manner and amount provided under 
        the Securities Investor Protection Act of 1970 (15 
        U.S.C. 78aaa et seq.), as if the appointment of the 
        Corporation as receiver had not occurred, and with a 
        filing date as of the date on which the Corporation is 
        appointed as receiver. The Corporation shall satisfy 
        customer claims, to the extent that a customer would 
        have received more securities or cash with respect to 
        the allocation of customer property had the covered 
        financial company been subject to a proceeding under 
        the Securities Investor Protection Act (15 U.S.C. 78aaa 
        et seq.) without the appointment of the Corporation as 
        receiver, and with a filing date as of the date on 
        which the Corporation is appointed as receiver.
  [(g) Priorities.--
          [(1) Customer property.--As trustee for a covered 
        broker or dealer, SIPC shall allocate customer property 
        and deliver customer name securities in accordance with 
        section 8(c) of the Securities Investor Protection Act 
        of 1970 (15 U.S.C. 78fff-2(c)).
          [(2) Other claims.--All claims other than those 
        described in paragraph (1) (including any unpaid claim 
        by a customer for the allowed net equity claim of such 
        customer from customer property) shall be paid in 
        accordance with the priorities in section 210(b).
  [(h) Rulemaking.--The Commission and the Corporation, after 
consultation with SIPC, shall jointly issue rules to implement 
this section.

[SEC. 206. MANDATORY TERMS AND CONDITIONS FOR ALL ORDERLY LIQUIDATION 
                    ACTIONS.

  [In taking action under this title, the Corporation shall--
          [(1) determine that such action is necessary for 
        purposes of the financial stability of the United 
        States, and not for the purpose of preserving the 
        covered financial company;
          [(2) ensure that the shareholders of a covered 
        financial company do not receive payment until after 
        all other claims and the Fund are fully paid;
          [(3) ensure that unsecured creditors bear losses in 
        accordance with the priority of claim provisions in 
        section 210;
          [(4) ensure that management responsible for the 
        failed condition of the covered financial company is 
        removed (if such management has not already been 
        removed at the time at which the Corporation is 
        appointed receiver);
          [(5) ensure that the members of the board of 
        directors (or body performing similar functions) 
        responsible for the failed condition of the covered 
        financial company are removed, if such members have not 
        already been removed at the time the Corporation is 
        appointed as receiver; and
          [(6) not take an equity interest in or become a 
        shareholder of any covered financial company or any 
        covered subsidiary.

[SEC. 207. DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT OF 
                    RECEIVER.

  [The members of the board of directors (or body performing 
similar functions) of a covered financial company shall not be 
liable to the shareholders or creditors thereof for acquiescing 
in or consenting in good faith to the appointment of the 
Corporation as receiver for the covered financial company under 
section 203.

[SEC. 208. DISMISSAL AND EXCLUSION OF OTHER ACTIONS.

  [(a) In General.--Effective as of the date of the appointment 
of the Corporation as receiver for the covered financial 
company under section 202 or the appointment of SIPC as trustee 
for a covered broker or dealer under section 205, as 
applicable, any case or proceeding commenced with respect to 
the covered financial company under the Bankruptcy Code or the 
Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et 
seq.) shall be dismissed, upon notice to the bankruptcy court 
(with respect to a case commenced under the Bankruptcy Code), 
and upon notice to SIPC (with respect to a covered broker or 
dealer) and no such case or proceeding may be commenced with 
respect to a covered financial company at any time while the 
orderly liquidation is pending.
  [(b) Revesting of Assets.--Effective as of the date of 
appointment of the Corporation as receiver, the assets of a 
covered financial company shall, to the extent they have vested 
in any entity other than the covered financial company as a 
result of any case or proceeding commenced with respect to the 
covered financial company under the Bankruptcy Code, the 
Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et 
seq.), or any similar provision of State liquidation or 
insolvency law applicable to the covered financial company, 
revest in the covered financial company.
  [(c) Limitation.--Notwithstanding subsections (a) and (b), 
any order entered or other relief granted by a bankruptcy court 
prior to the date of appointment of the Corporation as receiver 
shall continue with the same validity as if an orderly 
liquidation had not been commenced.

[SEC. 209. RULEMAKING; NON-CONFLICTING LAW.

  [The Corporation shall, in consultation with the Council, 
prescribe such rules or regulations as the Corporation 
considers necessary or appropriate to implement this title, 
including rules and regulations with respect to the rights, 
interests, and priorities of creditors, counterparties, 
security entitlement holders, or other persons with respect to 
any covered financial company or any assets or other property 
of or held by such covered financial company, and address the 
potential for conflicts of interest between or among individual 
receiverships established under this title or under the Federal 
Deposit Insurance Act. To the extent possible, the Corporation 
shall seek to harmonize applicable rules and regulations 
promulgated under this section with the insolvency laws that 
would otherwise apply to a covered financial company.

[SEC. 210. POWERS AND DUTIES OF THE CORPORATION.

  [(a) Powers and Authorities.--
          [(1) General powers.--
                  [(A) Successor to covered financial 
                company.--The Corporation shall, upon 
                appointment as receiver for a covered financial 
                company under this title, succeed to--
                          [(i) all rights, titles, powers, and 
                        privileges of the covered financial 
                        company and its assets, and of any 
                        stockholder, member, officer, or 
                        director of such company; and
                          [(ii) title to the books, records, 
                        and assets of any previous receiver or 
                        other legal custodian of such covered 
                        financial company.
                  [(B) Operation of the covered financial 
                company during the period of orderly 
                liquidation.--The Corporation, as receiver for 
                a covered financial company, may--
                          [(i) take over the assets of and 
                        operate the covered financial company 
                        with all of the powers of the members 
                        or shareholders, the directors, and the 
                        officers of the covered financial 
                        company, and conduct all business of 
                        the covered financial company;
                          [(ii) collect all obligations and 
                        money owed to the covered financial 
                        company;
                          [(iii) perform all functions of the 
                        covered financial company, in the name 
                        of the covered financial company;
                          [(iv) manage the assets and property 
                        of the covered financial company, 
                        consistent with maximization of the 
                        value of the assets in the context of 
                        the orderly liquidation; and
                          [(v) provide by contract for 
                        assistance in fulfilling any function, 
                        activity, action, or duty of the 
                        Corporation as receiver.
                  [(C) Functions of covered financial company 
                officers, directors, and shareholders.--The 
                Corporation may provide for the exercise of any 
                function by any member or stockholder, 
                director, or officer of any covered financial 
                company for which the Corporation has been 
                appointed as receiver under this title.
                  [(D) Additional powers as receiver.--The 
                Corporation shall, as receiver for a covered 
                financial company, and subject to all legally 
                enforceable and perfected security interests 
                and all legally enforceable security 
                entitlements in respect of assets held by the 
                covered financial company, liquidate, and wind-
                up the affairs of a covered financial company, 
                including taking steps to realize upon the 
                assets of the covered financial company, in 
                such manner as the Corporation deems 
                appropriate, including through the sale of 
                assets, the transfer of assets to a bridge 
                financial company established under subsection 
                (h), or the exercise of any other rights or 
                privileges granted to the receiver under this 
                section.
                  [(E) Additional powers with respect to 
                failing subsidiaries of a covered financial 
                company.--
                          [(i) In general.--In any case in 
                        which a receiver is appointed for a 
                        covered financial company under section 
                        202, the Corporation may appoint itself 
                        as receiver of any covered subsidiary 
                        of the covered financial company that 
                        is organized under Federal law or the 
                        laws of any State, if the Corporation 
                        and the Secretary jointly determine 
                        that--
                                  [(I) the covered subsidiary 
                                is in default or in danger of 
                                default;
                                  [(II) such action would avoid 
                                or mitigate serious adverse 
                                effects on the financial 
                                stability or economic 
                                conditions of the United 
                                States; and
                                  [(III) such action would 
                                facilitate the orderly 
                                liquidation of the covered 
                                financial company.
                          [(ii) Treatment as covered financial 
                        company.--If the Corporation is 
                        appointed as receiver of a covered 
                        subsidiary of a covered financial 
                        company under clause (i), the covered 
                        subsidiary shall thereafter be 
                        considered a covered financial company 
                        under this title, and the Corporation 
                        shall thereafter have all the powers 
                        and rights with respect to that covered 
                        subsidiary as it has with respect to a 
                        covered financial company under this 
                        title.
                  [(F) Organization of bridge companies.--The 
                Corporation, as receiver for a covered 
                financial company, may organize a bridge 
                financial company under subsection (h).
                  [(G) Merger; transfer of assets and 
                liabilities.--
                          [(i) In general.--Subject to clauses 
                        (ii) and (iii), the Corporation, as 
                        receiver for a covered financial 
                        company, may--
                                  [(I) merge the covered 
                                financial company with another 
                                company; or
                                  [(II) transfer any asset or 
                                liability of the covered 
                                financial company (including 
                                any assets and liabilities held 
                                by the covered financial 
                                company for security 
                                entitlement holders, any 
                                customer property, or any 
                                assets and liabilities 
                                associated with any trust or 
                                custody business) without 
                                obtaining any approval, 
                                assignment, or consent with 
                                respect to such transfer.
                          [(ii) Federal agency approval; 
                        antitrust review.--With respect to a 
                        transaction described in clause (i)(I) 
                        that requires approval by a Federal 
                        agency--
                                  [(I) the transaction may not 
                                be consummated before the 5th 
                                calendar day after the date of 
                                approval by the Federal agency 
                                responsible for such approval;
                                  [(II) if, in connection with 
                                any such approval, a report on 
                                competitive factors is 
                                required, the Federal agency 
                                responsible for such approval 
                                shall promptly notify the 
                                Attorney General of the United 
                                States of the proposed 
                                transaction, and the Attorney 
                                General shall provide the 
                                required report not later than 
                                10 days after the date of the 
                                request; and
                                  [(III) if notification under 
                                section 7A of the Clayton Act 
                                is required with respect to 
                                such transaction, then the 
                                required waiting period shall 
                                end on the 15th day after the 
                                date on which the Attorney 
                                General and the Federal Trade 
                                Commission receive such 
                                notification, unless the 
                                waiting period is terminated 
                                earlier under subsection (b)(2) 
                                of such section 7A, or is 
                                extended pursuant to subsection 
                                (e)(2) of such section 7A.
                          [(iii) Setoff.--Subject to the other 
                        provisions of this title, any 
                        transferee of assets from a receiver, 
                        including a bridge financial company, 
                        shall be subject to such claims or 
                        rights as would prevail over the rights 
                        of such transferee in such assets under 
                        applicable noninsolvency law.
                  [(H) Payment of valid obligations.--The 
                Corporation, as receiver for a covered 
                financial company, shall, to the extent that 
                funds are available, pay all valid obligations 
                of the covered financial company that are due 
                and payable at the time of the appointment of 
                the Corporation as receiver, in accordance with 
                the prescriptions and limitations of this 
                title.
                  [(I) Applicable noninsolvency law.--Except as 
                may otherwise be provided in this title, the 
                applicable noninsolvency law shall be 
                determined by the noninsolvency choice of law 
                rules otherwise applicable to the claims, 
                rights, titles, persons, or entities at issue.
                  [(J) Subpoena authority.--
                          [(i) In general.--The Corporation, as 
                        receiver for a covered financial 
                        company, may, for purposes of carrying 
                        out any power, authority, or duty with 
                        respect to the covered financial 
                        company (including determining any 
                        claim against the covered financial 
                        company and determining and realizing 
                        upon any asset of any person in the 
                        course of collecting money due the 
                        covered financial company), exercise 
                        any power established under section 
                        8(n) of the Federal Deposit Insurance 
                        Act, as if the Corporation were the 
                        appropriate Federal banking agency for 
                        the covered financial company, and the 
                        covered financial company were an 
                        insured depository institution.
                          [(ii) Rule of construction.--This 
                        subparagraph may not be construed as 
                        limiting any rights that the 
                        Corporation, in any capacity, might 
                        otherwise have to exercise any powers 
                        described in clause (i) or under any 
                        other provision of law.
                  [(K) Incidental powers.--The Corporation, as 
                receiver for a covered financial company, may 
                exercise all powers and authorities 
                specifically granted to receivers under this 
                title, and such incidental powers as shall be 
                necessary to carry out such powers under this 
                title.
                  [(L) Utilization of private sector.--In 
                carrying out its responsibilities in the 
                management and disposition of assets from the 
                covered financial company, the Corporation, as 
                receiver for a covered financial company, may 
                utilize the services of private persons, 
                including real estate and loan portfolio asset 
                management, property management, auction 
                marketing, legal, and brokerage services, if 
                such services are available in the private 
                sector, and the Corporation determines that 
                utilization of such services is practicable, 
                efficient, and cost effective.
                  [(M) Shareholders and creditors of covered 
                financial company.--Notwithstanding any other 
                provision of law, the Corporation, as receiver 
                for a covered financial company, shall succeed 
                by operation of law to the rights, titles, 
                powers, and privileges described in 
                subparagraph (A), and shall terminate all 
                rights and claims that the stockholders and 
                creditors of the covered financial company may 
                have against the assets of the covered 
                financial company or the Corporation arising 
                out of their status as stockholders or 
                creditors, except for their right to payment, 
                resolution, or other satisfaction of their 
                claims, as permitted under this section. The 
                Corporation shall ensure that shareholders and 
                unsecured creditors bear losses, consistent 
                with the priority of claims provisions under 
                this section.
                  [(N) Coordination with foreign financial 
                authorities.--The Corporation, as receiver for 
                a covered financial company, shall coordinate, 
                to the maximum extent possible, with the 
                appropriate foreign financial authorities 
                regarding the orderly liquidation of any 
                covered financial company that has assets or 
                operations in a country other than the United 
                States.
                  [(O) Restriction on transfers.--
                          [(i) Selection of accounts for 
                        transfer.--If the Corporation 
                        establishes one or more bridge 
                        financial companies with respect to a 
                        covered broker or dealer, the 
                        Corporation shall transfer to one of 
                        such bridge financial companies, all 
                        customer accounts of the covered broker 
                        or dealer, and all associated customer 
                        name securities and customer property, 
                        unless the Corporation, after 
                        consulting with the Commission and 
                        SIPC, determines that--
                                  [(I) the customer accounts, 
                                customer name securities, and 
                                customer property are likely to 
                                be promptly transferred to 
                                another broker or dealer that 
                                is registered with the 
                                Commission under section 15(b) 
                                of the Securities Exchange Act 
                                of 1934 (15 U.S.C. 73o(b)) and 
                                is a member of SIPC; or
                                  [(II) the transfer of the 
                                accounts to a bridge financial 
                                company would materially 
                                interfere with the ability of 
                                the Corporation to avoid or 
                                mitigate serious adverse 
                                effects on financial stability 
                                or economic conditions in the 
                                United States.
                          [(ii) Transfer of property.--SIPC, as 
                        trustee for the liquidation of the 
                        covered broker or dealer, and the 
                        Commission shall provide any and all 
                        reasonable assistance necessary to 
                        complete such transfers by the 
                        Corporation.
                          [(iii) Customer consent and court 
                        approval not required.--Neither 
                        customer consent nor court approval 
                        shall be required to transfer any 
                        customer accounts or associated 
                        customer name securities or customer 
                        property to a bridge financial company 
                        in accordance with this section.
                          [(iv) Notification of sipc and 
                        sharing of information.--The 
                        Corporation shall identify to SIPC the 
                        customer accounts and associated 
                        customer name securities and customer 
                        property transferred to the bridge 
                        financial company. The Corporation and 
                        SIPC shall cooperate in the sharing of 
                        any information necessary for each 
                        entity to discharge its obligations 
                        under this title and under the 
                        Securities Investor Protection Act of 
                        1970 (15 U.S.C. 78aaa et seq.) 
                        including by providing access to the 
                        books and records of the covered 
                        financial company and any bridge 
                        financial company established in 
                        accordance with this title.
          [(2) Determination of claims.--
                  [(A) In general.--The Corporation, as 
                receiver for a covered financial company, shall 
                report on claims, as set forth in section 
                203(c)(3). Subject to paragraph (4) of this 
                subsection, the Corporation, as receiver for a 
                covered financial company, shall determine 
                claims in accordance with the requirements of 
                this subsection and regulations prescribed 
                under section 209.
                  [(B) Notice requirements.--The Corporation, 
                as receiver for a covered financial company, in 
                any case involving the liquidation or winding 
                up of the affairs of a covered financial 
                company, shall--
                          [(i) promptly publish a notice to the 
                        creditors of the covered financial 
                        company to present their claims, 
                        together with proof, to the receiver by 
                        a date specified in the notice, which 
                        shall be not earlier than 90 days after 
                        the date of publication of such notice; 
                        and
                          [(ii) republish such notice 1 month 
                        and 2 months, respectively, after the 
                        date of publication under clause (i).
                  [(C) Mailing required.--The Corporation as 
                receiver shall mail a notice similar to the 
                notice published under clause (i) or (ii) of 
                subparagraph (B), at the time of such 
                publication, to any creditor shown on the books 
                and records of the covered financial company--
                          [(i) at the last address of the 
                        creditor appearing in such books;
                          [(ii) in any claim filed by the 
                        claimant; or
                          [(iii) upon discovery of the name and 
                        address of a claimant not appearing on 
                        the books and records of the covered 
                        financial company, not later than 30 
                        days after the date of the discovery of 
                        such name and address.
          [(3) Procedures for resolution of claims.--
                  [(A) Decision period.--
                          [(i) In general.--Prior to the 180th 
                        day after the date on which a claim 
                        against a covered financial company is 
                        filed with the Corporation as receiver, 
                        or such later date as may be agreed as 
                        provided in clause (ii), the 
                        Corporation shall notify the claimant 
                        whether it allows or disallows the 
                        claim, in accordance with subparagraphs 
                        (B), (C), and (D).
                          [(ii) Extension of time.--By written 
                        agreement executed not later than 180 
                        days after the date on which a claim 
                        against a covered financial company is 
                        filed with the Corporation, the period 
                        described in clause (i) may be extended 
                        by written agreement between the 
                        claimant and the Corporation. Failure 
                        to notify the claimant of any 
                        disallowance within the time period set 
                        forth in clause (i), as it may be 
                        extended by agreement under this 
                        clause, shall be deemed to be a 
                        disallowance of such claim, and the 
                        claimant may file or continue an action 
                        in court, as provided in paragraph (4).
                          [(iii) Mailing of notice 
                        sufficient.--The requirements of clause 
                        (i) shall be deemed to be satisfied if 
                        the notice of any decision with respect 
                        to any claim is mailed to the last 
                        address of the claimant which appears--
                                  [(I) on the books, records, 
                                or both of the covered 
                                financial company;
                                  [(II) in the claim filed by 
                                the claimant; or
                                  [(III) in documents submitted 
                                in proof of the claim.
                          [(iv) Contents of notice of 
                        disallowance.--If the Corporation as 
                        receiver disallows any claim filed 
                        under clause (i), the notice to the 
                        claimant shall contain--
                                  [(I) a statement of each 
                                reason for the disallowance; 
                                and
                                  [(II) the procedures required 
                                to file or continue an action 
                                in court, as provided in 
                                paragraph (4).
                  [(B) Allowance of proven claim.--The receiver 
                shall allow any claim received by the receiver 
                on or before the date specified in the notice 
                under paragraph (2)(B)(i), which is proved to 
                the satisfaction of the receiver.
                  [(C) Disallowance of claims filed after end 
                of filing period.--
                          [(i) In general.--Except as provided 
                        in clause (ii), claims filed after the 
                        date specified in the notice published 
                        under paragraph (2)(B)(i) shall be 
                        disallowed, and such disallowance shall 
                        be final.
                          [(ii) Certain exceptions.--Clause (i) 
                        shall not apply with respect to any 
                        claim filed by a claimant after the 
                        date specified in the notice published 
                        under paragraph (2)(B)(i), and such 
                        claim may be considered by the receiver 
                        under subparagraph (B), if--
                                  [(I) the claimant did not 
                                receive notice of the 
                                appointment of the receiver in 
                                time to file such claim before 
                                such date; and
                                  [(II) such claim is filed in 
                                time to permit payment of such 
                                claim.
                  [(D) Authority to disallow claims.--
                          [(i) In general.--The Corporation may 
                        disallow any portion of any claim by a 
                        creditor or claim of a security, 
                        preference, setoff, or priority which 
                        is not proved to the satisfaction of 
                        the Corporation.
                          [(ii) Payments to undersecured 
                        creditors.--In the case of a claim 
                        against a covered financial company 
                        that is secured by any property or 
                        other asset of such covered financial 
                        company, the receiver--
                                  [(I) may treat the portion of 
                                such claim which exceeds an 
                                amount equal to the fair market 
                                value of such property or other 
                                asset as an unsecured claim; 
                                and
                                  [(II) may not make any 
                                payment with respect to such 
                                unsecured portion of the claim, 
                                other than in connection with 
                                the disposition of all claims 
                                of unsecured creditors of the 
                                covered financial company.
                          [(iii) Exceptions.--No provision of 
                        this paragraph shall apply with respect 
                        to--
                                  [(I) any extension of credit 
                                from any Federal reserve bank, 
                                or the Corporation, to any 
                                covered financial company; or
                                  [(II) subject to clause (ii), 
                                any legally enforceable and 
                                perfected security interest in 
                                the assets of the covered 
                                financial company securing any 
                                such extension of credit.
                  [(E) Legal effect of filing.--
                          [(i) Statute of limitations tolled.--
                        For purposes of any applicable statute 
                        of limitations, the filing of a claim 
                        with the receiver shall constitute a 
                        commencement of an action.
                          [(ii) No prejudice to other 
                        actions.--Subject to paragraph (8), the 
                        filing of a claim with the receiver 
                        shall not prejudice any right of the 
                        claimant to continue any action which 
                        was filed before the date of 
                        appointment of the receiver for the 
                        covered financial company.
          [(4) Judicial determination of claims.--
                  [(A) In general.--Subject to subparagraph 
                (B), a claimant may file suit on a claim (or 
                continue an action commenced before the date of 
                appointment of the Corporation as receiver) in 
                the district or territorial court of the United 
                States for the district within which the 
                principal place of business of the covered 
                financial company is located (and such court 
                shall have jurisdiction to hear such claim).
                  [(B) Timing.--A claim under subparagraph (A) 
                may be filed before the end of the 60-day 
                period beginning on the earlier of--
                          [(i) the end of the period described 
                        in paragraph (3)(A)(i) (or, if extended 
                        by agreement of the Corporation and the 
                        claimant, the period described in 
                        paragraph (3)(A)(ii)) with respect to 
                        any claim against a covered financial 
                        company for which the Corporation is 
                        receiver; or
                          [(ii) the date of any notice of 
                        disallowance of such claim pursuant to 
                        paragraph (3)(A)(i).
                  [(C) Statute of limitations.--If any claimant 
                fails to file suit on such claim (or to 
                continue an action on such claim commenced 
                before the date of appointment of the 
                Corporation as receiver) prior to the end of 
                the 60-day period described in subparagraph 
                (B), the claim shall be deemed to be disallowed 
                (other than any portion of such claim which was 
                allowed by the receiver) as of the end of such 
                period, such disallowance shall be final, and 
                the claimant shall have no further rights or 
                remedies with respect to such claim.
          [(5) Expedited determination of claims.--
                  [(A) Procedure required.--The Corporation 
                shall establish a procedure for expedited 
                relief outside of the claims process 
                established under paragraph (3), for any 
                claimant that alleges--
                          [(i) having a legally valid and 
                        enforceable or perfected security 
                        interest in property of a covered 
                        financial company or control of any 
                        legally valid and enforceable security 
                        entitlement in respect of any asset 
                        held by the covered financial company 
                        for which the Corporation has been 
                        appointed receiver; and
                          [(ii) that irreparable injury will 
                        occur if the claims procedure 
                        established under paragraph (3) is 
                        followed.
                  [(B) Determination period.--Prior to the end 
                of the 90-day period beginning on the date on 
                which a claim is filed in accordance with the 
                procedures established pursuant to subparagraph 
                (A), the Corporation shall--
                          [(i) determine--
                                  [(I) whether to allow or 
                                disallow such claim, or any 
                                portion thereof; or
                                  [(II) whether such claim 
                                should be determined pursuant 
                                to the procedures established 
                                pursuant to paragraph (3);
                          [(ii) notify the claimant of the 
                        determination; and
                          [(iii) if the claim is disallowed, 
                        provide a statement of each reason for 
                        the disallowance and the procedure for 
                        obtaining a judicial determination.
                  [(C) Period for filing or renewing suit.--Any 
                claimant who files a request for expedited 
                relief shall be permitted to file suit (or 
                continue a suit filed before the date of 
                appointment of the Corporation as receiver 
                seeking a determination of the rights of the 
                claimant with respect to such security interest 
                (or such security entitlement) after the 
                earlier of--
                          [(i) the end of the 90-day period 
                        beginning on the date of the filing of 
                        a request for expedited relief; or
                          [(ii) the date on which the 
                        Corporation denies the claim or a 
                        portion thereof.
                  [(D) Statute of limitations.--If an action 
                described in subparagraph (C) is not filed, or 
                the motion to renew a previously filed suit is 
                not made, before the end of the 30-day period 
                beginning on the date on which such action or 
                motion may be filed in accordance with 
                subparagraph (C), the claim shall be deemed to 
                be disallowed as of the end of such period 
                (other than any portion of such claim which was 
                allowed by the receiver), such disallowance 
                shall be final, and the claimant shall have no 
                further rights or remedies with respect to such 
                claim.
                  [(E) Legal effect of filing.--
                          [(i) Statute of limitations tolled.--
                        For purposes of any applicable statute 
                        of limitations, the filing of a claim 
                        with the receiver shall constitute a 
                        commencement of an action.
                          [(ii) No prejudice to other 
                        actions.--Subject to paragraph (8), the 
                        filing of a claim with the receiver 
                        shall not prejudice any right of the 
                        claimant to continue any action which 
                        was filed before the appointment of the 
                        Corporation as receiver for the covered 
                        financial company.
          [(6) Agreements against interest of the receiver.--No 
        agreement that tends to diminish or defeat the interest 
        of the Corporation as receiver in any asset acquired by 
        the receiver under this section shall be valid against 
        the receiver, unless such agreement--
                  [(A) is in writing;
                  [(B) was executed by an authorized officer or 
                representative of the covered financial 
                company, or confirmed in the ordinary course of 
                business by the covered financial company; and
                  [(C) has been, since the time of its 
                execution, an official record of the company or 
                the party claiming under the agreement provides 
                documentation, acceptable to the receiver, of 
                such agreement and its authorized execution or 
                confirmation by the covered financial company.
          [(7) Payment of claims.--
                  [(A) In general.--Subject to subparagraph 
                (B), the Corporation as receiver may, in its 
                discretion and to the extent that funds are 
                available, pay creditor claims, in such manner 
                and amounts as are authorized under this 
                section, which are--
                          [(i) allowed by the receiver;
                          [(ii) approved by the receiver 
                        pursuant to a final determination 
                        pursuant to paragraph (3) or (5), as 
                        applicable; or
                          [(iii) determined by the final 
                        judgment of a court of competent 
                        jurisdiction.
                  [(B) Limitation.--A creditor shall, in no 
                event, receive less than the amount that the 
                creditor is entitled to receive under 
                paragraphs (2) and (3) of subsection (d), as 
                applicable.
                  [(C) Payment of dividends on claims.--The 
                Corporation as receiver may, in its sole 
                discretion, and to the extent otherwise 
                permitted by this section, pay dividends on 
                proven claims at any time, and no liability 
                shall attach to the Corporation as receiver, by 
                reason of any such payment or for failure to 
                pay dividends to a claimant whose claim is not 
                proved at the time of any such payment.
                  [(D) Rulemaking by the corporation.--The 
                Corporation may prescribe such rules, including 
                definitions of terms, as the Corporation deems 
                appropriate to establish an interest rate for 
                or to make payments of post-insolvency interest 
                to creditors holding proven claims against the 
                receivership estate of a covered financial 
                company, except that no such interest shall be 
                paid until the Corporation as receiver has 
                satisfied the principal amount of all creditor 
                claims.
          [(8) Suspension of legal actions.--
                  [(A) In general.--After the appointment of 
                the Corporation as receiver for a covered 
                financial company, the Corporation may request 
                a stay in any judicial action or proceeding in 
                which such covered financial company is or 
                becomes a party, for a period of not to exceed 
                90 days.
                  [(B) Grant of stay by all courts required.--
                Upon receipt of a request by the Corporation 
                pursuant to subparagraph (A), the court shall 
                grant such stay as to all parties.
          [(9) Additional rights and duties.--
                  [(A) Prior final adjudication.--The 
                Corporation shall abide by any final, non-
                appealable judgment of any court of competent 
                jurisdiction that was rendered before the 
                appointment of the Corporation as receiver.
                  [(B) Rights and remedies of receiver.--In the 
                event of any appealable judgment, the 
                Corporation as receiver shall--
                          [(i) have all the rights and remedies 
                        available to the covered financial 
                        company (before the date of appointment 
                        of the Corporation as receiver under 
                        section 202) and the Corporation, 
                        including removal to Federal court and 
                        all appellate rights; and
                          [(ii) not be required to post any 
                        bond in order to pursue such remedies.
                  [(C) No attachment or execution.--No 
                attachment or execution may be issued by any 
                court upon assets in the possession of the 
                Corporation as receiver for a covered financial 
                company.
                  [(D) Limitation on judicial review.--Except 
                as otherwise provided in this title, no court 
                shall have jurisdiction over--
                          [(i) any claim or action for payment 
                        from, or any action seeking a 
                        determination of rights with respect 
                        to, the assets of any covered financial 
                        company for which the Corporation has 
                        been appointed receiver, including any 
                        assets which the Corporation may 
                        acquire from itself as such receiver; 
                        or
                          [(ii) any claim relating to any act 
                        or omission of such covered financial 
                        company or the Corporation as receiver.
                  [(E) Disposition of assets.--In exercising 
                any right, power, privilege, or authority as 
                receiver in connection with any covered 
                financial company for which the Corporation is 
                acting as receiver under this section, the 
                Corporation shall, to the greatest extent 
                practicable, conduct its operations in a manner 
                that--
                          [(i) maximizes the net present value 
                        return from the sale or disposition of 
                        such assets;
                          [(ii) minimizes the amount of any 
                        loss realized in the resolution of 
                        cases;
                          [(iii) mitigates the potential for 
                        serious adverse effects to the 
                        financial system;
                          [(iv) ensures timely and adequate 
                        competition and fair and consistent 
                        treatment of offerors; and
                          [(v) prohibits discrimination on the 
                        basis of race, sex, or ethnic group in 
                        the solicitation and consideration of 
                        offers.
          [(10) Statute of limitations for actions brought by 
        receiver.--
                  [(A) In general.--Notwithstanding any 
                provision of any contract, the applicable 
                statute of limitations with regard to any 
                action brought by the Corporation as receiver 
                for a covered financial company shall be--
                          [(i) in the case of any contract 
                        claim, the longer of--
                                  [(I) the 6-year period 
                                beginning on the date on which 
                                the claim accrues; or
                                  [(II) the period applicable 
                                under State law; and
                          [(ii) in the case of any tort claim, 
                        the longer of--
                                  [(I) the 3-year period 
                                beginning on the date on which 
                                the claim accrues; or
                                  [(II) the period applicable 
                                under State law.
                  [(B) Date on which a claim accrues.--For 
                purposes of subparagraph (A), the date on which 
                the statute of limitations begins to run on any 
                claim described in subparagraph (A) shall be 
                the later of--
                          [(i) the date of the appointment of 
                        the Corporation as receiver under this 
                        title; or
                          [(ii) the date on which the cause of 
                        action accrues.
                  [(C) Revival of expired state causes of 
                action.--
                          [(i) In general.--In the case of any 
                        tort claim described in clause (ii) for 
                        which the applicable statute of 
                        limitations under State law has expired 
                        not more than 5 years before the date 
                        of appointment of the Corporation as 
                        receiver for a covered financial 
                        company, the Corporation may bring an 
                        action as receiver on such claim 
                        without regard to the expiration of the 
                        statute of limitations.
                          [(ii) Claims described.--A tort claim 
                        referred to in clause (i) is a claim 
                        arising from fraud, intentional 
                        misconduct resulting in unjust 
                        enrichment, or intentional misconduct 
                        resulting in substantial loss to the 
                        covered financial company.
          [(11) Avoidable transfers.--
                  [(A) Fraudulent transfers.--The Corporation, 
                as receiver for any covered financial company, 
                may avoid a transfer of any interest of the 
                covered financial company in property, or any 
                obligation incurred by the covered financial 
                company, that was made or incurred at or within 
                2 years before the date on which the 
                Corporation was appointed receiver, if--
                          [(i) the covered financial company 
                        voluntarily or involuntarily--
                                  [(I) made such transfer or 
                                incurred such obligation with 
                                actual intent to hinder, delay, 
                                or defraud any entity to which 
                                the covered financial company 
                                was or became, on or after the 
                                date on which such transfer was 
                                made or such obligation was 
                                incurred, indebted; or
                                  [(II) received less than a 
                                reasonably equivalent value in 
                                exchange for such transferor 
                                obligation; and
                          [(ii) the covered financial company 
                        voluntarily or involuntarily--
                                  [(I) was insolvent on the 
                                date that such transfer was 
                                made or such obligation was 
                                incurred, or became insolvent 
                                as a result of such transfer or 
                                obligation;
                                  [(II) was engaged in business 
                                or a transaction, or was about 
                                to engage in business or a 
                                transaction, for which any 
                                property remaining with the 
                                covered financial company was 
                                an unreasonably small capital;
                                  [(III) intended to incur, or 
                                believed that the covered 
                                financial company would incur, 
                                debts that would be beyond the 
                                ability of the covered 
                                financial company to pay as 
                                such debts matured; or
                                  [(IV) made such transfer to 
                                or for the benefit of an 
                                insider, or incurred such 
                                obligation to or for the 
                                benefit of an insider, under an 
                                employment contract and not in 
                                the ordinary course of 
                                business.
                  [(B) Preferential transfers.--The Corporation 
                as receiver for any covered financial company 
                may avoid a transfer of an interest of the 
                covered financial company in property--
                          [(i) to or for the benefit of a 
                        creditor;
                          [(ii) for or on account of an 
                        antecedent debt that was owed by the 
                        covered financial company before the 
                        transfer was made;
                          [(iii) that was made while the 
                        covered financial company was 
                        insolvent;
                          [(iv) that was made--
                                  [(I) 90 days or less before 
                                the date on which the 
                                Corporation was appointed 
                                receiver; or
                                  [(II) more than 90 days, but 
                                less than 1 year before the 
                                date on which the Corporation 
                                was appointed receiver, if such 
                                creditor at the time of the 
                                transfer was an insider; and
                          [(v) that enables the creditor to 
                        receive more than the creditor would 
                        receive if--
                                  [(I) the covered financial 
                                company had been liquidated 
                                under chapter 7 of the 
                                Bankruptcy Code;
                                  [(II) the transfer had not 
                                been made; and
                                  [(III) the creditor received 
                                payment of such debt to the 
                                extent provided by the 
                                provisions of chapter 7 of the 
                                Bankruptcy Code.
                  [(C) Post-receivership transactions.--The 
                Corporation as receiver for any covered 
                financial company may avoid a transfer of 
                property of the receivership that occurred 
                after the Corporation was appointed receiver 
                that was not authorized under this title by the 
                Corporation as receiver.
                  [(D) Right of recovery.--To the extent that a 
                transfer is avoided under subparagraph (A), 
                (B), or (C), the Corporation may recover, for 
                the benefit of the covered financial company, 
                the property transferred or, if a court so 
                orders, the value of such property (at the time 
                of such transfer) from--
                          [(i) the initial transferee of such 
                        transfer or the person for whose 
                        benefit such transfer was made; or
                          [(ii) any immediate or mediate 
                        transferee of any such initial 
                        transferee.
                  [(E) Rights of transferee or obligee.--The 
                Corporation may not recover under subparagraph 
                (D)(ii) from--
                          [(i) any transferee that takes for 
                        value, including in satisfaction of or 
                        to secure a present or antecedent debt, 
                        in good faith, and without knowledge of 
                        the voidability of the transfer 
                        avoided; or
                          [(ii) any immediate or mediate good 
                        faith transferee of such transferee.
                  [(F) Defenses.--Subject to the other 
                provisions of this title--
                          [(i) a transferee or obligee from 
                        which the Corporation seeks to recover 
                        a transfer or to avoid an obligation 
                        under subparagraph (A), (B), (C), or 
                        (D) shall have the same defenses 
                        available to a transferee or obligee 
                        from which a trustee seeks to recover a 
                        transfer or avoid an obligation under 
                        sections 547, 548, and 549 of the 
                        Bankruptcy Code; and
                          [(ii) the authority of the 
                        Corporation to recover a transfer or 
                        avoid an obligation shall be subject to 
                        subsections (b) and (c) of section 546, 
                        section 547(c), and section 548(c) of 
                        the Bankruptcy Code.
                  [(G) Rights under this section.--The rights 
                of the Corporation as receiver under this 
                section shall be superior to any rights of a 
                trustee or any other party (other than a 
                Federal agency) under the Bankruptcy Code.
                  [(H) Rules of construction; definitions.--For 
                purposes of--
                          [(i) subparagraphs (A) and (B)--
                                  [(I) the term ``insider'' has 
                                the same meaning as in section 
                                101(31) of the Bankruptcy Code;
                                  [(II) a transfer is made when 
                                such transfer is so perfected 
                                that a bona fide purchaser from 
                                the covered financial company 
                                against whom applicable law 
                                permits such transfer to be 
                                perfected cannot acquire an 
                                interest in the property 
                                transferred that is superior to 
                                the interest in such property 
                                of the transferee, but if such 
                                transfer is not so perfected 
                                before the date on which the 
                                Corporation is appointed as 
                                receiver for the covered 
                                financial company, such 
                                transfer is made immediately 
                                before the date of such 
                                appointment; and
                                  [(III) the term ``value'' 
                                means property, or satisfaction 
                                or securing of a present or 
                                antecedent debt of the covered 
                                financial company, but does not 
                                include an unperformed promise 
                                to furnish support to the 
                                covered financial company; and
                          [(ii) subparagraph (B)--
                                  [(I) the covered financial 
                                company is presumed to have 
                                been insolvent on and during 
                                the 90-day period immediately 
                                preceding the date of 
                                appointment of the Corporation 
                                as receiver; and
                                  [(II) the term ``insolvent'' 
                                has the same meaning as in 
                                section 101(32) of the 
                                Bankruptcy Code.
          [(12) Setoff.--
                  [(A) Generally.--Except as otherwise provided 
                in this title, any right of a creditor to 
                offset a mutual debt owed by the creditor to 
                any covered financial company that arose before 
                the Corporation was appointed as receiver for 
                the covered financial company against a claim 
                of such creditor may be asserted if enforceable 
                under applicable noninsolvency law, except to 
                the extent that--
                          [(i) the claim of the creditor 
                        against the covered financial company 
                        is disallowed;
                          [(ii) the claim was transferred, by 
                        an entity other than the covered 
                        financial company, to the creditor--
                                  [(I) after the Corporation 
                                was appointed as receiver of 
                                the covered financial company; 
                                or
                                  [(II)(aa) after the 90-day 
                                period preceding the date on 
                                which the Corporation was 
                                appointed as receiver for the 
                                covered financial company; and
                                  [(bb) while the covered 
                                financial company was insolvent 
                                (except for a setoff in 
                                connection with a qualified 
                                financial contract); or
                          [(iii) the debt owed to the covered 
                        financial company was incurred by the 
                        covered financial company--
                                  [(I) after the 90-day period 
                                preceding the date on which the 
                                Corporation was appointed as 
                                receiver for the covered 
                                financial company;
                                  [(II) while the covered 
                                financial company was 
                                insolvent; and
                                  [(III) for the purpose of 
                                obtaining a right of setoff 
                                against the covered financial 
                                company (except for a setoff in 
                                connection with a qualified 
                                financial contract).
                  [(B) Insufficiency.--
                          [(i) In general.--Except with respect 
                        to a setoff in connection with a 
                        qualified financial contract, if a 
                        creditor offsets a mutual debt owed to 
                        the covered financial company against a 
                        claim of the covered financial company 
                        on or within the 90-day period 
                        preceding the date on which the 
                        Corporation is appointed as receiver 
                        for the covered financial company, the 
                        Corporation may recover from the 
                        creditor the amount so offset, to the 
                        extent that any insufficiency on the 
                        date of such setoff is less than the 
                        insufficiency on the later of--
                                  [(I) the date that is 90 days 
                                before the date on which the 
                                Corporation is appointed as 
                                receiver for the covered 
                                financial company; or
                                  [(II) the first day on which 
                                there is an insufficiency 
                                during the 90-day period 
                                preceding the date on which the 
                                Corporation is appointed as 
                                receiver for the covered 
                                financial company.
                          [(ii) Definition of insufficiency.--
                        In this subparagraph, the term 
                        ``insufficiency'' means the amount, if 
                        any, by which a claim against the 
                        covered financial company exceeds a 
                        mutual debt owed to the covered 
                        financial company by the holder of such 
                        claim.
                  [(C) Insolvency.--The term ``insolvent'' has 
                the same meaning as in section 101(32) of the 
                Bankruptcy Code.
                  [(D) Presumption of insolvency.--For purposes 
                of this paragraph, the covered financial 
                company is presumed to have been insolvent on 
                and during the 90-day period preceding the date 
                of appointment of the Corporation as receiver.
                  [(E) Limitation.--Nothing in this paragraph 
                (12) shall be the basis for any right of setoff 
                where no such right exists under applicable 
                noninsolvency law.
                  [(F) Priority claim.--Except as otherwise 
                provided in this title, the Corporation as 
                receiver for the covered financial company may 
                sell or transfer any assets free and clear of 
                the setoff rights of any party, except that 
                such party shall be entitled to a claim, 
                subordinate to the claims payable under 
                subparagraphs (A), (B), (C), and (D) of 
                subsection (b)(1), but senior to all other 
                unsecured liabilities defined in subsection 
                (b)(1)(E), in an amount equal to the value of 
                such setoff rights.
          [(13) Attachment of assets and other injunctive 
        relief.--Subject to paragraph (14), any court of 
        competent jurisdiction may, at the request of the 
        Corporation as receiver for a covered financial 
        company, issue an order in accordance with Rule 65 of 
        the Federal Rules of Civil Procedure, including an 
        order placing the assets of any person designated by 
        the Corporation under the control of the court and 
        appointing a trustee to hold such assets.
          [(14) Standards.--
                  [(A) Showing.--Rule 65 of the Federal Rules 
                of Civil Procedure shall apply with respect to 
                any proceeding under paragraph (13), without 
                regard to the requirement that the applicant 
                show that the injury, loss, or damage is 
                irreparable and immediate.
                  [(B) State proceeding.--If, in the case of 
                any proceeding in a State court, the court 
                determines that rules of civil procedure 
                available under the laws of the State provide 
                substantially similar protections of the right 
                of the parties to due process as provided under 
                Rule 65 (as modified with respect to such 
                proceeding by subparagraph (A)), the relief 
                sought by the Corporation pursuant to paragraph 
                (14) may be requested under the laws of such 
                State.
          [(15) Treatment of claims arising from breach of 
        contracts executed by the corporation as receiver.--
        Notwithstanding any other provision of this title, any 
        final and non-appealable judgment for monetary damages 
        entered against the Corporation as receiver for a 
        covered financial company for the breach of an 
        agreement executed or approved by the Corporation after 
        the date of its appointment shall be paid as an 
        administrative expense of the receiver. Nothing in this 
        paragraph shall be construed to limit the power of a 
        receiver to exercise any rights under contract or law, 
        including to terminate, breach, cancel, or otherwise 
        discontinue such agreement.
          [(16) Accounting and recordkeeping requirements.--
                  [(A) In general.--The Corporation as receiver 
                for a covered financial company shall, 
                consistent with the accounting and reporting 
                practices and procedures established by the 
                Corporation, maintain a full accounting of each 
                receivership or other disposition of any 
                covered financial company.
                  [(B) Annual accounting or report.--With 
                respect to each receivership to which the 
                Corporation is appointed, the Corporation shall 
                make an annual accounting or report, as 
                appropriate, available to the Secretary and the 
                Comptroller General of the United States.
                  [(C) Availability of reports.--Any report 
                prepared pursuant to subparagraph (B) and 
                section 203(c)(3) shall be made available to 
                the public by the Corporation.
                  [(D) Recordkeeping requirement.--
                          [(i) In general.--The Corporation 
                        shall prescribe such regulations and 
                        establish such retention schedules as 
                        are necessary to maintain the documents 
                        and records of the Corporation 
                        generated in exercising the authorities 
                        of this title and the records of a 
                        covered financial company for which the 
                        Corporation is appointed receiver, with 
                        due regard for--
                                  [(I) the avoidance of 
                                duplicative record retention; 
                                and
                                  [(II) the expected 
                                evidentiary needs of the 
                                Corporation as receiver for a 
                                covered financial company and 
                                the public regarding the 
                                records of covered financial 
                                companies.
                          [(ii) Retention of records.--Unless 
                        otherwise required by applicable 
                        Federal law or court order, the 
                        Corporation may not, at any time, 
                        destroy any records that are subject to 
                        clause (i).
                          [(iii) Records defined.--As used in 
                        this subparagraph, the terms 
                        ``records'' and ``records of a covered 
                        financial company'' mean any document, 
                        book, paper, map, photograph, 
                        microfiche, microfilm, computer or 
                        electronically-created record generated 
                        or maintained by the covered financial 
                        company in the course of and necessary 
                        to its transaction of business.
  [(b) Priority of Expenses and Unsecured Claims.--
          [(1) In general.--Unsecured claims against a covered 
        financial company, or the Corporation as receiver for 
        such covered financial company under this section, that 
        are proven to the satisfaction of the receiver shall 
        have priority in the following order:
                  [(A) Administrative expenses of the receiver.
                  [(B) Any amounts owed to the United States, 
                unless the United States agrees or consents 
                otherwise.
                  [(C) Wages, salaries, or commissions, 
                including vacation, severance, and sick leave 
                pay earned by an individual (other than an 
                individual described in subparagraph (G)), but 
                only to the extent of 11,725 for each 
                individual (as indexed for inflation, by 
                regulation of the Corporation) earned not later 
                than 180 days before the date of appointment of 
                the Corporation as receiver.
                  [(D) Contributions owed to employee benefit 
                plans arising from services rendered not later 
                than 180 days before the date of appointment of 
                the Corporation as receiver, to the extent of 
                the number of employees covered by each such 
                plan, multiplied by 11,725 (as indexed for 
                inflation, by regulation of the Corporation), 
                less the aggregate amount paid to such 
                employees under subparagraph (C), plus the 
                aggregate amount paid by the receivership on 
                behalf of such employees to any other employee 
                benefit plan.
                  [(E) Any other general or senior liability of 
                the covered financial company (which is not a 
                liability described under subparagraph (F), 
                (G), or (H)).
                  [(F) Any obligation subordinated to general 
                creditors (which is not an obligation described 
                under subparagraph (G) or (H)).
                  [(G) Any wages, salaries, or commissions, 
                including vacation, severance, and sick leave 
                pay earned, owed to senior executives and 
                directors of the covered financial company.
                  [(H) Any obligation to shareholders, members, 
                general partners, limited partners, or other 
                persons, with interests in the equity of the 
                covered financial company arising as a result 
                of their status as shareholders, members, 
                general partners, limited partners, or other 
                persons with interests in the equity of the 
                covered financial company.
          [(2) Post-receivership financing priority.--In the 
        event that the Corporation, as receiver for a covered 
        financial company, is unable to obtain unsecured credit 
        for the covered financial company from commercial 
        sources, the Corporation as receiver may obtain credit 
        or incur debt on the part of the covered financial 
        company, which shall have priority over any or all 
        administrative expenses of the receiver under paragraph 
        (1)(A).
          [(3) Claims of the united states.--Unsecured claims 
        of the United States shall, at a minimum, have a higher 
        priority than liabilities of the covered financial 
        company that count as regulatory capital.
          [(4) Creditors similarly situated.--All claimants of 
        a covered financial company that are similarly situated 
        under paragraph (1) shall be treated in a similar 
        manner, except that the Corporation may take any action 
        (including making payments, subject to subsection 
        (o)(1)(D)(i)) that does not comply with this 
        subsection, if--
                  [(A) the Corporation determines that such 
                action is necessary--
                          [(i) to maximize the value of the 
                        assets of the covered financial 
                        company;
                          [(ii) to initiate and continue 
                        operations essential to implementation 
                        of the receivership or any bridge 
                        financial company;
                          [(iii) to maximize the present value 
                        return from the sale or other 
                        disposition of the assets of the 
                        covered financial company; or
                          [(iv) to minimize the amount of any 
                        loss realized upon the sale or other 
                        disposition of the assets of the 
                        covered financial company; and
                  [(B) all claimants that are similarly 
                situated under paragraph (1) receive not less 
                than the amount provided in paragraphs (2) and 
                (3) of subsection (d).
          [(5) Secured claims unaffected.--This section shall 
        not affect secured claims or security entitlements in 
        respect of assets or property held by the covered 
        financial company, except to the extent that the 
        security is insufficient to satisfy the claim, and then 
        only with regard to the difference between the claim 
        and the amount realized from the security.
          [(6) Priority of expenses and unsecured claims in the 
        orderly liquidation of sipc member.--Where the 
        Corporation is appointed as receiver for a covered 
        broker or dealer, unsecured claims against such covered 
        broker or dealer, or the Corporation as receiver for 
        such covered broker or dealer under this section, that 
        are proven to the satisfaction of the receiver under 
        section 205(e), shall have the priority prescribed in 
        paragraph (1), except that--
                  [(A) SIPC shall be entitled to recover 
                administrative expenses incurred in performing 
                its responsibilities under section 205 on an 
                equal basis with the Corporation, in accordance 
                with paragraph (1)(A);
                  [(B) the Corporation shall be entitled to 
                recover any amounts paid to customers or to 
                SIPC pursuant to section 205(f), in accordance 
                with paragraph (1)(B);
                  [(C) SIPC shall be entitled to recover any 
                amounts paid out of the SIPC Fund to meet its 
                obligations under section 205 and under the 
                Securities Investor Protection Act of 1970 (15 
                U.S.C. 78aaa et seq.), which claim shall be 
                subordinate to the claims payable under 
                subparagraphs (A) and (B) of paragraph (1), but 
                senior to all other claims; and
                  [(D) the Corporation may, after paying any 
                proven claims to customers under section 205 
                and the Securities Investor Protection Act of 
                1970 (15 U.S.C. 78aaa et seq.), and as provided 
                above, pay dividends on other proven claims, in 
                its discretion, and to the extent that funds 
                are available, in accordance with the 
                priorities set forth in paragraph (1).
  [(c) Provisions Relating to Contracts Entered Into Before 
Appointment of Receiver.--
          [(1) Authority to repudiate contracts.--In addition 
        to any other rights that a receiver may have, the 
        Corporation as receiver for any covered financial 
        company may disaffirm or repudiate any contract or 
        lease--
                  [(A) to which the covered financial company 
                is a party;
                  [(B) the performance of which the Corporation 
                as receiver, in the discretion of the 
                Corporation, determines to be burdensome; and
                  [(C) the disaffirmance or repudiation of 
                which the Corporation as receiver determines, 
                in the discretion of the Corporation, will 
                promote the orderly administration of the 
                affairs of the covered financial company.
          [(2) Timing of repudiation.--The Corporation, as 
        receiver for any covered financial company, shall 
        determine whether or not to exercise the rights of 
        repudiation under this section within a reasonable 
        period of time.
          [(3) Claims for damages for repudiation.--
                  [(A) In general.--Except as provided in 
                paragraphs (4), (5), and (6) and in 
                subparagraphs (C), (D), and (E) of this 
                paragraph, the liability of the Corporation as 
                receiver for a covered financial company for 
                the disaffirmance or repudiation of any 
                contract pursuant to paragraph (1) shall be--
                          [(i) limited to actual direct 
                        compensatory damages; and
                          [(ii) determined as of--
                                  [(I) the date of the 
                                appointment of the Corporation 
                                as receiver; or
                                  [(II) in the case of any 
                                contract or agreement referred 
                                to in paragraph (8), the date 
                                of the disaffirmance or 
                                repudiation of such contract or 
                                agreement.
                  [(B) No liability for other damages.--For 
                purposes of subparagraph (A), the term ``actual 
                direct compensatory damages'' does not 
                include--
                          [(i) punitive or exemplary damages;
                          [(ii) damages for lost profits or 
                        opportunity; or
                          [(iii) damages for pain and 
                        suffering.
                  [(C) Measure of damages for repudiation of 
                qualified financial contracts.--In the case of 
                any qualified financial contract or agreement 
                to which paragraph (8) applies, compensatory 
                damages shall be--
                          [(i) deemed to include normal and 
                        reasonable costs of cover or other 
                        reasonable measures of damages utilized 
                        in the industries for such contract and 
                        agreement claims; and
                          [(ii) paid in accordance with this 
                        paragraph and subsection (d), except as 
                        otherwise specifically provided in this 
                        subsection.
                  [(D) Measure of damages for repudiation or 
                disaffirmance of debt obligation.--In the case 
                of any debt for borrowed money or evidenced by 
                a security, actual direct compensatory damages 
                shall be no less than the amount lent plus 
                accrued interest plus any accreted original 
                issue discount as of the date the Corporation 
                was appointed receiver of the covered financial 
                company and, to the extent that an allowed 
                secured claim is secured by property the value 
                of which is greater than the amount of such 
                claim and any accrued interest through the date 
                of repudiation or disaffirmance, such accrued 
                interest pursuant to paragraph (1).
                  [(E) Measure of damages for repudiation or 
                disaffirmance of contingent obligation.--In the 
                case of any contingent obligation of a covered 
                financial company consisting of any obligation 
                under a guarantee, letter of credit, loan 
                commitment, or similar credit obligation, the 
                Corporation may, by rule or regulation, 
                prescribe that actual direct compensatory 
                damages shall be no less than the estimated 
                value of the claim as of the date the 
                Corporation was appointed receiver of the 
                covered financial company, as such value is 
                measured based on the likelihood that such 
                contingent claim would become fixed and the 
                probable magnitude thereof.
          [(4) Leases under which the covered financial company 
        is the lessee.--
                  [(A) In general.--If the Corporation as 
                receiver disaffirms or repudiates a lease under 
                which the covered financial company is the 
                lessee, the receiver shall not be liable for 
                any damages (other than damages determined 
                pursuant to subparagraph (B)) for the 
                disaffirmance or repudiation of such lease.
                  [(B) Payments of rent.--Notwithstanding 
                subparagraph (A), the lessor under a lease to 
                which subparagraph (A) would otherwise apply 
                shall--
                          [(i) be entitled to the contractual 
                        rent accruing before the later of the 
                        date on which--
                                  [(I) the notice of 
                                disaffirmance or repudiation is 
                                mailed; or
                                  [(II) the disaffirmance or 
                                repudiation becomes effective, 
                                unless the lessor is in default 
                                or breach of the terms of the 
                                lease;
                          [(ii) have no claim for damages under 
                        any acceleration clause or other 
                        penalty provision in the lease; and
                          [(iii) have a claim for any unpaid 
                        rent, subject to all appropriate 
                        offsets and defenses, due as of the 
                        date of the appointment which shall be 
                        paid in accordance with this paragraph 
                        and subsection (d).
          [(5) Leases under which the covered financial company 
        is the lessor.--
                  [(A) In general.--If the Corporation as 
                receiver for a covered financial company 
                repudiates an unexpired written lease of real 
                property of the covered financial company under 
                which the covered financial company is the 
                lessor and the lessee is not, as of the date of 
                such repudiation, in default, the lessee under 
                such lease may either--
                          [(i) treat the lease as terminated by 
                        such repudiation; or
                          [(ii) remain in possession of the 
                        leasehold interest for the balance of 
                        the term of the lease, unless the 
                        lessee defaults under the terms of the 
                        lease after the date of such 
                        repudiation.
                  [(B) Provisions applicable to lessee 
                remaining in possession.--If any lessee under a 
                lease described in subparagraph (A) remains in 
                possession of a leasehold interest pursuant to 
                clause (ii) of subparagraph (A)--
                          [(i) the lessee--
                                  [(I) shall continue to pay 
                                the contractual rent pursuant 
                                to the terms of the lease after 
                                the date of the repudiation of 
                                such lease; and
                                  [(II) may offset against any 
                                rent payment which accrues 
                                after the date of the 
                                repudiation of the lease, any 
                                damages which accrue after such 
                                date due to the nonperformance 
                                of any obligation of the 
                                covered financial company under 
                                the lease after such date; and
                          [(ii) the Corporation as receiver 
                        shall not be liable to the lessee for 
                        any damages arising after such date as 
                        a result of the repudiation, other than 
                        the amount of any offset allowed under 
                        clause (i)(II).
          [(6) Contracts for the sale of real property.--
                  [(A) In general.--If the receiver repudiates 
                any contract (which meets the requirements of 
                subsection (a)(6)) for the sale of real 
                property, and the purchaser of such real 
                property under such contract is in possession 
                and is not, as of the date of such repudiation, 
                in default, such purchaser may either--
                          [(i) treat the contract as terminated 
                        by such repudiation; or
                          [(ii) remain in possession of such 
                        real property.
                  [(B) Provisions applicable to purchaser 
                remaining in possession.--If any purchaser of 
                real property under any contract described in 
                subparagraph (A) remains in possession of such 
                property pursuant to clause (ii) of 
                subparagraph (A)--
                          [(i) the purchaser--
                                  [(I) shall continue to make 
                                all payments due under the 
                                contract after the date of the 
                                repudiation of the contract; 
                                and
                                  [(II) may offset against any 
                                such payments any damages which 
                                accrue after such date due to 
                                the nonperformance (after such 
                                date) of any obligation of the 
                                covered financial company under 
                                the contract; and
                          [(ii) the Corporation as receiver 
                        shall--
                                  [(I) not be liable to the 
                                purchaser for any damages 
                                arising after such date as a 
                                result of the repudiation, 
                                other than the amount of any 
                                offset allowed under clause 
                                (i)(II);
                                  [(II) deliver title to the 
                                purchaser in accordance with 
                                the provisions of the contract; 
                                and
                                  [(III) have no obligation 
                                under the contract other than 
                                the performance required under 
                                subclause (II).
                  [(C) Assignment and sale allowed.--
                          [(i) In general.--No provision of 
                        this paragraph shall be construed as 
                        limiting the right of the Corporation 
                        as receiver to assign the contract 
                        described in subparagraph (A) and sell 
                        the property, subject to the contract 
                        and the provisions of this paragraph.
                          [(ii) No liability after assignment 
                        and sale.--If an assignment and sale 
                        described in clause (i) is consummated, 
                        the Corporation as receiver shall have 
                        no further liability under the contract 
                        described in subparagraph (A) or with 
                        respect to the real property which was 
                        the subject of such contract.
          [(7) Provisions applicable to service contracts.--
                  [(A) Services performed before appointment.--
                In the case of any contract for services 
                between any person and any covered financial 
                company for which the Corporation has been 
                appointed receiver, any claim of such person 
                for services performed before the date of 
                appointment shall be--
                          [(i) a claim to be paid in accordance 
                        with subsections (a), (b), and (d); and
                          [(ii) deemed to have arisen as of the 
                        date on which the receiver was 
                        appointed.
                  [(B) Services performed after appointment and 
                prior to repudiation.--If, in the case of any 
                contract for services described in subparagraph 
                (A), the Corporation as receiver accepts 
                performance by the other person before making 
                any determination to exercise the right of 
                repudiation of such contract under this 
                section--
                          [(i) the other party shall be paid 
                        under the terms of the contract for the 
                        services performed; and
                          [(ii) the amount of such payment 
                        shall be treated as an administrative 
                        expense of the receivership.
                  [(C) Acceptance of performance no bar to 
                subsequent repudiation.--The acceptance by the 
                Corporation as receiver for services referred 
                to in subparagraph (B) in connection with a 
                contract described in subparagraph (B) shall 
                not affect the right of the Corporation as 
                receiver to repudiate such contract under this 
                section at any time after such performance.
          [(8) Certain qualified financial contracts.--
                  [(A) Rights of parties to contracts.--Subject 
                to subsection (a)(8) and paragraphs (9) and 
                (10) of this subsection, and notwithstanding 
                any other provision of this section, any other 
                provision of Federal law, or the law of any 
                State, no person shall be stayed or prohibited 
                from exercising--
                          [(i) any right that such person has 
                        to cause the termination, liquidation, 
                        or acceleration of any qualified 
                        financial contract with a covered 
                        financial company which arises upon the 
                        date of appointment of the Corporation 
                        as receiver for such covered financial 
                        company or at any time after such 
                        appointment;
                          [(ii) any right under any security 
                        agreement or arrangement or other 
                        credit enhancement related to one or 
                        more qualified financial contracts 
                        described in clause (i); or
                          [(iii) any right to offset or net out 
                        any termination value, payment amount, 
                        or other transfer obligation arising 
                        under or in connection with 1 or more 
                        contracts or agreements described in 
                        clause (i), including any master 
                        agreement for such contracts or 
                        agreements.
                  [(B) Applicability of other provisions.--
                Subsection (a)(8) shall apply in the case of 
                any judicial action or proceeding brought 
                against the Corporation as receiver referred to 
                in subparagraph (A), or the subject covered 
                financial company, by any party to a contract 
                or agreement described in subparagraph (A)(i) 
                with such covered financial company.
                  [(C) Certain transfers not avoidable.--
                          [(i) In general.--Notwithstanding 
                        subsection (a)(11), (a)(12), or 
                        (c)(12), section 5242 of the Revised 
                        Statutes of the United States, or any 
                        other provision of Federal or State law 
                        relating to the avoidance of 
                        preferential or fraudulent transfers, 
                        the Corporation, whether acting as the 
                        Corporation or as receiver for a 
                        covered financial company, may not 
                        avoid any transfer of money or other 
                        property in connection with any 
                        qualified financial contract with a 
                        covered financial company.
                          [(ii) Exception for certain 
                        transfers.--Clause (i) shall not apply 
                        to any transfer of money or other 
                        property in connection with any 
                        qualified financial contract with a 
                        covered financial company if the 
                        transferee had actual intent to hinder, 
                        delay, or defraud such company, the 
                        creditors of such company, or the 
                        Corporation as receiver appointed for 
                        such company.
                  [(D) Certain contracts and agreements 
                defined.--For purposes of this subsection, the 
                following definitions shall apply:
                          [(i) Qualified financial contract.--
                        The term ``qualified financial 
                        contract'' means any securities 
                        contract, commodity contract, forward 
                        contract, repurchase agreement, swap 
                        agreement, and any similar agreement 
                        that the Corporation determines by 
                        regulation, resolution, or order to be 
                        a qualified financial contract for 
                        purposes of this paragraph.
                          [(ii) Securities contract.--The term 
                        ``securities contract''--
                                  [(I) means a contract for the 
                                purchase, sale, or loan of a 
                                security, a certificate of 
                                deposit, a mortgage loan, any 
                                interest in a mortgage loan, a 
                                group or index of securities, 
                                certificates of deposit, or 
                                mortgage loans or interests 
                                therein (including any interest 
                                therein or based on the value 
                                thereof), or any option on any 
                                of the foregoing, including any 
                                option to purchase or sell any 
                                such security, certificate of 
                                deposit, mortgage loan, 
                                interest, group or index, or 
                                option, and including any 
                                repurchase or reverse 
                                repurchase transaction on any 
                                such security, certificate of 
                                deposit, mortgage loan, 
                                interest, group or index, or 
                                option (whether or not such 
                                repurchase or reverse 
                                repurchase transaction is a 
                                ``repurchase agreement'', as 
                                defined in clause (v));
                                  [(II) does not include any 
                                purchase, sale, or repurchase 
                                obligation under a 
                                participation in a commercial 
                                mortgage loan unless the 
                                Corporation determines by 
                                regulation, resolution, or 
                                order to include any such 
                                agreement within the meaning of 
                                such term;
                                  [(III) means any option 
                                entered into on a national 
                                securities exchange relating to 
                                foreign currencies;
                                  [(IV) means the guarantee 
                                (including by novation) by or 
                                to any securities clearing 
                                agency of any settlement of 
                                cash, securities, certificates 
                                of deposit, mortgage loans or 
                                interests therein, group or 
                                index of securities, 
                                certificates of deposit or 
                                mortgage loans or interests 
                                therein (including any interest 
                                therein or based on the value 
                                thereof) or an option on any of 
                                the foregoing, including any 
                                option to purchase or sell any 
                                such security, certificate of 
                                deposit, mortgage loan, 
                                interest, group or index, or 
                                option (whether or not such 
                                settlement is in connection 
                                with any agreement or 
                                transaction referred to in 
                                subclauses (I) through (XII) 
                                (other than subclause (II)));
                                  [(V) means any margin loan;
                                  [(VI) means any extension of 
                                credit for the clearance or 
                                settlement of securities 
                                transactions;
                                  [(VII) means any loan 
                                transaction coupled with a 
                                securities collar transaction, 
                                any prepaid securities forward 
                                transaction, or any total 
                                return swap transaction coupled 
                                with a securities sale 
                                transaction;
                                  [(VIII) means any other 
                                agreement or transaction that 
                                is similar to any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(IX) means any combination 
                                of the agreements or 
                                transactions referred to in 
                                this clause;
                                  [(X) means any option to 
                                enter into any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(XI) means a master 
                                agreement that provides for an 
                                agreement or transaction 
                                referred to in any of 
                                subclauses (I) through (X), 
                                other than subclause (II), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a securities 
                                contract under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a securities contract 
                                under this clause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in any of subclauses (I) 
                                through (X), other than 
                                subclause (II); and
                                  [(XII) means any security 
                                agreement or arrangement or 
                                other credit enhancement 
                                related to any agreement or 
                                transaction referred to in this 
                                clause, including any guarantee 
                                or reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                this clause.
                          [(iii) Commodity contract.--The term 
                        ``commodity contract'' means--
                                  [(I) with respect to a 
                                futures commission merchant, a 
                                contract for the purchase or 
                                sale of a commodity for future 
                                delivery on, or subject to the 
                                rules of, a contract market or 
                                board of trade;
                                  [(II) with respect to a 
                                foreign futures commission 
                                merchant, a foreign future;
                                  [(III) with respect to a 
                                leverage transaction merchant, 
                                a leverage transaction;
                                  [(IV) with respect to a 
                                clearing organization, a 
                                contract for the purchase or 
                                sale of a commodity for future 
                                delivery on, or subject to the 
                                rules of, a contract market or 
                                board of trade that is cleared 
                                by such clearing organization, 
                                or commodity option traded on, 
                                or subject to the rules of, a 
                                contract market or board of 
                                trade that is cleared by such 
                                clearing organization;
                                  [(V) with respect to a 
                                commodity options dealer, a 
                                commodity option;
                                  [(VI) any other agreement or 
                                transaction that is similar to 
                                any agreement or transaction 
                                referred to in this clause;
                                  [(VII) any combination of the 
                                agreements or transactions 
                                referred to in this clause;
                                  [(VIII) any option to enter 
                                into any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(IX) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in any 
                                of subclauses (I) through 
                                (VIII), together with all 
                                supplements to any such master 
                                agreement, without regard to 
                                whether the master agreement 
                                provides for an agreement or 
                                transaction that is not a 
                                commodity contract under this 
                                clause, except that the master 
                                agreement shall be considered 
                                to be a commodity contract 
                                under this clause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in any of subclauses (I) 
                                through (VIII); or
                                  [(X) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in this clause, 
                                including any guarantee or 
                                reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                this clause.
                          [(iv) Forward contract.--The term 
                        ``forward contract'' means--
                                  [(I) a contract (other than a 
                                commodity contract) for the 
                                purchase, sale, or transfer of 
                                a commodity or any similar 
                                good, article, service, right, 
                                or interest which is presently 
                                or in the future becomes the 
                                subject of dealing in the 
                                forward contract trade, or 
                                product or byproduct thereof, 
                                with a maturity date that is 
                                more than 2 days after the date 
                                on which the contract is 
                                entered into, including a 
                                repurchase or reverse 
                                repurchase transaction (whether 
                                or not such repurchase or 
                                reverse repurchase transaction 
                                is a ``repurchase agreement'', 
                                as defined in clause (v)), 
                                consignment, lease, swap, hedge 
                                transaction, deposit, loan, 
                                option, allocated transaction, 
                                unallocated transaction, or any 
                                other similar agreement;
                                  [(II) any combination of 
                                agreements or transactions 
                                referred to in subclauses (I) 
                                and (III);
                                  [(III) any option to enter 
                                into any agreement or 
                                transaction referred to in 
                                subclause (I) or (II);
                                  [(IV) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), or (III), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a forward contract 
                                under this clause, except that 
                                the master agreement shall be 
                                considered to be a forward 
                                contract under this clause only 
                                with respect to each agreement 
                                or transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), or 
                                (III); or
                                  [(V) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in subclause (I), 
                                (II), (III), or (IV), including 
                                any guarantee or reimbursement 
                                obligation in connection with 
                                any agreement or transaction 
                                referred to in any such 
                                subclause.
                          [(v) Repurchase agreement.--The term 
                        ``repurchase agreement'' (which 
                        definition also applies to a reverse 
                        repurchase agreement)--
                                  [(I) means an agreement, 
                                including related terms, which 
                                provides for the transfer of 
                                one or more certificates of 
                                deposit, mortgage related 
                                securities (as such term is 
                                defined in section 3 of the 
                                Securities Exchange Act of 
                                1934), mortgage loans, 
                                interests in mortgage-related 
                                securities or mortgage loans, 
                                eligible bankers' acceptances, 
                                qualified foreign government 
                                securities (which, for purposes 
                                of this clause, means a 
                                security that is a direct 
                                obligation of, or that is fully 
                                guaranteed by, the central 
                                government of a member of the 
                                Organization for Economic 
                                Cooperation and Development, as 
                                determined by regulation or 
                                order adopted by the Board of 
                                Governors), or securities that 
                                are direct obligations of, or 
                                that are fully guaranteed by, 
                                the United States or any agency 
                                of the United States against 
                                the transfer of funds by the 
                                transferee of such certificates 
                                of deposit, eligible bankers' 
                                acceptances, securities, 
                                mortgage loans, or interests 
                                with a simultaneous agreement 
                                by such transferee to transfer 
                                to the transferor thereof 
                                certificates of deposit, 
                                eligible bankers' acceptances, 
                                securities, mortgage loans, or 
                                interests as described above, 
                                at a date certain not later 
                                than 1 year after such 
                                transfers or on demand, against 
                                the transfer of funds, or any 
                                other similar agreement;
                                  [(II) does not include any 
                                repurchase obligation under a 
                                participation in a commercial 
                                mortgage loan, unless the 
                                Corporation determines, by 
                                regulation, resolution, or 
                                order to include any such 
                                participation within the 
                                meaning of such term;
                                  [(III) means any combination 
                                of agreements or transactions 
                                referred to in subclauses (I) 
                                and (IV);
                                  [(IV) means any option to 
                                enter into any agreement or 
                                transaction referred to in 
                                subclause (I) or (III);
                                  [(V) means a master agreement 
                                that provides for an agreement 
                                or transaction referred to in 
                                subclause (I), (III), or (IV), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a repurchase 
                                agreement under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a repurchase agreement 
                                under this subclause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (III), or 
                                (IV); and
                                  [(VI) means any security 
                                agreement or arrangement or 
                                other credit enhancement 
                                related to any agreement or 
                                transaction referred to in 
                                subclause (I), (III), (IV), or 
                                (V), including any guarantee or 
                                reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                any such subclause.
                          [(vi) Swap agreement.--The term 
                        ``swap agreement'' means--
                                  [(I) any agreement, including 
                                the terms and conditions 
                                incorporated by reference in 
                                any such agreement, which is an 
                                interest rate swap, option, 
                                future, or forward agreement, 
                                including a rate floor, rate 
                                cap, rate collar, cross-
                                currency rate swap, and basis 
                                swap; a spot, same day-
                                tomorrow, tomorrow-next, 
                                forward, or other foreign 
                                exchange, precious metals, or 
                                other commodity agreement; a 
                                currency swap, option, future, 
                                or forward agreement; an equity 
                                index or equity swap, option, 
                                future, or forward agreement; a 
                                debt index or debt swap, 
                                option, future, or forward 
                                agreement; a total return, 
                                credit spread or credit swap, 
                                option, future, or forward 
                                agreement; a commodity index or 
                                commodity swap, option, future, 
                                or forward agreement; weather 
                                swap, option, future, or 
                                forward agreement; an emissions 
                                swap, option, future, or 
                                forward agreement; or an 
                                inflation swap, option, future, 
                                or forward agreement;
                                  [(II) any agreement or 
                                transaction that is similar to 
                                any other agreement or 
                                transaction referred to in this 
                                clause and that is of a type 
                                that has been, is presently, or 
                                in the future becomes, the 
                                subject of recurrent dealings 
                                in the swap or other 
                                derivatives markets (including 
                                terms and conditions 
                                incorporated by reference in 
                                such agreement) and that is a 
                                forward, swap, future, option, 
                                or spot transaction on one or 
                                more rates, currencies, 
                                commodities, equity securities 
                                or other equity instruments, 
                                debt securities or other debt 
                                instruments, quantitative 
                                measures associated with an 
                                occurrence, extent of an 
                                occurrence, or contingency 
                                associated with a financial, 
                                commercial, or economic 
                                consequence, or economic or 
                                financial indices or measures 
                                of economic or financial risk 
                                or value;
                                  [(III) any combination of 
                                agreements or transactions 
                                referred to in this clause;
                                  [(IV) any option to enter 
                                into any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(V) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), (III), or 
                                (IV), together with all 
                                supplements to any such master 
                                agreement, without regard to 
                                whether the master agreement 
                                contains an agreement or 
                                transaction that is not a swap 
                                agreement under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a swap agreement under 
                                this clause only with respect 
                                to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), (III), 
                                or (IV); and
                                  [(VI) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in any of 
                                subclauses (I) through (V), 
                                including any guarantee or 
                                reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                any such clause.
                          [(vii) Definitions relating to 
                        default.--When used in this paragraph 
                        and paragraphs (9) and (10)--
                                  [(I) the term ``default'' 
                                means, with respect to a 
                                covered financial company, any 
                                adjudication or other official 
                                decision by any court of 
                                competent jurisdiction, or 
                                other public authority pursuant 
                                to which the Corporation has 
                                been appointed receiver; and
                                  [(II) the term ``in danger of 
                                default'' means a covered 
                                financial company with respect 
                                to which the Corporation or 
                                appropriate State authority has 
                                determined that--
                                          [(aa) in the opinion 
                                        of the Corporation or 
                                        such authority--
                                                  [(AA) the 
                                                covered 
                                                financial 
                                                company is not 
                                                likely to be 
                                                able to pay its 
                                                obligations in 
                                                the normal 
                                                course of 
                                                business; and
                                                  [(BB) there 
                                                is no 
                                                reasonable 
                                                prospect that 
                                                the covered 
                                                financial 
                                                company will be 
                                                able to pay 
                                                such 
                                                obligations 
                                                without Federal 
                                                assistance; or
                                          [(bb) in the opinion 
                                        of the Corporation or 
                                        such authority--
                                                  [(AA) the 
                                                covered 
                                                financial 
                                                company has 
                                                incurred or is 
                                                likely to incur 
                                                losses that 
                                                will deplete 
                                                all or 
                                                substantially 
                                                all of its 
                                                capital; and
                                                  [(BB) there 
                                                is no 
                                                reasonable 
                                                prospect that 
                                                the capital 
                                                will be 
                                                replenished 
                                                without Federal 
                                                assistance.
                          [(viii) Treatment of master agreement 
                        as one agreement.--Any master agreement 
                        for any contract or agreement described 
                        in any of clauses (i) through (vi) (or 
                        any master agreement for such master 
                        agreement or agreements), together with 
                        all supplements to such master 
                        agreement, shall be treated as a single 
                        agreement and a single qualified 
                        financial contact. If a master 
                        agreement contains provisions relating 
                        to agreements or transactions that are 
                        not themselves qualified financial 
                        contracts, the master agreement shall 
                        be deemed to be a qualified financial 
                        contract only with respect to those 
                        transactions that are themselves 
                        qualified financial contracts.
                          [(ix) Transfer.--The term 
                        ``transfer'' means every mode, direct 
                        or indirect, absolute or conditional, 
                        voluntary or involuntary, of disposing 
                        of or parting with property or with an 
                        interest in property, including 
                        retention of title as a security 
                        interest and foreclosure of the equity 
                        of redemption of the covered financial 
                        company.
                          [(x) Person.--The term ``person'' 
                        includes any governmental entity in 
                        addition to any entity included in the 
                        definition of such term in section 1, 
                        title 1, United States Code.
                  [(E) Clarification.--No provision of law 
                shall be construed as limiting the right or 
                power of the Corporation, or authorizing any 
                court or agency to limit or delay, in any 
                manner, the right or power of the Corporation 
                to transfer any qualified financial contract or 
                to disaffirm or repudiate any such contract in 
                accordance with this subsection.
                  [(F) Walkaway clauses not effective.--
                          [(i) In general.--Notwithstanding the 
                        provisions of subparagraph (A) of this 
                        paragraph and sections 403 and 404 of 
                        the Federal Deposit Insurance 
                        Corporation Improvement Act of 1991, no 
                        walkaway clause shall be enforceable in 
                        a qualified financial contract of a 
                        covered financial company in default.
                          [(ii) Limited suspension of certain 
                        obligations.--In the case of a 
                        qualified financial contract referred 
                        to in clause (i), any payment or 
                        delivery obligations otherwise due from 
                        a party pursuant to the qualified 
                        financial contract shall be suspended 
                        from the time at which the Corporation 
                        is appointed as receiver until the 
                        earlier of--
                                  [(I) the time at which such 
                                party receives notice that such 
                                contract has been transferred 
                                pursuant to paragraph (10)(A); 
                                or
                                  [(II) 5:00 p.m. (eastern 
                                time) on the business day 
                                following the date of the 
                                appointment of the Corporation 
                                as receiver.
                          [(iii) Walkaway clause defined.--For 
                        purposes of this subparagraph, the term 
                        ``walkaway clause'' means any provision 
                        in a qualified financial contract that 
                        suspends, conditions, or extinguishes a 
                        payment obligation of a party, in whole 
                        or in part, or does not create a 
                        payment obligation of a party that 
                        would otherwise exist, solely because 
                        of the status of such party as a 
                        nondefaulting party in connection with 
                        the insolvency of a covered financial 
                        company that is a party to the contract 
                        or the appointment of or the exercise 
                        of rights or powers by the Corporation 
                        as receiver for such covered financial 
                        company, and not as a result of the 
                        exercise by a party of any right to 
                        offset, setoff, or net obligations that 
                        exist under the contract, any other 
                        contract between those parties, or 
                        applicable law.
                  [(G) Certain obligations to clearing 
                organizations.--In the event that the 
                Corporation has been appointed as receiver for 
                a covered financial company which is a party to 
                any qualified financial contract cleared by or 
                subject to the rules of a clearing organization 
                (as defined in paragraph (9)(D)), the receiver 
                shall use its best efforts to meet all margin, 
                collateral, and settlement obligations of the 
                covered financial company that arise under 
                qualified financial contracts (other than any 
                margin, collateral, or settlement obligation 
                that is not enforceable against the receiver 
                under paragraph (8)(F)(i) or paragraph 
                (10)(B)), as required by the rules of the 
                clearing organization when due. Notwithstanding 
                any other provision of this title, if the 
                receiver fails to satisfy any such margin, 
                collateral, or settlement obligations under the 
                rules of the clearing organization, the 
                clearing organization shall have the immediate 
                right to exercise, and shall not be stayed from 
                exercising, all of its rights and remedies 
                under its rules and applicable law with respect 
                to any qualified financial contract of the 
                covered financial company, including, without 
                limitation, the right to liquidate all 
                positions and collateral of such covered 
                financial company under the company's qualified 
                financial contracts, and suspend or cease to 
                act for such covered financial company, all in 
                accordance with the rules of the clearing 
                organization.
                  [(H) Recordkeeping.--
                          [(i) Joint rulemaking.--The Federal 
                        primary financial regulatory agencies 
                        shall jointly prescribe regulations 
                        requiring that financial companies 
                        maintain such records with respect to 
                        qualified financial contracts 
                        (including market valuations) that the 
                        Federal primary financial regulatory 
                        agencies determine to be necessary or 
                        appropriate in order to assist the 
                        Corporation as receiver for a covered 
                        financial company in being able to 
                        exercise its rights and fulfill its 
                        obligations under this paragraph or 
                        paragraph (9) or (10).
                          [(ii) Time frame.--The Federal 
                        primary financial regulatory agencies 
                        shall prescribe joint final or interim 
                        final regulations not later than 24 
                        months after the date of enactment of 
                        this Act.
                          [(iii) Back-up rulemaking 
                        authority.--If the Federal primary 
                        financial regulatory agencies do not 
                        prescribe joint final or interim final 
                        regulations within the time frame in 
                        clause (ii), the Chairperson of the 
                        Council shall prescribe, in 
                        consultation with the Corporation, the 
                        regulations required by clause (i).
                          [(iv) Categorization and tiering.--
                        The joint regulations prescribed under 
                        clause (i) shall, as appropriate, 
                        differentiate among financial companies 
                        by taking into consideration their 
                        size, risk, complexity, leverage, 
                        frequency and dollar amount of 
                        qualified financial contracts, 
                        interconnectedness to the financial 
                        system, and any other factors deemed 
                        appropriate.
          [(9) Transfer of qualified financial contracts.--
                  [(A) In general.--In making any transfer of 
                assets or liabilities of a covered financial 
                company in default, which includes any 
                qualified financial contract, the Corporation 
                as receiver for such covered financial company 
                shall either--
                          [(i) transfer to one financial 
                        institution, other than a financial 
                        institution for which a conservator, 
                        receiver, trustee in bankruptcy, or 
                        other legal custodian has been 
                        appointed or which is otherwise the 
                        subject of a bankruptcy or insolvency 
                        proceeding--
                                  [(I) all qualified financial 
                                contracts between any person or 
                                any affiliate of such person 
                                and the covered financial 
                                company in default;
                                  [(II) all claims of such 
                                person or any affiliate of such 
                                person against such covered 
                                financial company under any 
                                such contract (other than any 
                                claim which, under the terms of 
                                any such contract, is 
                                subordinated to the claims of 
                                general unsecured creditors of 
                                such company);
                                  [(III) all claims of such 
                                covered financial company 
                                against such person or any 
                                affiliate of such person under 
                                any such contract; and
                                  [(IV) all property securing 
                                or any other credit enhancement 
                                for any contract described in 
                                subclause (I) or any claim 
                                described in subclause (II) or 
                                (III) under any such contract; 
                                or
                          [(ii) transfer none of the qualified 
                        financial contracts, claims, property 
                        or other credit enhancement referred to 
                        in clause (i) (with respect to such 
                        person and any affiliate of such 
                        person).
                  [(B) Transfer to foreign bank, financial 
                institution, or branch or agency thereof.--In 
                transferring any qualified financial contracts 
                and related claims and property under 
                subparagraph (A)(i), the Corporation as 
                receiver for the covered financial company 
                shall not make such transfer to a foreign bank, 
                financial institution organized under the laws 
                of a foreign country, or a branch or agency of 
                a foreign bank or financial institution unless, 
                under the law applicable to such bank, 
                financial institution, branch or agency, to the 
                qualified financial contracts, and to any 
                netting contract, any security agreement or 
                arrangement or other credit enhancement related 
                to one or more qualified financial contracts, 
                the contractual rights of the parties to such 
                qualified financial contracts, netting 
                contracts, security agreements or arrangements, 
                or other credit enhancements are enforceable 
                substantially to the same extent as permitted 
                under this section.
                  [(C) Transfer of contracts subject to the 
                rules of a clearing organization.--In the event 
                that the Corporation as receiver for a 
                financial institution transfers any qualified 
                financial contract and related claims, 
                property, or credit enhancement pursuant to 
                subparagraph (A)(i) and such contract is 
                cleared by or subject to the rules of a 
                clearing organization, the clearing 
                organization shall not be required to accept 
                the transferee as a member by virtue of the 
                transfer.
                  [(D) Definitions.--For purposes of this 
                paragraph--
                          [(i) the term ``financial 
                        institution'' means a broker or dealer, 
                        a depository institution, a futures 
                        commission merchant, a bridge financial 
                        company, or any other institution 
                        determined by the Corporation, by 
                        regulation, to be a financial 
                        institution; and
                          [(ii) the term ``clearing 
                        organization'' has the same meaning as 
                        in section 402 of the Federal Deposit 
                        Insurance Corporation Improvement Act 
                        of 1991.
          [(10) Notification of transfer.--
                  [(A) In general.--
                          [(i) Notice.--The Corporation shall 
                        provide notice in accordance with 
                        clause (ii), if--
                                  [(I) the Corporation as 
                                receiver for a covered 
                                financial company in default or 
                                in danger of default transfers 
                                any assets or liabilities of 
                                the covered financial company; 
                                and
                                  [(II) the transfer includes 
                                any qualified financial 
                                contract.
                          [(ii) Timing.--The Corporation as 
                        receiver for a covered financial 
                        company shall notify any person who is 
                        a party to any contract described in 
                        clause (i) of such transfer not later 
                        than 5:00 p.m. (eastern time) on the 
                        business day following the date of the 
                        appointment of the Corporation as 
                        receiver.
                  [(B) Certain rights not enforceable.--
                          [(i) Receivership.--A person who is a 
                        party to a qualified financial contract 
                        with a covered financial company may 
                        not exercise any right that such person 
                        has to terminate, liquidate, or net 
                        such contract under paragraph (8)(A) 
                        solely by reason of or incidental to 
                        the appointment under this section of 
                        the Corporation as receiver for the 
                        covered financial company (or the 
                        insolvency or financial condition of 
                        the covered financial company for which 
                        the Corporation has been appointed as 
                        receiver)--
                                  [(I) until 5:00 p.m. (eastern 
                                time) on the business day 
                                following the date of the 
                                appointment; or
                                  [(II) after the person has 
                                received notice that the 
                                contract has been transferred 
                                pursuant to paragraph (9)(A).
                          [(ii) Notice.--For purposes of this 
                        paragraph, the Corporation as receiver 
                        for a covered financial company shall 
                        be deemed to have notified a person who 
                        is a party to a qualified financial 
                        contract with such covered financial 
                        company, if the Corporation has taken 
                        steps reasonably calculated to provide 
                        notice to such person by the time 
                        specified in subparagraph (A).
                  [(C) Treatment of bridge financial company.--
                For purposes of paragraph (9), a bridge 
                financial company shall not be considered to be 
                a financial institution for which a 
                conservator, receiver, trustee in bankruptcy, 
                or other legal custodian has been appointed, or 
                which is otherwise the subject of a bankruptcy 
                or insolvency proceeding.
                  [(D) Business day defined.--For purposes of 
                this paragraph, the term ``business day'' means 
                any day other than any Saturday, Sunday, or any 
                day on which either the New York Stock Exchange 
                or the Federal Reserve Bank of New York is 
                closed.
          [(11) Disaffirmance or repudiation of qualified 
        financial contracts.--In exercising the rights of 
        disaffirmance or repudiation of the Corporation as 
        receiver with respect to any qualified financial 
        contract to which a covered financial company is a 
        party, the Corporation shall either--
                  [(A) disaffirm or repudiate all qualified 
                financial contracts between--
                          [(i) any person or any affiliate of 
                        such person; and
                          [(ii) the covered financial company 
                        in default; or
                  [(B) disaffirm or repudiate none of the 
                qualified financial contracts referred to in 
                subparagraph (A) (with respect to such person 
                or any affiliate of such person).
          [(12) Certain security and customer interests not 
        avoidable.--No provision of this subsection shall be 
        construed as permitting the avoidance of any--
                  [(A) legally enforceable or perfected 
                security interest in any of the assets of any 
                covered financial company, except in accordance 
                with subsection (a)(11); or
                  [(B) legally enforceable interest in customer 
                property, security entitlements in respect of 
                assets or property held by the covered 
                financial company for any security entitlement 
                holder.
          [(13) Authority to enforce contracts.--
                  [(A) In general.--The Corporation, as 
                receiver for a covered financial company, may 
                enforce any contract, other than a liability 
                insurance contract of a director or officer, a 
                financial institution bond entered into by the 
                covered financial company, notwithstanding any 
                provision of the contract providing for 
                termination, default, acceleration, or exercise 
                of rights upon, or solely by reason of, 
                insolvency, the appointment of or the exercise 
                of rights or powers by the Corporation as 
                receiver, the filing of the petition pursuant 
                to section 202(a)(1), or the issuance of the 
                recommendations or determination, or any 
                actions or events occurring in connection 
                therewith or as a result thereof, pursuant to 
                section 203.
                  [(B) Certain rights not affected.--No 
                provision of this paragraph may be construed as 
                impairing or affecting any right of the 
                Corporation as receiver to enforce or recover 
                under a liability insurance contract of a 
                director or officer or financial institution 
                bond under other applicable law.
                  [(C) Consent requirement and ipso facto 
                clauses.--
                          [(i) In general.--Except as otherwise 
                        provided by this section, no person may 
                        exercise any right or power to 
                        terminate, accelerate, or declare a 
                        default under any contract to which the 
                        covered financial company is a party 
                        (and no provision in any such contract 
                        providing for such default, 
                        termination, or acceleration shall be 
                        enforceable), or to obtain possession 
                        of or exercise control over any 
                        property of the covered financial 
                        company or affect any contractual 
                        rights of the covered financial 
                        company, without the consent of the 
                        Corporation as receiver for the covered 
                        financial company during the 90 day 
                        period beginning from the appointment 
                        of the Corporation as receiver.
                          [(ii) Exceptions.--No provision of 
                        this subparagraph shall apply to a 
                        director or officer liability insurance 
                        contract or a financial institution 
                        bond, to the rights of parties to 
                        certain qualified financial contracts 
                        pursuant to paragraph (8), or to the 
                        rights of parties to netting contracts 
                        pursuant to subtitle A of title IV of 
                        the Federal Deposit Insurance 
                        Corporation Improvement Act of 1991 (12 
                        U.S.C. 4401 et seq.), or shall be 
                        construed as permitting the Corporation 
                        as receiver to fail to comply with 
                        otherwise enforceable provisions of 
                        such contract.
                  [(D) Contracts to extend credit.--
                Notwithstanding any other provision in this 
                title, if the Corporation as receiver enforces 
                any contract to extend credit to the covered 
                financial company or bridge financial company, 
                any valid and enforceable obligation to repay 
                such debt shall be paid by the Corporation as 
                receiver, as an administrative expense of the 
                receivership.
          [(14) Exception for federal reserve banks and 
        corporation security interest.--No provision of this 
        subsection shall apply with respect to--
                  [(A) any extension of credit from any Federal 
                reserve bank or the Corporation to any covered 
                financial company; or
                  [(B) any security interest in the assets of 
                the covered financial company securing any such 
                extension of credit.
          [(15) Savings clause.--The meanings of terms used in 
        this subsection are applicable for purposes of this 
        subsection only, and shall not be construed or applied 
        so as to challenge or affect the characterization, 
        definition, or treatment of any similar terms under any 
        other statute, regulation, or rule, including the 
        Gramm-Leach-Bliley Act, the Legal Certainty for Bank 
        Products Act of 2000, the securities laws (as that term 
        is defined in section 3(a)(47) of the Securities 
        Exchange Act of 1934), and the Commodity Exchange Act.
          [(16) Enforcement of contracts guaranteed by the 
        covered financial company.--
                  [(A) In general.--The Corporation, as 
                receiver for a covered financial company or as 
                receiver for a subsidiary of a covered 
                financial company (including an insured 
                depository institution) shall have the power to 
                enforce contracts of subsidiaries or affiliates 
                of the covered financial company, the 
                obligations under which are guaranteed or 
                otherwise supported by or linked to the covered 
                financial company, notwithstanding any 
                contractual right to cause the termination, 
                liquidation, or acceleration of such contracts 
                based solely on the insolvency, financial 
                condition, or receivership of the covered 
                financial company, if--
                          [(i) such guaranty or other support 
                        and all related assets and liabilities 
                        are transferred to and assumed by a 
                        bridge financial company or a third 
                        party (other than a third party for 
                        which a conservator, receiver, trustee 
                        in bankruptcy, or other legal custodian 
                        has been appointed, or which is 
                        otherwise the subject of a bankruptcy 
                        or insolvency proceeding) within the 
                        same period of time as the Corporation 
                        is entitled to transfer the qualified 
                        financial contracts of such covered 
                        financial company; or
                          [(ii) the Corporation, as receiver, 
                        otherwise provides adequate protection 
                        with respect to such obligations.
                  [(B) Rule of construction.--For purposes of 
                this paragraph, a bridge financial company 
                shall not be considered to be a third party for 
                which a conservator, receiver, trustee in 
                bankruptcy, or other legal custodian has been 
                appointed, or which is otherwise the subject of 
                a bankruptcy or insolvency proceeding.
  [(d) Valuation of Claims in Default.--
          [(1) In general.--Notwithstanding any other provision 
        of Federal law or the law of any State, and regardless 
        of the method utilized by the Corporation for a covered 
        financial company, including transactions authorized 
        under subsection (h), this subsection shall govern the 
        rights of the creditors of any such covered financial 
        company.
          [(2) Maximum liability.--The maximum liability of the 
        Corporation, acting as receiver for a covered financial 
        company or in any other capacity, to any person having 
        a claim against the Corporation as receiver or the 
        covered financial company for which the Corporation is 
        appointed shall equal the amount that such claimant 
        would have received if--
                  [(A) the Corporation had not been appointed 
                receiver with respect to the covered financial 
                company; and
                  [(B) the covered financial company had been 
                liquidated under chapter 7 of the Bankruptcy 
                Code, or any similar provision of State 
                insolvency law applicable to the covered 
                financial company.
          [(3) Special provision for orderly liquidation by 
        sipc.--The maximum liability of the Corporation, acting 
        as receiver or in its corporate capacity for any 
        covered broker or dealer to any customer of such 
        covered broker or dealer, with respect to customer 
        property of such customer, shall be--
                  [(A) equal to the amount that such customer 
                would have received with respect to such 
                customer property in a case initiated by SIPC 
                under the Securities Investor Protection Act of 
                1970 (15 U.S.C. 78aaa et seq.); and
                  [(B) determined as of the close of business 
                on the date on which the Corporation is 
                appointed as receiver.
          [(4) Additional payments authorized.--
                  [(A) In general.--Subject to subsection 
                (o)(1)(D)(i), the Corporation, with the 
                approval of the Secretary, may make additional 
                payments or credit additional amounts to or 
                with respect to or for the account of any 
                claimant or category of claimants of the 
                covered financial company, if the Corporation 
                determines that such payments or credits are 
                necessary or appropriate to minimize losses to 
                the Corporation as receiver from the orderly 
                liquidation of the covered financial company 
                under this section.
                  [(B) Limitations.--
                          [(i) Prohibition.--The Corporation 
                        shall not make any payments or credit 
                        amounts to any claimant or category of 
                        claimants that would result in any 
                        claimant receiving more than the face 
                        value amount of any claim that is 
                        proven to the satisfaction of the 
                        Corporation.
                          [(ii) No obligation.--Notwithstanding 
                        any other provision of Federal or State 
                        law, or the Constitution of any State, 
                        the Corporation shall not be obligated, 
                        as a result of having made any payment 
                        under subparagraph (A) or credited any 
                        amount described in subparagraph (A) to 
                        or with respect to, or for the account, 
                        of any claimant or category of 
                        claimants, to make payments to any 
                        other claimant or category of 
                        claimants.
                  [(C) Manner of payment.--The Corporation may 
                make payments or credit amounts under 
                subparagraph (A) directly to the claimants or 
                may make such payments or credit such amounts 
                to a company other than a covered financial 
                company or a bridge financial company 
                established with respect thereto in order to 
                induce such other company to accept liability 
                for such claims.
  [(e) Limitation on Court Action.--Except as provided in this 
title, no court may take any action to restrain or affect the 
exercise of powers or functions of the receiver hereunder, and 
any remedy against the Corporation or receiver shall be limited 
to money damages determined in accordance with this title.
  [(f) Liability of Directors and Officers.--
          [(1) In general.--A director or officer of a covered 
        financial company may be held personally liable for 
        monetary damages in any civil action described in 
        paragraph (2) by, on behalf of, or at the request or 
        direction of the Corporation, which action is 
        prosecuted wholly or partially for the benefit of the 
        Corporation--
                  [(A) acting as receiver for such covered 
                financial company;
                  [(B) acting based upon a suit, claim, or 
                cause of action purchased from, assigned by, or 
                otherwise conveyed by the Corporation as 
                receiver; or
                  [(C) acting based upon a suit, claim, or 
                cause of action purchased from, assigned by, or 
                otherwise conveyed in whole or in part by a 
                covered financial company or its affiliate in 
                connection with assistance provided under this 
                title.
          [(2) Actions covered.--Paragraph (1) shall apply with 
        respect to actions for gross negligence, including any 
        similar conduct or conduct that demonstrates a greater 
        disregard of a duty of care (than gross negligence) 
        including intentional tortious conduct, as such terms 
        are defined and determined under applicable State law.
          [(3) Savings clause.--Nothing in this subsection 
        shall impair or affect any right of the Corporation 
        under other applicable law.
  [(g) Damages.--In any proceeding related to any claim against 
a director, officer, employee, agent, attorney, accountant, or 
appraiser of a covered financial company, or any other party 
employed by or providing services to a covered financial 
company, recoverable damages determined to result from the 
improvident or otherwise improper use or investment of any 
assets of the covered financial company shall include principal 
losses and appropriate interest.
  [(h) Bridge Financial Companies.--
          [(1) Organization.--
                  [(A) Purpose.--The Corporation, as receiver 
                for one or more covered financial companies or 
                in anticipation of being appointed receiver for 
                one or more covered financial companies, may 
                organize one or more bridge financial companies 
                in accordance with this subsection.
                  [(B) Authorities.--Upon the creation of a 
                bridge financial company under subparagraph (A) 
                with respect to a covered financial company, 
                such bridge financial company may--
                          [(i) assume such liabilities 
                        (including liabilities associated with 
                        any trust or custody business, but 
                        excluding any liabilities that count as 
                        regulatory capital) of such covered 
                        financial company as the Corporation 
                        may, in its discretion, determine to be 
                        appropriate;
                          [(ii) purchase such assets (including 
                        assets associated with any trust or 
                        custody business) of such covered 
                        financial company as the Corporation 
                        may, in its discretion, determine to be 
                        appropriate; and
                          [(iii) perform any other temporary 
                        function which the Corporation may, in 
                        its discretion, prescribe in accordance 
                        with this section.
          [(2) Charter and establishment.--
                  [(A) Establishment.--Except as provided in 
                subparagraph (H), where the covered financial 
                company is a covered broker or dealer, the 
                Corporation, as receiver for a covered 
                financial company, may grant a Federal charter 
                to and approve articles of association for one 
                or more bridge financial company or companies, 
                with respect to such covered financial company 
                which shall, by operation of law and 
                immediately upon issuance of its charter and 
                approval of its articles of association, be 
                established and operate in accordance with, and 
                subject to, such charter, articles, and this 
                section.
                  [(B) Management.--Upon its establishment, a 
                bridge financial company shall be under the 
                management of a board of directors appointed by 
                the Corporation.
                  [(C) Articles of association.--The articles 
                of association and organization certificate of 
                a bridge financial company shall have such 
                terms as the Corporation may provide, and shall 
                be executed by such representatives as the 
                Corporation may designate.
                  [(D) Terms of charter; rights and 
                privileges.--Subject to and in accordance with 
                the provisions of this subsection, the 
                Corporation shall--
                          [(i) establish the terms of the 
                        charter of a bridge financial company 
                        and the rights, powers, authorities, 
                        and privileges of a bridge financial 
                        company granted by the charter or as an 
                        incident thereto; and
                          [(ii) provide for, and establish the 
                        terms and conditions governing, the 
                        management (including the bylaws and 
                        the number of directors of the board of 
                        directors) and operations of the bridge 
                        financial company.
                  [(E) Transfer of rights and privileges of 
                covered financial company.--
                          [(i) In general.--Notwithstanding any 
                        other provision of Federal or State 
                        law, the Corporation may provide for a 
                        bridge financial company to succeed to 
                        and assume any rights, powers, 
                        authorities, or privileges of the 
                        covered financial company with respect 
                        to which the bridge financial company 
                        was established and, upon such 
                        determination by the Corporation, the 
                        bridge financial company shall 
                        immediately and by operation of law 
                        succeed to and assume such rights, 
                        powers, authorities, and privileges.
                          [(ii) Effective without approval.--
                        Any succession to or assumption by a 
                        bridge financial company of rights, 
                        powers, authorities, or privileges of a 
                        covered financial company under clause 
                        (i) or otherwise shall be effective 
                        without any further approval under 
                        Federal or State law, assignment, or 
                        consent with respect thereto.
                  [(F) Corporate governance and election and 
                designation of body of law.--To the extent 
                permitted by the Corporation and consistent 
                with this section and any rules, regulations, 
                or directives issued by the Corporation under 
                this section, a bridge financial company may 
                elect to follow the corporate governance 
                practices and procedures that are applicable to 
                a corporation incorporated under the general 
                corporation law of the State of Delaware, or 
                the State of incorporation or organization of 
                the covered financial company with respect to 
                which the bridge financial company was 
                established, as such law may be amended from 
                time to time.
                  [(G) Capital.--
                          [(i) Capital not required.--
                        Notwithstanding any other provision of 
                        Federal or State law, a bridge 
                        financial company may, if permitted by 
                        the Corporation, operate without any 
                        capital or surplus, or with such 
                        capital or surplus as the Corporation 
                        may in its discretion determine to be 
                        appropriate.
                          [(ii) No contribution by the 
                        corporation required.--The Corporation 
                        is not required to pay capital into a 
                        bridge financial company or to issue 
                        any capital stock on behalf of a bridge 
                        financial company established under 
                        this subsection.
                          [(iii) Authority.--If the Corporation 
                        determines that such action is 
                        advisable, the Corporation may cause 
                        capital stock or other securities of a 
                        bridge financial company established 
                        with respect to a covered financial 
                        company to be issued and offered for 
                        sale in such amounts and on such terms 
                        and conditions as the Corporation may, 
                        in its discretion, determine.
                          [(iv) Operating funds in lieu of 
                        capital and implementation plan.--Upon 
                        the organization of a bridge financial 
                        company, and thereafter as the 
                        Corporation may, in its discretion, 
                        determine to be necessary or advisable, 
                        the Corporation may make available to 
                        the bridge financial company, subject 
                        to the plan described in subsection 
                        (n)(9), funds for the operation of the 
                        bridge financial company in lieu of 
                        capital.
                  [(H) Bridge brokers or dealers.--
                          [(i) In general.--The Corporation, as 
                        receiver for a covered broker or 
                        dealer, may approve articles of 
                        association for one or more bridge 
                        financial companies with respect to 
                        such covered broker or dealer, which 
                        bridge financial company or companies 
                        shall, by operation of law and 
                        immediately upon approval of its 
                        articles of association--
                                  [(I) be established and 
                                deemed registered with the 
                                Commission under the Securities 
                                Exchange Act of 1934 and a 
                                member of SIPC;
                                  [(II) operate in accordance 
                                with such articles and this 
                                section; and
                                  [(III) succeed to any and all 
                                registrations and memberships 
                                of the covered financial 
                                company with or in any self-
                                regulatory organizations.
                          [(ii) Other requirements.--Except as 
                        provided in clause (i), and 
                        notwithstanding any other provision of 
                        this section, the bridge financial 
                        company shall be subject to the Federal 
                        securities laws and all requirements 
                        with respect to being a member of a 
                        self-regulatory organization, unless 
                        exempted from any such requirements by 
                        the Commission, as is necessary or 
                        appropriate in the public interest or 
                        for the protection of investors.
                          [(iii) Treatment of customers.--
                        Except as otherwise provided by this 
                        title, any customer of the covered 
                        broker or dealer whose account is 
                        transferred to a bridge financial 
                        company shall have all the rights, 
                        privileges, and protections under 
                        section 205(f) and under the Securities 
                        Investor Protection Act of 1970 (15 
                        U.S.C. 78aaa et seq.), that such 
                        customer would have had if the account 
                        were not transferred from the covered 
                        financial company under this 
                        subparagraph.
                          [(iv) Operation of bridge brokers or 
                        dealers.--Notwithstanding any other 
                        provision of this title, the 
                        Corporation shall not operate any 
                        bridge financial company created by the 
                        Corporation under this title with 
                        respect to a covered broker or dealer 
                        in such a manner as to adversely affect 
                        the ability of customers to promptly 
                        access their customer property in 
                        accordance with applicable law.
          [(3) Interests in and assets and obligations of 
        covered financial company.--Notwithstanding paragraph 
        (1) or (2) or any other provision of law--
                  [(A) a bridge financial company shall assume, 
                acquire, or succeed to the assets or 
                liabilities of a covered financial company 
                (including the assets or liabilities associated 
                with any trust or custody business) only to the 
                extent that such assets or liabilities are 
                transferred by the Corporation to the bridge 
                financial company in accordance with, and 
                subject to the restrictions set forth in, 
                paragraph (1)(B); and
                  [(B) a bridge financial company shall not 
                assume, acquire, or succeed to any obligation 
                that a covered financial company for which the 
                Corporation has been appointed receiver may 
                have to any shareholder, member, general 
                partner, limited partner, or other person with 
                an interest in the equity of the covered 
                financial company that arises as a result of 
                the status of that person having an equity 
                claim in the covered financial company.
          [(4) Bridge financial company treated as being in 
        default for certain purposes.--A bridge financial 
        company shall be treated as a covered financial company 
        in default at such times and for such purposes as the 
        Corporation may, in its discretion, determine.
          [(5) Transfer of assets and liabilities.--
                  [(A) Authority of corporation.--The 
                Corporation, as receiver for a covered 
                financial company, may transfer any assets and 
                liabilities of a covered financial company 
                (including any assets or liabilities associated 
                with any trust or custody business) to one or 
                more bridge financial companies, in accordance 
                with and subject to the restrictions of 
                paragraph (1).
                  [(B) Subsequent transfers.--At any time after 
                the establishment of a bridge financial company 
                with respect to a covered financial company, 
                the Corporation, as receiver, may transfer any 
                assets and liabilities of such covered 
                financial company as the Corporation may, in 
                its discretion, determine to be appropriate in 
                accordance with and subject to the restrictions 
                of paragraph (1).
                  [(C) Treatment of trust or custody 
                business.--For purposes of this paragraph, the 
                trust or custody business, including fiduciary 
                appointments, held by any covered financial 
                company is included among its assets and 
                liabilities.
                  [(D) Effective without approval.--The 
                transfer of any assets or liabilities, 
                including those associated with any trust or 
                custody business of a covered financial 
                company, to a bridge financial company shall be 
                effective without any further approval under 
                Federal or State law, assignment, or consent 
                with respect thereto.
                  [(E) Equitable treatment of similarly 
                situated creditors.--The Corporation shall 
                treat all creditors of a covered financial 
                company that are similarly situated under 
                subsection (b)(1), in a similar manner in 
                exercising the authority of the Corporation 
                under this subsection to transfer any assets or 
                liabilities of the covered financial company to 
                one or more bridge financial companies 
                established with respect to such covered 
                financial company, except that the Corporation 
                may take any action (including making payments, 
                subject to subsection (o)(1)(D)(i)) that does 
                not comply with this subparagraph, if--
                          [(i) the Corporation determines that 
                        such action is necessary--
                                  [(I) to maximize the value of 
                                the assets of the covered 
                                financial company;
                                  [(II) to maximize the present 
                                value return from the sale or 
                                other disposition of the assets 
                                of the covered financial 
                                company; or
                                  [(III) to minimize the amount 
                                of any loss realized upon the 
                                sale or other disposition of 
                                the assets of the covered 
                                financial company; and
                          [(ii) all creditors that are 
                        similarly situated under subsection 
                        (b)(1) receive not less than the amount 
                        provided under paragraphs (2) and (3) 
                        of subsection (d).
                  [(F) Limitation on transfer of liabilities.--
                Notwithstanding any other provision of law, the 
                aggregate amount of liabilities of a covered 
                financial company that are transferred to, or 
                assumed by, a bridge financial company from a 
                covered financial company may not exceed the 
                aggregate amount of the assets of the covered 
                financial company that are transferred to, or 
                purchased by, the bridge financial company from 
                the covered financial company.
          [(6) Stay of judicial action.--Any judicial action to 
        which a bridge financial company becomes a party by 
        virtue of its acquisition of any assets or assumption 
        of any liabilities of a covered financial company shall 
        be stayed from further proceedings for a period of not 
        longer than 45 days (or such longer period as may be 
        agreed to upon the consent of all parties) at the 
        request of the bridge financial company.
          [(7) Agreements against interest of the bridge 
        financial company.--No agreement that tends to diminish 
        or defeat the interest of the bridge financial company 
        in any asset of a covered financial company acquired by 
        the bridge financial company shall be valid against the 
        bridge financial company, unless such agreement--
                  [(A) is in writing;
                  [(B) was executed by an authorized officer or 
                representative of the covered financial company 
                or confirmed in the ordinary course of business 
                by the covered financial company; and
                  [(C) has been on the official record of the 
                company, since the time of its execution, or 
                with which, the party claiming under the 
                agreement provides documentation of such 
                agreement and its authorized execution or 
                confirmation by the covered financial company 
                that is acceptable to the receiver.
          [(8) No federal status.--
                  [(A) Agency status.--A bridge financial 
                company is not an agency, establishment, or 
                instrumentality of the United States.
                  [(B) Employee status.--Representatives for 
                purposes of paragraph (1)(B), directors, 
                officers, employees, or agents of a bridge 
                financial company are not, solely by virtue of 
                service in any such capacity, officers or 
                employees of the United States. Any employee of 
                the Corporation or of any Federal 
                instrumentality who serves at the request of 
                the Corporation as a representative for 
                purposes of paragraph (1)(B), director, 
                officer, employee, or agent of a bridge 
                financial company shall not--
                          [(i) solely by virtue of service in 
                        any such capacity lose any existing 
                        status as an officer or employee of the 
                        United States for purposes of title 5, 
                        United States Code, or any other 
                        provision of law; or
                          [(ii) receive any salary or benefits 
                        for service in any such capacity with 
                        respect to a bridge financial company 
                        in addition to such salary or benefits 
                        as are obtained through employment with 
                        the Corporation or such Federal 
                        instrumentality.
          [(9) Funding authorized.--The Corporation may, 
        subject to the plan described in subsection (n)(9), 
        provide funding to facilitate any transaction described 
        in subparagraph (A), (B), (C), or (D) of paragraph (13) 
        with respect to any bridge financial company, or 
        facilitate the acquisition by a bridge financial 
        company of any assets, or the assumption of any 
        liabilities, of a covered financial company for which 
        the Corporation has been appointed receiver.
          [(10) Exempt tax status.--Notwithstanding any other 
        provision of Federal or State law, a bridge financial 
        company, its franchise, property, and income shall be 
        exempt from all taxation now or hereafter imposed by 
        the United States, by any territory, dependency, or 
        possession thereof, or by any State, county, 
        municipality, or local taxing authority.
          [(11) Federal agency approval; antitrust review.--If 
        a transaction involving the merger or sale of a bridge 
        financial company requires approval by a Federal 
        agency, the transaction may not be consummated before 
        the 5th calendar day after the date of approval by the 
        Federal agency responsible for such approval with 
        respect thereto. If, in connection with any such 
        approval a report on competitive factors from the 
        Attorney General is required, the Federal agency 
        responsible for such approval shall promptly notify the 
        Attorney General of the proposed transaction and the 
        Attorney General shall provide the required report 
        within 10 days of the request. If a notification is 
        required under section 7A of the Clayton Act with 
        respect to such transaction, the required waiting 
        period shall end on the 15th day after the date on 
        which the Attorney General and the Federal Trade 
        Commission receive such notification, unless the 
        waiting period is terminated earlier under section 
        7A(b)(2) of the Clayton Act, or extended under section 
        7A(e)(2) of that Act.
          [(12) Duration of bridge financial company.--Subject 
        to paragraphs (13) and (14), the status of a bridge 
        financial company as such shall terminate at the end of 
        the 2-year period following the date on which it was 
        granted a charter. The Corporation may, in its 
        discretion, extend the status of the bridge financial 
        company as such for no more than 3 additional 1-year 
        periods.
          [(13) Termination of bridge financial company 
        status.--The status of any bridge financial company as 
        such shall terminate upon the earliest of--
                  [(A) the date of the merger or consolidation 
                of the bridge financial company with a company 
                that is not a bridge financial company;
                  [(B) at the election of the Corporation, the 
                sale of a majority of the capital stock of the 
                bridge financial company to a company other 
                than the Corporation and other than another 
                bridge financial company;
                  [(C) the sale of 80 percent, or more, of the 
                capital stock of the bridge financial company 
                to a person other than the Corporation and 
                other than another bridge financial company;
                  [(D) at the election of the Corporation, 
                either the assumption of all or substantially 
                all of the liabilities of the bridge financial 
                company by a company that is not a bridge 
                financial company, or the acquisition of all or 
                substantially all of the assets of the bridge 
                financial company by a company that is not a 
                bridge financial company, or other entity as 
                permitted under applicable law; and
                  [(E) the expiration of the period provided in 
                paragraph (12), or the earlier dissolution of 
                the bridge financial company, as provided in 
                paragraph (15).
          [(14) Effect of termination events.--
                  [(A) Merger or consolidation.--A merger or 
                consolidation, described in paragraph (13)(A) 
                shall be conducted in accordance with, and 
                shall have the effect provided in, the 
                provisions of applicable law. For the purpose 
                of effecting such a merger or consolidation, 
                the bridge financial company shall be treated 
                as a corporation organized under the laws of 
                the State of Delaware (unless the law of 
                another State has been selected by the bridge 
                financial company in accordance with paragraph 
                (2)(F)), and the Corporation shall be treated 
                as the sole shareholder thereof, 
                notwithstanding any other provision of State or 
                Federal law.
                  [(B) Charter conversion.--Following the sale 
                of a majority of the capital stock of the 
                bridge financial company, as provided in 
                paragraph (13)(B), the Corporation may amend 
                the charter of the bridge financial company to 
                reflect the termination of the status of the 
                bridge financial company as such, whereupon the 
                company shall have all of the rights, powers, 
                and privileges under its constituent documents 
                and applicable Federal or State law. In 
                connection therewith, the Corporation may take 
                such steps as may be necessary or convenient to 
                reincorporate the bridge financial company 
                under the laws of a State and, notwithstanding 
                any provisions of Federal or State law, such 
                State-chartered corporation shall be deemed to 
                succeed by operation of law to such rights, 
                titles, powers, and interests of the bridge 
                financial company as the Corporation may 
                provide, with the same effect as if the bridge 
                financial company had merged with the State-
                chartered corporation under provisions of the 
                corporate laws of such State.
                  [(C) Sale of stock.--Following the sale of 80 
                percent or more of the capital stock of a 
                bridge financial company, as provided in 
                paragraph (13)(C), the company shall have all 
                of the rights, powers, and privileges under its 
                constituent documents and applicable Federal or 
                State law. In connection therewith, the 
                Corporation may take such steps as may be 
                necessary or convenient to reincorporate the 
                bridge financial company under the laws of a 
                State and, notwithstanding any provisions of 
                Federal or State law, the State-chartered 
                corporation shall be deemed to succeed by 
                operation of law to such rights, titles, powers 
                and interests of the bridge financial company 
                as the Corporation may provide, with the same 
                effect as if the bridge financial company had 
                merged with the State-chartered corporation 
                under provisions of the corporate laws of such 
                State.
                  [(D) Assumption of liabilities and sale of 
                assets.--Following the assumption of all or 
                substantially all of the liabilities of the 
                bridge financial company, or the sale of all or 
                substantially all of the assets of the bridge 
                financial company, as provided in paragraph 
                (13)(D), at the election of the Corporation, 
                the bridge financial company may retain its 
                status as such for the period provided in 
                paragraph (12) or may be dissolved at the 
                election of the Corporation.
                  [(E) Amendments to charter.--Following the 
                consummation of a transaction described in 
                subparagraph (A), (B), (C), or (D) of paragraph 
                (13), the charter of the resulting company 
                shall be amended to reflect the termination of 
                bridge financial company status, if 
                appropriate.
          [(15) Dissolution of bridge financial company.--
                  [(A) In general.--Notwithstanding any other 
                provision of Federal or State law, if the 
                status of a bridge financial company as such 
                has not previously been terminated by the 
                occurrence of an event specified in 
                subparagraph (A), (B), (C), or (D) of paragraph 
                (13)--
                          [(i) the Corporation may, in its 
                        discretion, dissolve the bridge 
                        financial company in accordance with 
                        this paragraph at any time; and
                          [(ii) the Corporation shall promptly 
                        commence dissolution proceedings in 
                        accordance with this paragraph upon the 
                        expiration of the 2-year period 
                        following the date on which the bridge 
                        financial company was chartered, or any 
                        extension thereof, as provided in 
                        paragraph (12).
                  [(B) Procedures.--The Corporation shall 
                remain the receiver for a bridge financial 
                company for the purpose of dissolving the 
                bridge financial company. The Corporation as 
                receiver for a bridge financial company shall 
                wind up the affairs of the bridge financial 
                company in conformity with the provisions of 
                law relating to the liquidation of covered 
                financial companies under this title. With 
                respect to any such bridge financial company, 
                the Corporation as receiver shall have all the 
                rights, powers, and privileges and shall 
                perform the duties related to the exercise of 
                such rights, powers, or privileges granted by 
                law to the Corporation as receiver for a 
                covered financial company under this title and, 
                notwithstanding any other provision of law, in 
                the exercise of such rights, powers, and 
                privileges, the Corporation shall not be 
                subject to the direction or supervision of any 
                State agency or other Federal agency.
          [(16) Authority to obtain credit.--
                  [(A) In general.--A bridge financial company 
                may obtain unsecured credit and issue unsecured 
                debt.
                  [(B) Inability to obtain credit.--If a bridge 
                financial company is unable to obtain unsecured 
                credit or issue unsecured debt, the Corporation 
                may authorize the obtaining of credit or the 
                issuance of debt by the bridge financial 
                company--
                          [(i) with priority over any or all of 
                        the obligations of the bridge financial 
                        company;
                          [(ii) secured by a lien on property 
                        of the bridge financial company that is 
                        not otherwise subject to a lien; or
                          [(iii) secured by a junior lien on 
                        property of the bridge financial 
                        company that is subject to a lien.
                  [(C) Limitations.--
                          [(i) In general.--The Corporation, 
                        after notice and a hearing, may 
                        authorize the obtaining of credit or 
                        the issuance of debt by a bridge 
                        financial company that is secured by a 
                        senior or equal lien on property of the 
                        bridge financial company that is 
                        subject to a lien, only if--
                                  [(I) the bridge financial 
                                company is unable to otherwise 
                                obtain such credit or issue 
                                such debt; and
                                  [(II) there is adequate 
                                protection of the interest of 
                                the holder of the lien on the 
                                property with respect to which 
                                such senior or equal lien is 
                                proposed to be granted.
                          [(ii) Hearing.--The hearing required 
                        pursuant to this subparagraph shall be 
                        before a court of the United States, 
                        which shall have jurisdiction to 
                        conduct such hearing and to authorize a 
                        bridge financial company to obtain 
                        secured credit under clause (i).
                  [(D) Burden of proof.--In any hearing under 
                this paragraph, the Corporation has the burden 
                of proof on the issue of adequate protection.
                  [(E) Qualified financial contracts.--No 
                credit or debt obtained or issued by a bridge 
                financial company may contain terms that impair 
                the rights of a counterparty to a qualified 
                financial contract upon a default by the bridge 
                financial company, other than the priority of 
                such counterparty's unsecured claim (after the 
                exercise of rights) relative to the priority of 
                the bridge financial company's obligations in 
                respect of such credit or debt, unless such 
                counterparty consents in writing to any such 
                impairment.
          [(17) Effect on debts and liens.--The reversal or 
        modification on appeal of an authorization under this 
        subsection to obtain credit or issue debt, or of a 
        grant under this section of a priority or a lien, does 
        not affect the validity of any debt so issued, or any 
        priority or lien so granted, to an entity that extended 
        such credit in good faith, whether or not such entity 
        knew of the pendency of the appeal, unless such 
        authorization and the issuance of such debt, or the 
        granting of such priority or lien, were stayed pending 
        appeal.
  [(i) Sharing Records.--If the Corporation has been appointed 
as receiver for a covered financial company, other Federal 
regulators shall make all records relating to the covered 
financial company available to the Corporation, which may be 
used by the Corporation in any manner that the Corporation 
determines to be appropriate.
  [(j) Expedited Procedures for Certain Claims.--
          [(1) Time for filing notice of appeal.--The notice of 
        appeal of any order, whether interlocutory or final, 
        entered in any case brought by the Corporation against 
        a director, officer, employee, agent, attorney, 
        accountant, or appraiser of the covered financial 
        company, or any other person employed by or providing 
        services to a covered financial company, shall be filed 
        not later than 30 days after the date of entry of the 
        order. The hearing of the appeal shall be held not 
        later than 120 days after the date of the notice of 
        appeal. The appeal shall be decided not later than 180 
        days after the date of the notice of appeal.
          [(2) Scheduling.--The court shall expedite the 
        consideration of any case brought by the Corporation 
        against a director, officer, employee, agent, attorney, 
        accountant, or appraiser of a covered financial company 
        or any other person employed by or providing services 
        to a covered financial company. As far as practicable, 
        the court shall give such case priority on its docket.
          [(3) Judicial discretion.--The court may modify the 
        schedule and limitations stated in paragraphs (1) and 
        (2) in a particular case, based on a specific finding 
        that the ends of justice that would be served by making 
        such a modification would outweigh the best interest of 
        the public in having the case resolved expeditiously.
  [(k) Foreign Investigations.--The Corporation, as receiver 
for any covered financial company, and for purposes of carrying 
out any power, authority, or duty with respect to a covered 
financial company--
          [(1) may request the assistance of any foreign 
        financial authority and provide assistance to any 
        foreign financial authority in accordance with section 
        8(v) of the Federal Deposit Insurance Act, as if the 
        covered financial company were an insured depository 
        institution, the Corporation were the appropriate 
        Federal banking agency for the company, and any foreign 
        financial authority were the foreign banking authority; 
        and
          [(2) may maintain an office to coordinate foreign 
        investigations or investigations on behalf of foreign 
        financial authorities.
  [(l) Prohibition on Entering Secrecy Agreements and 
Protective Orders.--The Corporation may not enter into any 
agreement or approve any protective order which prohibits the 
Corporation from disclosing the terms of any settlement of an 
administrative or other action for damages or restitution 
brought by the Corporation in its capacity as receiver for a 
covered financial company.
  [(m) Liquidation of Certain Covered Financial Companies or 
Bridge Financial Companies.--
          [(1) In general.--Except as specifically provided in 
        this section, and notwithstanding any other provision 
        of law, the Corporation, in connection with the 
        liquidation of any covered financial company or bridge 
        financial company with respect to which the Corporation 
        has been appointed as receiver, shall--
                  [(A) in the case of any covered financial 
                company or bridge financial company that is a 
                stockbroker, but is not a member of the 
                Securities Investor Protection Corporation, 
                apply the provisions of subchapter III of 
                chapter 7 of the Bankruptcy Code, in respect of 
                the distribution to any customer of all 
                customer name security and customer property 
                and member property, as if such covered 
                financial company or bridge financial company 
                were a debtor for purposes of such subchapter; 
                or
                  [(B) in the case of any covered financial 
                company or bridge financial company that is a 
                commodity broker, apply the provisions of 
                subchapter IV of chapter 7 the Bankruptcy Code, 
                in respect of the distribution to any customer 
                of all customer property and member property, 
                as if such covered financial company or bridge 
                financial company were a debtor for purposes of 
                such subchapter.
          [(2) Definitions.--For purposes of this subsection--
                  [(A) the terms ``customer'', ``customer name 
                security'', and ``customer property and member 
                property'' have the same meanings as in 
                sections 741 and 761 of title 11, United States 
                Code; and
                  [(B) the terms ``commodity broker'' and 
                ``stockbroker'' have the same meanings as in 
                section 101 of the Bankruptcy Code.
  [(n) Orderly Liquidation Fund.--
          [(1) Establishment.--There is established in the 
        Treasury of the United States a separate fund to be 
        known as the ``Orderly Liquidation Fund'', which shall 
        be available to the Corporation to carry out the 
        authorities contained in this title, for the cost of 
        actions authorized by this title, including the orderly 
        liquidation of covered financial companies, payment of 
        administrative expenses, the payment of principal and 
        interest by the Corporation on obligations issued under 
        paragraph (5), and the exercise of the authorities of 
        the Corporation under this title.
          [(2) Proceeds.--Amounts received by the Corporation, 
        including assessments received under subsection (o), 
        proceeds of obligations issued under paragraph (5), 
        interest and other earnings from investments, and 
        repayments to the Corporation by covered financial 
        companies, shall be deposited into the Fund.
          [(3) Management.--The Corporation shall manage the 
        Fund in accordance with this subsection and the 
        policies and procedures established under section 
        203(d).
          [(4) Investments.--At the request of the Corporation, 
        the Secretary may invest such portion of amounts held 
        in the Fund that are not, in the judgment of the 
        Corporation, required to meet the current needs of the 
        Corporation, in obligations of the United States having 
        suitable maturities, as determined by the Corporation. 
        The interest on and the proceeds from the sale or 
        redemption of such obligations shall be credited to the 
        Fund.
          [(5) Authority to issue obligations.--
                  [(A) Corporation authorized to issue 
                obligations.--Upon appointment by the Secretary 
                of the Corporation as receiver for a covered 
                financial company, the Corporation is 
                authorized to issue obligations to the 
                Secretary.
                  [(B) Secretary authorized to purchase 
                obligations.--The Secretary may, under such 
                terms and conditions as the Secretary may 
                require, purchase or agree to purchase any 
                obligations issued under subparagraph (A), and 
                for such purpose, the Secretary is authorized 
                to use as a public debt transaction the 
                proceeds of the sale of any securities issued 
                under chapter 31 of title 31, United States 
                Code, and the purposes for which securities may 
                be issued under chapter 31 of title 31, United 
                States Code, are extended to include such 
                purchases.
                  [(C) Interest rate.--Each purchase of 
                obligations by the Secretary under this 
                paragraph shall be upon such terms and 
                conditions as to yield a return at a rate 
                determined by the Secretary, taking into 
                consideration the current average yield on 
                outstanding marketable obligations of the 
                United States of comparable maturity, plus an 
                interest rate surcharge to be determined by the 
                Secretary, which shall be greater than the 
                difference between--
                          [(i) the current average rate on an 
                        index of corporate obligations of 
                        comparable maturity; and
                          [(ii) the current average rate on 
                        outstanding marketable obligations of 
                        the United States of comparable 
                        maturity.
                  [(D) Secretary authorized to sell 
                obligations.--The Secretary may sell, upon such 
                terms and conditions as the Secretary shall 
                determine, any of the obligations acquired 
                under this paragraph.
                  [(E) Public debt transactions.--All purchases 
                and sales by the Secretary of such obligations 
                under this paragraph shall be treated as public 
                debt transactions of the United States, and the 
                proceeds from the sale of any obligations 
                acquired by the Secretary under this paragraph 
                shall be deposited into the Treasury of the 
                United States as miscellaneous receipts.
          [(6) Maximum obligation limitation.--The Corporation 
        may not, in connection with the orderly liquidation of 
        a covered financial company, issue or incur any 
        obligation, if, after issuing or incurring the 
        obligation, the aggregate amount of such obligations 
        outstanding under this subsection for each covered 
        financial company would exceed--
                  [(A) an amount that is equal to 10 percent of 
                the total consolidated assets of the covered 
                financial company, based on the most recent 
                financial statement available, during the 30-
                day period immediately following the date of 
                appointment of the Corporation as receiver (or 
                a shorter time period if the Corporation has 
                calculated the amount described under 
                subparagraph (B)); and
                  [(B) the amount that is equal to 90 percent 
                of the fair value of the total consolidated 
                assets of each covered financial company that 
                are available for repayment, after the time 
                period described in subparagraph (A).
          [(7) Rulemaking.--The Corporation and the Secretary 
        shall jointly, in consultation with the Council, 
        prescribe regulations governing the calculation of the 
        maximum obligation limitation defined in this 
        paragraph.
          [(8) Rule of construction.--
                  [(A) In general.--Nothing in this section 
                shall be construed to affect the authority of 
                the Corporation under subsection (a) or (b) of 
                section 14 or section 15(c)(5) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1824, 
                1825(c)(5)), the management of the Deposit 
                Insurance Fund by the Corporation, or the 
                resolution of insured depository institutions, 
                provided that--
                          [(i) the authorities of the 
                        Corporation contained in this title 
                        shall not be used to assist the Deposit 
                        Insurance Fund or to assist any 
                        financial company under applicable law 
                        other than this Act;
                          [(ii) the authorities of the 
                        Corporation relating to the Deposit 
                        Insurance Fund, or any other 
                        responsibilities of the Corporation 
                        under applicable law other than this 
                        title, shall not be used to assist a 
                        covered financial company pursuant to 
                        this title; and
                          [(iii) the Deposit Insurance Fund may 
                        not be used in any manner to otherwise 
                        circumvent the purposes of this title.
                  [(B) Valuation.--For purposes of determining 
                the amount of obligations under this 
                subsection--
                          [(i) the Corporation shall include as 
                        an obligation any contingent liability 
                        of the Corporation pursuant to this 
                        title; and
                          [(ii) the Corporation shall value any 
                        contingent liability at its expected 
                        cost to the Corporation.
          [(9) Orderly liquidation and repayment plans.--
                  [(A) Orderly liquidation plan.--Amounts in 
                the Fund shall be available to the Corporation 
                with regard to a covered financial company for 
                which the Corporation is appointed receiver 
                after the Corporation has developed an orderly 
                liquidation plan that is acceptable to the 
                Secretary with regard to such covered financial 
                company, including the provision and use of 
                funds, including taking any actions specified 
                under section 204(d) and subsection 
                (h)(2)(G)(iv) and (h)(9) of this section, and 
                payments to third parties. The orderly 
                liquidation plan shall take into account 
                actions to avoid or mitigate potential adverse 
                effects on low income, minority, or underserved 
                communities affected by the failure of the 
                covered financial company, and shall provide 
                for coordination with the primary financial 
                regulatory agencies, as appropriate, to ensure 
                that such actions are taken. The Corporation 
                may, at any time, amend any orderly liquidation 
                plan approved by the Secretary with the 
                concurrence of the Secretary.
                  [(B) Mandatory repayment plan.--
                          [(i) In general.--No amount 
                        authorized under paragraph (6)(B) may 
                        be provided by the Secretary to the 
                        Corporation under paragraph (5), unless 
                        an agreement is in effect between the 
                        Secretary and the Corporation that--
                                  [(I) provides a specific plan 
                                and schedule to achieve the 
                                repayment of the outstanding 
                                amount of any borrowing under 
                                paragraph (5); and
                                  [(II) demonstrates that 
                                income to the Corporation from 
                                the liquidated assets of the 
                                covered financial company and 
                                assessments under subsection 
                                (o) will be sufficient to 
                                amortize the outstanding 
                                balance within the period 
                                established in the repayment 
                                schedule and pay the interest 
                                accruing on such balance within 
                                the time provided in subsection 
                                (o)(1)(B).
                          [(ii) Consultation with and report to 
                        congress.--The Secretary and the 
                        Corporation shall--
                                  [(I) consult with the 
                                Committee on Banking, Housing, 
                                and Urban Affairs of the Senate 
                                and the Committee on Financial 
                                Services of the House of 
                                Representatives on the terms of 
                                any repayment schedule 
                                agreement; and
                                  [(II) submit a copy of the 
                                repayment schedule agreement to 
                                the Committees described in 
                                subclause (I) before the end of 
                                the 30-day period beginning on 
                                the date on which any amount is 
                                provided by the Secretary to 
                                the Corporation under paragraph 
                                (5).
          [(10) Implementation expenses.--
                  [(A) In general.--Reasonable implementation 
                expenses of the Corporation incurred after the 
                date of enactment of this Act shall be treated 
                as expenses of the Council.
                  [(B) Requests for reimbursement.--The 
                Corporation shall periodically submit a request 
                for reimbursement for implementation expenses 
                to the Chairperson of the Council, who shall 
                arrange for prompt reimbursement to the 
                Corporation of reasonable implementation 
                expenses.
                  [(C) Definition.--As used in this paragraph, 
                the term ``implementation expenses''--
                          [(i) means costs incurred by the 
                        Corporation beginning on the date of 
                        enactment of this Act, as part of its 
                        efforts to implement this title that do 
                        not relate to a particular covered 
                        financial company; and
                          [(ii) includes the costs incurred in 
                        connection with the development of 
                        policies, procedures, rules, and 
                        regulations and other planning 
                        activities of the Corporation 
                        consistent with carrying out this 
                        title.
  [(o) Assessments.--
          [(1) Risk-based assessments.--
                  [(A) Eligible financial companies defined.--
                For purposes of this subsection, the term 
                ``eligible financial company'' means any bank 
                holding company with total consolidated assets 
                equal to or greater than $50,000,000,000 and 
                any nonbank financial company supervised by the 
                Board of Governors.
                  [(B) Assessments.--The Corporation shall 
                charge one or more risk-based assessments in 
                accordance with the provisions of subparagraph 
                (D), if such assessments are necessary to pay 
                in full the obligations issued by the 
                Corporation to the Secretary under this title 
                within 60 months of the date of issuance of 
                such obligations.
                  [(C) Extensions authorized.--The Corporation 
                may, with the approval of the Secretary, extend 
                the time period under subparagraph (B), if the 
                Corporation determines that an extension is 
                necessary to avoid a serious adverse effect on 
                the financial system of the United States.
                  [(D) Application of assessments.--To meet the 
                requirements of subparagraph (B), the 
                Corporation shall--
                          [(i) impose assessments, as soon as 
                        practicable, on any claimant that 
                        received additional payments or amounts 
                        from the Corporation pursuant to 
                        subsection (b)(4), (d)(4), or 
                        (h)(5)(E), except for payments or 
                        amounts necessary to initiate and 
                        continue operations essential to 
                        implementation of the receivership or 
                        any bridge financial company, to 
                        recover on a cumulative basis, the 
                        entire difference between--
                                  [(I) the aggregate value the 
                                claimant received from the 
                                Corporation on a claim pursuant 
                                to this title (including 
                                pursuant to subsection (b)(4), 
                                (d)(4), and (h)(5)(E)), as of 
                                the date on which such value 
                                was received; and
                                  [(II) the value the claimant 
                                was entitled to receive from 
                                the Corporation on such claim 
                                solely from the proceeds of the 
                                liquidation of the covered 
                                financial company under this 
                                title; and
                          [(ii) if the amounts to be recovered 
                        on a cumulative basis under clause (i) 
                        are insufficient to meet the 
                        requirements of subparagraph (B), after 
                        taking into account the considerations 
                        set forth in paragraph (4), impose 
                        assessments on--
                                  [(I) eligible financial 
                                companies; and
                                  [(II) financial companies 
                                with total consolidated assets 
                                equal to or greater than 
                                $50,000,000,000 that are not 
                                eligible financial companies.
                  [(E) Provision of financing.--Payments or 
                amounts necessary to initiate and continue 
                operations essential to implementation of the 
                receivership or any bridge financial company 
                described in subparagraph (D)(i) shall not 
                include the provision of financing, as defined 
                by rule of the Corporation, to third parties.
          [(2) Graduated assessment rate.--The Corporation 
        shall impose assessments on a graduated basis, with 
        financial companies having greater assets and risk 
        being assessed at a higher rate.
          [(3) Notification and payment.--The Corporation shall 
        notify each financial company of that company's 
        assessment under this subsection. Any financial company 
        subject to assessment under this subsection shall pay 
        such assessment in accordance with the regulations 
        prescribed pursuant to paragraph (6).
          [(4) Risk-based assessment considerations.--In 
        imposing assessments under paragraph (1)(D)(ii), the 
        Corporation shall use a risk matrix. The Council shall 
        make a recommendation to the Corporation on the risk 
        matrix to be used in imposing such assessments, and the 
        Corporation shall take into account any such 
        recommendation in the establishment of the risk matrix 
        to be used to impose such assessments. In recommending 
        or establishing such risk matrix, the Council and the 
        Corporation, respectively, shall take into account--
                  [(A) economic conditions generally affecting 
                financial companies so as to allow assessments 
                to increase during more favorable economic 
                conditions and to decrease during less 
                favorable economic conditions;
                  [(B) any assessments imposed on a financial 
                company or an affiliate of a financial company 
                that--
                          [(i) is an insured depository 
                        institution, assessed pursuant to 
                        section 7 or 13(c)(4)(G) of the Federal 
                        Deposit Insurance Act;
                          [(ii) is a member of the Securities 
                        Investor Protection Corporation, 
                        assessed pursuant to section 4 of the 
                        Securities Investor Protection Act of 
                        1970 (15 U.S.C. 78ddd);
                          [(iii) is an insured credit union, 
                        assessed pursuant to section 
                        202(c)(1)(A)(i) of the Federal Credit 
                        Union Act (12 U.S.C. 1782(c)(1)(A)(i)); 
                        or
                          [(iv) is an insurance company, 
                        assessed pursuant to applicable State 
                        law to cover (or reimburse payments 
                        made to cover) the costs of the 
                        rehabilitation, liquidation, or other 
                        State insolvency proceeding with 
                        respect to 1 or more insurance 
                        companies;
                  [(C) the risks presented by the financial 
                company to the financial system and the extent 
                to which the financial company has benefitted, 
                or likely would benefit, from the orderly 
                liquidation of a financial company under this 
                title, including--
                          [(i) the amount, different 
                        categories, and concentrations of 
                        assets of the financial company and its 
                        affiliates, including both on-balance 
                        sheet and off-balance sheet assets;
                          [(ii) the activities of the financial 
                        company and its affiliates;
                          [(iii) the relevant market share of 
                        the financial company and its 
                        affiliates;
                          [(iv) the extent to which the 
                        financial company is leveraged;
                          [(v) the potential exposure to sudden 
                        calls on liquidity precipitated by 
                        economic distress;
                          [(vi) the amount, maturity, 
                        volatility, and stability of the 
                        company's financial obligations to, and 
                        relationship with, other financial 
                        companies;
                          [(vii) the amount, maturity, 
                        volatility, and stability of the 
                        liabilities of the company, including 
                        the degree of reliance on short-term 
                        funding, taking into consideration 
                        existing systems for measuring a 
                        company's risk-based capital;
                          [(viii) the stability and variety of 
                        the company's sources of funding;
                          [(ix) the company's importance as a 
                        source of credit for households, 
                        businesses, and State and local 
                        governments and as a source of 
                        liquidity for the financial system;
                          [(x) the extent to which assets are 
                        simply managed and not owned by the 
                        financial company and the extent to 
                        which ownership of assets under 
                        management is diffuse; and
                          [(xi) the amount, different 
                        categories, and concentrations of 
                        liabilities, both insured and 
                        uninsured, contingent and 
                        noncontingent, including both on-
                        balance sheet and off-balance sheet 
                        liabilities, of the financial company 
                        and its affiliates;
                  [(D) any risks presented by the financial 
                company during the 10-year period immediately 
                prior to the appointment of the Corporation as 
                receiver for the covered financial company that 
                contributed to the failure of the covered 
                financial company; and
                  [(E) such other risk-related factors as the 
                Corporation, or the Council, as applicable, may 
                determine to be appropriate.
          [(5) Collection of information.--The Corporation may 
        impose on covered financial companies such collection 
        of information requirements as the Corporation deems 
        necessary to carry out this subsection after the 
        appointment of the Corporation as receiver under this 
        title.
          [(6) Rulemaking.--
                  [(A) In general.--The Corporation shall 
                prescribe regulations to carry out this 
                subsection. The Corporation shall consult with 
                the Secretary in the development and 
                finalization of such regulations.
                  [(B) Equitable treatment.--The regulations 
                prescribed under subparagraph (A) shall take 
                into account the differences in risks posed to 
                the financial stability of the United States by 
                financial companies, the differences in the 
                liability structures of financial companies, 
                and the different bases for other assessments 
                that such financial companies may be required 
                to pay, to ensure that assessed financial 
                companies are treated equitably and that 
                assessments under this subsection reflect such 
                differences.
  [(p) Unenforceability of Certain Agreements.--
          [(1) In general.--No provision described in paragraph 
        (2) shall be enforceable against or impose any 
        liability on any person, as such enforcement or 
        liability shall be contrary to public policy.
          [(2) Prohibited provisions.--A provision described in 
        this paragraph is any term contained in any existing or 
        future standstill, confidentiality, or other agreement 
        that, directly or indirectly--
                  [(A) affects, restricts, or limits the 
                ability of any person to offer to acquire or 
                acquire;
                  [(B) prohibits any person from offering to 
                acquire or acquiring; or
                  [(C) prohibits any person from using any 
                previously disclosed information in connection 
                with any such offer to acquire or acquisition 
                of,
        all or part of any covered financial company, including 
        any liabilities, assets, or interest therein, in 
        connection with any transaction in which the 
        Corporation exercises its authority under this title.
  [(q) Other Exemptions.--
          [(1) In general.--When acting as a receiver under 
        this title--
                  [(A) the Corporation, including its 
                franchise, its capital, reserves and surplus, 
                and its income, shall be exempt from all 
                taxation imposed by any State, county, 
                municipality, or local taxing authority, except 
                that any real property of the Corporation shall 
                be subject to State, territorial, county, 
                municipal, or local taxation to the same extent 
                according to its value as other real property 
                is taxed, except that, notwithstanding the 
                failure of any person to challenge an 
                assessment under State law of the value of such 
                property, such value, and the tax thereon, 
                shall be determined as of the period for which 
                such tax is imposed;
                  [(B) no property of the Corporation shall be 
                subject to levy, attachment, garnishment, 
                foreclosure, or sale without the consent of the 
                Corporation, nor shall any involuntary lien 
                attach to the property of the Corporation; and
                  [(C) the Corporation shall not be liable for 
                any amounts in the nature of penalties or 
                fines, including those arising from the failure 
                of any person to pay any real property, 
                personal property, probate, or recording tax or 
                any recording or filing fees when due; and
                  [(D) the Corporation shall be exempt from all 
                prosecution by the United States or any State, 
                county, municipality, or local authority for 
                any criminal offense arising under Federal, 
                State, county, municipal, or local law, which 
                was allegedly committed by the covered 
                financial company, or persons acting on behalf 
                of the covered financial company, prior to the 
                appointment of the Corporation as receiver.
          [(2) Limitation.--Paragraph (1) shall not apply with 
        respect to any tax imposed (or other amount arising) 
        under the Internal Revenue Code of 1986.
  [(r) Certain Sales of Assets Prohibited.--
          [(1) Persons who engaged in improper conduct with, or 
        caused losses to, covered financial companies.--The 
        Corporation shall prescribe regulations which, at a 
        minimum, shall prohibit the sale of assets of a covered 
        financial company by the Corporation to--
                  [(A) any person who--
                          [(i) has defaulted, or was a member 
                        of a partnership or an officer or 
                        director of a corporation that has 
                        defaulted, on 1 or more obligations, 
                        the aggregate amount of which exceeds 
                        $1,000,000, to such covered financial 
                        company;
                          [(ii) has been found to have engaged 
                        in fraudulent activity in connection 
                        with any obligation referred to in 
                        clause (i); and
                          [(iii) proposes to purchase any such 
                        asset in whole or in part through the 
                        use of the proceeds of a loan or 
                        advance of credit from the Corporation 
                        or from any covered financial company;
                  [(B) any person who participated, as an 
                officer or director of such covered financial 
                company or of any affiliate of such company, in 
                a material way in any transaction that resulted 
                in a substantial loss to such covered financial 
                company; or
                  [(C) any person who has demonstrated a 
                pattern or practice of defalcation regarding 
                obligations to such covered financial company.
          [(2) Convicted debtors.--Except as provided in 
        paragraph (3), a person may not purchase any asset of 
        such institution from the receiver, if that person--
                  [(A) has been convicted of an offense under 
                section 215, 656, 657, 1005, 1006, 1007, 1008, 
                1014, 1032, 1341, 1343, or 1344 of title 18, 
                United States Code, or of conspiring to commit 
                such an offense, affecting any covered 
                financial company; and
                  [(B) is in default on any loan or other 
                extension of credit from such covered financial 
                company which, if not paid, will cause 
                substantial loss to the Fund or the 
                Corporation.
          [(3) Settlement of claims.--Paragraphs (1) and (2) 
        shall not apply to the sale or transfer by the 
        Corporation of any asset of any covered financial 
        company to any person, if the sale or transfer of the 
        asset resolves or settles, or is part of the resolution 
        or settlement, of 1 or more claims that have been, or 
        could have been, asserted by the Corporation against 
        the person.
          [(4) Definition of default.--For purposes of this 
        subsection, the term ``default'' means a failure to 
        comply with the terms of a loan or other obligation to 
        such an extent that the property securing the 
        obligation is foreclosed upon.
  [(s) Recoupment of Compensation From Senior Executives and 
Directors.--
          [(1) In general.--The Corporation, as receiver of a 
        covered financial company, may recover from any current 
        or former senior executive or director substantially 
        responsible for the failed condition of the covered 
        financial company any compensation received during the 
        2-year period preceding the date on which the 
        Corporation was appointed as the receiver of the 
        covered financial company, except that, in the case of 
        fraud, no time limit shall apply.
          [(2) Cost considerations.--In seeking to recover any 
        such compensation, the Corporation shall weigh the 
        financial and deterrent benefits of such recovery 
        against the cost of executing the recovery.
          [(3) Rulemaking.--The Corporation shall promulgate 
        regulations to implement the requirements of this 
        subsection, including defining the term 
        ``compensation'' to mean any financial remuneration, 
        including salary, bonuses, incentives, benefits, 
        severance, deferred compensation, or golden parachute 
        benefits, and any profits realized from the sale of the 
        securities of the covered financial company.

[SEC. 211. MISCELLANEOUS PROVISIONS.

  [(a) Clarification of Prohibition Regarding Concealment of 
Assets From Receiver or Liquidating Agent.--Section 1032(1) of 
title 18, United States Code, is amended by inserting ``the 
Federal Deposit Insurance Corporation acting as receiver for a 
covered financial company, in accordance with title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act,'' 
before ``or the National Credit''.
  [(b) Conforming Amendment.--Section 1032 of title 18, United 
States Code, is amended in the section heading, by striking 
``of financial institution''.
  [(c) Federal Deposit Insurance Corporation Improvement Act of 
1991.--Section 403(a) of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4403(a)) is 
amended by inserting ``section 210(c) of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, section 1367 of the 
Federal Housing Enterprises Financial Safety and Soundness Act 
of 1992 (12 U.S.C. 4617(d)),'' after ``section 11(e) of the 
Federal Deposit Insurance Act,''.
  [(d) FDIC Inspector General Reviews.--
          [(1) Scope.--The Inspector General of the Corporation 
        shall conduct, supervise, and coordinate audits and 
        investigations of the liquidation of any covered 
        financial company by the Corporation as receiver under 
        this title, including collecting and summarizing--
                  [(A) a description of actions taken by the 
                Corporation as receiver;
                  [(B) a description of any material sales, 
                transfers, mergers, obligations, purchases, and 
                other material transactions entered into by the 
                Corporation;
                  [(C) an evaluation of the adequacy of the 
                policies and procedures of the Corporation 
                under section 203(d) and orderly liquidation 
                plan under section 210(n)(14);
                  [(D) an evaluation of the utilization by the 
                Corporation of the private sector in carrying 
                out its functions, including the adequacy of 
                any conflict-of-interest reviews; and
                  [(E) an evaluation of the overall performance 
                of the Corporation in liquidating the covered 
                financial company, including administrative 
                costs, timeliness of liquidation process, and 
                impact on the financial system.
          [(2) Frequency.--Not later than 6 months after the 
        date of appointment of the Corporation as receiver 
        under this title and every 6 months thereafter, the 
        Inspector General of the Corporation shall conduct the 
        audit and investigation described in paragraph (1).
          [(3) Reports and testimony.--The Inspector General of 
        the Corporation shall include in the semiannual reports 
        required by section 5(a) of the Inspector General Act 
        of 1978 (5 U.S.C. App.), a summary of the findings and 
        evaluations under paragraph (1), and shall appear 
        before the appropriate committees of Congress, if 
        requested, to present each such report.
          [(4) Funding.--
                  [(A) Initial funding.--The expenses of the 
                Inspector General of the Corporation in 
                carrying out this subsection shall be 
                considered administrative expenses of the 
                receivership.
                  [(B) Additional funding.--If the maximum 
                amount available to the Corporation as receiver 
                under this title is insufficient to enable the 
                Inspector General of the Corporation to carry 
                out the duties under this subsection, the 
                Corporation shall pay such additional amounts 
                from assessments imposed under section 210.
          [(5) Termination of responsibilities.--The duties and 
        responsibilities of the Inspector General of the 
        Corporation under this subsection shall terminate 1 
        year after the date of termination of the receivership 
        under this title.
  [(e) Treasury Inspector General Reviews.--
          [(1) Scope.--The Inspector General of the Department 
        of the Treasury shall conduct, supervise, and 
        coordinate audits and investigations of actions taken 
        by the Secretary related to the liquidation of any 
        covered financial company under this title, including 
        collecting and summarizing--
                  [(A) a description of actions taken by the 
                Secretary under this title;
                  [(B) an analysis of the approval by the 
                Secretary of the policies and procedures of the 
                Corporation under section 203 and acceptance of 
                the orderly liquidation plan of the Corporation 
                under section 210; and
                  [(C) an assessment of the terms and 
                conditions underlying the purchase by the 
                Secretary of obligations of the Corporation 
                under section 210.
          [(2) Frequency.--Not later than 6 months after the 
        date of appointment of the Corporation as receiver 
        under this title and every 6 months thereafter, the 
        Inspector General of the Department of the Treasury 
        shall conduct the audit and investigation described in 
        paragraph (1).
          [(3) Reports and testimony.--The Inspector General of 
        the Department of the Treasury shall include in the 
        semiannual reports required by section 5(a) of the 
        Inspector General Act of 1978 (5 U.S.C. App.), a 
        summary of the findings and assessments under paragraph 
        (1), and shall appear before the appropriate committees 
        of Congress, if requested, to present each such report.
          [(4) Termination of responsibilities.--The duties and 
        responsibilities of the Inspector General of the 
        Department of the Treasury under this subsection shall 
        terminate 1 year after the date on which the 
        obligations purchased by the Secretary from the 
        Corporation under section 210 are fully redeemed.
  [(f) Primary Financial Regulatory Agency Inspector General 
Reviews.--
          [(1) Scope.--Upon the appointment of the Corporation 
        as receiver for a covered financial company supervised 
        by a Federal primary financial regulatory agency or the 
        Board of Governors under section 165, the Inspector 
        General of the agency or the Board of Governors shall 
        make a written report reviewing the supervision by the 
        agency or the Board of Governors of the covered 
        financial company, which shall--
                  [(A) evaluate the effectiveness of the agency 
                or the Board of Governors in carrying out its 
                supervisory responsibilities with respect to 
                the covered financial company;
                  [(B) identify any acts or omissions on the 
                part of agency or Board of Governors officials 
                that contributed to the covered financial 
                company being in default or in danger of 
                default;
                  [(C) identify any actions that could have 
                been taken by the agency or the Board of 
                Governors that would have prevented the company 
                from being in default or in danger of default; 
                and
                  [(D) recommend appropriate administrative or 
                legislative action.
          [(2) Reports and testimony.--Not later than 1 year 
        after the date of appointment of the Corporation as 
        receiver under this title, the Inspector General of the 
        Federal primary financial regulatory agency or the 
        Board of Governors shall provide the report required by 
        paragraph (1) to such agency or the Board of Governors, 
        and along with such agency or the Board of Governors, 
        as applicable, shall appear before the appropriate 
        committees of Congress, if requested, to present the 
        report required by paragraph (1). Not later than 90 
        days after the date of receipt of the report required 
        by paragraph (1), such agency or the Board of 
        Governors, as applicable, shall provide a written 
        report to Congress describing any actions taken in 
        response to the recommendations in the report, and if 
        no such actions were taken, describing the reasons why 
        no actions were taken.

[SEC. 212. PROHIBITION OF CIRCUMVENTION AND PREVENTION OF CONFLICTS OF 
                    INTEREST.

  [(a) No Other Funding.--Funds for the orderly liquidation of 
any covered financial company under this title shall only be 
provided as specified under this title.
  [(b) Limit on Governmental Actions.--No governmental entity 
may take any action to circumvent the purposes of this title.
  [(c) Conflict of Interest.--In the event that the Corporation 
is appointed receiver for more than 1 covered financial company 
or is appointed receiver for a covered financial company and 
receiver for any insured depository institution that is an 
affiliate of such covered financial company, the Corporation 
shall take appropriate action, as necessary to avoid any 
conflicts of interest that may arise in connection with 
multiple receiverships.

[SEC. 213. BAN ON CERTAIN ACTIVITIES BY SENIOR EXECUTIVES AND 
                    DIRECTORS.

  [(a) Prohibition Authority.--The Board of Governors or, if 
the covered financial company was not supervised by the Board 
of Governors, the Corporation, may exercise the authority 
provided by this section.
  [(b) Authority To Issue Order.--The appropriate agency 
described in subsection (a) may take any action authorized by 
subsection (c), if the agency determines that--
          [(1) a senior executive or a director of the covered 
        financial company, prior to the appointment of the 
        Corporation as receiver, has, directly or indirectly--
                  [(A) violated--
                          [(i) any law or regulation;
                          [(ii) any cease-and-desist order 
                        which has become final;
                          [(iii) any condition imposed in 
                        writing by a Federal agency in 
                        connection with any action on any 
                        application, notice, or request by such 
                        company or senior executive; or
                          [(iv) any written agreement between 
                        such company and such agency;
                  [(B) engaged or participated in any unsafe or 
                unsound practice in connection with any 
                financial company; or
                  [(C) committed or engaged in any act, 
                omission, or practice which constitutes a 
                breach of the fiduciary duty of such senior 
                executive or director;
          [(2) by reason of the violation, practice, or breach 
        described in any subparagraph of paragraph (1), such 
        senior executive or director has received financial 
        gain or other benefit by reason of such violation, 
        practice, or breach and such violation, practice, or 
        breach contributed to the failure of the company; and
          [(3) such violation, practice, or breach--
                  [(A) involves personal dishonesty on the part 
                of such senior executive or director; or
                  [(B) demonstrates willful or continuing 
                disregard by such senior executive or director 
                for the safety or soundness of such company.
  [(c) Authorized Actions.--
          [(1) In general.--The appropriate agency for a 
        financial company, as described in subsection (a), may 
        serve upon a senior executive or director described in 
        subsection (b) a written notice of the intention of the 
        agency to prohibit any further participation by such 
        person, in any manner, in the conduct of the affairs of 
        any financial company for a period of time determined 
        by the appropriate agency to be commensurate with such 
        violation, practice, or breach, provided such period 
        shall be not less than 2 years.
          [(2) Procedures.--The due process requirements and 
        other procedures under section 8(e) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(e)) shall apply 
        to actions under this section as if the covered 
        financial company were an insured depository 
        institution and the senior executive or director were 
        an institution-affiliated party, as those terms are 
        defined in that Act.
  [(d) Regulations.--The Corporation and the Board of 
Governors, in consultation with the Council, shall jointly 
prescribe rules or regulations to administer and carry out this 
section, including rules, regulations, or guidelines to further 
define the term senior executive for the purposes of this 
section.

[SEC. 214. PROHIBITION ON TAXPAYER FUNDING.

  [(a) Liquidation Required.--All financial companies put into 
receivership under this title shall be liquidated. No taxpayer 
funds shall be used to prevent the liquidation of any financial 
company under this title.
  [(b) Recovery of Funds.--All funds expended in the 
liquidation of a financial company under this title shall be 
recovered from the disposition of assets of such financial 
company, or shall be the responsibility of the financial 
sector, through assessments.
  [(c) No Losses to Taxpayers.--Taxpayers shall bear no losses 
from the exercise of any authority under this title.

[SEC. 215. STUDY ON SECURED CREDITOR HAIRCUTS.

  [(a) Study Required.--The Council shall conduct a study 
evaluating the importance of maximizing United States taxpayer 
protections and promoting market discipline with respect to the 
treatment of fully secured creditors in the utilization of the 
orderly liquidation authority authorized by this Act. In 
carrying out such study, the Council shall--
          [(1) not be prejudicial to current or past laws or 
        regulations with respect to secured creditor treatment 
        in a resolution process;
          [(2) study the similarities and differences between 
        the resolution mechanisms authorized by the Bankruptcy 
        Code, the Federal Deposit Insurance Corporation 
        Improvement Act of 1991, and the orderly liquidation 
        authority authorized by this Act;
          [(3) determine how various secured creditors are 
        treated in such resolution mechanisms and examine how a 
        haircut (of various degrees) on secured creditors could 
        improve market discipline and protect taxpayers;
          [(4) compare the benefits and dynamics of prudent 
        lending practices by depository institutions in secured 
        loans for consumers and small businesses to the lending 
        practices of secured creditors to large, interconnected 
        financial firms;
          [(5) consider whether credit differs according to 
        different types of collateral and different terms and 
        timing of the extension of credit; amd
          [(6) include an examination of stakeholders who were 
        unsecured or under-collateralized and seek collateral 
        when a firm is failing, and the impact that such 
        behavior has on financial stability and an orderly 
        resolution that protects taxpayers if the firm fails.
  [(b) Report.--Not later than the end of the 1-year period 
beginning on the date of enactment of this Act, the Council 
shall issue a report to the Congress containing all findings 
and conclusions made by the Council in carrying out the study 
required under subsection (a).

[SEC. 216. STUDY ON BANKRUPTCY PROCESS FOR FINANCIAL AND NONBANK 
                    FINANCIAL INSTITUTIONS.

  [(a) Study.--
          [(1) In general.--Upon enactment of this Act, the 
        Board of Governors, in consultation with the 
        Administrative Office of the United States Courts, 
        shall conduct a study regarding the resolution of 
        financial companies under the Bankruptcy Code, under 
        chapter 7 or 11 thereof.
          [(2) Issues to be studied.--Issues to be studied 
        under this section include--
                  [(A) the effectiveness of chapter 7 and 
                chapter 11 of the Bankruptcy Code in 
                facilitating the orderly resolution or 
                reorganization of systemic financial companies;
                  [(B) whether a special financial resolution 
                court or panel of special masters or judges 
                should be established to oversee cases 
                involving financial companies to provide for 
                the resolution of such companies under the 
                Bankruptcy Code, in a manner that minimizes 
                adverse impacts on financial markets without 
                creating moral hazard;
                  [(C) whether amendments to the Bankruptcy 
                Code should be adopted to enhance the ability 
                of the Code to resolve financial companies in a 
                manner that minimizes adverse impacts on 
                financial markets without creating moral 
                hazard;
                  [(D) whether amendments should be made to the 
                Bankruptcy Code, the Federal Deposit Insurance 
                Act, and other insolvency laws to address the 
                manner in which qualified financial contracts 
                of financial companies are treated; and
                  [(E) the implications, challenges, and 
                benefits to creating a new chapter or 
                subchapter of the Bankruptcy Code to deal with 
                financial companies.
  [(b) Reports to Congress.--Not later than 1 year after the 
date of enactment of this Act, and in each successive year 
until the fifth year after the date of enactment of this Act, 
the Administrative Office of the United States courts shall 
submit to the Committees on Banking, Housing, and Urban Affairs 
and the Judiciary of the Senate and the Committees on Financial 
Services and the Judiciary of the House of Representatives a 
report summarizing the results of the study conducted under 
subsection (a).

[SEC. 217. STUDY ON INTERNATIONAL COORDINATION RELATING TO BANKRUPTCY 
                    PROCESS FOR NONBANK FINANCIAL INSTITUTIONS.

  [(a) Study.--
          [(1) In general.--The Board of Governors, in 
        consultation with the Administrative Office of the 
        United States Courts, shall conduct a study regarding 
        international coordination relating to the resolution 
        of systemic financial companies under the United States 
        Bankruptcy Code and applicable foreign law.
          [(2) Issues to be studied.--With respect to the 
        bankruptcy process for financial companies, issues to 
        be studied under this section include--
                  [(A) the extent to which international 
                coordination currently exists;
                  [(B) current mechanisms and structures for 
                facilitating international cooperation;
                  [(C) barriers to effective international 
                coordination; and
                  [(D) ways to increase and make more effective 
                international coordination of the resolution of 
                financial companies, so as to minimize the 
                impact on the financial system without creating 
                moral hazard.
  [(b) Report to Congress.--Not later than 1 year after the 
date of enactment of this Act, the Administrative office of the 
United States Courts shall submit to the Committees on Banking, 
Housing, and Urban Affairs and the Judiciary of the Senate and 
the Committees on Financial Services and the Judiciary of the 
House of Representatives a report summarizing the results of 
the study conducted under subsection (a).]

           *       *       *       *       *       *       *


TITLE VII--WALL STREET TRANSPARENCY AND ACCOUNTABILITY

           *       *       *       *       *       *       *


        Subtitle A--Regulation of Over-the-Counter Swaps Markets

PART I--REGULATORY AUTHORITY

           *       *       *       *       *       *       *


SEC. 716. PROHIBITION AGAINST FEDERAL GOVERNMENT BAILOUTS OF SWAPS 
                    ENTITIES.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Excluded Entities.--For purposes of this section, the 
term ``swaps entity'' shall not include any insured depository 
institution under the Federal Deposit Insurance Act [or a 
covered financial company under title II] which is in a 
conservatorship, receivership, or a bridge bank operated by the 
Federal Deposit Insurance Corporation.

           *       *       *       *       *       *       *


TITLE XI--FEDERAL RESERVE SYSTEM PROVISIONS

           *       *       *       *       *       *       *


SEC. 1100D. AMENDMENTS TO THE PAPERWORK REDUCTION ACT.

  [(a) Designation as an Independent Agency.--Section 2(5) of 
the Paperwork Reduction Act (44 U.S.C. 3502(5)) is amended by 
inserting ``the Bureau of Consumer Financial Protection, the 
Office of Financial Research,'' after ``the Securities and 
Exchange Commission,''.]
  (a) Designation as an Independent Agency.--Section 3502(5) of 
subchapter I of chapter 35 of title 44, United States Code 
(commonly known as the Paperwork Reduction Act) is amended by 
inserting ``the Bureau of Consumer Financial Protection,'' 
after ``the Securities and Exchange Commission,''.

           *       *       *       *       *       *       *


SEC. 1105. EMERGENCY FINANCIAL STABILIZATION.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Funding.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Authority of the secretary.--The Secretary may 
        purchase any obligations issued under paragraph (3)(A). 
        For such purpose, the Secretary may use the proceeds of 
        the sale of any securities issued under chapter 31 of 
        title 31, United States Code, and the purposes for 
        which securities may be issued under that chapter 31 
        are extended to include such purchases, and the [amount 
        of any securities issued under that chapter 31 for such 
        purpose shall be treated in the same manner as 
        securities issued under section 208(n)(5)(E)] issuances 
        of such securities under that chapter 31 for such 
        purpose shall by treated as public debt transactions of 
        the United States, and the proceeds from the sale of 
        any obligations acquired by the Secretary under this 
        paragraph shall be deposited into the Treasury of the 
        United States as miscellaneous receipts.

           *       *       *       *       *       *       *


SEC. 1106. ADDITIONAL RELATED AMENDMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Effect of Default on an FDIC Guarantee.--If an insured 
depository institution or depository institution holding 
company (as those terms are defined in section 3 of the Federal 
Deposit Insurance Act) participating in a program under section 
1105, or any participant in a debt guarantee program 
established pursuant to section 13(c)(4)(G)(i) of the Federal 
Deposit Insurance Act defaults on any obligation guaranteed by 
the Corporation after the date of enactment of this Act, the 
Corporation shall--
          (1) * * *
          (2) with respect to any other participating company 
        that is not an insured depository institution that 
        defaults--
                  [(A) require--
                          [(i) consideration of whether a 
                        determination shall be made, as 
                        provided in section 203 to resolve the 
                        company under section 202; and
                          [(ii) the company to file a petition 
                        for bankruptcy under section 301 of 
                        title 11, United States Code, if the 
                        Corporation is not appointed receiver 
                        pursuant to section 202 within 30 days 
                        of the date of default; or]
                  (A) require the company to file a petition 
                for bankruptcy under section 301 of title 11, 
                United States Code; or

           *       *       *       *       *       *       *

                              ----------                              


FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 10. (a) * * *
  (b) Examinations.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Special examination of any insured depository 
        institution.--
                  (A) In general.--In addition to the 
                examinations authorized under paragraph (2), 
                any examiner appointed under paragraph (1) 
                shall have power, on behalf of the Corporation, 
                to make any special examination of any insured 
                depository institution or nonbank financial 
                company supervised by the Board of Governors or 
                a bank holding company described in section 
                165(a) of the Financial Stability Act of 2010, 
                whenever the Board of Directors determines that 
                a special examination of any such depository 
                institution is necessary to determine the 
                condition of such depository institution for 
                insurance purposes[, or of such nonbank 
                financial company supervised by the Board of 
                Governors or bank holding company described in 
                section 165(a) of the Financial Stability Act 
                of 2010, for the purpose of implementing its 
                authority to provide for orderly liquidation of 
                any such company under title II of that Act], 
                provided that such authority may not be used 
                with respect to any such company that is in a 
                generally sound condition.

           *       *       *       *       *       *       *

                              ----------                              


FEDERAL RESERVE ACT

           *       *       *       *       *       *       *


                    POWERS OF FEDERAL RESERVE BANKS.

  Sec. 13. Any Federal reserve bank may receive from any of its 
member banks or other depository institutions, and from the 
United States, deposits of current funds in lawful money, 
national-bank notes, Federal reserve notes, or checks, and 
drafts, payable upon presentation or other items, and also, for 
collection, maturing notes and bills; or, solely for purposes 
of exchange or of collection, may receive from other Federal 
reserve banks deposits of current funds in lawful money, 
national-bank notes, or checks upon other Federal reserve 
banks, and checks and drafts, payable upon presentation within 
its district or other items, and maturing notes and bills 
payable within its district; or, solely for the purposes of 
exchange or of collection, may receive from any nonmember bank 
or trust company or other depository institution deposits of 
current funds in lawful money, national-bank notes, Federal 
reserve notes, checks and drafts payable upon presentation or 
other items, or maturing notes and bills: Provided, Such 
nonmember bank or trust company or other depository institution 
maintains with the Federal reserve bank of its district a 
balance in such amount as the Board determines taking into 
account items in transit, services provided by the Federal 
Reserve bank, and other factors as the Board may deem 
appropriate: Provided further, That nothing in this or any 
other section of this Act shall be construed as prohibiting a 
member or nonmember bank or other depository institution from 
making reasonable charges, to be determined and regulated by 
the Board of Governors of the Federal Reserve System, but in no 
case to exceed 10 cents per $100 or fraction thereof, based on 
the total of checks and drafts presented at any one time, for 
collection or payment of checks and drafts and remission 
therefor by exchange or otherwise; but no such charges shall be 
made against the Federal reserve banks.
  Upon the indorsement of any of its member banks, which shall 
be deemed a waiver of demand, notice and protest by such bank 
as to its own indorsement exclusively, any Federal reserve bank 
may discount notes, drafts, and bills of exchange arising out 
of actual commercial transactions; that is, notes, drafts, and 
bills of exchange issued or drawn for agricultural, industrial, 
or commercial purposes, or the proceeds of which have been 
used, or are to be used, for such purposes, the Board of 
Governors of the Federal Reserve System to have the right to 
determine or define the character of the paper thus eligible 
for discount, within the meaning of this Act. Nothing in this 
Act contained shall be construed to prohibit such notes, 
drafts, and bills of exchange, secured by staple agricultural 
products, or other goods, wares, or merchandise from being 
eligible for such discount, and the notes, drafts, and bills of 
exchange of factors issued as such making advances exclusively 
to producers of staple agricultural products in their raw state 
shall be eligible for such discount; but such definition shall 
not include notes, drafts, or bills covering merely investments 
or issued or drawn for the purpose of carrying or trading in 
stocks, bonds, or other investment securities, except bonds and 
notes of the Government of the United States. Notes, drafts, 
and bills admitted to discount under the terms of this 
paragraph must have a maturity at the time of discount of not 
more than 90 days, exclusive of grace.
  (3)(A) * * *
          (B)(i) * * *
                  (ii) The Board shall establish procedures to 
                prohibit borrowing from programs and facilities 
                by borrowers that are insolvent. Such 
                procedures may include a certification from the 
                chief executive officer (or other authorized 
                officer) of the borrower, at the time the 
                borrower initially borrows under the program or 
                facility (with a duty by the borrower to update 
                the certification if the information in the 
                certification materially changes), that the 
                borrower is not insolvent. A borrower shall be 
                considered insolvent for purposes of this 
                subparagraph, if the borrower is in 
                bankruptcy[, resolution under title II of the 
                Dodd-Frank Wall Street Reform and Consumer 
                Protection Act, or] or is subject to resolution 
                under any other Federal or State insolvency 
                proceeding.
                  (iii) A program or facility that is 
                structured to remove assets from the balance 
                sheet of a single and specific company, or that 
                is established for the purpose of assisting a 
                single and specific company avoid bankruptcy[, 
                resolution under title II of the Dodd-Frank 
                Wall Street Reform and Consumer Protection Act, 
                or] or resolution under any other Federal or 
                State insolvency proceeding, shall not be 
                considered a program or facility with broad-
                based eligibility.

           *       *       *       *       *       *       *

          [(E) If an entity to which a Federal reserve bank has 
        provided a loan under this paragraph becomes a covered 
        financial company, as defined in section 201 of the 
        Dodd-Frank Wall Street Reform and Consumer Protection 
        Act, at any time while such loan is outstanding, and 
        the Federal reserve bank incurs a realized net loss on 
        the loan, then the Federal reserve bank shall have a 
        claim equal to the amount of the net realized loss 
        against the covered entity, with the same priority as 
        an obligation to the Secretary of the Treasury under 
        section 210(b) of the Dodd-Frank Wall Street Reform and 
        Consumer Protection Act. ]

           *       *       *       *       *       *       *

                              ----------                              


              EMERGENCY ECONOMIC STABILIZATION ACT OF 2008

DIVISION A--EMERGENCY ECONOMIC STABILIZATION

           *       *       *       *       *       *       *


TITLE I--TROUBLED ASSETS RELIEF PROGRAM

           *       *       *       *       *       *       *


SEC. 120. TERMINATION OF AUTHORITY.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Termination of Authority To Provide New Assistance Under 
the Home Affordable Modification Program.--
          (1) In general.--Except as provided under paragraph 
        (2), after the date of the enactment of this subsection 
        the Secretary may not provide any assistance under the 
        Home Affordable Modification Program under the Making 
        Home Affordable initiative of the Secretary, authorized 
        under this Act, on behalf of any homeowner.
          (2) Protection of existing obligations on behalf of 
        homeowners already extended an offer to participate in 
        the program.--Paragraph (1) shall not apply with 
        respect to assistance provided on behalf of a homeowner 
        who, before the date of the enactment of this 
        subsection, was extended an offer to participate in the 
        Home Affordable Modification Program on a trial or 
        permanent basis.
          (3) Deficit reduction.--
                  (A) Use of unobligated funds.--
                Notwithstanding any other provision of this 
                title, the amounts described in subparagraph 
                (B) shall not be available after the date of 
                the enactment of this subsection for obligation 
                or expenditure under the Home Affordable 
                Modification Program of the Secretary, but 
                should be covered into the General Fund of the 
                Treasury and should be used only for reducing 
                the budget deficit of the Federal Government.
                  (B) Identification of unobligated funds.--The 
                amounts described in this subparagraph are any 
                amounts made available under title I of the 
                Emergency Economic Stabilization Act of 2008 
                that--
                          (i) have been allocated for use, but 
                        not yet obligated as of the date of the 
                        enactment of this subsection, under the 
                        Home Affordable Modification Program of 
                        the Secretary; and
                          (ii) are not necessary for providing 
                        assistance under such Program on behalf 
                        of homeowners who, pursuant to 
                        paragraph (2), may be provided 
                        assistance after the date of the 
                        enactment of this subsection.
          (4) Study of use of program by members of the armed 
        forces, veterans, and gold star recipients.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine the extent of usage of the 
                Home Affordable Modification Program by, and 
                the impact of such Program on, covered 
                homeowners.
                  (B) Report.--Not later than the expiration of 
                the 90-day period beginning on the date of the 
                enactment of this subsection, the Secretary 
                shall submit to the Congress a report setting 
                forth the results of the study under 
                subparagraph (A) and identifying best 
                practices, derived from studying the Home 
                Affordable Modification Program, that could be 
                applied to existing mortgage assistance 
                programs available to covered homeowners.
                  (C) Covered homeowner.--For purposes of this 
                subsection, the term ``covered homeowner'' 
                means a homeowner who is--
                          (i) a member of the Armed Forces of 
                        the United States on active duty or the 
                        spouse or parent of such a member;
                          (ii) a veteran, as such term is 
                        defined in section 101 of title 38, 
                        United States Code; or
                          (iii) eligible to receive a Gold Star 
                        lapel pin under section 1126 of title 
                        10, United States Code, as a widow, 
                        parent, or next of kin of a member of 
                        the Armed Forces person who died in a 
                        manner described in subsection (a) of 
                        such section.
          (5) Publication of member availability for 
        assistance.--Not later than 5 days after the date of 
        the enactment of this subsection, the Secretary of the 
        Treasury shall publish to its Website on the World Wide 
        Web in a prominent location, large point font, and 
        boldface type the following statement: ``The Home 
        Affordable Modification Program (HAMP) has been 
        terminated. If you are having trouble paying your 
        mortgage and need help contacting your lender or 
        servicer for purposes of negotiating or acquiring a 
        loan modification, please contact your Member of 
        Congress to assist you in contacting your lender or 
        servicer for the purpose of negotiating or acquiring a 
        loan modification.''.
          (6) Notification to hamp applicants required.--Not 
        later than 30 days after the date of the enactment of 
        this subsection, the Secretary of the Treasury shall 
        inform each individual who applied for the Home 
        Affordable Modification Program and will not be 
        considered for a modification under such Program due to 
        termination of such Program under this subsection--
                  (A) that such Program has been terminated;
                  (B) that loan modifications under such 
                Program are no longer available;
                  (C) of the name and contact information of 
                such individual's Member of Congress; and
                  (D) that the individual should contact his or 
                her Member of Congress to assist the individual 
                in contacting the individual's lender or 
                servicer for the purpose of negotiating or 
                acquiring a loan modification.

           *       *       *       *       *       *       *

                              ----------                              


CONSUMER FINANCIAL PROTECTION ACT OF 2010

           *       *       *       *       *       *       *


TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION

           *       *       *       *       *       *       *


Subtitle A--Bureau of Consumer Financial Protection

           *       *       *       *       *       *       *


SEC. 1017. FUNDING; PENALTIES AND FINES.--

  (a) [Transfer of Funds From Board Of Governors.--] Budget, 
Financial Management, and Audit._
          [(1) In general.--Each year (or quarter of such 
        year), beginning on the designated transfer date, and 
        each quarter thereafter, the Board of Governors shall 
        transfer to the Bureau from the combined earnings of 
        the Federal Reserve System, the amount determined by 
        the Director to be reasonably necessary to carry out 
        the authorities of the Bureau under Federal consumer 
        financial law, taking into account such other sums made 
        available to the Bureau from the preceding year (or 
        quarter of such year).
          [(2) Funding cap.--
                  [(A) In general.--Notwithstanding paragraph 
                (1), and in accordance with this paragraph, the 
                amount that shall be transferred to the Bureau 
                in each fiscal year shall not exceed a fixed 
                percentage of the total operating expenses of 
                the Federal Reserve System, as reported in the 
                Annual Report, 2009, of the Board of Governors, 
                equal to--
                          [(i) 10 percent of such expenses in 
                        fiscal year 2011;
                          [(ii) 11 percent of such expenses in 
                        fiscal year 2012; and
                          [(iii) 12 percent of such expenses in 
                        fiscal year 2013, and in each year 
                        thereafter.
                  [(B) Adjustment of amount.--The dollar amount 
                referred to in subparagraph (A)(iii) shall be 
                adjusted annually, using the percent increase, 
                if any, in the employment cost index for total 
                compensation for State and local government 
                workers published by the Federal Government, or 
                the successor index thereto, for the 12-month 
                period ending on September 30 of the year 
                preceding the transfer.
                  [(C) Reviewability.--Notwithstanding any 
                other provision in this title, the funds 
                derived from the Federal Reserve System 
                pursuant to this subsection shall not be 
                subject to review by the Committees on 
                Appropriations of the House of Representatives 
                and the Senate.
          [(3) Transition period.--Beginning on the date of 
        enactment of this Act and until the designated transfer 
        date, the Board of Governors shall transfer to the 
        Bureau the amount estimated by the Secretary needed to 
        carry out the authorities granted to the Bureau under 
        Federal consumer financial law, from the date of 
        enactment of this Act until the designated transfer 
        date.]
          [(4)] (1) Budget and financial management.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(E) Rule of construction.--This subsection 
                may not be construed as implying any obligation 
                on the part of the Director to consult with or 
                obtain the consent or approval of the Director 
                of the Office of Management and Budget with 
                respect to any report, plan, forecast, or other 
                information referred to in subparagraph (A) or 
                any jurisdiction or oversight over the affairs 
                or operations of the Bureau.
                  [(F) Financial statements.--The financial 
                statements of the Bureau shall not be 
                consolidated with the financial statements of 
                either the Board of Governors or the Federal 
                Reserve System.]
          [(5)] (2) Audit of the bureau.--
                  (A) * * *

           *       *       *       *       *       *       *

  [(b) Consumer Financial Protection Fund.--
          [(1) Separate fund in federal reserve established.--
        There is established in the Federal Reserve a separate 
        fund, to be known as the ``Bureau of Consumer Financial 
        Protection Fund'' (referred to in this section as the 
        ``Bureau Fund''). The Bureau Fund shall be maintained 
        and established at a Federal reserve bank, in 
        accordance with such requirements as the Board of 
        Governors may impose.
          [(2) Fund receipts.--All amounts transferred to the 
        Bureau under subsection (a) shall be deposited into the 
        Bureau Fund.
          [(3) Investment authority.--
                  [(A) Amounts in bureau fund may be 
                invested.--The Bureau may request the Board of 
                Governors to direct the investment of the 
                portion of the Bureau Fund that is not, in the 
                judgment of the Bureau, required to meet the 
                current needs of the Bureau.
                  [(B) Eligible investments.--Investments 
                authorized by this paragraph shall be made in 
                obligations of the United States or obligations 
                that are guaranteed as to principal and 
                interest by the United States, with maturities 
                suitable to the needs of the Bureau Fund, as 
                determined by the Bureau.
                  [(C) Interest and proceeds credited.--The 
                interest on, and the proceeds from the sale or 
                redemption of, any obligations held in the 
                Bureau Fund shall be credited to the Bureau 
                Fund.
  [(c) Use of Funds.--
          [(1) In general.--Funds obtained by, transferred to, 
        or credited to the Bureau Fund shall be immediately 
        available to the Bureau and under the control of the 
        Director, and shall remain available until expended, to 
        pay the expenses of the Bureau in carrying out its 
        duties and responsibilities. The compensation of the 
        Director and other employees of the Bureau and all 
        other expenses thereof may be paid from, obtained by, 
        transferred to, or credited to the Bureau Fund under 
        this section.
          [(2) Funds that are not government funds.--Funds 
        obtained by or transferred to the Bureau Fund shall not 
        be construed to be Government funds or appropriated 
        monies.
          [(3) Amounts not subject to apportionment.--
        Notwithstanding any other provision of law, amounts in 
        the Bureau Fund and in the Civil Penalty Fund 
        established under subsection (d) shall not be subject 
        to apportionment for purposes of chapter 15 of title 
        31, United States Code, or under any other authority.
  [(d) Penalties and Fines.--
          [(1) Establishment of victims relief fund.--There is 
        established in the Federal Reserve a separate fund, to 
        be known as the ``Consumer Financial Civil Penalty 
        Fund'' (referred to in this section as the ``Civil 
        Penalty Fund''). The Civil Penalty Fund shall be 
        maintained and established at a Federal reserve bank, 
        in accordance with such requirements as the Board of 
        Governors may impose. If the Bureau obtains a civil 
        penalty against any person in any judicial or 
        administrative action under Federal consumer financial 
        laws, the Bureau shall deposit into the Civil Penalty 
        Fund, the amount of the penalty collected.
          [(2) Payment to victims.--Amounts in the Civil 
        Penalty Fund shall be available to the Bureau, without 
        fiscal year limitation, for payments to the victims of 
        activities for which civil penalties have been imposed 
        under the Federal consumer financial laws. To the 
        extent that such victims cannot be located or such 
        payments are otherwise not practicable, the Bureau may 
        use such funds for the purpose of consumer education 
        and financial literacy programs.]
  [(e)] (b) Authorization of Appropriations; Annual Report.--
          [(1) Determination regarding need for appropriated 
        funds.--
                  [(A) In general.--The Director is authorized 
                to determine that sums available to the Bureau 
                under this section will not be sufficient to 
                carry out the authorities of the Bureau under 
                Federal consumer financial law for the upcoming 
                year.
                  [(B) Report required.--When making a 
                determination under subparagraph (A), the 
                Director shall prepare a report regarding the 
                funding of the Bureau, including the assets and 
                liabilities of the Bureau, and the extent to 
                which the funding needs of the Bureau are 
                anticipated to exceed the level of the amount 
                set forth in subsection (a)(2). The Director 
                shall submit the report to the President and to 
                the Committee on Appropriations of the Senate 
                and the Committee on Appropriations of the 
                House of Representatives.
          [(2) Authorization of appropriations.--If the 
        Director makes the determination and submits the report 
        pursuant to paragraph (1), there are hereby authorized 
        to be appropriated to the Bureau, for the purposes of 
        carrying out the authorities granted in Federal 
        consumer financial law, $200,000,000 for each of fiscal 
        years 2010, 2011, 2012, 2013, and 2014.
          [(3) Apportionment.--Notwithstanding any other 
        provision of law, the amounts in paragraph (2) shall be 
        subject to apportionment under section 1517 of title 
        31, United States Code, and restrictions that generally 
        apply to the use of appropriated funds in title 31, 
        United States Code, and other laws.]
          (1) Authorization of appropriations.--There is 
        authorized to be appropriated $200,000,000 to carry out 
        this title for each of fiscal years 2012 and 2013.
          [(4)] (2) Annual report.--The Director shall prepare 
        and submit a report, on an annual basis, to the 
        Committee on Appropriations of the Senate and the 
        Committee on Appropriations of the House of 
        Representatives regarding the financial operating plans 
        and forecasts of the Director, the financial condition 
        and results of operations of the Bureau, and the 
        sources and application of funds of the Bureau, 
        including any funds appropriated in accordance with 
        this subsection.

           *       *       *       *       *       *       *

                              ----------                              


                  NATIONAL FLOOD INSURANCE ACT OF 1968

                  TITLE XIII--NATIONAL FLOOD INSURANCE

                              SHORT TITLE

  Sec. 1301. This title may be cited as the ``National Flood 
Insurance Act of 1968''.

           *       *       *       *       *       *       *


            CHAPTER I--THE NATIONAL FLOOD INSURANCE PROGRAM

                            BASIC AUTHORITY

  Sec. 1304. (a) To carry out the purposes of this title, the 
[Director] Administrator of the Federal Emergency Management 
Agency is authorized to establish and carry out a national 
flood insurance program which will enable interested persons to 
purchase insurance against loss resulting from physical damage 
to or loss of real property or personal property related 
thereto arising from any flood occurring in the United States.
  (b) Additional Coverage for Compliance With Land Use and 
Control Measures.--The national flood insurance program 
established pursuant to subsection (a) shall enable the 
purchase of insurance to cover the cost of implementing 
measures that are consistent with land use and control measures 
established by the community under section 1361 for--
          (1) * * *

           *       *       *       *       *       *       *

          (3) properties that have sustained flood damage on 
        multiple occasions, if the [Director] Administrator 
        determines that it is cost-effective and in the best 
        interests of the National Flood Insurance Fund to 
        require compliance with the land use and control 
        measures.
          (4) properties for which an offer of mitigation 
        assistance is made under--
                  (A) * * *
                  [(B) section 1368 (Repetitive Loss Priority 
                Program and Individual Priority Property 
                Program);]
                  [(C)] (B) the Hazard Mitigation Grant Program 
                authorized under section 404 of the Robert T. 
                Stafford Disaster Assistance and Emergency 
                Relief Act (42 U.S.C. 5170c);
                  [(D)] (C) the Predisaster Hazard Mitigation 
                Program under section 203 of the Robert T. 
                Stafford Disaster Assistance and Emergency 
                Relief Act (42 U.S.C. 5133); and
                  [(E)] (D) any programs authorized or for 
                which funds are appropriated to address any 
                unmet needs or for which supplemental funds are 
                made available.
The [Director] Administrator shall impose a surcharge on each 
insured of not more than $75 per policy to provide cost of 
compliance coverage in accordance with the provisions of this 
subsection.
  (c) In carrying out the flood insurance program the 
[Director] Administrator shall, to the maxmium extent 
practicable, encourage and arrange for--
          (1) * * *

           *       *       *       *       *       *       *


                    SCOPE OF PROGRAM AND PRIORITIES

  Sec. 1305. (a) In carrying out the flood insurance program 
the [Director] Administrator shall afford a priority to making 
flood insurance available to cover residential properties which 
are designed for the occupancy of from one to four families, 
church properties, and business properties which are owned or 
leased and operated by small business concerns.
  (b) If on the basis of--
          (1) * * *

           *       *       *       *       *       *       *

the [Director] Administrator determines that it would be 
feasible to extend the flood insurance program to cover other 
properties, he may take such action under this title as from 
time to time may be necessary in order to make flood insurance 
available to cover, on such basis as may be feasible, any types 
and classes of--
          (A) * * *

           *       *       *       *       *       *       *

and any such extensions of the program to any types and classes 
of these properties shall from time to time be prescribed in 
regulations.
  (c) The [Director] Administrator shall make flood insurance 
available in only those States or areas (or subdivisions 
thereof) which he has determined have--
          (1) * * *

           *       *       *       *       *       *       *


              NATURE AND LIMITATION OF INSURANCE COVERAGE

  Sec. 1306. (a) The [Director] Administrator shall from time 
to time, after consultation with the advisory committee 
authorized under section 1318, appropriate representatives of 
the pool formed or otherwise created under section 1331, and 
appropriate representatives of the insurance authorities of the 
respective States, provide by regulation for general terms and 
conditions of insurability which shall be applicable to 
properties eligible for flood insurance coverage under section 
1305, including--
          (1) * * *

           *       *       *       *       *       *       *

  (b) In addition to any other terms and conditions under 
subsection (a), such regulations shall provide that--
          (1) any flood insurance coverage based on chargeable 
        premium rates under section 1308 which are less than 
        the estimated premium rates under section 1307(a)(1) 
        shall not exceed--
                  (A) * * *
                  (B) in the case of business properties which 
                are owned or leased and operated by small 
                business concerns, an aggregate liability with 
                respect to any single structure, including any 
                contents thereof related to premises of small 
                business occupants (as term is defined by the 
                [Director] Administrator), which shall be equal 
                to (i) $100,000 plus (ii) $100,000 multiplied 
                by the number of such occupants and shall be 
                allocated among such occupants (or among the 
                occupant or occupants and the owner) under 
                regulations prescribed by the [Director] 
                Administrator; except that the aggregate 
                liability for the structure itself may in no 
                case exceed $100,000; and

           *       *       *       *       *       *       *

          (2) [in the case of any residential property] in the 
        case of any residential building designed for the 
        occupancy of from one to four families for which the 
        risk premium rate is determined in accordance with the 
        provisions of section 1307(a)(1), additional flood 
        insurance in excess of the limits specified in clause 
        (i) of subparagraph (A) of paragraph (1) [shall be made 
        available to every insured upon renewal and every 
        applicant for insurance so as to enable such insured or 
        applicant to receive coverage up to a total amount 
        (including such limits specified in paragraph 
        (1)(A)(i)) of $250,000] shall be made available, with 
        respect to any single such building, up to an aggregate 
        liability (including such limits specified in paragraph 
        (1)(A)(i)) of $250,000;

           *       *       *       *       *       *       *

          (4) [in the case of any nonresidential property, 
        including churches,] in the case of any nonresidential 
        building, including a church, for which the risk 
        premium rate is determined in accordance with the 
        provisions of section 1307(a)(1), additional flood 
        insurance in excess of the limits specified in 
        subparagraphs (B) and (C) of paragraph (1) [shall be 
        made available to every insured upon renewal and every 
        applicant for insurance, in respect to any single 
        structure, up to a total amount (including such limit 
        specified in subparagraph (B) or (C) of paragraph (1), 
        as applicable) of $500,000 for each structure and 
        $500,000 for any contents related to each structure] 
        shall be made available with respect to any single such 
        building, up to an aggregate liability (including such 
        limits specified in subparagraph (B) or (C) of 
        paragraph (1), as applicable) of $500,000, and coverage 
        shall be made available up to a total of $500,000 
        aggregate liability for contents owned by the building 
        owner and $500,000 aggregate liability for each unit 
        within the building for contents owned by the tenant; 
        [and]
          (5) the Administrator may provide that, in the case 
        of any residential property, each renewal or new 
        contract for flood insurance coverage may provide not 
        more than $5,000 aggregate liability per dwelling unit 
        for any necessary increases in living expenses incurred 
        by the insured when losses from a flood make the 
        residence unfit to live in, except that--
                  (A) purchase of such coverage shall be at the 
                option of the insured;
                  (B) any such coverage shall be made available 
                only at chargeable rates that are not less than 
                the estimated premium rates for such coverage 
                determined in accordance with section 
                1307(a)(1); and
                  (C) the Administrator may make such coverage 
                available only if the Administrator makes a 
                determination and causes notice of such 
                determination to be published in the Federal 
                Register that--
                          (i) a competitive private insurance 
                        market for such coverage does not 
                        exist; and
                          (ii) the national flood insurance 
                        program has the capacity to make such 
                        coverage available without borrowing 
                        funds from the Secretary of the 
                        Treasury under section 1309 or 
                        otherwise;
          (6) the Administrator may provide that, in the case 
        of any commercial property or other residential 
        property, including multifamily rental property, 
        coverage for losses resulting from any partial or total 
        interruption of the insured's business caused by damage 
        to, or loss of, such property from a flood may be made 
        available to every insured upon renewal and every 
        applicant, up to a total amount of $20,000 per 
        property, except that--
                  (A) purchase of such coverage shall be at the 
                option of the insured;
                  (B) any such coverage shall be made available 
                only at chargeable rates that are not less than 
                the estimated premium rates for such coverage 
                determined in accordance with section 
                1307(a)(1); and
                  (C) the Administrator may make such coverage 
                available only if the Administrator makes a 
                determination and causes notice of such 
                determination to be published in the Federal 
                Register that--
                          (i) a competitive private insurance 
                        market for such coverage does not 
                        exist; and
                          (ii) the national flood insurance 
                        program has the capacity to make such 
                        coverage available without borrowing 
                        funds from the Secretary of the 
                        Treasury under section 1309 or 
                        otherwise;
          [(5)] (7) any flood insurance coverage which may be 
        made available in excess of the limits specified in 
        subparagraph (A), (B), or (C) of paragraph (1), shall 
        be based only on chargeable premium rates under section 
        1308 which are not less than the estimated premium 
        rates under section 1307(a)(1), and the amount of such 
        excess coverage shall not in any case exceed an amount 
        equal to the applicable limit so specified (or 
        allocated) under paragraph (1)(C), (2), (3), or (4), as 
        applicable[.]; and
          (8) each of the dollar amount limitations under 
        paragraphs (2), (3), (4), (5), and (6) shall be 
        adjusted effective on the date of the enactment of the 
        Flood Insurance Reform Act of 2012, such adjustments 
        shall be calculated using the percentage change, over 
        the period beginning on September 30, 1994, and ending 
        on such date of enactment, in such inflationary index 
        as the Administrator shall, by regulation, specify, and 
        the dollar amount of such adjustment shall be rounded 
        to the next lower dollar; and the Administrator shall 
        cause to be published in the Federal Register the 
        adjustments under this paragraph to such dollar amount 
        limitations; except that in the case of coverage for a 
        property that is made available, pursuant to this 
        paragraph, in an amount that exceeds the limitation 
        otherwise applicable to such coverage as specified in 
        paragraph (2), (3), (4), (5), or (6), the total of such 
        coverage shall be made available only at chargeable 
        rates that are not less than the estimated premium 
        rates for such coverage determined in accordance with 
        section 1307(a)(1).
  (c) Effective Date of Policies.--
          (1) Waiting period.--Except as provided in paragraph 
        (2), coverage under a new contract for flood insurance 
        coverage under this title entered into after the date 
        of enactment of the Riegle Community Development and 
        Regulatory Improvement Act of 1994, and any 
        modification to coverage under an existing flood 
        insurance contract made after such date, shall become 
        effective upon the expiration of the 30-day period 
        beginning on the date that all obligations for such 
        coverage (including completion of the application and 
        payment of any initial premiums owed) are 
        satisfactorily completed. With respect to any flood 
        that has commenced or is in progress before the 
        expiration of such 30-day period, such flood insurance 
        coverage for a property shall take effect upon the 
        expiration of such 30-day period and shall cover damage 
        to such property occurring after the expiration of such 
        period that results from such flood, but only if the 
        property has not suffered damage or loss as a result of 
        such flood before the expiration of such 30-day period.

           *       *       *       *       *       *       *

  (d) Payment of Premiums in Installments for Residential 
Properties.--
          (1) Authority.--In addition to any other terms and 
        conditions under subsection (a), such regulations shall 
        provide that, in the case of any residential property, 
        premiums for flood insurance coverage made available 
        under this title for such property may be paid in 
        installments.
          (2) Limitations.--In implementing the authority under 
        paragraph (1), the Administrator may establish 
        increased chargeable premium rates and surcharges, and 
        deny coverage and establish such other sanctions, as 
        the Administrator considers necessary to ensure that 
        insureds purchase, pay for, and maintain coverage for 
        the full term of a contract for flood insurance 
        coverage or to prevent insureds from purchasing 
        coverage only for periods during a year when risk of 
        flooding is comparatively higher or canceling coverage 
        for periods when such risk is comparatively lower.

                       ESTIMATES OF PREMIUM RATES

  Sec. 1307. (a) The [Director] Administrator is authorized to 
undertake and carry out such studies and investigations and 
receive or exchange such information as may be necessary to 
estimate, and shall from time to time estimate, on an area, 
subdivision, or other appropriate basis--
          (1) * * *

           *       *       *       *       *       *       *

  (b) In carrying out subsection (a), the [Director] 
Administrator shall, to the maximum extent feasible and on a 
reimbursable basis, utilize the services of the Department of 
the Army, the Department of the Interior, The Department of 
Agriculture, the Department of Commerce, and the Tennessee 
Valley Authority, and, as appropriate, other Federal 
departments or agencies, and for such purposes may enter into 
agreements or other appropriate arrangements with any persons.
  (c) The [Director] Administrator shall give priority to 
conducting studies and investigations and making estimates 
under this section in those States or areas (or subdivisions 
thereof) which he has determined have evidenced a positive 
interest in securing flood insurance coverage under the flood 
insurance program.
  (d) Notwithstanding any other provision of law, any structure 
existing on the date of enactment of the Flood Disaster 
Protection Act of 1973 and located within Avoyelles, 
Evangeline, Rapides, or Saint Landry Parish in the State of 
Louisiana, which the [Director] Administrator determines is 
subject to additional flood hazards as a result of the 
construction or operation of the Atchafalaya Basin Levee 
System, shall be eligible for flood insurance under this title 
(if and to the extent it is eligible for such insurance under 
the other provisions of this title) at premium rates that shall 
not exceed those which would be applicable if such additional 
hazards did not exist.
  (e) Notwithstanding any other provision of law, any community 
that has made adequate progress, acceptable to the [Director] 
Administrator, on the [construction of a flood protection 
system] construction, reconstruction, or improvement of a flood 
protection system (without respect to the level of Federal 
investment or participation) which will afford flood protection 
for the one-hundred-year frequency flood as determined by the 
[Director] Administrator, shall be eligible for flood insurance 
under this title (if and to the extent it is eligible for such 
insurance under the other provisions of this title) at premium 
rates not exceeding those which would be applicable under this 
section if such flood protection system had been completed. The 
[Director] Administrator shall find that adequate progress on 
the [construction of a flood protection system] construction, 
reconstruction, or improvement of a flood protection system as 
required herein has been only if (1) 100 percent of the project 
cost of the system has been authorized, (2) at least 60 percent 
of the project cost of the system has been appropriated, (3) at 
least 50 percent of the project cost of the system has been 
expended based on the present value of the completed system, 
and (4) the system is at least 50 percent completed.
  (f) Notwithstanding any other provision of law, this 
subsection shall only apply in a community which has been 
determined by the [Director] Administrator of the Federal 
Emergency Management Agency to be in the process of restoring 
flood protection afforded by a flood protection system that had 
been previously accredited on a Flood Insurance Rate Map as 
providing 100-year frequency flood protection but no longer 
does so (without respect to the level of Federal investment or 
participation). Except as provided in this subsection, in such 
a community, flood insurance shall be made available to those 
properties impacted by the disaccreditation of the flood 
protection system at premium rates that do not exceed those 
which would be applicable to any property located in an area of 
special flood hazard, the construction of which was started 
prior to the effective date of the initial Flood Insurance Rate 
Map published by the [Director] Administrator for the community 
in which such property is located. A revised Flood Insurance 
Rate Map shall be prepared for the community to delineate as 
Zone AR the areas of special flood hazard, whether coastal or 
riverine, that result from the disaccreditation of the flood 
protection system. A community will be considered to be in the 
process of restoration if--
          (1) the flood protection system has been deemed 
        restorable by [a Federal agency in consultation with 
        the local project sponsor] the entity or entities that 
        own, operate, maintain, or repair such system;

           *       *       *       *       *       *       *

Communities that the [Director] Administrator of the Federal 
Emergency Management Agency determines to meet the criteria set 
forth in paragraphs (1) and (2) as of January 1, 1992, shall 
not be subject to revised Flood Insurance Rate Maps that 
contravene the intent of this subsection. Such communities 
shall remain eligible for C zone rates for properties located 
in zone AR for any policy written prior to promulgation of 
final regulations for this section. Floodplain management 
criteria for such communities shall not require the elevation 
of improvements to existing structures and shall not exceed 3 
feet above existing grade for new construction, provided the 
base flood elevation based on the disaccredited flood control 
system does not exceed five feet above existing grade, or the 
remaining new construction in such communities is limited to 
infill sites, rehabilitation of existing structures, or 
redevelopment of previously developed areas.
The [Director] Administrator of the Federal Emergency 
Management Agency shall develop and promulgate regulations to 
implement this subsection, including minimum floodplain 
management criteria, within 24 months after the date of 
enactment of this subsection.

               ESTABLISHMENT OF CHARGEABLE PREMIUM RATES

  Sec. 1308. (a) On the basis of estimates made under section 
1307 and such other information as may be necessary, the 
[Director] Administrator shall from time to time, after 
consultation with the advisory committee authorized under 
section 1318, appropriate representatives of the pool formed or 
otherwise created under section 1331, and appropriate 
representatives of the insurance authorities of the respective 
States, prescribe by regulation or notice--
          (1) * * *

           *       *       *       *       *       *       *

  (c) Actuarial Rate Properties.--Subject only to [the 
limitations provided under paragraphs (1) and (2)] subsection 
(e) and subsection (g), the chargeable rate shall not be less 
than the applicable estimated risk premium rate for such area 
(or subdivision thereof) under section 1307(a)(1) with respect 
to the following properties:
          (1) Post-firm properties.--Any property the 
        construction or substantial improvement of which the 
        [Director] Administrator determines has been started 
        after December 31, 1974, or started after the effective 
        date of the initial rate map published by the 
        [Director] Administrator under paragraph (2) of section 
        1360 for the area in which such property is located, 
        whichever is later[, except that the chargeable rate 
        for properties under this paragraph shall be subject to 
        the limitation under subsection (e)].
          (2) Commercial properties.--Any nonresidential 
        property.
          (3) Second homes and vacation homes.--Any residential 
        property that is not the primary residence of any 
        individual.
          (4) Homes sold to new owners.--Any single family 
        property that--
                  (A) has been constructed or substantially 
                improved and for which such construction or 
                improvement was started, as determined by the 
                Administrator, before December 31, 1974, or 
                before the effective date of the initial rate 
                map published by the Administrator under 
                paragraph (2) of section 1360(a) for the area 
                in which such property is located, whichever is 
                later; and
                  (B) is purchased after the effective date of 
                this paragraph, pursuant to section 
                345(c)(3)(A) of the Flood Insurance Reform Act 
                of 2012.
          (5) Homes damaged or improved.--Any property that, on 
        or after the date of the enactment of the Flood 
        Insurance Reform Act of 2012, has experienced or 
        sustained--
                  (A) substantial flood damage exceeding 50 
                percent of the fair market value of such 
                property; or
                  (B) substantial improvement exceeding 30 
                percent of the fair market value of such 
                property.
          (6) Homes with multiple claims.--Any severe 
        repetitive loss property (as such term is defined in 
        section 1366(j)).
          [(2)] (7) Certain leased coastal and river 
        properties.--Any property leased from the Federal 
        Government (including residential and nonresidential 
        properties) that the [Director] Administrator 
        determines is located on the river-facing side of any 
        dike, levee, or other riverine flood control structure, 
        or seaward of any seawall or other coastal flood 
        control structure.
  (d) With respect to any chargeable premium rate prescribed 
under this section, a sum equal to the portion of the rate that 
covers any administrative expenses of carrying out the flood 
insurance and floodplain management programs which have been 
estimated under paragraphs (1)(B)(ii) and (1)(B)(iii) of 
section 1307(a) or paragraph (2) of such section (including the 
fees under such paragraphs), shall be paid to the [Director] 
Administrator. The [Director] Administrator shall deposit the 
sum in the National Flood Insurance Fund established under 
section 1310.
  (e) Annual Limitation on Premium Increases.--Except with 
respect to properties described under [paragraph (2) or (3)] 
paragraph (7) of subsection (c) or subsection (h), and 
notwithstanding any other provision of this title, the 
chargeable risk premium rates for flood insurance under this 
title for any properties within any single risk classification 
may not be increased by an amount that would result in the 
average of such rate increases for properties within the risk 
classification during any 12-month period exceeding [10 
percent] 20 percent of the average of the risk premium rates 
for properties within the risk classification upon the 
commencement of such 12-month period.
  (f) Adjustment of Premium.--Notwithstanding any other 
provision of law, if the [Director] Administrator determines 
that the holder of a flood insurance policy issued under this 
Act is paying a lower premium than is required under this 
section due to an error in the flood plain determination, the 
[Director] Administrator may only prospectively charge the 
higher premium rate.
  (g) 5-Year Phase-In of Flood Insurance Rates for Certain 
Properties in Newly Mapped Areas.--
          (1) 5-year phase-in period.--Notwithstanding 
        subsection (c) or any other provision of law relating 
        to chargeable risk premium rates for flood insurance 
        coverage under this title, in the case of any area that 
        was not previously designated as an area having special 
        flood hazards and that, pursuant to any issuance, 
        revision, updating, or other change in flood insurance 
        maps, becomes designated as such an area, during the 5-
        year period that begins, except as provided in 
        paragraph (2), upon the date that such maps, as issued, 
        revised, updated, or otherwise changed, become 
        effective, the chargeable premium rate for flood 
        insurance under this title with respect to any covered 
        property that is located within such area shall be the 
        rate described in paragraph (3).
          (2) Applicability to preferred risk rate areas.--In 
        the case of any area described in paragraph (1) that 
        consists of or includes an area that, as of date of the 
        effectiveness of the flood insurance maps for such area 
        referred to in paragraph (1) as so issued, revised, 
        updated, or changed, is eligible for any reason for 
        preferred risk rate method premiums for flood insurance 
        coverage and was eligible for such premiums as of the 
        enactment of the Flood Insurance Reform Act of 2012, 
        the 5-year period referred to in paragraph (1) for such 
        area eligible for preferred risk rate method premiums 
        shall begin upon the expiration of the period during 
        which such area is eligible for such preferred risk 
        rate method premiums.
          (3) Phase-in of full actuarial rates.--With respect 
        to any area described in paragraph (1), the chargeable 
        risk premium rate for flood insurance under this title 
        for a covered property that is located in such area 
        shall be--
                  (A) for the first year of the 5-year period 
                referred to in paragraph (1), the greater of--
                          (i) 20 percent of the chargeable risk 
                        premium rate otherwise applicable under 
                        this title to the property; and
                          (ii) in the case of any property 
                        that, as of the beginning of such first 
                        year, is eligible for preferred risk 
                        rate method premiums for flood 
                        insurance coverage, such preferred risk 
                        rate method premium for the property;
                  (B) for the second year of such 5-year 
                period, 40 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property;
                  (C) for the third year of such 5-year period, 
                60 percent of the chargeable risk premium rate 
                otherwise applicable under this title to the 
                property;
                  (D) for the fourth year of such 5-year 
                period, 80 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property; and
                  (E) for the fifth year of such 5-year period, 
                100 percent of the chargeable risk premium rate 
                otherwise applicable under this title to the 
                property.
          (4) Covered properties.--For purposes of the 
        subsection, the term ``covered property'' means any 
        residential property occupied by its owner or a bona 
        fide tenant as a primary residence.
  (h) Prohibition of Extension of Subsidized Rates to Lapsed 
Policies.--Notwithstanding any other provision of law relating 
to chargeable risk premium rates for flood insurance coverage 
under this title, the Administrator shall not provide flood 
insurance coverage under this title for any property for which 
a policy for such coverage for the property has previously 
lapsed in coverage as a result of the deliberate choice of the 
holder of such policy, at a rate less than the applicable 
estimated risk premium rates for the area (or subdivision 
thereof) in which such property is located.

SEC. 1308A. NOTIFICATION TO TENANTS OF AVAILABILITY OF CONTENTS 
                    INSURANCE.

  (a) In General.--The Administrator shall, upon entering into 
a contract for flood insurance coverage under this title for 
any property--
          (1) provide to the insured sufficient copies of the 
        notice developed pursuant to subsection (b); and
          (2) require the insured to provide a copy of the 
        notice, or otherwise provide notification of the 
        information under subsection (b) in the manner that the 
        manager or landlord deems most appropriate, to each 
        such tenant and to each new tenant upon commencement of 
        such a tenancy.
  (b) Notice.--Notice to a tenant of a property in accordance 
with this subsection is written notice that clearly informs a 
tenant--
          (1) whether the property is located in an area having 
        special flood hazards;
          (2) that flood insurance coverage is available under 
        the national flood insurance program under this title 
        for contents of the unit or structure leased by the 
        tenant;
          (3) of the maximum amount of such coverage for 
        contents available under this title at that time; and
          (4) of where to obtain information regarding how to 
        obtain such coverage, including a telephone number, 
        mailing address, and Internet site of the Administrator 
        where such information is available.

                               FINANCING

  Sec. 1309. (a) All authority which was vested in the Housing 
and Home Finance Administrator by virtue of section 15(e) of 
the Federal Flood Insurance Act of 1956 (70 Stat. 1084) 
(pertaining to the issue of notes or other obligations or the 
Secretary of the Treasury), as amended by subsections (a) and 
(b) of section 1303 of this Act, shall be available to the 
[Director] Administrator for the purpose of carrying out the 
flood insurance program under this title; except that the total 
amount of notes and obligations which may be issued by the 
[Director] Administrator pursuant to such authority (1) without 
the approval of the President, may not exceed $500,000,000, and 
(2) with the approval of the President, may not exceed 
$1,500,000,000 through the date specified in section 1319, and 
$1,000,000,000 thereafter; except that, through [the earlier of 
the date of the enactment into law of an Act that specifically 
amends the date specified in this section or May 31, 2012] 
September 30, 2016, clause (2) of this sentence shall be 
applied by substituting ``$20,725,000,000'' for 
``$1,500,000,000''. The [Director] Administrator shall report 
to the Committee on Banking, Finance and Urban Affairs of the 
House of Representatives and the Committee on Banking, Housing, 
and Urban Affairs of the Senate at any time when he requests 
the approval of the President in accordance with the preceding 
sentence.
  (b) Any funds borrowed by the [Director] Administrator under 
this authority shall, from time to time, be deposited in the 
National Flood Insurance Fund established under section 1310.

                     NATIONAL FLOOD INSURANCE FUND

  Sec. 1310. (a) To carry out the flood insurance program 
authorized by this title, the [Director] Administrator shall 
establish in the Treasury of the United States a National Flood 
Insurance Fund (hereinafter referred to as the ``fund'') which 
shall be an account separate from any other accounts or funds 
available to the [Director] Administrator and shall be 
available as described in subsection (f), without fiscal year 
limitation (except as otherwise provided in this section)--
          (1) * * *

           *       *       *       *       *       *       *

          (6) for carrying out the program under section 
        1315(b);
          (7) for transfers to the National Flood Mitigation 
        Fund, but only to the extent provided in section 
        1367(b)(1)[;]; and
          [(8) for financial assistance under section 1361A to 
        States and communities for taking actions under such 
        section with respect to severe repetitive loss 
        properties, but only to the extent provided in section 
        1361A(i); and
          [(9) for funding, not to exceed $10,000,000 in any 
        fiscal year, for mitigation actions under section 1323, 
        except that, notwithstanding any other provision of 
        this title, amounts made available pursuant to this 
        paragraph shall not be subject to offsetting 
        collections through premium rates for flood insurance 
        coverage under this title.]
          (8) for transfers to the National Flood Insurance 
        Reserve Fund under section 1310A, in accordance with 
        such section.
  (b) The fund shall be credited with--
          (1) * * *

           *       *       *       *       *       *       *

          (5) such sums as are required to be paid to the 
        [Director] Administrator under section 1308(d); and

           *       *       *       *       *       *       *

  (c) If, after--
          (1) * * *

           *       *       *       *       *       *       *

the [Director] Administrator determines that the moneys of the 
fund are in excess of current needs, he may request the 
investment of such amounts as he deems advisable by the 
Secretary of the Treasury in obligations issued or guaranteed 
by the United States.
  (d) In the event the [Director] Administrator makes a 
determination in accordance with the provisions of section 1340 
that operation of the flood insurance program, in whole or in 
part, should be carried out through the facilities of the 
Federal Government, the fund shall be available for all 
purposes incident thereto, including--
          (1) * * *

           *       *       *       *       *       *       *

for so long as the program is so carried out, and in such event 
any premiums paid shall be deposited by the [Director] 
Administrator to the credit of the fund.

           *       *       *       *       *       *       *


SEC. 1310A. RESERVE FUND.

  (a) Establishment of Reserve Fund.--In carrying out the flood 
insurance program authorized by this title, the Administrator 
shall establish in the Treasury of the United States a National 
Flood Insurance Reserve Fund (in this section referred to as 
the ``Reserve Fund'') which shall--
          (1) be an account separate from any other accounts or 
        funds available to the Administrator; and
          (2) be available for meeting the expected future 
        obligations of the flood insurance program.
  (b) Reserve Ratio.--Subject to the phase-in requirements 
under subsection (d), the Reserve Fund shall maintain a balance 
equal to--
          (1) 1 percent of the sum of the total potential loss 
        exposure of all outstanding flood insurance policies in 
        force in the prior fiscal year; or
          (2) such higher percentage as the Administrator 
        determines to be appropriate, taking into consideration 
        any circumstance that may raise a significant risk of 
        substantial future losses to the Reserve Fund.
  (c) Maintenance of Reserve Ratio.--
          (1) In general.--The Administrator shall have the 
        authority to establish, increase, or decrease the 
        amount of aggregate annual insurance premiums to be 
        collected for any fiscal year necessary--
                  (A) to maintain the reserve ratio required 
                under subsection (b); and
                  (B) to achieve such reserve ratio, if the 
                actual balance of such reserve is below the 
                amount required under subsection (b).
          (2) Considerations.--In exercising the authority 
        under paragraph (1), the Administrator shall consider--
                  (A) the expected operating expenses of the 
                Reserve Fund;
                  (B) the insurance loss expenditures under the 
                flood insurance program;
                  (C) any investment income generated under the 
                flood insurance program; and
                  (D) any other factor that the Administrator 
                determines appropriate.
          (3) Limitations.--In exercising the authority under 
        paragraph (1), the Administrator shall be subject to 
        all other provisions of this Act, including any 
        provisions relating to chargeable premium rates and 
        annual increases of such rates.
  (d) Phase-in Requirements.--The phase-in requirements under 
this subsection are as follows:
          (1) In general.--Beginning in fiscal year 2012 and 
        not ending until the fiscal year in which the ratio 
        required under subsection (b) is achieved, in each such 
        fiscal year the Administrator shall place in the 
        Reserve Fund an amount equal to not less than 7.5 
        percent of the reserve ratio required under subsection 
        (b).
          (2) Amount satisfied.--As soon as the ratio required 
        under subsection (b) is achieved, and except as 
        provided in paragraph (3), the Administrator shall not 
        be required to set aside any amounts for the Reserve 
        Fund.
          (3) Exception.--If at any time after the ratio 
        required under subsection (b) is achieved, the Reserve 
        Fund falls below the required ratio under subsection 
        (b), the Administrator shall place in the Reserve Fund 
        for that fiscal year an amount equal to not less than 
        7.5 percent of the reserve ratio required under 
        subsection (b).
  (e) Limitation on Reserve Ratio.--In any given fiscal year, 
if the Administrator determines that the reserve ratio required 
under subsection (b) cannot be achieved, the Administrator 
shall submit a report to the Congress that--
          (1) describes and details the specific concerns of 
        the Administrator regarding such consequences;
          (2) demonstrates how such consequences would harm the 
        long-term financial soundness of the flood insurance 
        program; and
          (3) indicates the maximum attainable reserve ratio 
        for that particular fiscal year.
  (f) Availability of Amounts.--The reserve ratio requirements 
under subsection (b) and the phase-in requirements under 
subsection (d) shall be subject to the availability of amounts 
in the National Flood Insurance Fund for transfer under section 
1310(a)(10), as provided in section 1310(f).

                     OPERATING COSTS AND ALLOWANCES

  Sec. 1311. (a) The [Director] Administrator shall from time 
to time negotiate with appropriate representatives of the 
insurance industry for the purpose of establishing--
          (1) * * *

           *       *       *       *       *       *       *

  (b) For purposes of subsection (a)--
          (1) the term ``operating costs'' shall (without 
        limiting such term) include--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) other direct, actual, and necessary 
                expenses which the [Director] Administrator 
                finds are incurred in connection with selling 
                or servicing flood insurance coverage; and
          (2) the term ``operating allowances'' shall (without 
        limiting such term) include amounts for profit and 
        contingencies which the [Director] Administrator finds 
        reasonable and necessary to carry out the purposes of 
        this title.

                           PAYMENT OF CLAIMS

  Sec. 1312. [The Director is] (a) In General.--The 
Administrator is authorized to prescribe regulations 
establishing the general method or methods by which proved and 
approved claims for losses may be adjusted and paid for any 
damage to or loss of property which is covered by flood 
insurance made available under the provisions of this title.
  (b) Minimum Annual Deductibles.--
          (1) Subsidized rate properties.--For any structure 
        that is covered by flood insurance under this title, 
        and for which the chargeable rate for such coverage is 
        less than the applicable estimated risk premium rate 
        under section 1307(a)(1) for the area (or subdivision 
        thereof) in which such structure is located, the 
        minimum annual deductible for damage to or loss of such 
        structure shall be $2,000.
          (2) Actuarial rate properties.--For any structure 
        that is covered by flood insurance under this title, 
        for which the chargeable rate for such coverage is not 
        less than the applicable estimated risk premium rate 
        under section 1307(a)(1) for the area (or subdivision 
        thereof) in which such structure is located, the 
        minimum annual deductible for damage to or loss of such 
        structure shall be $1,000.

              DISSEMINATION OF FLOOD INSURANCE INFORMATION

  Sec. 1313. The [Director] Administrator shall from time to 
time take such action as may be necessary in order to make 
information and data available to the public, and to any State 
or local agency or official, with regard to--
          (1) * * *

           *       *       *       *       *       *       *


                   STATE AND LOCAL LAND USE CONTROLS

  Sec. 1315. (a) Requirement for Participation in Flood 
Insurance Program.--
          (1) In general.--After December 31, 1971, no new 
        flood insurance coverage shall be provided under this 
        title in any area (or subdivision thereof) unless an 
        appropriate public body shall have adopted adequate 
        land use and control measures (with effective 
        enforcement provisions) which the [Director] 
        Administrator finds are consistent with the 
        comprehensive criteria for land management and use 
        under section 1361.
          (2) Agricultural structures.--
                  (A) * * *
                  (B) Premium rates and coverage.--To the 
                extent applicable, an agricultural structure 
                repaired or restored pursuant to subparagraph 
                (A) shall pay chargeable premium rates 
                established under section 1308 at the estimated 
                risk premium rates under section 1307(a)(1). If 
                resources are available, the [Director] 
                Administrator shall provide technical 
                assistance and counseling, upon request of the 
                owner of the structure, regarding wet flood-
                proofing and other flood damage reduction 
                measures for agricultural structures. The 
                [Director] Administrator shall not be required 
                to make flood insurance coverage available for 
                such an agricultural structure unless the 
                structure is wet flood-proofed through 
                permanent or contingent measures applied to the 
                structure or its contents that prevent or 
                provide resistance to damage from flooding by 
                allowing flood waters to pass through the 
                structure, as determined by the [Director] 
                Administrator.
                  (C) Prohibition on disaster relief.--
                Notwithstanding any other provision of law, any 
                agricultural structure repaired or restored 
                pursuant to subparagraph (A) shall not be 
                eligible for disaster relief assistance under 
                any program administered by the [Director] 
                Administrator or any other Federal agency.

           *       *       *       *       *       *       *

  (b) Community Rating System and Incentives for Community 
Floodplain Management.--
          (1) Authority and goals.--The [Director] 
        Administrator shall carry out a community rating system 
        program, under which communities participate 
        voluntarily--
                  (A) * * *

           *       *       *       *       *       *       *

          (2) Incentives.--The program shall provide incentives 
        in the form of credits on premium rates for flood 
        insurance coverage in communities that the [Director] 
        Administrator determines have adopted and enforced 
        measures that reduce the risk of flood and erosion 
        damage that exceed the criteria set forth in section 
        1361. In providing incentives under this paragraph, the 
        [Director] Administrator may provide for credits to 
        flood insurance premium rates in communities that the 
        [Director] Administrator determines have implemented 
        measures that protect natural and beneficial floodplain 
        functions.
          (3) Credits.--The credits on premium rates for flood 
        insurance coverage shall be based on the estimated 
        reduction in flood and erosion damage risks resulting 
        from the measures adopted by the community under this 
        program. If a community has received mitigation 
        assistance under section 1366, the credits shall be 
        phased in a manner, determined by the [Director] 
        Administrator, to recover the amount of such assistance 
        provided for the community.
          (4) Reports.--Not later than 2 years after the date 
        of enactment of the Riegle Community Development and 
        Regulatory Improvement Act of 1994 and not less than 
        every 2 years thereafter, the [Director] Administrator 
        shall submit a report to the Congress regarding the 
        program under this subsection. Each report shall 
        include an analysis of the cost-effectiveness of the 
        program, any other accomplishments or shortcomings of 
        the program, and any recommendations of the [Director] 
        Administrator for legislation regarding the program.

             PROPERTIES IN VIOLATION OF STATE AND LOCAL LAW

  Sec. 1316. No new flood insurance coverage shall be provided 
under this title for any property which the [Director] 
Administrator finds has been declared by a duly constituted 
State or local zoning authority, or other authorized public 
body, to be in violation of State or local laws, regulations or 
ordinances which are intended to discourage or otherwise 
restrict land development or occupancy in flood-prone areas.

                    COORDINATION WITH OTHER PROGRAMS

  Sec. 1317. In carrying out this title, the [Director] 
Administrator shall consult with other departments and agencies 
of the Federal Government, and with interstate, State, and 
local agencies having responsibilities for flood control, flood 
forecasting, or flood damage prevention, in order to assure 
that the programs of such agencies and the flood insurance 
program authorized under this title are mutually consistent.

                           ADVISORY COMMITTEE

  Sec. 1318. (a) The [Director] Administrator shall appoint a 
flood insurance advisory committee without regard to the 
provisions of title 5, United States Code, governing 
appointments in the competitive service, and such committee 
shall advise the [Director] Administrator in the preparation of 
any regulations prescribed in accordance with this title and 
with respect to policy matters arising in the administration of 
this title, and shall perform such other responsibilities as 
the [Director] Administrator may, from time to time, assign to 
such committee.

           *       *       *       *       *       *       *

  (c) Members of the committee shall, while attending 
conferences or meetings thereof, be entitled to receive 
compensation at a rate fixed by the [Director] Administrator 
but not exceeding $100 per day, including traveltime, and while 
so serving away from their homes or regular places of business 
they may be allowed travel expenses, including per diem in lieu 
of subsistence, as is authorized under section 5703 of title 5, 
United States Code, for persons in the Government service 
employed intermittently.

                           PROGRAM EXPIRATION

  Sec. 1319. No new contract for flood insurance under this 
title shall be entered into after [the earlier of the date of 
the enactment into law of an Act that specifically amends the 
date specified in this section or May 31, 2012] September 30, 
2016.

          [REPORT TO THE PRESIDENT] ANNUAL REPORT TO CONGRESS

  Sec. 1320. (a) In General.--The [Director] Administrator 
shall [biennially] submit a report of operations under this 
title to [the President for submission to] the Congress not 
later than June 30 of each year.
  (b) Effects of Flood Insurance Program.--The [Director] 
Administrator shall include, as part of the [biennial] annual 
report submitted under subsection (a), a chapter reporting on 
the effects on the flood insurance program observed through 
implementation of requirements under the Riegle Community 
Development and Regulatory Improvement Act of 1994.
  (c) Financial Status of Program.--The report under this 
section for each year shall include information regarding the 
financial status of the national flood insurance program under 
this title, including a description of the financial status of 
the National Flood Insurance Fund and current and projected 
levels of claims, premium receipts, expenses, and borrowing 
under the program.

           *       *       *       *       *       *       *


[SEC. 1323. GRANTS FOR REPETITIVE INSURANCE CLAIMS PROPERTIES.

  [(a) In General.--The Director may provide funding for 
mitigation actions that reduce flood damages to individual 
properties for which 1 or more claim payments for losses have 
been made under flood insurance coverage under this title, but 
only if the Director determines that--
          [(1) such activities are in the best interest of the 
        National Flood Insurance Fund; and
          [(2) such activities cannot be funded under the 
        program under section 1366 because--
                  [(A) the requirements of section 1366(g) are 
                not being met by the State or community in 
                which the property is located; or
                  [(B) the State or community does not have the 
                capacity to manage such activities.
  [(b) Priority for Worst-Case Properties.--In determining the 
properties for which funding is to be provided under this 
section, the Director shall consult with the States in which 
such properties are located and provide assistance for 
properties in the order that will result in the greatest amount 
of savings to the National Flood Insurance Fund in the shortest 
period of time.]

           *       *       *       *       *       *       *


SEC. 1325. TREATMENT OF SWIMMING POOL ENCLOSURES OUTSIDE OF HURRICANE 
                    SEASON.

  In the case of any property that is otherwise in compliance 
with the coverage and building requirements of the national 
flood insurance program, the presence of an enclosed swimming 
pool located at ground level or in the space below the lowest 
floor of a building after November 30 and before June 1 of any 
year shall have no effect on the terms of coverage or the 
ability to receive coverage for such building under the 
national flood insurance program established pursuant to this 
title, if the pool is enclosed with non-supporting breakaway 
walls.

  CHAPTER II--ORGANIZATION AND ADMINISTRATION OF THE FLOOD INSURANCE 
                                PROGRAM

                    ORGANIZATION AND ADMINISTRATION

  Sec. 1330. Following such consultation with representatives 
of the insurance industry as may be necessary, the [Director] 
Administrator shall implement the flood insurance program 
authorized under chapter I in accordance with the provision of 
part A of this chapter and, if a determination is made by him 
under section 1340, under part B of this chapter.

       Part A--Industry Program With Federal Financial Assistance

                     INDUSTRY FLOOD INSURANCE POOL

  Sec. 1331. (a) The [Director] Administrator is authorized to 
encourage and otherwise assist any insurance companies and 
other insurers which meet the requirements prescribed under 
subsection (b) to form, as associate, or otherwise join 
together in a pool--
          (1) * * *
          (2) for the purpose of assuming, including as 
        reinsurance of insurance coverage provided by the flood 
        insurance program, on such terms and conditions as may 
        be agreed upon, such financial responsibility as will 
        enable such companies and other insurers, with the 
        Federal financial and other assistance available under 
        this title, to assure a reasonable proportion of 
        responsibility for the adjustment and payment of claims 
        for losses under the flood insurance program.
  (b) In order to promote the effective administration of the 
flood insurance program under this part, and to assure that the 
objectives of this title are furthered, the [Director] 
Administrator is authorized to prescribe appropriate 
requirements for insurance companies and other insurers 
participating in such pool including, but not limited to, 
minimum requirements for capital or surplus or assets.

                  AGREEMENTS WITH FLOOD INSURANCE POOL

  Sec. 1332. (a) The [Director] Administrator is authorized to 
enter into such agreements with the pool formed or otherwise 
created under this part as he deems necessary to carry out the 
purposes of this title.
  (b) Such agreements shall specify--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the maximum amount of profit, established by the 
        [Director] Administrator and set forth in the schedules 
        prescribed under section 1311, which may be realized by 
        such pool (and the companies and other insurers 
        participating therein),

           *       *       *       *       *       *       *

  (c) In addition, such agreements shall contain such 
provisions as the [Director] Administrator finds necessary to 
assure that--
          (1) * * *
          (2) the insurance companies and other insurers 
        participating in the pool will take whatever action may 
        be necessary to provide continuity of flood insurance 
        coverage or reinsurance by the pool, and

           *       *       *       *       *       *       *


                     PREMIUM EQUALIZATION PAYMENTS

  Sec. 1334. (a) The [Director] Administrator, on such terms 
and conditions as he may from time to time prescribe, shall 
make periodic payments to the pool formed or otherwise created 
under section 1331, in recognition of such reductions in 
chargeable premium rates under section 1308 below estimated 
premium rates under section 1307(a)(1) as are required in order 
to make flood insurance available on reasonable terms and 
conditions.
  (b) Designated periods under this section and the methods for 
determining the sum of premiums paid or payable during such 
periods shall be established by the [Director] Administrator.

                          REINSURANCE COVERAGE

  Sec. 1335. (a)(1) The [Director] Administrator is authorized 
to take such action as may be necessary in order to make 
available, to the pool formed or otherwise created under 
section 1331, reinsurance for losses (due to claims for proved 
and approved losses covered by flood insurance) which are in 
excess of losses assumed by such pool in accordance with the 
excess loss agreement entered into under subsection (c).
  (2) The Administrator is authorized to secure reinsurance 
coverage of coverage provided by the flood insurance program 
from private market insurance, reinsurance, and capital market 
sources at rates and on terms determined by the Administrator 
to be reasonable and appropriate in an amount sufficient to 
maintain the ability of the program to pay claims and that 
minimizes the likelihood that the program will utilize the 
borrowing authority provided under section 1309.
  (b) Such reinsurance shall be made available pursuant to 
contract, agreement, or any other arrangement, in consideration 
of such payment of a premium, fee, or other charge as the 
[Director] Administrator finds necessary to cover anticipated 
losses and other costs of providing such reinsurance.
  (c) The [Director] Administrator is authoried to negotiate an 
excess loss agreement, from time to time, under which the 
amount of flood insurance retained by the pool, after ceding 
reinsurance, shall be adequate to further the purposes of this 
title, consistent with the objective of maintaining appropriate 
financial participation and risk sharing to the maximum extent 
practicable on the part of participating insurance companies 
and other insurers.
  (d) All reinsurance claims for losses in excess of losses 
assumed by the pool shall be submitted on a portfolio basis by 
such pool in accordance with terms and conditions established 
by the [Director] Administrator.

                  EMERGENCY IMPLEMENTATION OF PROGRAM

  Sec. 1336. (a) Notwithstanding any other provisions of this 
title, for the purpose of providing flood insurance coverage at 
the earliest possible time, the [Director] Administrator shall 
carry out the flood insurance program authorized under chapter 
I during the period ending on the date specified in section 
1319, in accordance with the provisions of this part and the 
other provision of this title insofar as they relate to this 
part but subject to the modifications made by or under 
subsection (b).
  (b) In carrying out the flood insurance program pursuant to 
subsection (a), the [Director] Administrator--
          (1) * * *

           *       *       *       *       *       *       *


          Part B--Government Program With Industry Assistance

                    FEDERAL OPERATION OF THE PROGRAM

  Sec. 1340. (a) If at any time, after consultation with 
representatives of the insurance industry, the [Director] 
Administrator determines that operation of the flood insurance 
program as provided under part A cannot be carried out, or that 
such operation, in itself, would be assisted materially by the 
Federal Government's assumption, in whole or in part, of the 
operational responsibility for flood insurance under this title 
(on a temporary or other basis) he shall promptly undertake any 
necessary arrangements to carry out the program of flood 
insurance authorized under chapter I through the facilities of 
the Federal Government, utilizing, for purposes of providing 
flood insurance coverage, either--
          (1) * * *
          (2) such other officers and employees of any 
        executive agency (as defined in section 105 of title 5 
        of the United States Code) as the [Director] 
        Administrator and the head of any such agency may from 
        time to time, agree upon, on a reimbursement or other 
        basis, or

           *       *       *       *       *       *       *

  (b) Upon making the determination referred to in subsection 
(a), the [Director] Administrator shall make a report to the 
Congress and, at the same time, to the private insurance 
companies participating in the National Flood Insurance Program 
pursuant to section 1310 of this Act. Such report shall--
          (1) * * *

           *       *       *       *       *       *       *

          (4) contain such recommendations as the [Director] 
        Administrator deems advisable.
The [Director] Administrator shall not implement the program of 
flood insurance authorized under chapter I through the 
facilities of the Federal Government until 9 months after the 
date of submission of the report under this subsection unless 
it would be impossible to continue to effectively carry out the 
National Flood Insurance Program operations during this time.

          ADJUSTMENT AND PAYMENT OF CLAIMS AND JUDICIAL REVIEW

  Sec. 1341. In the event the program is carried out as 
provided in section 1340, the [Director] Administrator shall be 
authorized to adjust and make payment of any claims for proved 
and approved losses covered by flood insurance, and upon the 
disallowance by the [Director] Administrator of any such 
claims, or upon the refusal of the claimant to accept the 
amount allowed upon any such claim, the claimant, within one 
year after the date of mailing of notice of disallowance or 
partial disallowance by the [Director] Administrator, may 
institute an action against the [Director] Administrator on 
such claim in the United States district court for the district 
in which the insured property or the major part thereof shall 
have been situated, and original exclusive jurisdiction is 
hereby conferred upon such court to hear and determine such 
action without regard to the amount in controversy.

              Part C--Provisions of General Applicability

                     SERVICES BY INSURANCE INDUSTRY

  Sec. 1345. (a) In administering the flood insurance program 
under this chapter, the [Director] Administrator is authorized 
to enter into any contracts, agreements, or other appropriate 
arrangements which may, from time to time, be necessary for the 
purpose of utilizing, on such terms and conditions as may be 
agreed upon, the facilities and services of any insurance 
companies or other insurers, insurance agents and brokers, or 
insurance adjustment organizations; and such contracts, 
agreements, or arrangements may include provision for payment 
of applicable operating costs and allowances for such 
facilities and services as set forth in the schedules 
prescribed under section 1311.

           *       *       *       *       *       *       *

  (c) The [Director] Administrator of the Federal Emergency 
Management Agency shall hold any agent or broker selling or 
undertaking to sell flood insurance under this title harmless 
from any judgment for damages against such agent or broker as a 
result of any court action by a policyholder or applicant 
arising out of an error or omission on the part of the Federal 
Emergency Management Agency, and shall provide any such agent 
or broker with indemnification, including court costs and 
reasonable attorney fees, arising out of and caused by an error 
or omission on the part of the Federal Emergency Management 
Agency and its contractors. The [Director] Administrator of the 
Federal Emergency Management Agency may not hold harmless or 
indemnify an agent or broker for his or her error or omission.
  (d) Information Regarding Multiple Perils Claims.--
          (1) In general.--Subject to paragraph (2), if an 
        insured having flood insurance coverage under a policy 
        issued under the program under this title by the 
        Administrator or a company, insurer, or entity offering 
        flood insurance coverage under such program (in this 
        subsection referred to as a ``participating company'') 
        has wind or other homeowners coverage from any company, 
        insurer, or other entity covering property covered by 
        such flood insurance, in the case of damage to such 
        property that may have been caused by flood or by wind, 
        the Administrator and the participating company, upon 
        the request of the insured, shall provide to the 
        insured, within 30 days of such request--
                  (A) a copy of the estimate of structure 
                damage;
                  (B) proofs of loss;
                  (C) any expert or engineering reports or 
                documents commissioned by or relied upon by the 
                Administrator or participating company in 
                determining whether the damage was caused by 
                flood or any other peril; and
                  (D) the Administrator's or the participating 
                company's final determination on the claim.
          (2) Timing.--Paragraph (1) shall apply only with 
        respect to a request described in such paragraph made 
        by an insured after the Administrator or the 
        participating company, or both, as applicable, have 
        issued a final decision on the flood claim involved and 
        resolution of all appeals with respect to such claim.
  (e) FEMA Authority To Reject Transfer of Policies.--
Notwithstanding any other provision of this Act, the 
Administrator may, at the discretion of the Administrator, 
refuse to accept the transfer of the administration of policies 
for coverage under the flood insurance program under this title 
that are written and administered by any insurance company or 
other insurer, or any insurance agent or broker.

 USE OF INSURANCE POOL, COMPANIES, OR OTHER PRIVATE ORGANIZATIONS FOR 
                            CERTAIN PAYMENTS

  Sec. 1346. (a) In order to provide for maximum efficency in 
the administration of the flood insurance program and in order 
to facilitate the expeditious payment of any Federal funds 
under such program, the [Director] Administrator may enter into 
contracts with a pool formed or otherwise created under section 
1331, or any insurance company or other private organization, 
for the purpose of securing performance by such pool, company, 
or organization, or for purposes of securing reinsurance of 
insurance coverage provided by the program, of any or all of 
the following responsibilities:
                  (1) [estimating] Estimating and later 
                determining any amounts of payments to be 
                made[;].
                  (2) [receiving] Receiving from the [Director] 
                Administrator, disbursing, and accounting for 
                funds in making such payments[;].
                  (3) [making] Making such audits of the 
                records of any insurance company or other 
                insurer, insurance agent or broker, or 
                insurance adjustment organization as may be 
                necessary to assure that proper payments are 
                made[; and].
                  (4) Placing reinsurance coverage on insurance 
                provided by such program.
                  [(4) otherwise] (5) Otherwise assisting in 
                such manner as the contract may provide to 
                further the purposes of this title.
  (b) Any contract with the pool or an insurance company or 
other private organization under this section may contain such 
terms and conditions at the [Director] Administrator finds 
necessary or appropriate for carrying out responsibilities 
under subsection (a), and may provide for payment of any costs 
which the [Director] Administrator determines are incidental to 
carrying out such responsibilities which are covered by the 
contract.

           *       *       *       *       *       *       *

  (d) No contract may be entered into under this section unless 
the [Director] Administrator finds that the pool, company, or 
organization will perform its obligations under the contract 
efficiently and effectively, and will meet such requirements as 
to financial responsibility, legal authority, and other matters 
as he finds pertinent.
  (e)(1) Any such contract may require the pool, company, or 
organization or any of its officers or employees certifying 
payments or disbursing funds pursuant to the contract, or 
otherwise participating in carrying out the contract, to give 
surety bond to the United States in such amount as the 
[Director] Administrator may deem appropriate.

           *       *       *       *       *       *       *

  (f) Any contract entered into under this section shall be for 
a term of one year, and may be made automatically renewable 
from term to term in the absence of notice by either party of 
an intention to terminate at the end of the current term; 
except that the [Director] Administrator may terminate any such 
contract at any time (after reasonable notice to the pool, 
company, or organization involved) if he finds that the pool, 
company, or organization has failed substantially to carry out 
the contract, or is carrying out the contract in a manner 
inconsistent with the efficient and effective administration of 
the flood insurance program authorized under this title.

                       SETTLEMENT AND ARBITRATION

  Sec. 1347. (a) The [Director] Administrator is authorized to 
make final settlement of any claims or demands which may arise 
as a result of any financial transactions which he is 
authorized to carry out under this chapter, and may, to assist 
him in making any such settlement, refer any disputes relating 
to such claims or demands to arbitration, with the consent of 
the parties concerned.
  (b) Such arbitration shall be advisory in nature, and any 
award, decision, or recommendation which may be made shall 
become final only upon the approval of the [Director] 
Administrator.

                           RECORDS AND AUDITS

  Sec. 1348. (a) The flood insurance pool formed or otherwise 
created under part A of this chapter, and any insurance company 
or other private organization executing any contract, 
agreement, or other appropriate arrangement with the [Director] 
Administrator under part B of this chapter or this part, shall 
keep such records as the [Director] Administrator shall 
prescribe, including records which fully disclose the total 
costs of the program undertaken or the services being rendered, 
and such other records as will facilitate an effective audit.
  (b) The [Director] Administrator and the Comptroller General 
of the United States, or any of their duly authorized 
representatives, shall have access for the purpose of audit and 
examination to any books, documents, papers and any such 
insurance company or other private organization that are 
pertinent to the costs of the program undertaken or the 
services being rendered.

SEC. 1349. NOTIFICATION TO POLICY HOLDERS REGARDING DIRECT MANAGEMENT 
                    OF POLICY BY FEMA.

  (a) Notification.--Not later than 60 days before the date on 
which a transferred flood insurance policy expires, and 
annually thereafter until such time as the Federal Emergency 
Management Agency is no longer directly administering such 
policy, the Administrator shall notify the holder of such 
policy that--
          (1) the Federal Emergency Management Agency is 
        directly administering the policy;
          (2) such holder may purchase flood insurance that is 
        directly administered by an insurance company; and
          (3) purchasing flood insurance offered under the 
        National Flood Insurance Program that is directly 
        administered by an insurance company will not alter the 
        coverage provided or the premiums charged to such 
        holder that otherwise would be provided or charged if 
        the policy was directly administered by the Federal 
        Emergency Management Agency.
  (b) Definition.--In this section, the term ``transferred 
flood insurance policy'' means a flood insurance policy that--
          (1) was directly administered by an insurance company 
        at the time the policy was originally purchased by the 
        policy holder; and
          (2) at the time of renewal of the policy, direct 
        administration of the policy was or will be transferred 
        to the Federal Emergency Management Agency.

   CHAPTER III--COORDINATION OF FLOOD INSURANCE WITH LAND-MANAGEMENT 
                     PROGRAMS IN FLOOD-PRONE AREAS

                  IDENTIFICATION OF FLOOD-PRONE AREAS

  Sec. 1360. (a) The [Director] Administrator is authorized to 
consult with, receive information from, and enter into any 
agreements or other arrangements with the Secretaries of the 
Army, the Interior, Agriculture, and Commerce, the Tennessee 
Valley Authority, and the heads of other Federal departments or 
agencies, on a reimbursement basis, or with the head of any 
State or local agency, or enter into contracts with any persons 
or private firms, in order that he may--
          (1) * * *

           *       *       *       *       *       *       *

  (b) The [Director] Administrator is directed to accelerate 
the identification of risk zones within flood-prone and 
mudslide-prone areas, as provided by subsection (a)(2) of this 
section, in order to make known the degree of hazard within 
each such zone at the earliest possible date. To accomplish 
this objective, the [Director] Administrator is authorized, 
without regard to subsections (a) and (b) of section 3324 of 
title 31, United States Code, and section 3709 of the Revised 
Statutes (41 U.S.C. 5), to make grants, provide technical 
assistance, and enter into contracts, cooperative agreements, 
or other transactions, on such terms as he may deem 
appropriate, or consent to modifications thereof, and to make 
advance or progress payments in connection therewith.
  (c) The Secretary of Defense (through the Army Corps of 
Engineers), the Secretary of the Interior (through the United 
States Geological Survey), the Secretary of Agriculture 
(through the Soil Conservation Service), the Secretary of 
Commerce (through the National Oceanic and Atmospheric 
Administration), the head of the Tennessee Valley Authority, 
and the heads of all other Federal agencies engaged in the 
identification or delineation of flood-risk zones within the 
several States shall, in consultation with the [Director] 
Administrator, give the highest practicable priority in the 
allocation of available manpower and other available resources 
to the identification and mapping of flood hazard areas and 
flood-risk zones, in order to assist the [Director] 
Administrator to meet the deadline established by this section.
  (d) The [Director] Administrator shall, not later than 
September 30, 1984, submit to the Congress a plan for bringing 
all communities containing flood-risk zones into full program 
status by September 30, 1987.
  (e) Review of Flood Maps.--Once during each 5-year period 
(the 1st such period beginning on the date of enactment of the 
Riegle Community Development and Regulatory Improvement Act of 
1994) or more often as the [Director] Administrator determines 
necessary, the [Director] Administrator shall assess the need 
to revise and update all floodplain areas and flood risk zones 
identified, delineated, or established under this section, 
based on an analysis of all natural hazards affecting flood 
risks.
  (f) Updating Flood Maps.--The [Director] Administrator shall 
revise and update any floodplain areas and flood-risk zones--
          (1) upon the determination of the [Director] 
        Administrator, according to the assessment under 
        subsection (e), that revision and updating are 
        necessary for the areas and zones; or
          (2) upon the request from any State or local 
        government stating that specific floodplain areas or 
        flood-risk zones in the State or locality need revision 
        or updating, if sufficient technical data justifying 
        the request is submitted and the unit of government 
        making the request agrees to provide funds in an amount 
        determined by the [Director] Administrator, but which 
        may not exceed 50 percent of the cost of carrying out 
        the requested revision or update.
  (g) Availability of Flood Maps.--To promote compliance with 
the requirements of this title, the [Director] Administrator 
shall make flood insurance rate maps and related information 
available free of charge to the Federal entities for lending 
regulation, Federal agency lenders, State agencies directly 
responsible for coordinating the national flood insurance 
program, and appropriate representatives of communities 
participating in the national flood insurance program, and at a 
reasonable cost to all other persons. Any receipts resulting 
from this subsection shall be deposited in the National Flood 
Insurance Fund, pursuant to section 1310(b)(6).
  (h) Notification of Flood Map Changes.--The [Director] 
Administrator shall cause notice to be published in the Federal 
Register (or shall provide notice by another comparable method) 
of any change to flood insurance map panels and any change to 
flood insurance map panels issued in the form of a letter of 
map amendment or a letter of map revision. Such notice shall be 
published or otherwise provided not later than 30 days after 
the map change or revision becomes effective. Notice by any 
method other than publication in the Federal Register shall 
include all pertinent information, provide for regular and 
frequent distribution, and be at least as accessible to map 
users as notice in the Federal Register. All notices under this 
subsection shall include information on how to obtain copies of 
the changes or revisions.
  (i) Compendia of Flood Map Changes.--Every 6 months, the 
[Director] Administrator shall publish separately in their 
entirety within a compendium, all changes and revisions to 
flood insurance map panels and all letters of map amendment and 
letters of map revision for which notice was published in the 
Federal Register or otherwise provided during the preceding 6 
months. The [Director] Administrator shall make such compendia 
available, free of charge, to Federal entities for lending 
regulation, Federal agency lenders, and States and communities 
participating in the national flood insurance program pursuant 
to section 1310 and at cost to all other parties. Any receipts 
resulting from this subsection shall be deposited in the 
National Flood Insurance Fund, pursuant to section 1310(b)(6).
  (j) Provision of Information.--In the implementation of 
revisions to and updates of flood insurance rate maps, the 
[Director] Administrator shall share information, to the extent 
appropriate, with the Under Secretary of Commerce for Oceans 
and Atmosphere and representatives from State coastal zone 
management programs.
  (k) Treatment of Levees.--The Administrator may not issue 
flood insurance maps, or make effective updated flood insurance 
maps, that omit or disregard the actual protection afforded by 
an existing levee, floodwall, pump or other flood protection 
feature, regardless of the accreditation status of such 
feature.
  (l) Notification to Members of Congress of Map 
Modernization.--Upon any revision or update of any floodplain 
area or flood-risk zone pursuant to subsection (f), any 
decision pursuant to subsection (f)(1) that such revision or 
update is necessary, any issuance of preliminary maps for such 
revision or updating, or any other significant action relating 
to any such revision or update, the Administrator shall notify 
the Senators for each State affected, and each Member of the 
House of Representatives for each congressional district 
affected, by such revision or update in writing of the action 
taken.
  (m) Reimbursement.--
          (1) Requirement upon bona fide error.--If an owner of 
        any property located in an area described in section 
        102(i)(3) of the Flood Disaster Protection Act of 1973, 
        or a community in which such a property is located, 
        obtains a letter of map amendment, or a letter of map 
        revision, due to a bona fide error on the part of the 
        Administrator of the Federal Emergency Management 
        Agency, the Administrator shall reimburse such owner, 
        or such entity or jurisdiction acting on such owner's 
        behalf, or such community, as applicable, for any 
        reasonable costs incurred in obtaining such letter.
          (2) Reasonable costs.--The Administrator shall, by 
        regulation or notice, determine a reasonable amount of 
        costs to be reimbursed under paragraph (1), except that 
        such costs shall not include legal or attorneys fees. 
        In determining the reasonableness of costs, the 
        Administrator shall only consider the actual costs to 
        the owner or community, as applicable, of utilizing the 
        services of an engineer, surveyor, or similar services.
  (n) Enhanced Communication With Certain Communities During 
Map Updating Process.--In updating flood insurance maps under 
this section, the Administrator shall communicate with 
communities located in areas where flood insurance rate maps 
have not been updated in 20 years or more and the appropriate 
State emergency agencies to resolve outstanding issues, provide 
technical assistance, and disseminate all necessary information 
to reduce the prevalence of outdated maps in flood-prone areas.
  (o) Notification to Residents Newly Included in Flood Hazard 
Area.--In revising or updating any areas having special flood 
hazards, the Administrator shall provide to each owner of a 
property to be newly included in such a special flood hazard 
area, at the time of issuance of such proposed revised or 
updated flood insurance maps, a copy of the proposed revised or 
updated flood insurance maps together with information 
regarding the appeals process under section 1363 (42 U.S.C. 
4104).

                  CRITERIA FOR LAND MANAGEMENT AND USE

  Sec. 1361. (a) The [Director] Administrator is authorized to 
carry out studies and investigations, utilizing to the maximum 
extent practicable the existing facilities and services of 
other Federal departments or agencies, and State and local 
governmental agencies, and any other organizations, with 
respect to the adequacy of State and local measures in flood-
prone areas as to land management and use, flood control, flood 
zoning, and flood damage prevention, and may enter into any 
contracts, agreements or other appropriate arrangements to 
carry out such authority.

           *       *       *       *       *       *       *

  (c) On the basis of such studies and investigations, and such 
other information as he deems necessary, the [Director] 
Administrator shall from time to time develop comprehensive 
critera designed to encourage, where necessary, the adoption of 
adequate State and local measures which, to the maximum extent 
feasible, will--
          (1) * * *

           *       *       *       *       *       *       *

and he shall work closely with and provide any necessary 
technical assistance to State, interstate, and local 
governmental agencies, to encourage the application of such 
criteria and the adoption and enforcement of such measures.

[SEC. 1361A. PILOT PROGRAM FOR MITIGATION OF SEVERE REPETITIVE LOSS 
                    PROPERTIES.

  [(a) Authority.--To the extent amounts are made available for 
use under this section, the Director may, subject to the 
limitations of this section, provide financial assistance to 
States and communities that decide to participate in the pilot 
program established under this section for taking actions with 
respect to severe repetitive loss properties (as such term is 
defined in subsection (b)) to mitigate flood damage to such 
properties and losses to the National Flood Insurance Fund from 
such properties.
  [(b) Severe Repetitive Loss Property.--For purposes of this 
section, the term ``severe repetitive loss property'' has the 
following meaning:
          [(1) Single-family properties.--In the case of a 
        property consisting of 1 to 4 residences, such term 
        means a property that--
                  [(A) is covered under a contract for flood 
                insurance made available under this title; and
                  [(B) has incurred flood-related damage--
                          [(i) for which 4 or more separate 
                        claims payments have been made under 
                        flood insurance coverage under this 
                        title, with the amount of each such 
                        claim exceeding $5,000, and with the 
                        cumulative amount of such claims 
                        payments exceeding $20,000; or
                          [(ii) for which at least 2 separate 
                        claims payments have been made under 
                        such coverage, with the cumulative 
                        amount of such claims exceeding the 
                        value of the property.
          [(2) Multifamily properties.--In the case of a 
        property consisting of 5 or more residences, such term 
        shall have such meaning as the Director shall by 
        regulation provide.
  [(c) Eligible Activities.--Amounts provided under this 
section to a State or community may be used only for the 
following activities:
          [(1) Mitigation activities.--To carry out mitigation 
        activities that reduce flood damages to severe 
        repetitive loss properties, including elevation, 
        relocation, demolition, and floodproofing of 
        structures, and minor physical localized flood control 
        projects, and the demolition and rebuilding of 
        properties to at least Base Flood Elevation or greater, 
        if required by any local ordinance.
          [(2) Purchase.--To purchase severe repetitive loss 
        properties, subject to subsection (g).
  [(d) Matching Requirement.--
          [(1) In general.--Except as provided in paragraph 
        (2), in any fiscal year the Director may not provide 
        assistance under this section to a State or community 
        in an amount exceeding 3 times the amount that the 
        State or community certifies, as the Director shall 
        require, that the State or community will contribute 
        from non-Federal funds for carrying out the eligible 
        activities to be funded with such assistance amounts.
          [(2) Reduced community match.--With respect to any 1-
        year period in which assistance is made available under 
        this section, the Director may adjust the contribution 
        required under paragraph (1) by any State, and for the 
        communities located in that State, to not less than 10 
        percent of the cost of the activities for each severe 
        repetitive loss property for which grant amounts are 
        provided if, for such year--
                  [(A) the State has an approved State 
                mitigation plan meeting the requirements for 
                hazard mitigation planning under section 322 of 
                the Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act (42 U.S.C. 5165) that 
                specifies how the State intends to reduce the 
                number of severe repetitive loss properties; 
                and
                  [(B) the Director determines, after 
                consultation with the State, that the State has 
                taken actions to reduce the number of such 
                properties.
          [(3) Non-federal funds.--For purposes of this 
        subsection, the term ``non-Federal funds'' includes 
        State or local agency funds, in-kind contributions, any 
        salary paid to staff to carry out the eligible 
        activities of the recipient, the value of the time and 
        services contributed by volunteers to carry out such 
        activities (at a rate determined by the Director), and 
        the value of any donated material or building and the 
        value of any lease on a building.
  [(e) Notice of Mitigation Program.--
          [(1) In general.--Upon selecting a State or community 
        to receive assistance under subsection (a) to carry out 
        eligible activities, the Director shall notify the 
        owners of a severe repetitive loss property, in plain 
        language, within that State or community--
                  [(A) that their property meets the definition 
                of a severe repetitive loss property under this 
                section;
                  [(B) that they may receive an offer of 
                assistance under this section;
                  [(C) of the types of assistance potentially 
                available under this section;
                  [(D) of the implications of declining such 
                offer of assistance under this section; and
                  [(E) that there is a right to appeal under 
                this section.
          [(2) Identification of severe repetitive loss 
        properties.--The Director shall take such steps as are 
        necessary to identify severe repetitive loss 
        properties, and submit that information to the relevant 
        States and communities.
  [(f) Standards for Mitigation Offers.--The program under this 
section for providing assistance for eligible activities for 
severe repetitive loss properties shall be subject to the 
following limitations:
          [(1) Priority.--In determining the properties for 
        which to provide assistance for eligible activities 
        under subsection (c), the Director shall provide 
        assistance for properties in the order that will result 
        in the greatest amount of savings to the National Flood 
        Insurance Fund in the shortest period of time, in a 
        manner consistent with the allocation formula under 
        paragraph (5).
          [(2) Offers.--The Director shall provide assistance 
        in a manner that permits States and communities to make 
        offers to owners of severe repetitive loss properties 
        to take eligible activities under subsection (c) as 
        soon as practicable.
          [(3) Consultation.--In determining for which eligible 
        activities under subsection (c) to provide assistance 
        with respect to a severe repetitive loss property, the 
        relevant States and communities shall consult, to the 
        extent practicable, with the owner of the property.
          [(4) Deference to local mitigation decisions.--The 
        Director shall not, by rule, regulation, or order, 
        establish a priority for funding eligible activities 
        under this section that gives preference to one type or 
        category of eligible activity over any other type or 
        category of eligible activity.
          [(5) Allocation.--
                  [(A) In general.--Subject to subparagraphs 
                (B) and (C), of the total amount made available 
                for assistance under this section in any fiscal 
                year, the Director shall allocate assistance to 
                a State, and the communities located within 
                that State, based upon the percentage of the 
                total number of severe repetitive loss 
                properties located within that State.
                  [(B) Redistribution.--Any funds allocated to 
                a State, and the communities within the State, 
                under subparagraph (A) that have not been 
                obligated by the end of each fiscal year shall 
                be redistributed by the Director to other 
                States and communities to carry out eligible 
                activities in accordance with this section.
                  [(C) Exception.--Of the total amount made 
                available for assistance under this section in 
                any fiscal year, 10 percent shall be made 
                available to communities that--
                          [(i) contain one or more severe 
                        repetitive loss properties; and
                          [(ii) are located in States that 
                        receive little or no assistance, as 
                        determined by the Director, under the 
                        allocation formula under subparagraph 
                        (A).
          [(6) Notice.--Upon making an offer to provide 
        assistance with respect to a property for any eligible 
        activity under subsection (c), the State or community 
        shall notify each holder of a recorded interest on the 
        property of such offer and activity.
  [(g) Purchase Offers.--A State or community may take action 
under subsection (c)(2) to purchase a severe repetitive loss 
property only if the following requirements are met:
          [(1) Use of property.--The State or community enters 
        into an agreement with the Director that provides 
        assurances that the property purchased will be used in 
        a manner that is consistent with the requirements of 
        section 404(b)(2)(B) of the Robert T. Stafford Disaster 
        Relief and Emergency Assistance Act (42 U.S.C. 
        5170c(b)(2)(B)) for properties acquired, accepted, or 
        from which a structure will be removed pursuant to a 
        project provided property acquisition and relocation 
        assistance under such section 404(b).
          [(2) Offers.--The Director shall provide assistance 
        in a manner that permits States and communities to make 
        offers to owners of severe repetitive loss properties 
        and of associated land to engage in eligible activities 
        as soon as possible.
          [(3) Purchase price.--The amount of purchase offer is 
        not less than the greatest of--
                  [(A) the amount of the original purchase 
                price of the property, when purchased by the 
                holder of the current policy of flood insurance 
                under this title;
                  [(B) the total amount owed, at the time the 
                offer to purchase is made, under any loan 
                secured by a recorded interest on the property; 
                and
                  [(C) an amount equal to the fair market value 
                of the property immediately before the most 
                recent flood event affecting the property, or 
                an amount equal to the current fair market 
                value of the property.
          [(4) Comparable housing payment.--If a purchase offer 
        made under paragraph (2) is less than the cost of the 
        homeowner-occupant to purchase a comparable replacement 
        dwelling outside the flood hazard area in the same 
        community, the Director shall make available an 
        additional relocation payment to the homeowner-occupant 
        to apply to the difference.
  [(h) Increased Premiums in Cases of Refusal To Mitigate.--
          [(1) In general.--In any case in which the owner of a 
        severe repetitive loss property refuses an offer to 
        take action under paragraph (1) or (2) of subsection 
        (c) with respect to such property, the Director shall--
                  [(A) notify each holder of a recorded 
                interest on the property of such refusal; and
                  [(B) notwithstanding subsections (a) through 
                (c) of section 1308, thereafter the chargeable 
                premium rate with respect to the property shall 
                be the amount equal to 150 percent of the 
                chargeable rate for the property at the time 
                that the offer was made, as adjusted by any 
                other premium adjustments otherwise applicable 
                to the property and any subsequent increases 
                pursuant to paragraph (2) and subject to the 
                limitation under paragraph (3).
          [(2) Increased premiums upon subsequent flood 
        damage.--Notwithstanding subsections (a) through (c) of 
        section 1308, if the owner of a severe repetitive loss 
        property does not accept an offer to take action under 
        paragraph (1) or (2) of subsection (c) with respect to 
        such property and a claim payment exceeding $1,500 is 
        made under flood insurance coverage under this title 
        for damage to the property caused by a flood event 
        occurring after such offer is made, thereafter the 
        chargeable premium rate with respect to the property 
        shall be the amount equal to 150 percent of the 
        chargeable rate for the property at the time of such 
        flood event, as adjusted by any other premium 
        adjustments otherwise applicable to the property and 
        any subsequent increases pursuant to this paragraph and 
        subject to the limitation under paragraph (3).
          [(3) Limitation on increased premiums.--In no case 
        may the chargeable premium rate for a severe repetitive 
        loss property be increased pursuant to this subsection 
        to an amount exceeding the applicable estimated risk 
        premium rate for the area (or subdivision thereof) 
        under section 1307(a)(1).
          [(4) Treatment of deductibles.--Any increase in 
        chargeable premium rates required under this subsection 
        for a severe repetitive loss property may be carried 
        out, to the extent appropriate, as determined by the 
        Director, by adjusting any deductible charged in 
        connection with flood insurance coverage under this 
        title for the property.
          [(5) Notice of continued offer.--Upon each renewal or 
        modification of any flood insurance coverage under this 
        title for a severe repetitive loss property, the 
        Director shall notify the owner that the offer made 
        pursuant to subsection (c) is still open.
          [(6) Appeals.--
                  [(A) In general.--Any owner of a severe 
                repetitive loss property may appeal a 
                determination of the Director to take action 
                under paragraph (1)(B) or (2) with respect to 
                such property, based only upon the following 
                grounds:
                          [(i) As a result of such action, the 
                        owner of the property will not be able 
                        to purchase a replacement primary 
                        residence of comparable value and that 
                        is functionally equivalent.
                          [(ii) Based on independent 
                        information, such as contractor 
                        estimates or appraisals, the property 
                        owner believes that the price offered 
                        for purchasing the property is not an 
                        accurate estimation of the value of the 
                        property, or the amount of Federal 
                        funds offered for mitigation 
                        activities, when combined with funds 
                        from non-Federal sources, will not 
                        cover the actual cost of mitigation.
                          [(iii) As a result of such action, 
                        the preservation or maintenance of any 
                        prehistoric or historic district, site, 
                        building, structure, or object included 
                        in, or eligible for inclusion in, the 
                        National Register of Historic Places 
                        will be interfered with, impaired, or 
                        disrupted.
                          [(iv) The flooding that resulted in 
                        the flood insurance claims described in 
                        subsection (b)(2) for the property 
                        resulted from significant actions by a 
                        third party in violation of Federal, 
                        State, or local law, ordinance, or 
                        regulation.
                          [(v) In purchasing the property, the 
                        owner relied upon flood insurance rate 
                        maps of the Federal Emergency 
                        Management Agency that were current at 
                        the time and did not indicate that the 
                        property was located in an area having 
                        special flood hazards.
                          [(vi) The owner of the property, 
                        based on independent information, such 
                        as contractor estimates or other 
                        appraisals, demonstrates that an 
                        alternative eligible activity under 
                        subsection (c) is at least as cost 
                        effective as the initial offer of 
                        assistance.
                  [(B) Procedure.--An appeal under this 
                paragraph of a determination of the Director 
                shall be made by filing, with the Director, a 
                request for an appeal within 90 days after 
                receiving notice of such determination. Upon 
                receiving the request, the Director shall 
                select, from a list of independent third 
                parties compiled by the Director for such 
                purpose, a party to hear such appeal. Within 90 
                days after filing of the request for the 
                appeal, such third party shall review the 
                determination of the Director and shall set 
                aside such determination if the third party 
                determines that the grounds under subparagraph 
                (A) exist. During the pendency of an appeal 
                under this paragraph, the Director shall stay 
                the applicability of the rates established 
                pursuant to paragraph (1)(B) or (2), as 
                applicable.
                  [(C) Effect of final determination.--In an 
                appeal under this paragraph--
                          [(i) if a final determination is made 
                        in favor of the property owner under 
                        subparagraph (A) exist, the third party 
                        hearing such appeal shall require the 
                        Director to reduce the chargeable risk 
                        premium rate for flood insurance 
                        coverage for the property involved in 
                        the appeal from the amount required 
                        under paragraph (1)(B) or (2) to the 
                        amount paid prior to the offer to take 
                        action under paragraph (1) or (2) of 
                        subsection (c); and
                          [(ii) if a final determination is 
                        made that the grounds under 
                        subparagraph (A) do not exist, the 
                        Director shall promptly increase the 
                        chargeable risk premium rate for such 
                        property to the amount established 
                        pursuant to paragraph (1)(B) or (2), as 
                        applicable, and shall collect from the 
                        property owner the amount necessary to 
                        cover the stay of the applicability of 
                        such increased rates during the 
                        pendency of the appeal.
                  [(D) Costs.--If the third party hearing an 
                appeal under this paragraph is compensated for 
                such service, the costs of such compensation 
                shall be borne--
                          [(i) by the owner of the property 
                        requesting the appeal, if the final 
                        determination in the appeal is that the 
                        grounds under subparagraph (A) do not 
                        exist; and
                          [(ii) by the National Flood Insurance 
                        Fund, if such final determination is 
                        that the grounds under subparagraph (A) 
                        do exist.
                  [(E) Report.--Not later than 6 months after 
                the date of the enactment of the Bunning-
                Bereuter-Blumenauer Flood Insurance Reform Act 
                of 2004, the Director shall submit a report 
                describing the rules, procedures, and 
                administration for appeals under this paragraph 
                to--
                          [(i) the Committee on Banking, 
                        Housing, and Urban Affairs of the 
                        Senate; and
                          [(ii) the Committee on Financial 
                        Services of the House of 
                        Representatives.
  [(i) Discretionary Actions in Cases of Fraudulent Claims.--If 
the Director determines that a fraudulent claim was made under 
flood insurance coverage under this title for a severe 
repetitive loss property, the Director may--
          [(1) cancel the policy and deny the provision to such 
        policyholder of any new flood insurance coverage under 
        this title for the property; or
          [(2) refuse to renew the policy with such 
        policyholder upon expiration and deny the provision of 
        any new flood insurance coverage under this title to 
        such policyholder for the property.
  [(j) Rules.--
          [(1) In general.--The Director shall, by rule--
                  [(A) subject to subsection (f)(4), develop 
                procedures for the distribution of funds to 
                States and communities to carry out eligible 
                activities under this section; and
                  [(B) ensure that the procedures developed 
                under paragraph (1)--
                          [(i) require the Director to notify 
                        States and communities of the 
                        availability of funding under this 
                        section, and that participation in the 
                        pilot program under this section is 
                        optional;
                          [(ii) provide that the Director may 
                        assist States and communities in 
                        identifying severe repetitive loss 
                        properties within States or 
                        communities;
                          [(iii) allow each State and community 
                        to select properties to be the subject 
                        of eligible activities, and the 
                        appropriate eligible activity to be 
                        performed with respect to each severe 
                        repetitive loss property; and
                          [(iv) require each State or community 
                        to submit a list of severe repetitive 
                        loss properties to the Director that 
                        the State or community would like to be 
                        the subject of eligible activities 
                        under this section.
          [(2) Consultation.--Not later than 90 days after the 
        date of enactment of this Act, the Director shall 
        consult with State and local officials in carrying out 
        paragraph (1)(A), and provide an opportunity for an 
        oral presentation, on the record, of data and arguments 
        from such officials.
  [(k) Funding.--
          [(1) In general.--Pursuant to section 1310(a)(8), the 
        Director may use amounts from the National Flood 
        Insurance Fund to provide assistance under this section 
        in each of fiscal years 2005, 2006, 2007, 2008, and 
        2009, except that the amount so used in each such 
        fiscal year may not exceed $40,000,000 and shall remain 
        available until expended. Notwithstanding any other 
        provision of this title, amounts made available 
        pursuant to this subsection shall not be subject to 
        offsetting collections through premium rates for flood 
        insurance coverage under this title.
          [(2) Administrative expenses.--Of the amounts made 
        available under this subsection, the Director may use 
        up to 5 percent for expenses associated with the 
        administration of this section.
  [(l) Termination.--The Director may not provide assistance 
under this section to any State or community after September 
30, 2009.]

           *       *       *       *       *       *       *


                                APPEALS

  [Sec. 1363. (a) In establishing projected flood elevations 
for land use purposes with respect to any community pursuant to 
section 1361, the Director shall first propose such 
determinations by publication for comment in the Federal 
Register, by direct notification to the chief executive officer 
of the community, and by publication in a prominent local 
newspaper.]
  Sec. 1363. (a) In establishing projected flood elevations for 
land use purposes with respect to any community pursuant to 
section 1361, the Administrator shall first propose such 
determinations--
          (1) by providing the chief executive officer of each 
        community affected by the proposed elevations, by 
        certified mail, with a return receipt requested, notice 
        of the elevations, including a copy of the maps for the 
        elevations for such community and a statement 
        explaining the process under this section to appeal for 
        changes in such elevations;
          (2) by causing notice of such elevations to be 
        published in the Federal Register, which notice shall 
        include information sufficient to identify the 
        elevation determinations and the communities affected, 
        information explaining how to obtain copies of the 
        elevations, and a statement explaining the process 
        under this section to appeal for changes in the 
        elevations;
          (3) by publishing in a prominent local newspaper the 
        elevations, a description of the appeals process for 
        flood determinations, and the mailing address and 
        telephone number of a person the owner may contact for 
        more information or to initiate an appeal;
          (4) by providing written notification, by first class 
        mail, to each owner of real property affected by the 
        proposed elevations of--
                  (A) the status of such property, both prior 
                to and after the effective date of the proposed 
                determination, with respect to flood zone and 
                flood insurance requirements under this Act and 
                the Flood Disaster Protection Act of 1973;
                  (B) the process under this section to appeal 
                a flood elevation determination; and
                  (C) the mailing address and phone number of a 
                person the owner may contact for more 
                information or to initiate an appeal; and
          (5) by notifying a local television and radio 
        station.
  [(b) The Director] (b)(1) The Administrator shall publish 
notification of flood elevation determinations in a prominent 
local newspaper at least twice during the ten-day period 
following notification to the local government and shall notify 
a local television and radio station at least once during the 
same 10-day period. During the ninety-day period following the 
second publication, any owner or lessee of real property within 
the community who believes his property rights to be adversely 
affected by the [Director's] Administrator's proposed 
determination may appeal such determination to the local 
government. The sole basis for such appeal shall be the 
possession of knowledge or information indicating that 
elevations being proposed by the [Director] Administrator with 
respect to an identified area having special flood hazards are 
scientifically or technically incorrect, and the sole relief 
which shall be granted under the authority of this section in 
the event that such appeal is sustained in accordance with 
subsection (e) or (f) is a modification of the [Director's] 
Administrator's proposed determination accordingly.
  (2) The Administrator shall grant an extension of the 90-day 
period for appeals referred to in paragraph (1) for 90 
additional days if an affected community certifies to the 
Administrator, after the expiration of at least 60 days of such 
period, that the community--
          (A) believes there are property owners or lessees in 
        the community who are unaware of such period for 
        appeals; and
          (B) will utilize the extension under this paragraph 
        to notify property owners or lessees who are affected 
        by the proposed flood elevation determinations of the 
        period for appeals and the opportunity to appeal the 
        determinations proposed by the Administrator.
  (c) Appeals by private persons shall be made to the chief 
executive officer of the community, or to such agency as he 
shall publicly designate, and shall set forth the data that 
tend to negate or contradict the [Director's] Administrator's 
finding in such form as the chief executive officer may 
specify. The community shall review and consolidate all such 
appeals and issue a written opinion stating whether the 
evidence presented is sufficient to justify an appeal on behalf 
of such persions by the community in its own name. Whether or 
not the community decides to appeal the [Director's] 
Administrator's determination, copies of individual appeals 
shall be sent to the [Director] Administrator as they are 
received by the community, and the community's appeal or a copy 
of its decision not to appeal shall be filed with the 
[Director] Administrator not later than ninety days after the 
date of the second newspaper publication of the [Director's] 
Administrator's notification.
  (d) In the event the [Director] Administrator does not 
receive an appeal from the community within the ninety days 
provided he shall consolidate and review on their own merits, 
in accordance with the procedures set forth in subsection (e), 
the appeals filed within the community by private persons and 
shall make such modifications of his proposed determinations as 
may be appropriate, taking into account the written opinion, if 
any, issued by the community in not supporting such appeals. 
The [Director's] Administrator's decision shall be in written 
form, and copies thereof shall be sent both to the chief 
executive officer of the community and to each individual 
appellant.
  (e) Upon appeal by any community, as provided by this 
section, the [Director] Administrator shall review and take 
fully into account any technical or scientific data submitted 
by the community that tend to negate or contradict the 
information upon which his proposed determination is based. The 
[Director] Administrator shall resolve such appeal by 
consultation with officials of the local government involved, 
by administrative hearing, or by submission of the conflicting 
data to an independent scientific body or appropriate Federal 
agency for advice. Until the conflict in data is resolved, and 
the [Director] Administrator makes a final determination on the 
basis of his findings in the Federal Register, and so notifies 
the governing body of the community, flood insurance previously 
available within the community shall continue to be available, 
and no person shall be denied the right to purchase such 
insurance at chargeable rates. The [Director] Administrator 
shall make his determination within a reasonable time. The 
community shall be given a reasonable time after the 
[Director's] Administrator's final determination in which to 
adopt local land use and control measures consistent with the 
[Director's] Administrator's determination. The reports and 
other information used by the [Director] Administrator in 
making his final determination shall be made available for 
public inspection and shall be admissible in a court of law in 
the event the community seeks judicial review as provided by 
this section.
  (f) When, incident to any appeal under subsection (b) or (c), 
the owner or lessee of real property or the community, as the 
case may be, incurs expense in connection with the services of 
surveyors, engineers, or similar services, but not including 
legal services, in the effecting of an appeal which is 
successful in whole or in part, the [Director] Administrator 
shall reimburse such individual or community to an extent 
measured by the ratio of the successful portion of the appeal 
as compared to the entire appeal and applying such ratio to the 
reasonable value of all such services, but no reimbursement 
shall be made by the [Director] Administrator in respect to any 
fee or expense payment, the payment of which was agreed to be 
contingent upon the result of the appeal. There is authorized 
to be appropriated for purposes of implementing this 
subsection, not to exceed $250,000.
  (g) Any appellant aggrieved by any final determination of the 
[Director] Administrator upon administrative appeal, as 
provided by this section, may appeal such determination to the 
United States district court for the district within which the 
community is located not more than sixty days after receipt of 
notice of such determination. The scope of review by the court 
shall be as provided by chapter 7 of title 5, United States 
Code. During the pendency of any such litigation, all final 
determinations of the [Director] Administrator shall be 
effective for the purposes of this title unless stayed by the 
court for good cause shown.

                          NOTICE REQUIREMENTS

  Sec. 1364. (a) Notification of Special Flood Hazards.--
          (1) Regulated lending institutions.--Each Federal 
        entity for lending regulation (after consultation and 
        coordination with the Financial Institutions 
        Examination Council) shall by regulation require 
        regulated lending institutions, as a condition of 
        making, increasing, extending, or renewing any loan 
        secured by improved real estate or a mobile home that 
        the regulated lending institution determines is located 
        or is to be located in an area that has been identified 
        by the [Director] Administrator under this title or the 
        Flood Disaster Protection Act of 1973 as an area having 
        special flood hazards, to notify the purchaser or 
        lessee (or obtain satisfactory assurances that the 
        seller or lessor has notified the purchaser or lessee) 
        and the servicer of the loan of such special flood 
        hazards, in writing, a reasonable period in advance of 
        the signing of the purchase agreement, lease, or other 
        documents involved in the transaction. The regulations 
        shall also require that the regulated lending 
        institution retain a record of the receipt of the 
        notices by the purchaser or lessee and the servicer.
          (2) Federal agency lenders.--Each Federal agency 
        lender shall by regulation require notification in the 
        manner provided under paragraph (1) with respect to any 
        loan that is made by the Federal agency lender and 
        secured by improved real estate or a mobile home 
        located or to be located in an area that has been 
        identified by the [Director] Administrator under this 
        title or the Flood Disaster Protection Act of 1973 as 
        an area having special flood hazards. Any regulations 
        issued under this paragraph shall be consistent with 
        and substantially identical to the regulations issued 
        under paragraph (1).
          (3) Contents of notice.--Written notification 
        required under this subsection shall include--
                  (A) a warning, in a form to be established by 
                the [Director] Administrator, stating that the 
                building on the improved real estate securing 
                the loan is located, or the mobile home 
                securing the loan is or is to be located, in an 
                area having special flood hazards;

           *       *       *       *       *       *       *

                  (D) any other information that the [Director] 
                Administrator considers necessary to carry out 
                the purposes of the national flood insurance 
                program.
  (b) Notification of Change of Servicer.--
          (1) Lending institutions.--Each Federal entity for 
        lending regulation (after consultation and coordination 
        with the Financial Institutions Examination Council) 
        shall by regulation require regulated lending 
        institutions, in connection with the making, 
        increasing, extending, renewing, selling, or 
        transferring any loan described in subsection (a)(1), 
        to notify the [Director] Administrator (or the designee 
        of the [Director] Administrator) in writing during the 
        term of the loan of the servicer of the loan. Such 
        institutions shall also notify the [Director] 
        Administrator (or such designee) of any change in the 
        servicer of the loan, not later than 60 days after the 
        effective date of such change. The regulations under 
        this subsection shall provide that upon any change in 
        the servicing of a loan, the duty to provide 
        notification under this subsection shall transfer to 
        the transferee servicer of the loan.

           *       *       *       *       *       *       *

  (c) Notification of Expiration of Insurance.--The [Director] 
Administrator (or the designee of the [Director] Administrator) 
shall, not less than 45 days before the expiration of any 
contract for flood insurance under this title, issue notice of 
such expiration by first class mail to the owner of the 
property covered by the contract, the servicer of any loan 
secured by the property covered by the contract, and (if known 
to the [Director] Administrator) the owner of the loan.

                  STANDARD HAZARD DETERMINATION FORMS

  Sec. 1365. (a) Development.--The [Director] Administrator, in 
consultation with representatives of the mortgage and lending 
industry, the Federal entities for lending regulation, the 
Federal agency lenders, and any other appropriate individuals, 
shall develop a standard form for determining, in the case of a 
loan secured by improved real estate or a mobile home, whether 
the building or mobile home is located in an area identified by 
the [Director] Administrator as an area having special flood 
hazards and in which flood insurance under this title is 
available. The form shall be established by regulations issued 
not later than 270 days after the date of enactment of the 
Riegle Community Development and Regulatory Improvement Act of 
1994.
  (b) Design and Contents.--
          (1) * * *
          (2) Contents.--The form shall require identification 
        of the type of flood-risk zone in which the building or 
        mobile home is located, the complete map and panel 
        numbers for the improved real estate or property on 
        which the mobile home is located, the community 
        identification number and community participation 
        status (for purposes of the national flood insurance 
        program) of the community in which the improved real 
        estate or such property is located, and the date of the 
        map used for the determination, with respect to flood 
        hazard information on file with the [Director] 
        Administrator. If the building or mobile home is not 
        located in an area having special flood hazards the 
        form shall require a statement to such effect and shall 
        indicate the complete map and panel numbers of the 
        improved real estate or property on which the mobile 
        home is located. If the complete map and panel numbers 
        are not available because the building or mobile home 
        is not located in a community that is participating in 
        the national flood insurance program or because no map 
        exists for the relevant area, the form shall require a 
        statement to such effect. The form shall provide for 
        inclusion or attachment of any relevant documents 
        indicating revisions or amendments to maps.

           *       *       *       *       *       *       *

  (e) Reliance on Previous Determination.--Any person 
increasing, extending, renewing, or purchasing a loan secured 
by improved real estate or a mobile home may rely on a previous 
determination of whether the building or mobile home is located 
in an area having special flood hazards (and shall not be 
liable for any error in such previous determination), if the 
previous determination was made not more than 7 years before 
the date of the transaction and the basis for the previous 
determination has been set forth on a form under this section, 
unless--
          (1) * * *
          (2) the person contacts the [Director] Administrator 
        to determine when the most recent map revisions or 
        updates affecting such property occurred and such 
        revisions and updates have occurred after such previous 
        determination.

           *       *       *       *       *       *       *


                         MITIGATION ASSISTANCE

  Sec. 1366. (a) Authority.--The [Director] Administrator shall 
carry out a program to provide financial assistance to States 
and communities, using amounts made available from the National 
Flood Mitigation Fund under section 1367, for planning and 
carrying out activities designed to reduce the risk of flood 
damage to structures covered under contracts for flood 
insurance under this title. [Such financial assistance shall be 
made available to States and communities in the form of grants 
under subsection (b) for planning assistance and in the form of 
grants under this section for carrying out mitigation 
activities.] Such financial assistance shall be made 
available--
          (1) to States and communities in the form of grants 
        under this section for carrying out mitigation 
        activities;
          (2) to States and communities in the form of grants 
        under this section for carrying out mitigation 
        activities that reduce flood damage to severe 
        repetitive loss structures; and
          (3) to property owners in the form of direct grants 
        under this section for carrying out mitigation 
        activities that reduce flood damage to individual 
        structures for which 2 or more claim payments for 
        losses have been made under flood insurance coverage 
        under this title if the Administrator, after 
        consultation with the State and community, determines 
        that neither the State nor community in which such a 
        structure is located has the capacity to manage such 
        grants.
  [(b) Planning Assistance Grants.--
          [(1) In general.--The Director may make grants under 
        this subsection to States and communities to assist in 
        developing mitigation plans under subsection (c).
          [(2) Funding.--Of any amounts made available from the 
        National Flood Mitigation Fund for use under this 
        section in any fiscal year, the Director may use not 
        more than 7.5 percent of the available funds under this 
        section to provide planning assistance grants under 
        this subsection.
          [(3) Limitations.--
                  [(A) Timing.--A grant under this subsection 
                may be awarded to a State or community not more 
                than once every 5 years and each grant may 
                cover a period of 1 to 3 years.
                  [(B) Single grantee amount.--A grant for 
                planning assistance may not exceed--
                          [(i) $150,000, to any State; or
                          [(ii) $50,000, to any community.
                  [(C) Cumulative state grant amount.--The sum 
                of the amounts of grants made under this 
                subsection in any fiscal year to any one State 
                and all communities located in such State may 
                not exceed $300,000.]
  [(c)] (b) Eligibility for Mitigation Assistance.--To be 
eligible to receive financial assistance under this section for 
mitigation activities, a State or community shall develop, and 
have approved by the [Director] Administrator, a [flood risk] 
multi-hazard mitigation plan (in this section referred to as a 
``mitigation plan''), that describes the mitigation activities 
to be carried out with assistance provided under this section, 
is consistent with the criteria established by the [Director] 
Administrator under section 1361, and [provides protection 
against] examines reduction of flood losses to structures for 
which contracts for flood insurance are available under this 
title. The mitigation plan shall be consistent with a 
comprehensive strategy for mitigation activities for the area 
affected by the mitigation plan, that has been adopted by the 
State or community following a public hearing.
  [(d) Notification of Approval and Grant Award.--
          [(1) In general.--The Director shall notify a State 
        or community submitting a mitigation plan of the 
        approval or disapproval of the plan not later than 120 
        days after submission of the plan.
          [(2) Notification of disapproval.--If the Director 
        does not approve a mitigation plan submitted under this 
        subsection, the Director shall notify, in writing, the 
        State or community submitting the plan of the reasons 
        for such disapproval.]
  [(e)] (c) Eligible Mitigation Activities.--
          [(1) Use of amounts.--Amounts provided under this 
        section (other than under subsection (b)) may be used 
        only for mitigation activities specified in a 
        mitigation plan approved by the Director under 
        subsection (d).]
          (1) Requirement of consistency with approved 
        mitigation plan.--Amounts provided under this section 
        may be used only for mitigation activities that are 
        consistent with mitigation plans that are approved by 
        the Administrator and identified under subparagraph 
        (4). The [Director] Administrator shall provide 
        assistance under this section to the extent amounts are 
        available in the National Flood Mitigation Fund 
        pursuant to appropriation Acts, subject only to the 
        absence of approvable mitigation plans.
          [(2) Determination of eligible plans.--The Director 
        may approve only mitigation plans that specify 
        mitigation activities that the Director determines are 
        technically feasible and cost-effective and only such 
        plans that propose activities that are cost-beneficial 
        to the National Flood Mitigation Fund.
          [(3) Standard for approval.--The Director shall 
        approve mitigation plans meeting the requirements for 
        approval under paragraph (1) that will be most cost-
        beneficial to the National Flood Mitigation Fund. The 
        Director may approve only mitigation plans that give 
        priority for funding to such properties, or to such 
        subsets of properties, as are in the best interest of 
        the National Flood Insurance Fund.
          [(4) Priority for mitigation assistance.--In 
        providing grants under this subsection for mitigation 
        activities, the Director shall give first priority for 
        funding to such properties, or to such subsets of such 
        properties as the Director may establish, that the 
        Director determines are in the best interests of the 
        National Flood Insurance Fund and for which matching 
        amounts under subsection (f) are available.]
          (2) Requirements of technical feasibility, cost 
        effectiveness, and interest of nfif.--The Administrator 
        may approve only mitigation activities that the 
        Administrator determines are technically feasible and 
        cost-effective and in the interest of, and represent 
        savings to, the National Flood Insurance Fund. In 
        making such determinations, the Administrator shall 
        take into consideration recognized benefits that are 
        difficult to quantify.
          (3) Priority for mitigation assistance.--In providing 
        grants under this section for mitigation activities, 
        the Administrator shall give priority for funding to 
        activities that the Administrator determines will 
        result in the greatest savings to the National Flood 
        Insurance Fund, including activities for--
                  (A) severe repetitive loss structures;
                  (B) repetitive loss structures; and
                  (C) other subsets of structures as the 
                Administrator may establish.
          [(5) Eligible activities.--The Director shall 
        determine whether mitigation activities described in a 
        mitigation plan submitted under subsection (d) comply 
        with the requirements under paragraph (1). Such 
        activities may include--]
          (4) Eligible activities.--Eligible activities may 
        include--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) acquisition by States and communities of 
                properties (including public properties) 
                located in areas having special flood hazards 
                or other areas of flood risk and properties 
                substantially damaged by flood, for public use, 
                as the [Director] Administrator determines is 
                consistent with sound land management and use 
                in such area;
                  (D) elevation, relocation, and floodproofing 
                of utilities (including equipment that serve 
                structures);
                  [(D)] (E) minor physical mitigation efforts 
                that do not duplicate the flood prevention 
                activities of other Federal agencies and that 
                lessen the frequency or severity of flooding 
                and decrease predicted flood damages, which 
                shall not include major flood control projects 
                such as dikes, levees, seawalls, groins, and 
                jetties unless the [Director] Administrator 
                specifically determines in approving a 
                mitigation plan that such activities are the 
                most cost-effective mitigation activities for 
                the National Flood Mitigation Fund;
                  [(E) beach nourishment activities;]
                  (F) the development or update of State, 
                local, or Indian tribal mitigation plans which 
                meet the planning criteria established by the 
                Administrator, except that the amount from 
                grants under this section that may be used 
                under this subparagraph may not exceed $50,000 
                for any mitigation plan of a State or $25,000 
                for any mitigation plan of a local government 
                or Indian tribe;
                  [(F)] (G) the provision of technical 
                assistance by States to communities and 
                individuals to conduct eligible mitigation 
                activities;
                  [(G)] (H) other activities that the 
                [Director] Administrator considers appropriate 
                and specifies in regulation; [and]
                  [(H) other mitigation activities not 
                described in subparagraphs (A) through (F) or 
                the regulations issued under subparagraph (G), 
                that are described in the mitigation plan of a 
                State or community.]
                  (I) other mitigation activities not described 
                in subparagraphs (A) through (G) or the 
                regulations issued under subparagraph (H), that 
                are described in the mitigation plan of a 
                State, community, or Indian tribe; and
                  (J) personnel costs for State staff that 
                provide technical assistance to communities to 
                identify eligible activities, to develop grant 
                applications, and to implement grants awarded 
                under this section, not to exceed $50,000 per 
                State in any Federal fiscal year, so long as 
                the State applied for and was awarded at least 
                $1,000,000 in grants available under this 
                section in the prior Federal fiscal year; the 
                requirements of subsections (d)(1) and (d)(2) 
                shall not apply to the activity under this 
                subparagraph.
          (6) Eligibility of demolition and rebuilding of 
        properties.--The [Director] Administrator shall 
        consider as an eligible activity the demolition and 
        rebuilding of properties to at least base flood levels 
        or higher, if required by the [Director] Administrator 
        or if required by any State or local ordinance, and in 
        accordance with project implementation criteria 
        established by the [Director] Administrator.
          (6) Eligibility of demolition and rebuilding of 
        properties.--The Administrator shall consider as an 
        eligible activity the demolition and rebuilding of 
        properties to at least base flood elevation or greater, 
        if required by the Administrator or if required by any 
        State regulation or local ordinance, and in accordance 
        with criteria established by the Administrator.
  [(f) Limitations on Amount of Assistance.--
          [(1) Amount.--The sum of the amounts of mitigation 
        assistance provided under this section during any 5-
        year period may not exceed--
                  [(A) $10,000,000, to any State; or
                  [(B) $3,300,000, to any community.
          [(2) Geographic.--The sum of the amounts of 
        mitigation assistance provided under this section 
        during any 5-year period to any one State and all 
        communities located in such State may not exceed 
        $20,000,000.
          [(3) Waiver.--The Director may waive the dollar 
        amount limitations under paragraphs (1) and (2) for any 
        State or community for any 5-year period during which a 
        major disaster or emergency declared by the President 
        (pursuant to the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act) as a result of flood 
        conditions is in effect with respect to areas in the 
        State or community.
  [(g) Matching Requirement.--
          [(1) In general.--The Director may not provide 
        mitigation assistance under this section to a State or 
        community in an amount exceeding 3 times the amount 
        that the State or community certifies, as the Director 
        shall require, that the State or community will 
        contribute from non-Federal funds to develop a 
        mitigation plan under subsection (c) and to carry out 
        mitigation activities under the approved mitigation 
        plan. In no case shall any in-kind contribution by any 
        State or community exceed one-half of the amount of 
        non-Federal funds contributed by the State or 
        community.
          [(2) Reduced community match.--With respect to any 1-
        year period in which assistance is made available under 
        this section, the Director may adjust the contribution 
        required under paragraph (1) by any State, and for the 
        communities located in that State, to not less than 10 
        percent of the cost of the activities for each severe 
        repetitive loss property for which grant amounts are 
        provided if, for such year--
                  [(A) the State has an approved State 
                mitigation plan meeting the requirements for 
                hazard mitigation planning under section 322 of 
                the Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act (42 U.S.C. 5165) that 
                specifies how the State intends to reduce the 
                number of severe repetitive loss properties; 
                and
                  [(B) the Director determines, after 
                consultation with the State, that the State has 
                taken actions to reduce the number of such 
                properties.
          [(3) Non-federal funds.--For purposes of this 
        subsection, the term ``non-Federal funds'' includes 
        State or local agency funds, in-kind contributions, any 
        salary paid to staff to carry out the mitigation 
        activities of the recipient, the value of the time and 
        services contributed by volunteers to carry out such 
        activities (at a rate determined by the Director ), and 
        the value of any donated material or building and the 
        value of any lease on a building.
  [(h) Oversight of Mitigation Plans.--The Director shall 
conduct oversight of recipients of mitigation assistance under 
this section to ensure that the assistance is used in 
compliance with the approved mitigation plans of the recipients 
and that matching funds certified under subsection (g) are used 
in accordance with such certification.]
  (d) Matching Requirement.--The Administrator may provide 
grants for eligible mitigation activities as follows:
          (1) Severe repetitive loss structures.--In the case 
        of mitigation activities to severe repetitive loss 
        structures, in an amount up to 100 percent of all 
        eligible costs.
          (2) Repetitive loss structures.--In the case of 
        mitigation activities to repetitive loss structures, in 
        an amount up to 90 percent of all eligible costs.
          (3) Other mitigation activities.-- In the case of all 
        other mitigation activities, in an amount up to 75 
        percent of all eligible costs.
  [(i)] (e) Recapture.--
          (1) Noncompliance with plan.--If the [Director] 
        Administrator determines that a State or community that 
        has received mitigation assistance under this section 
        has not carried out the mitigation activities as set 
        forth in the mitigation plan, the [Director] 
        Administrator shall recapture any unexpended amounts 
        and deposit the amounts in the National Flood 
        Mitigation Fund under section 1367.
          (2) Failure to provide matching funds.--If the 
        [Director] Administrator determines that a State or 
        community that has received mitigation assistance under 
        this section has not provided matching funds in the 
        amount [certified under subsection (g)] required under 
        subsection (d), the [Director] Administrator shall 
        recapture any unexpended amounts of mitigation 
        assistance exceeding [3 times the amount] the amount of 
        such matching funds actually provided and deposit the 
        amounts in the National Flood Mitigation Fund under 
        section 1367.
  [(j)] (f) Reports.--Not later than 1 year after the date of 
enactment of the [Riegle Community Development and Regulatory 
Improvement Act of 1994] Flood Insurance Reform Act of 2012 and 
biennially thereafter, the [Director] Administrator shall 
submit a report to the Congress describing the status of 
mitigation activities carried out with assistance provided 
under this section.
  [(k) Definition of Community.--For purposes of this section, 
the term ``community'' means--
          [(1) a political subdivision that (A) has zoning and 
        building code jurisdiction over a particular area 
        having special flood hazards, and (B) is participating 
        in the national flood insurance program; or
          [(2) a political subdivision of a State, or other 
        authority, that is designated to develop and administer 
        a mitigation plan by political subdivisions, all of 
        which meet the requirements of paragraph (1).
  [(m) Coordination With States and Communities.--The Director 
shall, in consultation and coordination with States and 
communities take such actions as are appropriate to encourage 
and improve participation in the national flood insurance 
program of owners of properties, including owners of properties 
that are not located in areas having special flood hazards (the 
100-year floodplain), but are located within flood prone 
areas.]
  (g) Failure to Make Grant Award Within 5 Years.--For any 
application for a grant under this section for which the 
Administrator fails to make a grant award within 5 years of the 
date of application, the grant application shall be considered 
to be denied and any funding amounts allocated for such grant 
applications shall remain in the National Flood Mitigation Fund 
under section 1367 of this title and shall be made available 
for grants under this section.
  (h) Limitation on Funding for Mitigation Activities for 
Severe Repetitive Loss Structures.--The amount used pursuant to 
section 1310(a)(8) in any fiscal year may not exceed 
$40,000,000 and shall remain available until expended.
  (i) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Community.--The term ``community'' means--
                  (A) a political subdivision that--
                          (i) has zoning and building code 
                        jurisdiction over a particular area 
                        having special flood hazards, and
                          (ii) is participating in the national 
                        flood insurance program; or
                  (B) a political subdivision of a State, or 
                other authority, that is designated by 
                political subdivisions, all of which meet the 
                requirements of subparagraph (A), to administer 
                grants for mitigation activities for such 
                political subdivisions.
          (2) Repetitive loss structure.--The term ``repetitive 
        loss structure'' has the meaning given such term in 
        section 1370.
          (3) Severe repetitive loss structure.--The term 
        ``severe repetitive loss structure'' means a structure 
        that--
                  (A) is covered under a contract for flood 
                insurance made available under this title; and
                  (B) has incurred flood-related damage--
                          (i) for which 4 or more separate 
                        claims payments have been made under 
                        flood insurance coverage under this 
                        title, with the amount of each such 
                        claim exceeding $15,000, and with the 
                        cumulative amount of such claims 
                        payments exceeding $60,000; or
                          (ii) for which at least 2 separate 
                        claims payments have been made under 
                        such coverage, with the cumulative 
                        amount of such claims exceeding the 
                        value of the insured structure.

                     NATIONAL FLOOD MITIGATION FUND

  Sec. 1367. (a) Establishment and Availability.--The 
[Director] Administrator shall establish in the Treasury of the 
United States a fund to be known as the National Flood 
Mitigation Fund, which shall be credited with amounts described 
in subsection (b) and shall be available, to the extent 
provided in appropriation Acts, for providing assistance under 
section 1366.
  (b) Credits.--The National Flood Mitigation Fund shall be 
credited with--
          [(1) in each fiscal year, amounts from the National 
        Flood Insurance Fund not exceeding $40,000,000, to 
        remain available until expended;]
          (1) in each fiscal year, from the National Flood 
        Insurance Fund in amounts not exceeding $90,000,000 to 
        remain available until expended, of which--
                  (A) not more than $40,000,000 shall be 
                available pursuant to subsection (a) of this 
                section only for assistance described in 
                section 1366(a)(1);
                  (B) not more than $40,000,000 shall be 
                available pursuant to subsection (a) of this 
                section only for assistance described in 
                section 1366(a)(2); and
                  (C) not more than $10,000,000 shall be 
                available pursuant to subsection (a) of this 
                section only for assistance described in 
                section 1366(a)(3).

           *       *       *       *       *       *       *

          (3) any amounts recaptured under [section 1366(i)] 
        section 1366(e).
  (c) Administrative Expenses.--The [Director] Administrator 
may use not more than 5 percent of amounts made available under 
subsection (b) to cover salaries, expenses, and other 
administrative costs incurred by the [Director] Administrator 
to make grants and provide assistance under [sections 1366 and 
1323] section 1366.
  (d) Prohibition on Offsetting Collections.--Notwithstanding 
any other provision of this title, amounts made available 
pursuant to this section shall not be subject to offsetting 
collections through premium rates for flood insurance coverage 
under this title.
  (e) Continued Availability and Reallocation.--Any amounts 
made available pursuant to subparagraph (A), (B), or (C) of 
subsection (b)(1) that are not used in any fiscal year shall 
continue to be available for the purposes specified in such 
subparagraph of subsection (b)(1) pursuant to which such 
amounts were made available, unless the Administrator 
determines that reallocation of such unused amounts to meet 
demonstrated need for other mitigation activities under section 
1366 is in the best interest of the National Flood Insurance 
Fund.
  [(d)] (f) Investment.--If the [Director] Administrator 
determines that the amounts in the National Flood Mitigation 
Fund are in excess of amounts needed under subsection (a), the 
[Director] Administrator may invest any excess amounts the 
[Director] Administrator determines advisable in interest-
bearing obligations issued or guaranteed by the United States.
  [(e)] (g) Report.--The [Director] Administrator shall submit 
a report to the Congress not later than the expiration of the 
1-year period beginning on the date of enactment of this Act 
and not less than once during each successive 2-year period 
thereafter. The report shall describe the status of the Fund 
and any activities carried out with amounts from the Fund.

        CHAPTER IV--APPROPRIATIONS AND MISCELLANEOUS PROVISIONS

                              DEFINITIONS

  Sec. 1370. (a) As used in this title--
          (1) the term ``flood'' shall have such meaning as may 
        be prescribed in regulations of the [Director] 
        Administrator, and may include inundation from rising 
        waters or from the overflow of streams, rivers, or 
        other bodies of water, or from tidal surges, abnormally 
        high tidal water, tidal waves, tsunamis, hurricanes, or 
        other severe storms or deluge;

           *       *       *       *       *       *       *

          (3) the terms ``insurance company'', ``other 
        insurer'' and ``insurance agent or broker'' include any 
        organizations and persons authorized to engage in the 
        insurance business under the laws of any State, is 
        subject to the reporting requirements of the Securities 
        Exchange Act of 1934, pursuant to section 13(a) or 
        15(d) of such Act (15 U.S.C. 78m(a), 78o(d)), or is 
        authorized by the Administrator to assume reinsurance 
        on risks insured by the flood insurance program;

           *       *       *       *       *       *       *

          (6) the term ``[Director] Administrator'' means the 
        [Director] Administrator of the Federal Emergency 
        Management Agency;

           *       *       *       *       *       *       *

          (15) the term ``substantially damaged structure'' 
        means a structure covered by a contract for flood 
        insurance that has incurred damage for which the cost 
        of repair exceeds an amount specified in any regulation 
        promulgated by the [Director] Administrator, or by a 
        community ordinance, whichever is lower.
  (b) The term ``flood'' shall also include inundation from 
mudslides which are proximately caused by accumulations of 
water on or under the ground; and all of the provisions of this 
title shall apply with respect to such mudslides in the same 
manner and to the same extent as with respect to floods 
described in subsection (a)(1), subject to and in accordance 
with such regulations, modifying the provisions of this title 
(including the provisions relating to land management and use) 
to the extent necessary to insure that they can be effectively 
so applied, as the [Director] Administrator may prescribe to 
achieve (with respect to such mudslides) the purposes of this 
title and the objectives of the program.
  (c) The term ``flood'' shall also include the collapse or 
subsidence of land along the shore of a lake or other body of 
water as a result of erosion or undermining caused by waves or 
currents of water exceeding anticipated cyclical levels, and 
all of the provisions of this title shall apply with respect to 
such collapse or subsidence in the same manner and to the same 
extent as with respect to floods described in subsection 
(a)(1), subject to and in accordance with such regulations, 
modifying the provisions of this title (including the 
provisions relating to land management and use) to the extent 
necessary to insure that they can be effectively so applied, as 
the [Director] Administrator may prescribe to achieve (with 
respect to such collapse or subsidence) the purposes of this 
title and the objectives of the program.

                   STUDIES OF OTHER NATURAL DISASTERS

  Sec. 1371. (a) The [Director] Administrator is authorized to 
undertake such studies as may be necessary for the purpose of 
determining the extent to which insurance protection against 
earthquakes or any other natural disaster perils, other than 
flood, is not available from public or private sources, and the 
feasibility of such insurance protection being made available.
  (b) Studies under this section shall be carried out, to the 
maximum extent practicable, with the cooperation of other 
Federal departments and agencies and State and local agencies, 
and the [Director] Administrator is authorized to consult with, 
receive information from, and enter into any necessary 
agreements or other arrangements with such other Federal 
departments and agencies (on a reimbursement basis) and such 
State and local agencies.

                                PAYMENTS

  Sec. 1372. Any payments under this title may be made (after 
necessary adjustment on account of previously made 
underpayments or overpayments) in advance or by way of 
reimbursement, and in such installments and on such conditions, 
as the [Director] Administrator may determine.

           *       *       *       *       *       *       *


                             EFFECTIVE DATE

  Sec. 1377. This title shall take effect one hundred and 
twenty days following the date of its enactment, except that 
the [Director] Administrator on the basis of a finding that 
conditions exist necessitating the prescribing of an additional 
period, may prescribe a later effective date which in no event 
shall be more than one hundred and eighty days following such 
date of enactment.
                              ----------                              


                 FLOOD DISASTER PROTECTION ACT OF 1973

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act 
may be cited as the ``Flood Disaster Protection Act of 1973''.

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 3. (a) As used in this Act, unless the context otherwise 
requires, the term--
          (1) * * *

           *       *       *       *       *       *       *

          (6) ``[Director] Administrator'' means the [Director] 
        Administrator of the Federal Emergency Management 
        Agency;

           *       *       *       *       *       *       *

  (b) The [Director] Administrator is authorized to define or 
redefine, by rules and regulations, any scientific or technical 
term used in this Act, insofar as such definition is not 
inconsistent with the purposes of this Act.

TITLE I--EXPANSION OF NATIONAL FLOOD INSURANCE PROGRAM

           *       *       *       *       *       *       *


    FLOOD INSURANCE PURCHASE AND COMPLIANCE REQUIREMENTS AND ESCROW 
                                ACCOUNTS

  Sec. 102. (a) After the expiration of sixty days following 
the date of enactment of this Act, no Federal officer or agency 
shall approve any financial assistance for acquisition or 
construction purposes for use in any area that has been 
identified by the [Director] Administrator as an area having 
special flood hazards and in which the sale of flood insurance 
has been made available under the National Flood Insurance Act 
of 1968, unless the building or mobile home and any personal 
property to which such financial assistance relates is covered 
by flood insurance in an amount at least equal to its 
development or project cost (less estimated land cost) or to 
the maximum limit of coverage made available with respect to 
the particular type of property under the National Flood 
Insurance Act of 1968, whichever is less: Provided, That if the 
financial assistance provided is in the form of a loan or an 
insurance or guaranty of a loan, the amount of flood insurance 
required need not exceed the outstanding principal balance of 
the loan and need not be required beyond the term of the loan. 
The requirement of maintaining flood insurance shall apply 
during the life of the property, regardless of transfer of 
ownership of such property.
  (b) Requirement for Mortgage Loans.--
          (1) Regulated lending institutions.--Each Federal 
        entity for lending regulation (after consultation and 
        coordination with the Financial Institutions 
        Examination Council established under the Federal 
        Financial Institutions Examination Council Act of 1974) 
        shall by regulation direct regulated [lending 
        institutions not to make] lending institutions--
                  (A) not to make, increase, extend, or renew 
                any loan secured by improved real estate or a 
                mobile home located or to be located in an area 
                that has been identified by the [Director] 
                Administrator as an area having special flood 
                hazards and in which flood insurance has been 
                made available under the National Flood 
                Insurance Act of 1968, unless the building or 
                mobile home and any personal property securing 
                such loan is covered for the term of the loan 
                by flood insurance in an amount at least equal 
                to the outstanding principal balance of the 
                loan or the maximum limit of coverage made 
                available under the Act with respect to the 
                particular type of property, whichever is 
                less[.]; and
                  (B) to accept private flood insurance as 
                satisfaction of the flood insurance coverage 
                requirement under subparagraph (A) if the 
                coverage provided by such private flood 
                insurance meets the requirements for coverage 
                under such subparagraph.
          (2) Federal agency lenders.--A Federal agency lender 
        may not make, increase, extend, or renew any loan 
        secured by improved real estate or a mobile home 
        located or to be located in an area that has been 
        identified by the [Director] Administrator as an area 
        having special flood hazards and in which flood 
        insurance has been made available under the National 
        Flood Insurance Act of 1968, unless the building or 
        mobile home and any personal property securing such 
        loan is covered for the term of the loan by flood 
        insurance in the amount provided in paragraph (1). Each 
        Federal agency lender shall accept private flood 
        insurance as satisfaction of the flood insurance 
        coverage requirement under the preceding sentence if 
        the flood insurance coverage provided by such private 
        flood insurance meets the requirements for coverage 
        under such sentence. Each Federal agency lender shall 
        issue any regulations necessary to carry out this 
        paragraph. Such regulations shall be consistent with 
        and substantially identical to the regulations issued 
        under paragraph (1).
          (3) Government-sponsored enterprises for housing.--
        The Federal National Mortgage Association and the 
        Federal Home Loan Mortgage Corporation shall implement 
        procedures reasonably designed to ensure that, for any 
        loan that is--
                  (A) secured by improved real estate or a 
                mobile home located in an area that has been 
                identified, at the time of the origination of 
                the loan or at any time during the term of the 
                loan, by the [Director] Administrator as an 
                area having special flood hazards and in which 
                flood insurance is available under the National 
                Flood Insurance Act of 1968, and

           *       *       *       *       *       *       *

        the building or mobile home and any personal property 
        securing the loan is covered for the term of the loan 
        by flood insurance in the amount provided in paragraph 
        (1). The Federal National Mortgage Association and the 
        Federal Home Loan Mortgage Corporation shall accept 
        private flood insurance as satisfaction of the flood 
        insurance coverage requirement under the preceding 
        sentence if the flood insurance coverage provided by 
        such private flood insurance meets the requirements for 
        coverage under such sentence.

           *       *       *       *       *       *       *

          (5) Private flood insurance defined.--In this 
        subsection, the term ``private flood insurance'' means 
        a contract for flood insurance coverage allowed for 
        sale under the laws of any State.
  (c) Exceptions to Purchase Requirements.--
          (1) State-owned property.--Notwithstanding the other 
        provisions of this section, flood insurance shall not 
        be required on any State-owned property that is covered 
        under an adequate State policy of self-insurance 
        satisfactory to the [Director] Administrator. The 
        [Director] Administrator shall publish and periodically 
        revise the list of States to which this subsection 
        applies.

           *       *       *       *       *       *       *

  (d) Escrow of Flood Insurance Payments.--
          (1) Regulated lending institutions.--Each Federal 
        entity for lending regulation (after consultation and 
        coordination with the Financial Institutions 
        Examination Council) shall by regulation require that, 
        if a regulated lending institution requires the 
        escrowing of taxes, insurance premiums, fees, or any 
        other charges for a loan secured by residential 
        improved real estate or a mobile home, then all 
        premiums and fees for flood insurance under the 
        National Flood Insurance Act of 1968 for the real 
        estate or mobile home shall be paid to the regulated 
        lending institution or other servicer for the loan in a 
        manner sufficient to make payments as due for the 
        duration of the loan. Upon receipt of the premiums, the 
        regulated lending institution or servicer of the loan 
        shall deposit the premiums in an escrow account on 
        behalf of the borrower. Upon receipt of a notice from 
        the [Director] Administrator or the provider of the 
        insurance that insurance premiums are due, the 
        regulated lending institution or servicer shall pay 
        from the escrow account to the provider of the 
        insurance the amount of insurance premiums owed.

           *       *       *       *       *       *       *

  (e) Placement of Flood Insurance by Lender.--
          (1) Notification to borrower of lack of coverage.--
        If, at the time of origination or at any time during 
        the term of a loan secured by improved real estate or 
        by a mobile home located in an area that has been 
        identified by the [Director] Administrator (at the time 
        of the origination of the loan or at any time during 
        the term of the loan) as an area having special flood 
        hazards and in which flood insurance is available under 
        the National Flood Insurance Act of 1968, the lender or 
        servicer for the loan determines that the building or 
        mobile home and any personal property securing the loan 
        is not covered by flood insurance or is covered by such 
        insurance in an amount less than the amount required 
        for the property pursuant to paragraph (1), (2), or (3) 
        of subsection (b), the lender or servicer shall notify 
        the borrower under the loan that the borrower should 
        obtain, at the borrower's expense, an amount of flood 
        insurance for the building or mobile home and such 
        personal property that is not less than the amount 
        under subsection (b)(1), for the term of the loan.
          (2) Purchase of coverage on behalf of borrower.--If 
        the borrower fails to purchase such flood insurance 
        within 45 days after notification under paragraph (1), 
        the lender or servicer for the loan shall purchase the 
        insurance on behalf of the borrower and may charge the 
        borrower for the cost of premiums and fees incurred by 
        the lender or servicer for the loan in purchasing the 
        [insurance.] insurance, including premiums or fees 
        incurred for coverage beginning on the date on which 
        flood insurance coverage lapsed or did not provide a 
        sufficient coverage amount.
          (3) Termination of force-placed insurance.--Within 30 
        days of receipt by the lender or servicer of a 
        confirmation of a borrower's existing flood insurance 
        coverage, the lender or servicer shall--
                  (A) terminate the force-placed insurance; and
                  (B) refund to the borrower all force-placed 
                insurance premiums paid by the borrower during 
                any period during which the borrower's flood 
                insurance coverage and the force-placed flood 
                insurance coverage were each in effect, and any 
                related fees charged to the borrower with 
                respect to the force-placed insurance during 
                such period.
          (4) Sufficiency of demonstration.--For purposes of 
        confirming a borrower's existing flood insurance 
        coverage, a lender or servicer for a loan shall accept 
        from the borrower an insurance policy declarations page 
        that includes the existing flood insurance policy 
        number and the identity of, and contact information 
        for, the insurance company or agent.
          [(3)] (5) Review of determination regarding required 
        purchase.--
                  (A) In general.--The borrower and lender for 
                a loan secured by improved real estate or a 
                mobile home may jointly request the [Director] 
                Administrator to review a determination of 
                whether the building or mobile home is located 
                in an area having special flood hazards. Such 
                request shall be supported by technical 
                information relating to the improved real 
                estate or mobile home. Not later than 45 days 
                after the [Director] Administrator receives the 
                request, the [Director] Administrator shall 
                review the determination and provide to the 
                borrower and the lender with a letter stating 
                whether or not the building or mobile home is 
                in an area having special flood hazards. The 
                determination of the [Director] Administrator 
                shall be final.
                  (B) Effect of determination.--Any person to 
                whom a borrower provides a letter issued by the 
                [Director] Administrator pursuant to 
                subparagraph (A), stating that the building or 
                mobile home securing the loan of the borrower 
                is not in an area having special flood hazards, 
                shall have no obligation under this title to 
                require the purchase of flood insurance for 
                such building or mobile home during the period 
                determined by the [Director] Administrator, 
                which shall be specified in the letter and 
                shall begin on the date on which such letter is 
                provided.
                  (C) Effect of failure to respond.--If a 
                request under subparagraph (A) is made in 
                connection with the origination of a loan and 
                the [Director] Administrator fails to provide a 
                letter under subparagraph (A) before the later 
                of (i) the expiration of the 45-day period 
                under such subparagraph, or (ii) the closing of 
                the loan, no person shall have an obligation 
                under this title to require the purchase of 
                flood insurance for the building or mobile home 
                securing the loan until such letter is 
                provided.
          [(4)] (6) Applicability.--This subsection shall apply 
        to all loans outstanding on or after the date of 
        enactment of the Riegle Community Development and 
        Regulatory Improvement Act of 1994.

           *       *       *       *       *       *       *

  (h) Fee for Determining Location.--Notwithstanding any other 
Federal or State law, any person who makes a loan secured by 
improved real estate or a mobile home or any servicer for such 
a loan may charge a reasonable fee for the costs of determining 
whether the building or mobile home securing the loan is 
located in an area having special flood hazards, but only in 
accordance with the following requirements:
          (1) Borrower fee.--The borrower under such a loan may 
        be charged the fee, but only if the determination--
                  (A) * * *
                  (B) is made pursuant to a revision or 
                updating under section 1360(f) of the 
                floodplain areas and flood-risk zones or 
                publication of a notice or compendia under 
                subsection (h) or (i) of section 1360 that 
                affects the area in which the improved real 
                estate or mobile home securing the loan is 
                located or that, in the determination of the 
                [Director] Administrator, may reasonably be 
                considered to require a determination under 
                this subsection; or

           *       *       *       *       *       *       *

  (i) Authority To Temporarily Suspend Mandatory Purchase 
Requirement.--
          (1) Finding by administrator that area is an eligible 
        area.--For any area, upon a request submitted to the 
        Administrator by a local government authority having 
        jurisdiction over any portion of the area, the 
        Administrator shall make a finding of whether the area 
        is an eligible area under paragraph (3). If the 
        Administrator finds that such area is an eligible area, 
        the Administrator shall, in the discretion of the 
        Administrator, designate a period during which such 
        finding shall be effective, which shall not be longer 
        in duration than 12 months.
          (2) Suspension of mandatory purchase requirement.--If 
        the Administrator makes a finding under paragraph (1) 
        that an area is an eligible area under paragraph (3), 
        during the period specified in the finding, the 
        designation of such eligible area as an area having 
        special flood hazards shall not be effective for 
        purposes of subsections (a), (b), and (e) of this 
        section, and section 202(a) of this Act. Nothing in 
        this paragraph may be construed to prevent any lender, 
        servicer, regulated lending institution, Federal agency 
        lender, the Federal National Mortgage Association, or 
        the Federal Home Loan Mortgage Corporation, at the 
        discretion of such entity, from requiring the purchase 
        of flood insurance coverage in connection with the 
        making, increasing, extending, or renewing of a loan 
        secured by improved real estate or a mobile home 
        located or to be located in such eligible area during 
        such period or a lender or servicer from purchasing 
        coverage on behalf of a borrower pursuant to subsection 
        (e).
          (3) Eligible areas.--An eligible area under this 
        paragraph is an area that is designated or will, 
        pursuant to any issuance, revision, updating, or other 
        change in flood insurance maps that takes effect on or 
        after the date of the enactment of the Flood Insurance 
        Reform Act of 2012, become designated as an area having 
        special flood hazards and that meets any one of the 
        following 3 requirements:
                  (A) Areas with no history of special flood 
                hazards.--The area does not include any area 
                that has ever previously been designated as an 
                area having special flood hazards.
                  (B) Areas with flood protection systems under 
                improvements.--The area was intended to be 
                protected by a flood protection system--
                          (i) that has been decertified, or is 
                        required to be certified, as providing 
                        protection for the 100-year frequency 
                        flood standard;
                          (ii) that is being improved, 
                        constructed, or reconstructed; and
                          (iii) for which the Administrator has 
                        determined measurable progress toward 
                        completion of such improvement, 
                        construction, reconstruction is being 
                        made and toward securing financial 
                        commitments sufficient to fund such 
                        completion.
                  (C) Areas for which appeal has been filed.--
                An area for which a community has appealed 
                designation of the area as having special flood 
                hazards in a timely manner under section 1363.
          (4) Extension of delay.--Upon a request submitted by 
        a local government authority having jurisdiction over 
        any portion of the eligible area, the Administrator may 
        extend the period during which a finding under 
        paragraph (1) shall be effective, except that--
                  (A) each such extension under this paragraph 
                shall not be for a period exceeding 12 months; 
                and
                  (B) for any area, the cumulative number of 
                such extensions may not exceed 2.
          (5) Additional extension for communities making more 
        than adequate progress on flood protection system.--
                  (A) Extension.--
                          (i) Authority.--Except as provided in 
                        subparagraph (B), in the case of an 
                        eligible area for which the 
                        Administrator has, pursuant to 
                        paragraph (4), extended the period of 
                        effectiveness of the finding under 
                        paragraph (1) for the area, upon a 
                        request submitted by a local government 
                        authority having jurisdiction over any 
                        portion of the eligible area, if the 
                        Administrator finds that more than 
                        adequate progress has been made on the 
                        construction of a flood protection 
                        system for such area, as determined in 
                        accordance with the last sentence of 
                        section 1307(e) of the National Flood 
                        Insurance Act of 1968 (42 U.S.C. 
                        4014(e)), the Administrator may, in the 
                        discretion of the Administrator, 
                        further extend the period during which 
                        the finding under paragraph (1) shall 
                        be effective for such area for an 
                        additional 12 months.
                          (ii) Limit.-- For any eligible area, 
                        the cumulative number of extensions 
                        under this subparagraph may not exceed 
                        2.
                  (B) Exclusion for new mortgages.--
                          (i) Exclusion.--Any extension under 
                        subparagraph (A) of this paragraph of a 
                        finding under paragraph (1) shall not 
                        be effective with respect to any 
                        excluded property after the 
                        origination, increase, extension, or 
                        renewal of the loan referred to in 
                        clause (ii)(II) for the property.
                          (ii) Excluded properties.--For 
                        purposes of this subparagraph, the term 
                        ``excluded property'' means any 
                        improved real estate or mobile home--
                                  (I) that is located in an 
                                eligible area; and
                                  (II) for which, during the 
                                period that any extension under 
                                subparagraph (A) of this 
                                paragraph of a finding under 
                                paragraph (1) is otherwise in 
                                effect for the eligible area in 
                                which such property is 
                                located--
                                          (aa) a loan that is 
                                        secured by the property 
                                        is originated; or
                                          (bb) any existing 
                                        loan that is secured by 
                                        the property is 
                                        increased, extended, or 
                                        renewed.
          (6) Rule of construction.--Nothing in this subsection 
        may be construed to affect the applicability of a 
        designation of any area as an area having special flood 
        hazards for purposes of the availability of flood 
        insurance coverage, criteria for land management and 
        use, notification of flood hazards, eligibility for 
        mitigation assistance, or any other purpose or 
        provision not specifically referred to in paragraph 
        (2).
          (7) Reports.--The Administrator shall, in each annual 
        report submitted pursuant to section 1320, include 
        information identifying each finding under paragraph 
        (1) by the Administrator during the preceding year that 
        an area is an area having special flood hazards, the 
        basis for each such finding, any extensions pursuant to 
        paragraph (4) of the periods of effectiveness of such 
        findings, and the reasons for such extensions.

               TITLE II--DISASTER MITIGATION REQUIREMENTS

                   NOTIFICATION TO FLOOD-PRONE AREAS

  Sec. 201. (a) Not later than six months following the 
enactment of this title, the [Director] Administrator shall 
publish information in accordance with subsection 1360(1) of 
the National Flood Insurance Act of 1968, and shall notify the 
chief executive officer of each known flood-prone community not 
already participating in the national flood insurance program 
of its tentative identification as a community containing one 
or more areas having special flood hazards.
  (b) After such notification, each tentatively identified 
community shall either (1) promptly make proper application to 
participate in the national flood insurance program or (2) 
within six months submit technical data sufficient to establish 
to the satisfaction of the [Director] Administrator that the 
community either is not seriously flood prone or that such 
flood hazards as may have existed have been corrected by 
floodworks or other flood control methods. The [Director] 
Administrator may, in his discretion, grant a public hearing to 
any community with respect to which conflicting data exist as 
to the nature and extent of a flood hazard. If the [Director] 
Administrator decides not to hold a hearing, the community 
shall be given an opportunity to submit written and documentary 
evidence. Whether or not such hearing is granted, the 
[Director's] Administrator's final determination as to the 
existence or extent of a flood hazard area in a particular 
community shall be deemed conclusive for the purposes of this 
Act if supported by substantial evidence in the record 
considered as a whole.
  (c) As information becomes available to the [Director] 
Administrator, concerning the existence of flood hazards in 
communities not known to be flood prone at the time of the 
initial notification provided for by subsection (a) of this 
section he shall provide similar notifications to the chief 
executive officers of such additional communities, which shall 
then be subject to the requirements of subsection (b) of this 
section.

           *       *       *       *       *       *       *

  (e) The [Director] Administrator is authorized to establish 
administrative procedures whereby the identification under this 
section of one or more areas in the community as having special 
flood hazards may be appealed to the [Director] Administrator 
by the community or any owner or lessee of real property within 
the community who believes his property has been inadvertently 
included in a special flood hazard area by the identification. 
When, incident to any appeal under this subsection, the owner 
or lessee of real property or the community, as the case may 
be, incurs expense in connection with the services of 
surveyors, engineers, or similar services, but not including 
legal services, in the effecting of an appeal which is 
successful in whole or part, the [Director] Administrator shall 
reimburse such individual or community to an extent measured by 
the ratio of the successful portion of the appeal as compared 
to the entire appeal and applying such ratio to the reasonable 
value of all such services, but no reimbursement shall be made 
by the [Director] Administrator in respect to any fee or 
expense payment, the payment of which was agreed to be 
contingent upon the result of the appeal. There is authorized 
to be appropriated for purposes of implementing this subsection 
not to exceed $250,000.
  (f) Annual Notification.--The Administrator, in consultation 
with affected communities, shall establish and carry out a plan 
to notify residents of areas having special flood hazards, on 
an annual basis--
          (1) that they reside in such an area;
          (2) of the geographical boundaries of such area;
          (3) of whether section 1308(g) of the National Flood 
        Insurance Act of 1968 applies to properties within such 
        area;
          (4) of the provisions of section 102 requiring 
        purchase of flood insurance coverage for properties 
        located in such an area, including the date on which 
        such provisions apply with respect to such area, taking 
        into consideration section 102(i); and
          (5) of a general estimate of what similar homeowners 
        in similar areas typically pay for flood insurance 
        coverage, taking into consideration section 1308(g) of 
        the National Flood Insurance Act of 1968.

         EFFECT OF NONPARTICIPATION IN FLOOD INSURANCE PROGRAM

  Sec. 202. (a) No Federal officer or agency shall approve any 
financial assistance for acquisition or construction purposes 
on and after July 1, 1975, for use in any area that has been 
identified by the [Director] Administrator as an area having 
special flood hazards unless the community in which such area 
is situated is then participating in the national flood 
insurance program.

           *       *       *       *       *       *       *


                     AUTHORITY TO ISSUE REGULATIONS

  Sec. 205. (a) The [Director] Administrator is authorized to 
issue such regulations as may be necessary to carry out the 
purpose of this Act.
  (b) The head of each Federal agency that administers a 
program of financial assistance relating to the acquisition, 
construction, reconstruction, repair, or improvement of 
publicly or privately owned land or facilities, and each 
Federal instrumentality responsible for the supervision, 
approval, regulation, or insuring of banks, savings and loan 
associations, or similar institutions, shall, in cooperation 
with the [Director] Administrator, issue appropriate rules and 
regulations to govern the carrying out of the agency's 
responsibilities under this Act.

                   CONSULTATION WITH LOCAL OFFICIALS

  Sec. 206. In carrying out his responsibilities under the 
provisions of this title and the National Flood Insurance Act 
of 1968 which relate to notification to and identification of 
flood-prone areas and the application of criteria for land 
management and use, including criteria derived from data 
reflecting new developments that may indicate the desirability 
of modifying elevations based on previous flood studies, the 
[Director] Administrator shall establish procedures assuring 
adequate consultation with the appropriate elected officials of 
general purpose local governments, including but not limited to 
those local governments whose prior eligibility under the 
program has been suspended. Such consultations shall include, 
but not be limited to, fully informing local officials at the 
commencement of any flood elevation study or investigation 
undertaken by any agency on behalf of the [Director] 
Administrator concerning the nature and purpose of the study, 
the areas involved, the manner in which the study is to be 
undertaken, the general principles to be applied, and the use 
to be made of the data obtained. The [Director] Administrator 
shall encourage local officials to disseminate information 
concerning such study widely within the community, so that 
interested persons will have an opportunity to bring all 
relevant facts and technical data concerning the local flood 
hazard to the attention of the agency during the course of the 
study.

           *       *       *       *       *       *       *

                              ----------                              


REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974

           *       *       *       *       *       *       *


                      SPECIAL INFORMATION BOOKLETS

  Sec. 5. (a) * * *

           *       *       *       *       *       *       *

  (c) Each lender shall include with the booklet a good faith 
estimate of the amount or range of charges for specific 
settlement services the borrower is likely to incur in 
connection with the settlement as prescribed by the Bureau. 
Each such good faith estimate shall include the following 
conspicuous statements and information: (1) that flood 
insurance coverage for residential real estate is generally 
available under the national flood insurance program whether or 
not the real estate is located in an area having special flood 
hazards and that, to obtain such coverage, a home owner or 
purchaser should contact the national flood insurance program; 
(2) a telephone number and a location on the Internet by which 
a home owner or purchaser can contact the national flood 
insurance program; and (3) that the escrowing of flood 
insurance payments is required for many loans under section 
102(d) of the Flood Disaster Protection Act of 1973, and may be 
a convenient and available option with respect to other loans.

           *       *       *       *       *       *       *

                              ----------                              


             HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974

TITLE I--COMMUNITY DEVELOPMENT

           *       *       *       *       *       *       *


                          ELIGIBLE ACTIVITIES

  Sec. 105. (a) Activities assisted under this title may 
include only--
          (1) * * *

           *       *       *       *       *       *       *

          (24) the construction or improvement of tornado-safe 
        shelters for residents of manufactured housing, and the 
        provision of assistance (including loans and grants) to 
        nonprofit and for-profit entities (including owners of 
        manufactured housing parks) for such construction or 
        improvement, except that--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) amounts may not be used for a shelter as 
                provided under this paragraph unless there is 
                located, within the neighborhood in which the 
                shelter is located (or, in the case of a 
                shelter located in a manufactured housing park, 
                within 1,500 feet of such park), a warning 
                siren that is operated in accordance with such 
                local, regional, or national disaster warning 
                programs or systems as the Secretary, after 
                consultation with the Director of the Federal 
                Emergency Management Agency, considers 
                appropriate to ensure adequate notice of 
                occupants of manufactured housing located in 
                such neighborhood or park of a tornado; [and]
          (25) lead-based paint hazard evaluation and 
        reduction, as defined in section 1004 of the 
        Residential Lead-Based Paint Hazard Reduction Act of 
        1992[.];
          (26) supplementing existing State or local funding 
        for administration of building code enforcement by 
        local building code enforcement departments, including 
        for increasing staffing, providing staff training, 
        increasing staff competence and professional 
        qualifications, and supporting individual certification 
        or departmental accreditation, and for capital 
        expenditures specifically dedicated to the 
        administration of the building code enforcement 
        department, except that, to be eligible to use amounts 
        as provided in this paragraph--
                  (A) a building code enforcement department 
                shall provide matching, non-Federal funds to be 
                used in conjunction with amounts used under 
                this paragraph in an amount--
                          (i) in the case of a building code 
                        enforcement department serving an area 
                        with a population of more than 50,000, 
                        equal to not less than 50 percent of 
                        the total amount of any funds made 
                        available under this title that are 
                        used under this paragraph;
                          (ii) in the case of a building code 
                        enforcement department serving an area 
                        with a population of between 20,001 and 
                        50,000, equal to not less than 25 
                        percent of the total amount of any 
                        funds made available under this title 
                        that are used under this paragraph; and
                          (iii) in the case of a building code 
                        enforcement department serving an area 
                        with a population of less than 20,000, 
                        equal to not less than 12.5 percent of 
                        the total amount of any funds made 
                        available under this title that are 
                        used under this paragraph,
                except that the Secretary may waive the 
                matching fund requirements under this 
                subparagraph, in whole or in part, based upon 
                the level of economic distress of the 
                jurisdiction in which is located the local 
                building code enforcement department that is 
                using amounts for purposes under this 
                paragraph, and shall waive such matching fund 
                requirements in whole for any recipient 
                jurisdiction that has dedicated all building 
                code permitting fees to the conduct of local 
                building code enforcement; and
                  (B) any building code enforcement department 
                using funds made available under this title for 
                purposes under this paragraph shall empanel a 
                code administration and enforcement team 
                consisting of at least 1 full-time building 
                code enforcement officer, a city planner, and a 
                health planner or similar officer; and
          (27) provision of assistance to local governmental 
        agencies responsible for floodplain management 
        activities (including such agencies of Indians tribes, 
        as such term is defined in section 4 of the Native 
        American Housing Assistance and Self-Determination Act 
        of 1996 (25 U.S.C. 4103)) in communities that 
        participate in the national flood insurance program 
        under the National Flood Insurance Act of 1968 (42 
        U.S.C. 4001 et seq.), only for carrying out outreach 
        activities to encourage and facilitate the purchase of 
        flood insurance protection under such Act by owners and 
        renters of properties in such communities and to 
        promote educational activities that increase awareness 
        of flood risk reduction; except that--
                  (A) amounts used as provided under this 
                paragraph shall be used only for activities 
                designed to--
                          (i) identify owners and renters of 
                        properties in communities that 
                        participate in the national flood 
                        insurance program, including owners of 
                        residential and commercial properties;
                          (ii) notify such owners and renters 
                        when their properties become included 
                        in, or when they are excluded from, an 
                        area having special flood hazards and 
                        the effect of such inclusion or 
                        exclusion on the applicability of the 
                        mandatory flood insurance purchase 
                        requirement under section 102 of the 
                        Flood Disaster Protection Act of 1973 
                        (42 U.S.C. 4012a) to such properties;
                          (iii) educate such owners and renters 
                        regarding the flood risk and reduction 
                        of this risk in their community, 
                        including the continued flood risks to 
                        areas that are no longer subject to the 
                        flood insurance mandatory purchase 
                        requirement;
                          (iv) educate such owners and renters 
                        regarding the benefits and costs of 
                        maintaining or acquiring flood 
                        insurance, including, where applicable, 
                        lower-cost preferred risk policies 
                        under this title for such properties 
                        and the contents of such properties;
                          (v) encourage such owners and renters 
                        to maintain or acquire such coverage;
                          (vi) notify such owners of where to 
                        obtain information regarding how to 
                        obtain such coverage, including a 
                        telephone number, mailing address, and 
                        Internet site of the Administrator of 
                        the Federal Emergency Management Agency 
                        (in this paragraph referred to as the 
                        ``Administrator'') where such 
                        information is available; and
                          (vii) educate local real estate 
                        agents in communities participating in 
                        the national flood insurance program 
                        regarding the program and the 
                        availability of coverage under the 
                        program for owners and renters of 
                        properties in such communities, and 
                        establish coordination and liaisons 
                        with such real estate agents to 
                        facilitate purchase of coverage under 
                        the National Flood Insurance Act of 
                        1968 and increase awareness of flood 
                        risk reduction;
                  (B) in any fiscal year, a local governmental 
                agency may not use an amount under this 
                paragraph that exceeds 3 times the amount that 
                the agency certifies, as the Secretary, in 
                consultation with the Administrator, shall 
                require, that the agency will contribute from 
                non-Federal funds to be used with such amounts 
                used under this paragraph only for carrying out 
                activities described in subparagraph (A); and 
                for purposes of this subparagraph, the term 
                ``non-Federal funds'' includes State or local 
                government agency amounts, in-kind 
                contributions, any salary paid to staff to 
                carry out the eligible activities of the local 
                governmental agency involved, the value of the 
                time and services contributed by volunteers to 
                carry out such services (at a rate determined 
                by the Secretary), and the value of any donated 
                material or building and the value of any lease 
                on a building;
                  (C) a local governmental agency that uses 
                amounts as provided under this paragraph may 
                coordinate or contract with other agencies and 
                entities having particular capacities, 
                specialties, or experience with respect to 
                certain populations or constituencies, 
                including elderly or disabled families or 
                persons, to carry out activities described in 
                subparagraph (A) with respect to such 
                populations or constituencies; and
                  (D) each local government agency that uses 
                amounts as provided under this paragraph shall 
                submit a report to the Secretary and the 
                Administrator, not later than 12 months after 
                such amounts are first received, which shall 
                include such information as the Secretary and 
                the Administrator jointly consider appropriate 
                to describe the activities conducted using such 
                amounts and the effect of such activities on 
                the retention or acquisition of flood insurance 
                coverage.

           *       *       *       *       *       *       *

                              ----------                              


FEDERAL FLOOD INSURANCE ACT OF 1956

           *       *       *       *       *       *       *


                      FUNDS AND TREASURY BORROWING

  Sec. 15. * * *
  (e) The [Director] Administrator of the Federal Emergency 
Management Agency is authorized to issue to the Secretary of 
the Treasury from time to time and have outstanding at any one 
time, in an amount not exceeding $500,000,000 (or such greater 
amount as may be approved by the President) notes or other 
obligations in such forms and denominations bearing such 
maturities, and subject to such terms and conditions as may be 
prescribed by the [Director] Administrator of the Federal 
Emergency Management Agency, with the approval of the Secretary 
of the Treasury. Such notes or other obligations shall bear 
interest at a rate determined by the Secretary of the Treasury, 
taking into consideration the current average market yield on 
outstanding marketable obligations of the United States of 
comparable maturities during the month preceding the issuance 
of such notes or other obligations. The Secretary of the 
Treasury is authorized and directed to purchase any notes and 
other obligations to be issued hereunder and for such purpose 
he is authorized to use as a public debt transaction the 
proceeds from the sale of any securities issued under chapter 
31 of title 31, United States Code, and the purposes for which 
securities may be issued under such chapter are extended to 
include any purchases of such notes and obligations.
  The Secretary of the Treasury may at any time sell any of the 
notes or other obligations acquired by him under this section. 
All redemptions, purchases, and sales by the Secretary of the 
Treasury of such notes or other obligations shall be treated as 
public debt transactions of the United States.

           *       *       *       *       *       *       *


               DISSENTING VIEWS ON BUDGET RECONCILIATION

    We are very disappointed by the partisan, non-substantive 
approach taken by the Republican majority to the important 
issue of deficit reduction.
    The Republicans have simply used the reconciliation vehicle 
as a means of achieving what they have been unable to do 
through the regular legislative process, namely repeal the 
section of the Financial Reform bill--urged on us by Bush 
administration appointees after their experience with the 
crisis of 2008--that provide for a way to deal with large 
financial institutions that have become too indebted to exist. 
The legislation that was adopted requires that such 
institutions be put out of existence, with the shareholders 
wiped out and the officers and directors abolished. The law 
then mandates that the government--as recommended, we note, by 
Secretary of the Treasury Paulson--be given the authority to 
make some payments if necessary to prevent contagion from the 
unpaid debts of this now defunct institution, but also mandates 
the Secretary of the Treasury to recover any expenditure so 
made from large financial institutions. Because of the very 
specific timeframe Congress has imposed on the CBO, they were 
required to rule that there would be a $22 billion shortfall, 
again not because there would not be reimbursement, but because 
the reimbursement would lag the expenditure as a result of the 
way the law is written, Thus, CB0 estimates that $22 billion 
would be owed to the government at the end of the ten year 
period. It should be noted again that this is not an argument 
by CBO that the federal government would lose money. It is 
simply an assertion that at the end of an arbitrary ten year 
period, money that would eventually be repaid would be owed.
    The Democratic response to this scoring quirk was to simply 
move up the period within which institutions with $50 billion 
dollars or more would have to pay in the funding. Since CB0 
estimated that the cost of this would be $30 billion--$22 
billion in reimbursements and an $8 billion tax reduction in 
consequence for the paying financial institutions--we proposed 
that $30 billion be collected over a ten year period. The 
Republicans, expressing great sympathy for the banks which they 
believe, apparently, to be overtaxed, and thinking that these 
banks should not have to contribute to paying the cost of the 
financial crisis they caused, voted this down on a party line 
vote. Instead they responded by voting to repeal the entire 
orderly liquidation authority, which would put us back where we 
were in 2008, when the failure of Lehman Brothers triggered a 
crisis.
    In other words, rather than assess financial institutions 
at $50 billion dollars in assets and more, a total of $3 
billion a year collectively to provide some backup in case we 
needed to respond to a potential crisis, the Republicans 
repealed the entire mechanism that had been set up--and we note 
again, in response to the requests of Treasury Secretary 
Paulson, Federal Reserve Chairman Bernanke, and FDIC Chairman 
Bair--all three of them Bush appointees.
    The Republicans further used reconciliation for their 
ideological purposes by singling out the Consumer Financial 
Protection Bureau of all banking regulatory agencies to be 
subject to appropriations, rather than to have its own revenue 
stream guaranteed. When Democrats argue that if this was to be 
the model, it should apply also to the Federal Reserve System 
and the Comptroller of the Currency, the Republicans, with 
great inconsistency, voted us down. That is, of all the federal 
regulatory agencies that are not subject to the appropriations 
process, only the Consumer Financial Protection Bureau was 
singled out for this treatment, and the Republicans did so 
noting that if they had their way, they would thus be able to 
reduce the funding for this important consumer agency by 
billions of dollars over a ten year period. In addition to 
refusing to apply this principle to the Comptroller of the 
Currency or the Federal Reserve, the Republicans also neglected 
to apply it to the Federal Housing Financing Administration, 
which governs Fannie Mae and Freddie Mac, and when the 
Republicans were asked why they were not doing that, the result 
was an embarassed silence.
    Finally, the Republicans seek once again to repeal the HAMP 
Program which has resulted in the prevention of hundreds of 
thousands of foreclosures. This is in line with the Republican 
philosophy that the federal government should do nothing to 
deal with the crisis in housing, that is not only a terrible 
problem for individuals, but has a negative effect on the 
economy as a whole.
    The last part of the reconciliation was the adoption in the 
bill of the bipartisan flood insurance bill that has been 
worked on equally by Democrats and Republicans and we are 
supportive of this provision.
                                   Barney Frank.
                                   Joe Baca.
                                   Gwen Moore.
                                   Emanuel Cleaver.
                                   Gary C. Peters.
                                   Wm. Lacy Clay.
                                   Carolyn B. Maloney.
                                   Ed Perlmutter.
                                   Maxine Waters.
                                   Brad Miller.
                                   Michael E. Capuano.
                                   Luis V. Gutierrez.
                                   Melvin L. Watt.
                                   Ruben Hinojosa.
                                   Stephen F. Lynch.
                                   Gary L. Ackerman.
                                   Andre Carson.
                                   Keith Ellison.
                                   Carolyn McCarthy.
                TITLE IV--THE COMMITTEE ON THE JUDICIARY
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                                Committee on the Judiciary,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, House Committee on the Budget,
Washington, DC.
    Dear Chairman Ryan: Pursuant to Section 201 of H. Con. Res. 
112, I transmit to you the enclosed legislative language and 
accompanying materials from the Committee on the Judiciary.
            Sincerely,
                                               Lamar Smith,
                                                          Chairman.
  

                                CONTENTS

                                                                   Page
Summary of the Major Policy Decisions in the Legislation.........   365
Report Language: Section-by-Section..............................   412
Advisory on Earmarks.............................................   413
Committee Oversight Findings.....................................   413
Constitutional Authority Statement...............................   413
Committee Votes..................................................   413
Changes in Existing Law (Ramseyer Submission)....................   414
Performance Goals................................................   414
Congressional Budget Office Estimate.............................   415
Dissenting Views.................................................   421

        Summary of the Major Policy Decisions in the Legislation

    The HEALTH Act is modeled on California's legal reforms, 
which have been the law in that state for over 35 years. The 
HEALTH Act's reforms include a $250,000 cap on noneconomic 
damages, limits on the contingency fees lawyers can charge, and 
authorization for courts to require periodic payments for 
future damages instead of lump sum awards that prevent 
bankruptcies in which plaintiffs would receive only pennies on 
the dollar. Additionally, the HEALTH Act has a provision 
creating a ``fair share'' rule, by which damages are allocated 
fairly, in direct proportion to fault. It also includes 
reasonable guidelines--but not caps--on the award of punitive 
damages. The HEALTH Act will accomplish reform without in any 
way limiting compensation for 100% of plaintiffs' economic 
losses (anything to which a receipt can be attached), including 
their medical costs, their lost wages, their future lost wages, 
rehabilitation costs, and any other economic out of pocket loss 
suffered as the result of a health care injury. Finally, the 
HEALTH Act preserves any State law that otherwise caps damages 
or provides procedural or substantive protections for health 
care providers and health care organizations.

                Background and Need for the Legislation

    The HEALTH Act's reforms are necessary to help improve 
health care, make it more affordable, and save taxpayer money 
while reducing the federal deficit.
    The HEALTH Act, modeled after California's decades-old and 
highly successful health care litigation reforms, addresses the 
current crisis in health care by reigning in unlimited lawsuits 
and thereby making health care delivery more accessible and 
cost-effective in the United States. California's Medical 
Injury Compensation Reform Act (``MICRA''), which was signed 
into law by Governor Jerry Brown in 1975, has proved immensely 
successful in increasing access to affordable medical care. 
Overall, according to data of the National Association of 
Insurance Commissioners (with the latest data available from 
2008), the rate of increase in medical professional liability 
premiums in California since 1976 has been a relatively modest 
387%, whereas the rest of the United States have experienced a 
1,089% rate of increase, a rate of increase 281% larger than 
that experienced in California.
    By incorporating MICRA's time-tested reforms at the Federal 
level, the HEALTH Act will make medical malpractice insurance 
affordable again, encourage health care practitioners to 
maintain their practices, and reduce health care costs for 
patients. Its enactment will particularly help traditionally 
under-served rural and inner city communities, and women 
seeking obstetrics care.
    MICRA's reforms, which have been the law in California for 
over 35 years, include a $250,000 cap on noneconomic damages, 
limits on the contingency fees lawyers can charge, and 
authorization for courts to require periodic payments for 
future damages instead of lump sum awards that prevent 
bankruptcies in which plaintiff's would receive only pennies on 
the dollar. Additionally, the HEALTH Act has a provision 
creating a ``fair share'' rule, by which damages are allocated 
fairly, in direct proportion to fault. It also includes 
reasonable guidelines--but not caps--on the award of punitive 
damages. The HEALTH Act will accomplish reform without in any 
way limiting compensation for 100% of plaintiffs' economic 
losses (anything to which a receipt can be attached), including 
their medical costs, their lost wages, their future lost wages, 
rehabilitation costs, and any other economic out of pocket loss 
suffered as the result of a health care injury. Finally, the 
HEALTH Act preserves any State law that otherwise caps damages 
or provides greater procedural or substantive protections for 
health care providers and health care organizations.
    Enactment of the HEALTH Act will not result in more medical 
malpractice cases being brought in Federal court than would be 
brought in Federal court otherwise. The Supreme Court has held 
that a ``federal standard'' does not confer Federal question 
jurisdiction in the absence of congressional creation of a 
Federal cause of action.\1\
---------------------------------------------------------------------------
    \1\See Merrell Down Pharm Inc. v. Thompson, 478 U.S. 804, 813 
(1986).
---------------------------------------------------------------------------
    Finally, many State supreme courts have judicially 
nullified reasonable litigation management provisions enacted 
by State legislatures, many of which sought to address the 
crisis in medical professional liability that reduces patients' 
access to health care. Consequently, in such States, passage of 
federal legislation by Congress may be the only means of 
addressing the State's current crisis in medical professional 
liability and restoring patients' access to health care. Laws 
passed by States that have already provided for, or may in the 
future provide for, different limits on damages in health care 
lawsuits or greater procedural or substantive protections for 
health care providers and health care organizations will be 
preserved under the HEALTH Act.

    THE HUGE COSTS OF DEFENSIVE MEDICINE ARE PASSED ON TO TAXPAYERS

    The American medical liability system is broken. According 
to one study, 40 percent of claims are meritless, in that 
either no injury or no error occurred in the case. Attorneys' 
fees and administrative costs eat away 54% of the compensation 
that should be paid to plaintiffs. And completely meritless 
claims (which are nonetheless successful approximately one in 
four times) account for nearly a quarter of total 
administrative costs.\2\
---------------------------------------------------------------------------
    \2\``Claims, Errors, and Compensation Payments in Medicald 
Malpratice Litigation,'' David Studdert et al., New England Journal of 
Medicine (May 11, 2006).
---------------------------------------------------------------------------
    Under current rules, health care workers seek to avoid 
these costs to themselves by conducting many additional costly 
tests and procedures and shifting those costs to taxpayers. As 
one physician explained, ``[j]ust one successful lawsuit 
against a physician for a missed diagnosis can damage his 
ability to maintain his credentials, cost him . . . in 
increased liability insurance, jeopardize his financial assets, 
and even end his career. Why risk our own money when we can use 
somebody else's to protect us, even if it costs millions?''\3\
---------------------------------------------------------------------------
    \3\Panda Bear, MD, ``How I Am Learning to Throw Money Away with 
Both Hands and a Big Shovel'' (February 5, 2008).
---------------------------------------------------------------------------

 ``DEFENSIVE MEDICINE'' IS WIDESPREAD, AND THE SOLUTION IS TORT REFORM

    ``Defensive medicine'' is widely practiced. Skyrocketing 
medical liability insurance rates have distorted the practice 
of medicine. Costly, but unnecessary, tests have become routine 
as doctors try to protect themselves from frivolous lawsuits. 
Indeed, according to a Harvard University research study, 40% 
of medical malpractice lawsuits filed in the United States lack 
evidence of medical error or any actual patient injury.\4\
---------------------------------------------------------------------------
    \4\Available at http://www.hsph.harvard.edu/facility/articles/
litigation.pdf.
---------------------------------------------------------------------------
    A survey released in 2010 found defensive medicine is an 
issue for all physicians. The results, published in the 
Archives of Internal Medicine, found that 91% of the 1,231 
doctors who responded to their survey ``reported believing that 
physicians order more tests and procedures than needed to 
protect themselves from malpractice suits.'' That view was held 
by the vast majority of generalists (91%), medical specialists 
(89%), surgeons (93%) and other specialists (94%). The survey 
asked two questions: (1) ``Do physicians order more tests and 
procedures than patients need to protect themselves from 
malpractice suits?''; and, (2) ``Are protections against 
unwarranted malpractice lawsuits needed to decrease the 
unnecessary use of diagnostic tests?'' Overall, 91 percent of 
doctors surveyed agreed with both statements.\5\
---------------------------------------------------------------------------
    \5\See Tara F. Bishop, MD, Alex D. Federman, MD, MPH, Salomeh 
Keyhani, MD, MPH, ``Physicians' Views on Defensive Medicine: A National 
Survey'' Arch. Intern. Med. 2010; 170(12): 1081-1083.
---------------------------------------------------------------------------
    According to a 2008 survey conducted by the Massachusetts 
Medical Society, 83 percent of physicians reported that they 
practice defensive medicine.\6\ Another study in Pennsylvania 
put the figure at 93 percent.\7\
---------------------------------------------------------------------------
    \6\``Investigation of Defensive Medicine in Massachusetts,'' 
Massachusetts Medical Society (November 2008).
    \7\David Studdert et al., ``Defensive Medicine Among High-Risk 
Specialist Physicians in a Volatile Malpractice Environment,'' JAMA 
(June 1, 2005) at 2609-2617.
---------------------------------------------------------------------------
    Defensive medicine is widespread in specialty medical 
fields as well. According to another report:

          [A] survey from Emergency Physicians Monthly 
        [concludes] many tests performed in the ER [emergency 
        room] are deemed unnecessary to good patient care. 
        Here's how doctors responded to the following question: 
        ``Given that in a typical shift of eight hours you see 
        an average of two patients per hour (16 patients/
        shift), could you have eliminated any of the following 
        tests and/or treatments without compromising the 
        quality of care? If so, how many of each?'' The results 
        of the survey showed how many times ER doctors 
        prescribe which types of tests unnecessarily to avoid 
        unlimited lawsuits:

----------------------------------------------------------------------------------------------------------------
                                                                   None      1       2       3       4     More
----------------------------------------------------------------------------------------------------------------
Plain Film X-Rays...............................................     23%     20%     23%     15%     10%      9%
CT Scans........................................................     30%     32%     23%      6%      5%      5%
Lab Tests.......................................................     17%      8%     19%     14%     15%     27%
Medication Orders...............................................     42%     14%     18%     10%      7%     10%
Other...........................................................     45%     13%     17%      6%      6%     13%
----------------------------------------------------------------------------------------------------------------

          As you can see, laboratory tests and CT scans 
        comprised the greatest proportion of unnecessary 
        tests.\8\
---------------------------------------------------------------------------
    \8\KevinMD.com ``How Much Unnecessary Testing Goes On in the ER?'' 
(September 30, 2009).

    The same survey found that the HEALTH Act's limit on 
noneconomic damages is essential to reducing defensive 
medicine: ``The survey also found that non-economic caps are 
these physicians' preferred choice of malpractice reform, with 
84 percent of emergency physicians calling them a `non-
negotiable part of health reform.'''\9\
---------------------------------------------------------------------------
    \9\KevinMD.com ``How Much Unnecessary Testing Goes On in the ER?'' 
(September 30, 2009). And in 2003, the Florida Governor's Select Task 
Force on Health Care Professional Liability Insurance made its official 
recommendations to Governor Bush. The Task Force concluded as follows: 
``the most important [recommendation] is a cap on noneconomic damages 
in the amount of $250,000.'' Governor's Select Task Force on Healthcare 
Professional Liability Insurance (January 29, 2003) at xvi (Executive 
Summary).
---------------------------------------------------------------------------
    Another report on defensive medicine in the emergency room 
summarized emergency room doctors' incentives as follows:

          The fear of missing something weighs heavily on every 
        doctor's mind. But the stakes are highest in the ER, 
        and that fear often leads to extra blood tests and 
        imaging scans for what might be harmless chest pains, 
        run-of-the-mill head bumps and non-threatening 
        stomachaches. Many ER doctors say the No. 1 reason is 
        fear of malpractice lawsuits. ``It has everything to do 
        with it,'' said Dr. Angela Gardner, president of the 
        American College of Emergency Physicians.\10\
---------------------------------------------------------------------------
    \10\Lindsey Tanner, ``Fear Can Drive ERs To Do Tests to Excess,'' 
Associated Press (June 21, 2010).

    As one Newsweek reporter described the personal experience 
---------------------------------------------------------------------------
of individual doctors:

    When I asked physicians which medical procedures were 
costly and commonly performed but did not help (at least some) 
patients, I expected more of them to justify almost everything 
they do. Some did. But as the Newsweek article on ``medicine we 
can live without'' showed, many physicians couldn't get their 
nominees to me fast enough, so eager were they to spread the 
word about how much stupid, useless medical care there is.
    The reason for that isn't surprising: doctors hate 
practicing defensive medicine--that is, ordering tests, 
surgeries, or other procedures not because the doctor knows it 
will help the patient but to protect the physician from 
lawsuits. . . .
    [M]ore typical was Angela Gardner, president of the 
American College of Emergency Physicians, who had a list as 
long as my arm of procedures ER docs perform, often for no 
patient benefit. They include following a bedside sonogram 
(looking for ectopic pregnancy, for instance) with an 
``official'' sonogram (because if something is missed it's 
easier to defend yourself to a jury if you've ordered the 
second one); a CT scan for every child who bumped his or her 
head (to rule out things that can be diagnosed just fine by 
observation); X-rays that do not guide treatment, such as for a 
simple broken arm; CTs for suspected appendicitis that has been 
perfectly well diagnosed without it (ORs won't accept patients 
for an appendectomy without a CT); and . . . well, there were 
more. But in short, Gardner told me, ``I think there is plenty 
we could cut out without hurting patients in any way.''
    So why don't they? Because although doctors may hate 
practicing defensive medicine, they do it so they don't get 
sued. We've known that for a long time, but a recent survey of 
physicians is so replete with horror stories I can't resist 
sharing them. . . .
    Nationwide, physicians estimate that 35 percent of 
diagnostic tests they ordered were to avoid lawsuits, as were 
19 percent of hospitalizations, 14 percent of prescriptions, 
and 8 percent of surgeries . . . . All told, it adds up to $650 
billion in unnecessary care every year.
    And now for those horror stories. The ER, said one doc in 
the Jackson survey, ``should have a CT head scanner at the 
entrance door,'' since ``every patient gets a head CT.''
    Another ER doc said he ``routinely admit[s] low-risk chest 
pain patients because I know at some point in my career, one of 
them will go home and die from a heart attack. I will admit 
hundreds to avoid that one death (and possible lawsuit).'' 
Another said he ordered 52 CT scans in one 12-hour shift: 
``That's $104K in one day.'' And another: ``Any patient who 
presents to the ER and mentions the magic words `chest pain,' 
unless they are well known by the physician, is guaranteed to 
undergo multiple blood tests, ECGs, stress tests, perhaps CT 
scans, and will incur charges of several thousand dollars. A 
very large percentage of these patients will have very low 
probability of having ischemic chest pain, yet all patients 
will undergo testing to prevent `something from being missed' 
in the name of defensive medicine.''
    Like other physicians, this one bemoaned what he has to do 
to appease patients, such as a ``paranoid new mom [who] insists 
her child needs a head CT after they bumped their head . . . to 
rule out a head bleed. So to appease the lawyers and hospital 
administration and everyone else, I have to consciously sedate 
a perfectly normal 15-month-old and put them at terrible risk 
just to prove to a mother that children don't get head bleeds 
from falling over and bumping their heads!'' (That ``terrible 
risk'' refers to the fact that CTs deliver a lot of radiation 
and thus increase the risk of cancer.) And an anesthesiologist 
described how he orders ``lab tests, X rays, cardiac 
consultations, and stress tests, [as well as] pregnancy tests . 
. . most often to cover our butts.''
    Obstetricians really sounded off. One described having to 
admit to the hospital ``pregnant patients with complaints such 
as stomach pain, cramps, excess vaginal discharge, headache, 
etc.'' almost solely for defensive reasons: ``You can't afford 
to give them any reason to point to you if their baby isn't 
perfect.''\11\
---------------------------------------------------------------------------
    \11\Sharon Begley, ``Block That CT Scan!--Despite the massive 
overhaul of health care passed by Congress, many costs will remain 
high, thanks to doctors' fears of potential lawsuits,'' Newsweek (March 
22, 2010).
---------------------------------------------------------------------------
    And, according to a recent survey of heart doctors:

          A substantial number of heart doctors--about one in 
        four--say they order medical tests that might not be 
        needed out of fear of getting sued, according to a new 
        study . . . [A]bout 24 percent of the doctors said they 
        had recommended the test in the previous year because 
        they were worried about malpractice lawsuits . . . The 
        study was released Tuesday by the journal Circulation: 
        Cardiovascular Quality and Outcomes.\12\
---------------------------------------------------------------------------
    \12\Stephanie Nano, ``Heart Doctors Admit They Order Unnecessary 
Tests Out of Fear of Being Sued,'' Associated Press (April 14, 2010).

    Moreover, according to the Massachusetts Medical Society, 
and White Coat Notes, a publication of the Boston-area medical 
---------------------------------------------------------------------------
community:

          The fear of being sued is driving Massachusetts 
        physicians to order many tests, procedures, referrals 
        to specialists and even hospitalizations for consumers 
        that aren't needed and drive up health costs by more 
        than $1.4 billion a year, according to a new study that 
        is the first of its kind.
          The Massachusetts Medical Society surveyed 900 of its 
        members, including family doctors, obstetricians and 
        gynecologists and general surgeons, who reported 
        practicing so-called ``defensive medicine.''
          The report found that 83 percent of physicians 
        surveyed reported practicing defensive medicine and 
        that an average of 18 to 28 percent of tests, 
        procedures and referrals and consultations, and 13 
        percent of hospitalizations were ordered solely out of 
        fear of being sued.\13\
---------------------------------------------------------------------------
    \13\Kay Lazar, ``Doctors' Practice of `Defensive Medicine' 
Widespread, Costly,'' White Coat Notes (November 17, 2008).

    A recent Gallup survey of American physicians found the 
fear of lawsuits was the driver behind 21 percent of all the 
tests and treatments ordered by doctors, which equates to 26 
percent of all health care dollars spent. That comes to a 
staggering $650 billion.\14\ According to a study of medical 
liability costs and the practice of medicine in Health Affairs, 
overuse of imaging services alone, driven by fear of lawsuits, 
costs as much as $170 billion a year nationally.\15\
---------------------------------------------------------------------------
    \14\``Price: Cutting Medical Costs without Obamacare,'' Washington 
Times, 3/18/10.
    \15\``Addressing the New Health Care Crisis: Reforming the Medical 
Litigation System to Improve the Quality of Care 11,'' Office of the 
Assistant Secretary for Planning and Evaluation, U.S. Department of 
Health and Human Services, 2003.
---------------------------------------------------------------------------
    The medical lawsuit crisis affects nurses as well. Nearly 
half of nurses say they are prohibited or discouraged from 
providing needed care by rules set up to avoid lawsuits.\16\
---------------------------------------------------------------------------
    \16\``Fear of Litigation Study, The Impact on Medicine,'' Harris 
Interactive (April 11, 2002).
---------------------------------------------------------------------------

                      DEFENSIVE MEDICINE IS COSTLY

    As was recently reported, defensive medicine costs billions 
of dollars annually:

          The latest estimate of the costs of defensive 
        medicine, from an analysis just published in Health 
        Affairs: $45.6 billion annually (in 2008 dollars), 
        accounting for more than 80% of the $55.6 billion total 
        yearly cost of the medical liability system. The 
        authors from Harvard University and the University of 
        Melbourne explain that their analysis doesn't attempt 
        to estimate social costs or benefits of the malpractice 
        system, such as damage to physicians' reputations or 
        any deterrent effect it may provide . . . .
          [Their conclusions] include estimates of defensive 
        medicine costs both for hospitals ($38.8 billion) and 
        for physicians ($6.8 billion), calculated by looking at 
        costs in high- and low-liability environments. The 
        thought is that the difference represents [increased] 
        spending due to fear of being sued--i.e. defensive 
        medicine . . . . The total costs of the medical 
        liability system constitute about 2.4% of total health-
        care spending, the authors write. That's ``not 
        trivial,'' they write, and because some of these costs 
        ``stem from meritless malpractice litigation,'' flaws 
        in the system are worth addressing.\17\
---------------------------------------------------------------------------
    \17\Katherine Hobson, ``How Much Does Defensive Medicine Cost? One 
Study Says $46 Billion,'' Wall Street Journal Health Blog (September 7, 
2010).
---------------------------------------------------------------------------
    A study by the Pacific Research Institute estimates that 
defensive medicine costs $191 billion a year,\18\ while a 
separate study by PricewaterhouseCoopers puts the number even 
higher--$239 billion.\19\ That follows another study by 
PricewaterhouseCoopers that found, ``While the bulk of the 
premium dollar pays for medical services, those medical 
services include the cost of medical liability and defensive 
medicine . . . . Defensive tests and treatment can pose 
unnecessary medical risks and add unnecessary costs to 
healthcare.''\20\
---------------------------------------------------------------------------
    \18\Available at http://www.heartland.org/custom/semod--policybot/
pdf/26161.pdf.
    \19\PricewaterhouseCoopers' Health Research Institute, The Price of 
Excess: Identifying Waste in Healthcare Spending (New York: 
PricewaterhouseCoopers 2008), endnote 18, at 18.
    \20\``The Price of Excess: Identifying Waste in Healthcare 
Spending,'' PricewaterhouseCoopers, 2008.
---------------------------------------------------------------------------

 THE CONSENSUS IS THAT DEFENSIVE MEDICINE CAUSED BY UNLIMITED LAWSUITS 
                           IS A REAL PROBLEM

    President Obama himself acknowledged the harm caused by 
defensive medicine, stating ``I want to work with the AMA so we 
can scale back the excessive defensive medicine that reinforces 
our current system, and shift to a system where we are 
providing better care, simply--rather than simply more 
treatment.''\21\ The President himself weighed in on the issue 
in more detail, writing in the New England Journal of Medicine 
that ``the current tort system does not promote open 
communications to improve patient safety. On the contrary, it 
jeopardizes patient safety by creating an intimidating 
liability environment.''\22\ In his 2011 State of the Union 
Address, President Obama said ``I'm willing to look at other 
ideas to bring down costs, including one that Republicans 
suggested last year: medical malpractice reform to rein in 
frivolous lawsuits.'' Although the Associated Press has written 
that ``Republicans may be forgiven if [the President's] offer 
makes them feel like Charlie Brown running up to kick the 
football, only to have it pulled away, again,''\23\ the 
President should fulfill his promise and support time-tested 
reforms that have proven successful for over three decades in 
California.
---------------------------------------------------------------------------
    \21\Text: Obama's AMA Speech on Health Care (CBS News) (June 15, 
2010).
    \22\``Making Patient Safety the Centerpiece of Medical Liability 
Reform, `` Sen. Barack Obama and Sen. Hillary Clinton, New England 
Journal of Medicine (May 25, 2006).
    \23\Associated Press, ``Fact Check: Obama and His Imbalanced 
Ledger'' (January 26, 2011).
---------------------------------------------------------------------------
    A survey conducted for the bipartisan legal reform 
organization ``Common Good,'' whose Board of Advisors included 
Eric Holder, who is now President Obama's Attorney General, 
found that more than three-fourths of physicians feel that 
concern about malpractice litigation has hurt their ability to 
provide quality care in recent years. When physicians were 
asked, ``Generally speaking, how much do you think that fear of 
liability discourages medical professionals from openly 
discussing and thinking of ways to reduce medical errors?'' an 
astonishing 59% of physicians replied ``a lot.''\24\
---------------------------------------------------------------------------
    \24\See Harris Interactive, ``Common Good Fear of Litigation Study: 
The Impact of Medicine,'' Final Report (April 11, 2002) (``Executive 
Summary'') at 30 (Table 17), available at www.ourcommongood.com/
news.html.
---------------------------------------------------------------------------
    President Obama's own doctor of over two decades also 
supports medical tort reform. David Scheiner was President 
Obama's doctor from 1987 until he entered the White House. As 
was recently reported in Forbes magazine:

          [Dr. Scheiner is] still an enthusiastic Obama 
        supporter, but he worries about whether the health care 
        legislation currently making its way through Congress 
        will actually do any good, particularly for doctors 
        like himself who practice general medicine. ``I'm not 
        sure [Obama] really understands what we face in primary 
        care,'' Scheiner says. . . .
          Scheiner is critical of Obama's pick for Health and 
        Human Services secretary--Kansas Gov. Kathleen 
        Sebelius, who used to work as the chief lobbyist for 
        her state's trial lawyers association. . . .
          Scheiner says he never thought it was appropriate to 
        talk about health policy with Obama, especially once he 
        became a U.S. Senator. The one exception was medical 
        malpractice reform. ``I once briefly talked to him 
        about malpractice, and he took the lawyers' position,'' 
        he says. . . .
          Scheiner, like most others in his profession, thinks 
        that it should be harder to sue doctors and that awards 
        should be capped. He says that he and other doctors 
        must order too many tests and imaging studies just to 
        avoid being sued.\25\
---------------------------------------------------------------------------
    \25\David Whelan, ``Obama's Doctor Knocks ObamaCare,'' Forbes.com 
(June 16, 2009).
---------------------------------------------------------------------------

The National Commission on Fiscal Responsibility and Reform

    The National Commission on Fiscal Responsibility and 
Reform, which was created by President Obama, supports health 
care litigation reform in its final December 2010 report. As 
the Commission states in a report that was endorsed by 61% of 
its members (by a vote of 11-7):

          Most experts agree that the current tort system in 
        the United States leads to an increase in health care 
        costs. This is true both because of direct costs--
        higher malpractice insurance premiums--and indirect 
        costs in the form of over-utilization of diagnostic and 
        related services (sometimes referred to as ``defensive 
        medicine''). The Commission recommends an aggressive 
        set of reforms to the tort system.
          Among the policies pursued, the following should be 
        included: (1) Modifying the ``collateral source'' rule 
        to allow outside sources of income collected as a 
        result of an injury (for example workers' compensation 
        benefits or insurance benefits) to be considered in 
        deciding awards; (2) Imposing a statute of 
        limitations--perhaps one to three years--on medical 
        malpractice lawsuits; (3) Replacing joint-and-several 
        liability with a fair-share rule, under which a 
        defendant in a lawsuit would be liable only for the 
        percentage of the final award that was equal to his or 
        her share of responsibility for the injury; (4) 
        Creating specialized ``health courts'' for medical 
        malpractice lawsuits; and (5) Allowing ``safe haven'' 
        rules for providers who follow best practices of care.
          Many members of the Commission also believe that we 
        should impose statutory caps on punitive and non-
        economic damages, and we recommend that Congress 
        consider this approach and evaluate its impact.\26\

    \26\The National Commission on Fiscal Responsibility and Reform, 
``The Moment of Truth'' (December 2010) at 34-35.
---------------------------------------------------------------------------
    Since President Obama signed the health care bill into law, 
the co-chairs of the Commission, Erskine Bowles and Alan 
Simpson, recommended that Congress enact a law to ``[p]ay 
lawyers less and reduce the cost of defensive medicine'' by 
``[e]nact[ing] comprehensive medical malpractice liability 
reform to cap non-economic and punitive damages and make other 
changes in tort law.''\27\
---------------------------------------------------------------------------
    \27\Co-Chair Proposal, at 32, available at http://
www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/
CoChair--Draft.pdf.
---------------------------------------------------------------------------

The New York Times

    According to the New York Times:

          The fear of lawsuits among doctors does seem to lead 
        to a noticeable amount of wasteful treatment. Amitabh 
        Chandra--a Harvard economist whose research is cited by 
        both the American Medical Association and the trial 
        lawyers' association--says $60 billion a year, or about 
        3 percent of overall medical spending, is a reasonable 
        upper-end estimate.
          Perhaps the best-known study of defensive medicine--
        by Dr. Mark McClellan, who later ran Medicare in the 
        Bush administration, and Daniel Kessler--compared 
        cardiology treatment in states that had capped 
        malpractice awards in the 1980s and early '90s with 
        those that didn't. In the states without caps, stenting 
        and other treatments were more common, but the outcomes 
        were no better. . . .
          [T]he researchers in the field tend to agree about 
        the scale of the problem--and how much malpractice 
        reform might accomplish. . . . Dana Goldman, director 
        of the Schaeffer Center for Health Policy at the 
        University of Southern California, adds: ``It is one of 
        the things we need to address if we want to bend the 
        cost curve.''\28\
---------------------------------------------------------------------------
    \28\David Leonhardt, ``Medical Malpractice System Breeds More 
Waste,'' The New York Times (September 23, 2009).
---------------------------------------------------------------------------
    The New York Times also reported that Uwe E. Reinhardt, an 
economist at Princeton University, has written that the massive 
costs of lawsuit abuse in the United States distinguishes it 
from other countries:

          Health-services researchers call the difference 
        between these numbers [the health care spending of 
        different countries], ``excess spending.'' That term 
        [conveys] a difference driven by factors other than 
        G.D.P. per capita. Prominent among these other factors 
        are: . . . higher treatment costs triggered by our 
        uniquely American tort laws, which in the context of 
        medicine can lead to ``defensive medicine''--that is, 
        the application of tests and procedures mainly as a 
        defense against possible malpractice litigation, rather 
        than as a clinical imperative.\29\

    \29\Uwe E. Reinhardt, ``Why Does U.S. Health Care Cost So Much? 
(Part I),'' The New York Times (November 14, 2008).
---------------------------------------------------------------------------
    We know that our medical liability costs are at least twice 
those in other developed countries\30\ and make up 10 percent 
of all tort cases. That's the macro perspective, but what about 
the physicians, hospitals or other health care providers on the 
wrong end of a lawsuit? They can expect to pay an average of 
$26,000 to defend a case that is dropped before trial and as 
much as $140,000 if the case actually goes to court, regardless 
of the merits.\31\ So, even when good doctors win their 
lawsuits, which happens the vast majority of the time, they 
still lose. They lose valuable patient time, money, and peace 
of mind while watching their professional reputations impugned.
---------------------------------------------------------------------------
    \30\Manhattan Institute's Center for Legal Policy study (2008).
    \31\``Reviving Tort Reform,'' Investor's Business Daily, 11/15/10.
---------------------------------------------------------------------------

USA Today

    The USA Today editorial board also recently came out 
supporting tort reform, citing the high cost of defensive 
medicine:

          A study last month by the Massachusetts Medical 
        Society found that 83% of its doctors practice 
        defensive medicine at a cost of at least $1.4 billion a 
        year. Nationally, the cost is $60 billion-plus, 
        according to the Health and Human Services Department. 
        [And a] 2005 study in the Journal of the American 
        Medical Association found 93% of Pennsylvania doctors 
        practice defensive medicine. The liability system is 
        too often a lottery. Excessive compensation is awarded 
        to some patients and little or none to others. As much 
        as 60% of awards are spent on attorneys, expert 
        witnesses and administrative expenses . . .  The 
        current system is arbitrary, inefficient and results in 
        years of delay.\32\
---------------------------------------------------------------------------
    \32\USA Today editorial, ``Our View on `Defensive' Medicine: 
Lawyers' Bills Pile High, Driving Up Health Care Costs,'' USA Today 
(December 29, 2008).

    The editors of USA Today concluded that ``one glaring 
omission'' from the health care law ``was significant tort 
reform, which was opposed by trial lawyers and their Democratic 
allies. CBO estimates that restricting malpractice suits would 
save $54 billion over 10 years by curbing tests and procedures 
that patients don't really need. So why not add it?''\33\
---------------------------------------------------------------------------
    \33\USA Today editorial, ``Don't try to repeal the new health care 
law--improve it'' (November 18, 2010) at 9A.
---------------------------------------------------------------------------

The Director of Pediatric Neurosurgery at Johns Hopkins

    One of the nation's top surgeons, with credibility and 
acclaim the world over for the pioneering surgeries he has and 
his personal story of overcoming hardship, recently severely 
criticized the dominant health care legislation before 
Congress. Benjamin Carson, director of pediatric neurosurgery 
at the Johns Hopkins Medical Institutions in Baltimore, 
Maryland, and recipient of numerous awards including the 
Presidential Medal of Freedom, criticized in a recent interview 
the approach of the current bills for their mandate, creation 
of a ``public option,'' and lack of malpractice liability 
reform. He pointed to excessive litigation, pointing out how 
much malpractice insurance and other forms of ``defensive 
medicine'' to protect against lawsuits add to medical costs. In 
the interview with a local television station, Carson insisted 
that tort reform must go ``hand in hand'' as part of any true 
health care reform. According to Dr. Carson, ``We have to bring 
a rational approach to medical litigation.'' ``We're the only 
nation in the world that really has this problem. Why is it 
that everybody else has been able to solve this problem but us? 
Simple. Special interest groups like the trial lawyers' 
association. They don't want a solution.''\34\
---------------------------------------------------------------------------
    \34\John Berlau, ```Gifted Hands' Surgeon Rips Into Obamacare,'' 
BogGovernment.com, available at http://biggovernment.com/2009/10/14/
gifted-hands-surgeon-rips-into-obamacare/.
---------------------------------------------------------------------------

The Wall Street Journal

    As summarized by Kimberly Strassel in the Wall Street 
Journal:

          Tort reform is a policy no-brainer. Experts on left 
        and right agree that defensive medicine--ordering tests 
        and procedures solely to protect against Joe Lawyer--
        adds enormously to health costs. The estimated dollar 
        benefits of reform range from a conservative $65 
        billion a year to perhaps $200 billion. In context, Mr. 
        Obama's plan would cost about $100 billion annually. 
        That the president won't embrace even modest change 
        that would do so much, so quickly, to lower costs, has 
        left Americans suspicious of his real ambitions.
          It's also a political no-brainer. Americans are on 
        board. Polls routinely show that between 70% and 80% of 
        Americans believe the country suffers from excess 
        litigation. The entire health community is on board. 
        Republicans and swing-state Democrats are on board. 
        State and local governments, which have struggled to 
        clean up their own civil-justice systems, are on board. 
        In a debate defined by flash points, this is a rare 
        area of agreement. Former Democratic Sen. Bill Bradley, 
        in a New York Times piece, suggested a ``grand 
        bipartisan compromise'' in which Democrats got 
        universal coverage in return for offering legal reform.
    The only folks not on board are a handful of powerful trial 
lawyers, and a handful of politicians who receive a generous 
cut of those lawyers' contingency fees. The legal industry was 
the top contributor to the Democratic Party in the 2008 cycle, 
stumping up $47 million. The bill is now due, and Democrats are 
dutifully making a health-care down payment.
    During the markup of a bill in the Senate Health Committee, 
Republicans offered 11 tort amendments that varied in degree 
from mere pilot projects to measures to ensure more rural 
obstetricians. On a party line vote, Democrats killed every 
one.\35\
---------------------------------------------------------------------------
    \35\Kimberly A. Strassel, ``The President's Tort Two-Step,'' The 
Wall Street Journal (September 11, 2009).
---------------------------------------------------------------------------

 THE FURTHER HIDDEN COSTS OF DEFENSIVE MEDICINE: MORE RADIATION AND NO 
                          ADVICE BY TELEPHONE

    Defensive medicine entails additional hidden costs. As was 
reported recently:

          The result [of defensive medicine] can be extra 
        costs, and potential harm--including side effects from 
        unneeded drugs and increased risk of future cancer from 
        excessive radiation.
          No one tells patients after a CT scan that the test 
        ``just imparted three years of radiation to your body 
        as well as significant stress on your kidney, and 
        Medicare just got charged lots of money.''\36\

    \36\Lindsey Tanner, ``Fear Can Drive ERs To Do Tests to Excess,'' 
Associated Press (June 21, 2010).
---------------------------------------------------------------------------
    As explained by another doctor:

    Of course there is far more to defensive medicine than 
obstetric procedures. Many CT scans are entirely unnecessary, 
and in fact expose patients to radiation that may contribute to 
one in fifty cancers. But woe to the emergency room doc who 
didn't immediately scan the head of a trauma patient.
          Unnecessary blood tests, biopsies, and specialist 
        referrals are all done to ``spread the blame'' and make 
        lawsuits defensible.
          Defensive medicine costs you more than money. When 
        was the last time you asked for telephone advice? 
        Doctors are very, very leery of giving meaningful 
        advice over the phone, because we can't take the risk 
        of this kind of conversation in front of a jury:
          Attorney: You mean you refilled the medicine without 
        performing another physical exam? If you had seen the 
        patient in person, you would have found the cancer 
        earlier!
          Doctor: The medicine had nothing to do with cancer! I 
        was just trying to help the patient! It's expensive to 
        make them come in every month for a refill!
          Anytime we tell anyone anything, any kind of advice, 
        doctors must consider the risk of a lawsuit. Everything 
        we say and do is supposed to be documented, too--to 
        defend ourselves. Ever wonder why the doc spends so 
        much time scribbling in the chart, instead of talking 
        to you? It's not because we like writing. It's because 
        every single day we're reminded that the chart is our 
        only defense.
          Do you think this hasn't increased health care costs? 
        Do you think it hasn't affected the relationships 
        doctors have with patients?
          The current medical malpractice system is a 
        disgrace.\37\
---------------------------------------------------------------------------
    \37\Roy Benaroch, MD, ``Health Care Costs: Defensive Medicine,'' 
The Pediatric Insider (2010).
---------------------------------------------------------------------------

 DEFENSIVE MEDICINE CAUSES ALL THOSE HARMS WITHOUT ADDING ANY BENEFITS

    Two top economic researchers have concluded: ``[P]hysicians 
from states enacting liability reforms that directly reduce 
malpractice pressure experience lower growth over time in 
malpractice claims rates and in real malpractice insurance 
premiums. [Also], physicians from reforming states report 
significant relative declines in the perceived impact of 
malpractice pressure on practice patterns.''\38\ One of those 
economists is Mark McClellan, who worked on health policy 
issues in President Clinton's Treasury Department and who has 
been described by Senator Ted Kennedy as having ``impressive 
credentials both as a physician and as an economist.''\39\ 
These economists conducted two extensive studies using national 
data on Medicare populations and concluded that patients from 
states that adopted direct medical care litigation reforms, 
such as limits on damage awards, incur significantly lower 
hospital costs while suffering no increase in adverse health 
outcomes associated with the illness for which they were 
treated.
---------------------------------------------------------------------------
    \38\See Daniel P. Kessler and Mark B. McClellan, ``The Effects of 
Malpractice Pressure and Liability Reforms on Physicians' Perceptions 
of Medical Care,'' 60 Law and Contemporary Problems 1: 81-106 (1997), 
at 105.
    \39\Marc Kaufman, ``Bush Adviser Tabbed for FDA,'' Washington Post 
(September 25, 2002) at A25.
---------------------------------------------------------------------------
    In sum, the studies concluded that in states with medical 
litigation reforms in place, there was an average reduction of 
4.3% in hospital costs for patients in managed care 
programs,\40\ and an average reduction of 7.4% in hospital 
costs for patients in non-managed care programs.\41\ They have 
thereby quantified the cost of ``defensive medicine,'' in which 
doctors perform tests and prescribe medicines that are not 
necessary for health in order to avoid patients' future claims 
that they suffered adverse health effects because the doctor 
didn't do more. Former Senator George McGovern has written that 
``[l]egal fear drives [doctors] to prescribe medicines and 
order tests, even invasive procedures, that they feel are 
unnecessary. Reputable studies estimate that this `defensive 
medicine' squanders $50 billion a year, enough to provide 
medical care to millions of uninsured Americans.''\42\
---------------------------------------------------------------------------
    \40\Daniel P. Kessler and Mark B. McClellan, ``Medical Liability, 
Managed Care, and Defensive Medicine,'' National Bureau of Economic 
Research (NBER) Working Paper 7537 (February 2000) at 16.
    \41\Daniel P. Kessler and Mark B. McClellan, ``Do Doctors Practice 
Defensive Medicine?'' The Quarterly Journal of Economics (May 1996) at 
386 (``Our analysis indicates that reforms that directly limit ability, 
caps on damage awards ... and collateral source rule reforms--reduce 
hospital expenditures by 5 to 9 percent within three to five years of 
adoption. . .''). The researchers in this study analyzed populations in 
predominantly non-managed care programs in the mid-1980's, and found 
that, of the populations studied with two different types of illnesses, 
direct health care litigation reforms would reduce hospital 
expenditures by 5.8% and 8.9% several years after their adoption. Id. 
at 367, 382.
    \42\See George McGovern and Alan Simpson, ``We're Reaping What We 
Sue,'' Wall Street Journal (April 17, 2002) at A20.
---------------------------------------------------------------------------

      REDUCING UNLIMITED LAWSUITS WILL HELP REDUCE MEDICAL ERRORS

    The best evidence about medical injuries comes from two 
large studies of hospital records, which both concluded that 
under one percent of hospital charts showed negligent medical 
injury.\43\ Nevertheless, the litigation reforms in the HEALTH 
Act will reduce the incidence of medical malpractice because 
the threat of potentially infinite liability in an unregulated 
tort system prevents doctors from discussing medical errors and 
looking for ways to improve the delivery of health care.
---------------------------------------------------------------------------
    \43\D. Mills, J. Boyden, and D. Rubsamen, ``Report on the Medical 
Insurance Feasibility Study,'' (San Francisco: Sutter Publications 
1977, sponsored jointly by the California Medical Association and 
California Hospital Association); A. Localio, et al., ``Relation 
Between Malpractice Claims and Adverse Events Due to Negligence,'' New 
Engl. J. Med. 325:245-251 (1991).
---------------------------------------------------------------------------
    The HEALTH Act would largely dispel that fear and allow 
doctors to freely suggest improvements in medical care. The 
medical journal Annals of Medicine detailed reports of medical 
errors. As has been reported, ``[c]reating a series of articles 
on [medical] mistakes was the idea of Dr. Robert M. Wachter, 
associate chairman of the department of medicine at the 
University of California at San Francisco . . . . The series 
was inspired in part by a 1999 report by the Institute of 
Medicine, which found that mistakes in hospitals killed 44,000 
to 98,000 patients a year . . . . In an editorial about the new 
series, Dr. Wachter and his colleagues wrote that the medical 
profession ``for reasons that include liability issues . . . 
was not harnessing the full power of errors to teach [and 
thereby reduce errors].''\44\
---------------------------------------------------------------------------
    \44\Denise Grady, ``Oops, Wrong Patient: Journal Takes on Medical 
Mistakes,'' New York Times (June 18, 2002).
---------------------------------------------------------------------------
    A survey conducted for the bipartisan legal reform 
organization ``Common Good,'' whose Board of Advisors included 
former Senator George McGovern, Eric Holder, and former Senator 
Paul Simon, found that more than three-fourths of physicians 
feel that concern about malpractice litigation has hurt their 
ability to provide quality care in recent years. When 
physicians were asked, ``Generally speaking, how much do you 
think that fear of liability discourages medical professionals 
from openly discussing and thinking of ways to reduce medical 
errors?'' an astonishing 59% of physicians replied ``a 
lot.''\45\
---------------------------------------------------------------------------
    \45\See Harris Interactive, ``Common Good Fear of Litigation Study: 
The Impact of Medicine'' Final Report (April 11, 2002) (``Executive 
Summary'') at 30 (Table 17), available at www.ourcommongood.com/
news.html.
---------------------------------------------------------------------------
    Indeed, according to an exhaustive study by the RAND 
Corporation, California's reduction in the number of health 
care lawsuits filed in that state is attributable to improved 
patient safety at California hospitals. According to the study:

          Our results showed a highly significant correlation 
        between the frequency of adverse events [medical 
        errors] and malpractice claims: On average, a county 
        that shows a decrease of 10 adverse events in a given 
        year would also see a decrease of 3.7 malpractice 
        claims. Likewise, a county that shows an increase of 10 
        adverse events in a given year would also see, on 
        average, an increase of 3.7 malpractice claims. 
        According to the statistical analysis, nearly three-
        fourths of the within-county variation in annual 
        malpractice claims could be accounted for by the 
        changes in patient safety outcomes. We also found that 
        the correlation held true when we conducted similar 
        analyses for medical specialties--specifically, 
        surgeons, nonsurgical physicians, and obstetrician/
        gynecologists (OB-GYNs). Nearly two-thirds of the 
        variation in malpractice claiming against surgeons and 
        nonsurgeons can be explained by changes in safety. The 
        association is weaker for OB-GYNs, but still 
        significant.\46\

    \46\Michael D. Greenberg, Amelia M. Haviland, J. Scott Ashwood, 
Regan Main, ``Is Better Patient Safety Associated with Less Malpractice 
Activity?'' RAND Institute for Civil Justice (2010) at x.
---------------------------------------------------------------------------
    With the passage of health care lawsuit reform in 
California, doctors, hospitals and other healthcare providers 
are able to share information needed to create a safer 
environment, without fear of lawsuits, and focus on their 
patients instead of worrying about getting sued.

            THE CURRENT SYSTEM IS CAUSING A DOCTOR SHORTAGE

    Lawsuit abuse drives doctors out of practice. There is a 
well-documented record of doctors leaving the practice of 
medicine and hospitals shutting down particular practices that 
have high liability exposure. This problem has been 
particularly acute in the fields of ob-gyn and trauma care, as 
well as in rural areas.\47\
---------------------------------------------------------------------------
    \47\For an extensive compilation of such instances see ``Addressing 
the New Health Care Crisis: Reforming the Medical Litigation System to 
Improve the Quality of Care,'' U.S. Department of Health and Human 
Services (March 3, 2003).
---------------------------------------------------------------------------
    The absence of doctors in vital practice areas is at best 
an inconvenience; at worst it can have deadly consequences.\48\ 
Hundreds or even thousands of patients may die annually due to 
lack of doctors.\49\
---------------------------------------------------------------------------
    \48\See Testimony of Leanne Dyess, ``Patient Access Crisis: The 
Role of Medical Litigation,'' Senate Judiciary Committee (February 11, 
2003); Testimony of Dr. Thomas Gleason, ``Medical Liability Reform: 
Stopping the Skyrocketing Price of Health Care,'' House Small Business 
Committee (February 17, 2005).
    \49\See Testimony of Theodore Frank, ``Protecting Main Street from 
Lawsuit Abuse,'' Senate Republican Conference (March 16, 2009) (``The 
effect of the loss of productive doctors and the closing of emergency 
rooms . . .is in the hundreds of lives a year, and perhaps as high as 
1,000 deaths and many exacerbated injuries.''); ``Tort Reform and 
Accidental Deaths,'' Paul Rubin and Joanna Shepherd, Emory Law and 
Economics Research Paper No. 05-17H (finding tort reforms saved 
approximately 2,000 lives in the year 2000 and 24,000 over a 20-year 
period).
---------------------------------------------------------------------------
    According to the Massachusetts study, 38 percent of 
physicians have reduced the number of higher-risk procedures 
they provide, and 28 percent have reduced the number of higher-
risk patients they serve, out of fear of liability.\50\ The 
American College of Obstetricians and Gynecologists has 
concluded that the ``current medico-legal environment continues 
to deprive women of all ages, especially pregnant women, of 
their most educated and experienced women's health care 
providers.''\51\
---------------------------------------------------------------------------
    \50\``Defensive Medicine in Massachusetts,'' pp. 4-5.
    \51\``Overview of the 2009 ACOG Survey on Professional Liability.''
---------------------------------------------------------------------------
    As one doctor wrote recently:

          I am what you call a successful neurosurgeon, and I 
        have nothing against ``socialized medicine'' as such. 
        Everybody deserves good health care. But I am 
        nonetheless worried about President Obama's health care 
        reform, because without tort reform as part of the 
        package, it can't address the labor shortage we face in 
        my specialty. . . .
          Only because spinal problems affect nearly 80% of our 
        aging population: It's one of the most common reasons 
        patients visit a primary care physician . . . Baby 
        boomers are about to overwhelm the system with demand 
        for treatment of spinal problems--including surgery--at 
        precisely the moment the supply of neurosurgeons able 
        to treat them is dwindling. . . .
          Thus we come to the second reason: The cost of 
        malpractice insurance, which creates a very high cost 
        of entry into this field. Unfortunately, the health 
        care reforms of the Obama administration have done 
        little to curb costs. These costs are imposed by 
        hospital inefficiencies as unpoliced by government-run 
        insurance plans and by the price of malpractice 
        insurance undisciplined by tort reform.
          I believe that tort reform is the key to reducing 
        both kinds of cost, because the malignant threat of 
        malpractice haunts the hospitals as well as the 
        physicians. Without such reform, the choice for 
        practicing neurosurgeons like me is between retirement 
        and working 24/7 just to cover my insurance overhead. 
        My premature retirement will reduce the supply of 
        surgeons capable of dealing with the spinal problems of 
        an aging population--and that supply is already short 
        and getting shorter. Meanwhile, a few more board-
        certified surgeons a year won't meet the growing 
        demand. The lines at your doctor's office could get 
        long.
          When Congress returns to consider the problem of 
        health care, it must understand that without tort 
        reform, neurosurgery of the kind I can provide to an 
        aging population will be unavailable.\52\
---------------------------------------------------------------------------
    \52\Dr. Michael Lavyne, ``Obamacare Will Fail Without Tort Reforn: 
Malpractice Insurance Costs Are Crippling Medicine,'' New York Daily 
News (November 19, 2010).

    A new study from Northwestern University's Feinberg School 
of Medicine polled residents and found that many wish to leave 
the state to avoid its ``hostile'' malpractice environment. The 
study concluded that ``[a]pproximately one-half of graduating 
Illinois residents and fellows are leaving the state to 
practice. . . . [T]he medical malpractice liability environment 
is a major consideration for those that plan to leave Illinois 
to practice.''\53\ Without a uniform law to control health care 
costs, many states will continue to suffer under doctor 
shortages.
---------------------------------------------------------------------------
    \53\Northwestern University Feinberg School of Medicine, ``Illinois 
New Physician Workforce Study: Final Report November 2010'' at 4.
---------------------------------------------------------------------------
    As one local New Jersey official has written:

          Let's say you are a woman over 40 who follows the 
        American Cancer Society guidelines (regardless of the 
        recent controversy about them) and faithfully gets a 
        mammogram each year.
          What would you do if you tried to make your 2010 
        appointment, only to learn this test is no longer 
        available anywhere in the state? Would you take a day 
        off from work to travel to Pennsylvania--or forgo your 
        screening entirely?
          Unfortunately, this is a very real possibility for 
        New Jersey women. Eighty-nine percent of radiologists 
        surveyed by the New Jersey Medical Care Availability 
        Task Force said that new doctors in their specialty are 
        unwilling to perform mammography or have asked for 
        limited exposure to it.
          Or, imagine getting pregnant and having your 
        obstetrician tell you that you fall into a high-risk 
        category. The good news is that you can be effectively 
        treated by a specialist. The bad news? The closest 
        specialist is in upstate New York. Do you leave your 
        family for days at a time? Do you take a risk and allow 
        your regular physician to do the best she can? This is 
        a decision no woman should have to make, but many may 
        face. Hospitals in New Jersey have reported a serious 
        decline in the number of applicants for specialized 
        obstetrics training--and no new candidates means 
        steadily decreasing access to care.
          Even as debate about national health care reform 
        rages across the country, we in New Jersey must 
        confront a homegrown crisis: Our state is losing 
        doctors at an alarming rate. With or without a federal 
        mandate, if there are no doctors to treat New Jersey's 
        patients, the details don't matter.
          Why the exodus of physicians? To a significant 
        degree, they are fleeing malpractice insurance premiums 
        and legal exposure so enormous as to make the practice 
        of many medical specialties in our state near 
        untenable. . . .
          Medical malpractice liability premiums had already 
        spiraled out of control back in 2002, when huge crowds 
        of physicians donned their white coats and demonstrated 
        at the Statehouse to draw attention to the need for 
        reform. Around the same time, Dr. Dolores Williams, an 
        obstetrician, testified before an Assembly joint 
        committee that her insurance premiums--which had 
        escalated from $30,000 to an estimated $72,000--left 
        her financially unable to continue delivering babies. 
        Her decision to stop, she said, ``was based on possibly 
        losing my home, my assets, [and] my ability to fund my 
        children's college tuition.''
          Seven years later, these problems have only gotten 
        worse, not only in obstetrics but in a range of other 
        specialties like orthopedics and neonatology.
          ``The cumulative effect of medical malpractice claims 
        on the health care system in New Jersey is alarming,'' 
        agrees Marcus Rayner, executive director of the New 
        Jersey Lawsuit Reform Alliance. ``Due to skyrocketing 
        medical malpractice insurance premiums and the threat 
        of a lawsuit, hospitals have fewer OB-GYNs willing to 
        work in emergency departments, and fewer specialty 
        physicians willing to work at all.''
          Five years ago, a survey of New Jersey's 
        neurosurgeons indicated that there were only 63 
        remaining in the state--to serve a population of more 
        than 8.5 million. Someday it could be your teenager who 
        suffers a head injury in a sports or car accident, and 
        urgently needs the care of a neurosurgeon. What are the 
        odds that one would be available?\54\
---------------------------------------------------------------------------
    \54\Amy H. Handlin, ``Reduce Medical Liability Costs Before More 
Specialists Flee N.J.,'' New Jersey Times (November 22, 2009).

    It is clear that no doctor is safe from lawsuit abuse, but 
as studies have shown, some are more vulnerable to abusive 
litigation than others because of their specialty or the 
location of their practice. Today, one-third of orthopedists, 
trauma surgeons, ER doctors and plastic surgeons will probably 
be sued in any given year.\55\ Neurosurgeons face liability 
lawsuits more often--every two years on average.\56\
---------------------------------------------------------------------------
    \55\``Defending the Practice of Medicine,'' Richard E. Anderson, 
M.D., Archives of Internal Medicine, June 2004.
    \56\``Effective Legal Reform and the Malpractice Insurance 
Crisis,'' Richard E. Anderson, M.D., Yale Journal of Health Policy, Law 
and Ethics, December 2004.
---------------------------------------------------------------------------
    OB-GYNs are another favorite target of personal injury 
lawyers with nearly three out of five OB-GYNs sued at least 
twice in their careers. The American College of Obstetricians 
and Gynecologists (ACOG) 2009 Medical Liability Survey found 
nearly 91 percent of OB-GYNs surveyed had experienced at least 
one liability claim filed against them and sadly, we know most 
of the cases are without merit.\57\
---------------------------------------------------------------------------
    \57\American College of Obstetrics and Gynecologists Medical 
Liability Survey, 9/09.
---------------------------------------------------------------------------
    Three out of four emergency rooms say they have had to 
divert ambulances because of a shortage of specialists and more 
than 25 percent lost specialist coverage due to medical 
liability issues.\58\
---------------------------------------------------------------------------
    \58\Hospital Emergency Department Administration Survey, ``Federal 
Medical Liability Reform,'' 2004, the Schumacher Group, Alliance of 
Specialty Medicine, July 2005.
---------------------------------------------------------------------------
    One emergency room physician was quoted as saying, ``The 
lack of on-call specialists affects the numbers of patients 
referred to tertiary care facilities even for basic specialty 
related diseases (like orthopedics). This adds to emergency 
department crowding in some facilities, and it means that 
patients have to travel across town or greater distances for a 
relatively simple problem that could have been resolved if the 
specialist had been on call at the initial facility.''\59\
---------------------------------------------------------------------------
    \59\``National Report Card on the State of Emergency Medicine,'' 
American College of Emergency Physicians, 2009.
---------------------------------------------------------------------------
    The Association of American Medical Colleges (AAMC) has 
predicted that once the new health care reform provisions take 
effect in 2015, in just four short years, ``the shortage of 
physicians across all specialties will more than quadruple to 
almost 63,000.''\60\ Another group, the American Academy of 
Family Physicians, has projected the shortfall of family 
physicians will reach 149,000 by 2020.\61\
---------------------------------------------------------------------------
    \60\Association of American Medical Colleges Center for Workforce 
Studies estimates, 9/30/10.
    \61\``Doctor Shortage Looms as Primary Care Loses it Pull,'' Janice 
Lloyd, USA Today, 8/18/09.
---------------------------------------------------------------------------
    AAMC also found the country will need 46,000 more surgeons 
and other specialists to meet demand in the next decade and 
that those living in rural or inner city locations will suffer 
the most severe impact. According to Dr. Atul Grover, of the 
AAMC, ``This will be the first time since the 1930s that the 
ratio of physicians to the population will start to 
decline.''\62\
---------------------------------------------------------------------------
    \62\``Agencies warn of coming doctor shortage,'' Tammy Worth, Los 
Angeles times, 6/7/10.
---------------------------------------------------------------------------

            DOCTOR SHORTAGE CONSEQUENCES: THE DYESS TRAGEDY

    Regardless of the merits of any given case, there are 
inherent problems with so-called ``pain and suffering'' or 
noneconomic damages: they are utterly standardless, 
unquantifiable, and subject to discriminatory application based 
of whether or not a particular person happens to be sympathetic 
or unsympathetic, and even whether or not a particular case has 
attracted media attention. Tony Dyess's injury did not receive 
media attention. He was in a car accident in Mississippi. There 
were no longer any neurosurgeons in the area. They had stopped 
practicing because they couldn't afford medical professional 
liability insurance. It took six hours to airlift Tony Dyess to 
a hospital that could treat his brain injury. It was too late. 
The ``golden hour'' had passed, and Tony Dyess has been left 
permanently brain damaged. As Tony Dyess' wife Leanne has said, 
``[f]rom my perspective . . . this problem far exceeds any 
other challenge facing America's health care--even the 
challenge of the uninsured. My family had insurance when Tony 
was injured. We had good insurance. What we didn't have was a 
doctor. And now, no amount of money can relieve our pain and 
suffering. But knowing that others may not have to go through 
what we've gone through, could go a long way toward helping us 
heal.'' When Leanne Dyess began telling this story, trial 
lawyers gave her false information about what happened the 
night her husband was injured, then tried to hire her. She 
refused.
    We all recognize that injured victims should be adequately 
compensated for their injuries. But too often in this debate we 
lose sight of the larger health care picture. This country is 
blessed with the finest health care technology in the world. It 
is blessed with the finest doctors in the world. People are 
smuggled into this country for a chance at life and healing, 
the best chance they have in the world.
    The Department of Health and Human Services issued a report 
recently that included the following amazing statistics.\63\ 
During the past half century, death rates among children and 
adults up to age 24 were cut in half. Mortality among adults 
25-64 years fell nearly as much, and dropped among those 65 
years and over by a third. The infant mortality rate--deaths 
before the first birthday--has plummeted 75 percent since 1950. 
These are amazing statistics. And they didn't just happen. They 
happened because America produces the best health care 
technology and the best health care providers to use it. But 
now there are fewer and fewer doctors to use that miraculous 
technology. We have the best brain scanning and brain operation 
devices in history, and fewer and fewer neurosurgeons to use 
them. According to the American Board of Neurological Surgery, 
in 2001 there were fewer active board-certified neurosurgeons 
(2,936) than there have been in the last decade. Also in 2001, 
4.5 times as many board-certified neurosurgeons retired as 
retired a decade ago (1,400 retired in 2001, only 309 retired 
in 1990). Only about 100-200 neurosurgeons graduate from 
residency training programs each year, but it takes about 5 
years of post-residency to become ``board certified.'' 
Unlimited lawsuits are driving doctors out of the healing 
profession. They are reversing the clock. They are making us 
all less safe. All in the name of unlimited lawsuits and 
lawyers' lust for their cut of unlimited awards. But when 
someone gets sick, or is bringing a child into the world, we 
can't call our lawyers for help.
---------------------------------------------------------------------------
    \63\Available at http://www.cdc.gov/nchs/releases/02news/hus02.htm.
---------------------------------------------------------------------------

    WOMEN ARE AT RISK UNDER THE DOCTOR SHORTAGE DRIVEN BY UNLIMITED 
                                LAWSUITS

    Women pay an especially high price when it comes medical 
liability and access to care.
    According to Albert L. Strunk, M.D., deputy executive vice 
president of ACOG, ``the medical liability situation for ob-
gyns remains a chronic crisis and continues to deprive women of 
all ages--especially pregnant women--of experienced ob-
gyns.''\64\ ACOG's own data proves the point. According to 
their 2009 survey, 63 percent of OB-GYNs said they had made 
changes to their practice because of the risk or fear of 
liability claims. Between seven and eight percent have stopped 
practicing obstetrics altogether. In fact, ACOG found that the 
average retirement age of practicing obstetrics was 48. Once 
upon a time, before the medical lawsuit abuse crisis, that was 
considered mid-point in a doctor's career.\65\
---------------------------------------------------------------------------
    \64\ American College of Obstetricians and Gynecologists (ACOG) 
news release, 11/3/06.
    \65\ ``Survey on Professional Liability,'' ACOG, 9/09.
---------------------------------------------------------------------------
    Looking state by state, the picture is even more alarming. 
For example in 2007, Hawaiian women faced the harsh reality 
that 42 percent of the state's OB-GYNs had stopped providing 
prenatal care.\66\ Dr. Francine Sinofsky, an OB-GYN in East 
Brunswick, N.J., says two of her practice's seven members no 
longer practice obstetrics due to the cost of medical 
liability. One who practices gynecology only pays $14,000 a 
year for liability insurance while another who practices 
obstetrics as well pays more than $100,000.\67\ In 2008, 1,500 
counties in America, including eight counties in New York 
alone, did not have a single obstetrician as liability issues 
chased good doctors out of obstetrics.\68\
---------------------------------------------------------------------------
    \66\``Doctors Urging Lawmakers to support Tort Reform,'' KGMB9.com
    \67\``The Doctor Drain,'' Lauren Otis, the New Jersey Monthly, 2/5/
08.
    \68\''Center for Health Workforce Studies,'' cited in ``no Place to 
be Born,'' New York Sun, 8/25/08.
---------------------------------------------------------------------------
    But the negative impact of lawsuit abuse on women's health 
goes beyond obstetrics. Today, the number of radiologists 
willing to read mammograms is shrinking, exacerbated by the 
decreasing number of medical residents choosing radiology as 
their specialty. The reason is simple. A failure to diagnose 
properly is the number one allegation in most liability 
lawsuits.\69\ That makes radiologists the number one group of 
physicians affected.\70\ Abuse of the litigation system is 
putting women at risk.
---------------------------------------------------------------------------
    \69\AMA News, 3/20/06.
    \70\``Failure to Diagnose: Putting the Pieces Together, A Risk 
Management Review of Closed Claims in Selected Specialties 2002-2004,'' 
Linda Greenwald, Doctors' Insurance Services of New England, 2005.
---------------------------------------------------------------------------

                             PROVEN REFORMS

    The states have proven that legal reform works. While 
Democrats in Washington talk about the need to study the 
problem, states have acted to address it. Several states have 
limited noneconomic damages--such as those for ``pain and 
suffering''--and dramatically lessened the burden of lawsuits. 
In states with such limits, premiums are 17 percent lower than 
they are in states without them.\71\
---------------------------------------------------------------------------
    \71\``The Medical Malpractice `Crisis': Trends and the Impact of 
State Tort Reforms,'' Kenneth E. Thorpe, (January 21, 2004) at 20-30.
---------------------------------------------------------------------------
    States also have had success with a variety of other 
reforms. A comprehensive study of these reforms suggests that 
attorney-fee limits, such as those in California, are 
particularly effective.\72\ The cumulative effect of all state 
reforms put together could be as much as a 74 percent reduction 
in premiums.\73\
---------------------------------------------------------------------------
    \72\``Tort Law Tally: How State Tort Reforms Affect Tort Losses and 
Tort Insurance Premiums,'' Nicole V. Crain, and W. Mark Crain, et al, 
Pactific Research Institute (2009).
    \73\``Tort Law Tally: How State Tort Reforms Affect Tort Losses and 
Tort Insurance Premiums,'' Nicole V. Crain, and W. Mark Crain, et al, 
Pactific Research Institute (2009).
---------------------------------------------------------------------------

                      PROVEN REFORMS IN CALIFORNIA

    California's Medical Injury Compensation Reform Act (called 
``MICRA'') has proved immensely successful in increasing access 
to affordable medical care in California since it was signed 
into law in 1975. It has kept California medical malpractice 
insurance rates consistently much lower than the average in the 
rest of the country.\74\ Some critics claim that a California 
automobile insurance reform measure called Proposition 103 that 
required a ``rollback'' of insurance premiums--and not 
California's health care litigation reforms--have controlled 
medical professional liability premiums in that state. However, 
according to the Orange County Register, ``a rollback [under 
Proposition 103] never took place because the [California 
Supreme] court amended Prop. 103 to say that insurers could not 
be forced to implement the 20 percent rollback if it would 
deprive them of a fair profit.''\75\ Further, since Proposition 
103 went into effect, no medical professional liability insurer 
has been denied a requested premium increase.
---------------------------------------------------------------------------
    \74\See http://www.micra.org/about-micra/docs/micra--access--and--
affordability.pdf.
    \75\Orange County Register (October 22, 1997).
---------------------------------------------------------------------------

 COMMENTS OF SUPPORTERS OF CALIFORNIA'S HEALTH CARE LITIGATION REFORMS 
                  (ON WHICH THE HEALTH ACT IS MODELED)

    Cruz Reynoso, Democratic Vice Chairman of the U.S. 
Commission on Civil Rights (appointed by former Senate Majority 
Leader George Mitchell in 1993), Professor of Law at UCLA, and 
former Justice of the California Supreme Court:

          Medical insurance has been going up. I think there's 
        no question that what the legislature did and continues 
        to do has had an influence on keeping those expenses 
        down and that's a very important public policy . . . . 
        Publicly-funded medical centers were very supportive of 
        the continued protection of MICRA because if their own 
        insurance rates would go up they would be less able to 
        serve the poor . . . . I personally have favored having 
        as much access to the courts as possible, but at the 
        same time you have to be careful that it doesn't do so 
        in a way that is destructive, for example, in the 
        medical field, destructive of the ability of society to 
        respond to the medical needs of the people.

    Nancy Sasaki, President and CEO of Planned Parenthood, Los 
Angeles:

          If the caps [on non-economic damages] in MICRA were 
        to be increased, you actually would begin to see kind 
        of a domino effect . . . . If insurance costs for the 
        physicians go up they typically will then, as any 
        business would, look at what services are their highest 
        risks, which services are costing them the most, and 
        they may no longer provide that. And that's happened in 
        the past, where physicians have stopped providing 
        obstetric care because of costs.

    Donna Stidham, Director of Managed Care and Patient 
Services, AIDS Health Care Foundation:

          [An] increase in the MICRA cap . . . would increase 
        our premiums phenomenally. In a single clinic setting 
        it could probably increase their premiums maybe twenty 
        or thirty thousand dollars. For multiple physicians, 
        I'd hate to even guess, but it'd be in the hundreds of 
        thousands, which would take away from direct patient 
        care . . . . So it would directly take away from care, 
        from the patients. You'd see us perhaps not being able 
        to admit all types of patients. Right now we can take 
        any kind of patient, whether they have the ability to 
        pay or not.

CALIFORNIA SUPREME COURT STATEMENTS ON THE PURPOSES OF MICRA'S LIMIT ON 
                          NONECONOMIC DAMAGES

    The California Supreme Court has stated the following 
purposes of California Civil Code section 3333.2, which limits 
recovery of noneconomic damages to $250,000:

          One purpose is to provide a more stable base on which 
        to calculate insurance rates by eliminating the 
        ``unpredictability of the size of large noneconomic 
        damage awards, resulting from the inherent difficulties 
        in valuing such damages and the great disparity in the 
        price tag which different juries placed on such 
        losses.''\76\
---------------------------------------------------------------------------
    \76\Fein v. Permanent Medical Group, 38 Cal.3d 137, 163 (1985); see 
also Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital 8 
Cal.4th 100, 112 (1984).
---------------------------------------------------------------------------
          Another purpose is to ``promote settlements by 
        eliminating `the unknown possibility of phenomenal 
        awards for pain and suffering that can make litigation 
        worth the gamble.'''\77\
---------------------------------------------------------------------------
    \77\Fein v. Permanent Medical Group, 38 Cal.3d 137, 163 (1985).
---------------------------------------------------------------------------
          Another purpose is to be fair to medical malpractice 
        plaintiffs by ``reduc[ing] only the very large 
        noneconomic damage awards, rather than to diminish the 
        more modest recoveries from pain and suffering and the 
        like in the great bulk of cases.''\78\
---------------------------------------------------------------------------
    \78\Id.
---------------------------------------------------------------------------

                        PROVEN REFORMS IN TEXAS

    After Texas adopted a new liability system in 2003, medical 
liability premiums fell dramatically, and thousands of new 
doctors flooded into the state.\79\ Communities in Texas that 
once did not have primary or specialty care doctors now have a 
full complement of physicians.
---------------------------------------------------------------------------
    \79\``Tort Reform: A Victory for Patient Access,'' Texas Medical 
Association (July 5, 2006); ``Texas-Style Health Care Reform is Bigger 
and Better,'' Sally Pipes, San Francisco Examiner (July 24, 2009).
---------------------------------------------------------------------------
    A 2008 study from the Perryman Group found that perhaps the 
most visible economic impact of the lawsuit reforms are the 
benefits experienced by Texans who have better access to high-
quality healthcare.\80\ Doctors and hospitals are using their 
liability insurance savings to expand services and initiate 
innovative programs; those savings have allowed Texas hospitals 
to expand charity care by 24 percent.\81\
---------------------------------------------------------------------------
    \80\Peggy Venable, ``Tort Reform? We've already Done It,'' 
Washington Post (September 16, 2009).
    \81\Id.
---------------------------------------------------------------------------
    The total impact of tort reforms implemented since 1995 
includes gains of $112.5 billion in spending each year as well 
as almost 499,900 jobs in the state.\82\ The fiscal stimulus to 
the state from judicial reforms is almost a $2.6 billion per 
year increase in state revenue.\83\ In addition, these reforms 
are responsible for approximately 430,000 individuals having 
health insurance than would otherwise, and there has been an 
increase in the number of doctors, particularly in regions 
which have been facing severe shortages.\84\
---------------------------------------------------------------------------
    \82\Id.
    \83\Id.
    \84\Id.
---------------------------------------------------------------------------
    As the Wall Street Journal has observed:

          Before the reform, Texas was a kind of holy place on 
        the tort bar pilgrimage. Now it's a Mecca for doctors, 
        especially the emergency physicians, obstetricians and 
        surgical specialists who elsewhere can face blue-sky 
        malpractice premiums. Liability rates have fallen by 
        27.5% on average since 2003. The number of doctors 
        applying to practice in Texas has increased 60%, even 
        as the overall population grew by 14%.
          All of this is helping to end an acute Lone Star 
        physicians shortage, especially in rural areas. Twenty-
        three counties now have their first E.R. doctor, 10 
        their first OB-GYN. Hospitals are reinvesting the 
        malpractice savings in scarce services like 
        neurosurgery and neonatal units and expanding access to 
        care. This Texas success has opened eyes in nearby 
        Oklahoma, where even Democrats have been forced to 
        agree to some legal reforms.\85\
---------------------------------------------------------------------------
    \85\Wall Street Journal (editorial), ``Loser Pays, Everyone Wins'' 
(December 15, 2010).
---------------------------------------------------------------------------

                           BARRIERS TO REFORM

    The reason Democrats continue to refuse to add serious 
medical lawsuit reform to their health care legislation remains 
purely political, as was recently revealed by former DNC Chair 
Howard Dean. At a recent health care town hall meeting hosted 
by Rep. Jim Moran (D-VA), Dean responded to an angry 
constituent who wondered why a supposedly comprehensive 
``reform'' of the health-care system does not include tort 
reform to lower costs of malpractice insurance and reduce 
defensive medicine. Dean responded remarkably candidly, 
stating:

          ``This is the answer from a doctor and a 
        politician,'' said Dean. ``Here is why tort reform is 
        not in the bill. When you go to pass a really enormous 
        bill like that the more stuff you put in, the more 
        enemies you make, right? And the reason why tort reform 
        is not in the bill is because the people who wrote it 
        did not want to take on the trial lawyers in addition 
        to everybody else they were taking on, and that is the 
        plain and simple truth. Now, that's the truth.''

    Moreover, the Democrats' health care law's offer of HHS 
``demonstration projects'' on tort reform, rings hollow given 
that the cabinet secretary tasked with implementing this 
proposal for demonstration projects is Kathleen Sebelius. 
Before she was governor of Kansas and the insurance 
commissioner of Kansas, she spent eight years as the head of 
the Kansas Trial Lawyers Association, now the Kansas 
``Association for Justice.'' The KAJ's total opposition to 
reform is highlighted on its website. And Sebelius is also the 
state executive who, according to the New York Times, ``failed 
to make significant improvement in health coverage or costs 
during her two terms as governor.''
    The top contributor to President Obama's presidential 
campaign was the legal industry, whose donations came to more 
than $43 million. More than 80 percent of the money given to 
Congress by lawyers, mostly from the plaintiffs' bar, went to 
Democrats--almost $22 million.
    When President Obama spoke to the American Medical 
Association's convention in June of 2009, he told the audience 
``I'm not advocating caps on malpractice awards.''

                SUPPORT FOR REFORM: THE AMERICAN PEOPLE

    The American people are demanding legal reform. A recent 
survey found that 83 percent of Americans believe that 
reforming the legal system needs to be a part of any health 
care reform plan.\86\ As the Associated Press reported:
---------------------------------------------------------------------------
    \86\``National Voter Survey: Health Care Reform and the Legal 
System 2009,'' Clarus Research Group (August 2009).

          Most Americans want Congress to deal with malpractice 
        lawsuits driving up the cost of medical care, says an 
        Associated Press poll. Yet Democrats are reluctant to 
        press forward on an issue that would upset a valuable 
        political constituency--trial lawyers--even if 
        President Barack Obama says he's open to changes. The 
        AP poll found that 54 percent of Americans favor making 
        it harder to sue doctors and hospitals for mistakes 
        taking care of patients, while 32 percent are opposed . 
        . . . Support for limits on malpractice lawsuits cuts 
        across political lines, with 58 percent of independents 
        and 61 percent of Republicans in favor. Democrats are 
        more divided. Still, 47 percent said they favor making 
        it harder to sue, while 37 percent are opposed. The 
        survey was conducted by Stanford University with the 
        nonprofit Robert Wood Johnson Foundation . . . . In the 
        poll, 59 percent said they thought at least half the 
        tests doctors order are unnecessary, ordered only 
        because of fear of lawsuits.\87\
---------------------------------------------------------------------------
    \87\Ricardo Alonso-Zaldivar and Trevor Tompson, ``AP: Support for 
Curbs on Malpractice Lawsuits,'' The Associated Press (November 19, 
2009).

    In a poll done by the Health Coalition on Liability and 
Access (HCLA) in October 2009, 69 percent of Americans said 
they wanted medical liability reform included in health care 
reform legislation. Seventy-two percent said that their access 
to quality medical care is at risk because lawsuit abuse forces 
good doctors out of the practice of medicine. A Rasmussen poll 
done at the same time found that 57 percent of people favored 
limiting jury awards.\88\
---------------------------------------------------------------------------
    \88\Rasmussen Research, 12/2/09.
---------------------------------------------------------------------------
    The American people clearly understand the issue of 
liability reform and the motives behind the raft of lawsuits 
trial lawyers are bringing to stop reform in its tracks. The 
Health Coalition on Liability and Access poll done in October 
2009 found that by a wide margin, 70 percent of Americans 
support full payment for lost wages and medical expenses and 
reasonable limits on awards for non-economic ``pain and 
suffering.'' Sixty-eight percent of those polled also favor a 
law to limit the fees personal injury attorneys can take from 
an award or settlement.

         BLAMING THE INSURANCE COMPANIES IS OFTEN A RED HERRING

    As Dr. Stanley Goldfarb, associate dean of clinical 
education at the University of Pennsylvania School of Medicine, 
has written: ``The president points to for-profit insurance 
companies [as the source of the problem], but for-profit 
insurance companies only make up 25 percent of the system and 
they are not that profitable, ranking 85th among all U.S. 
industries. [Insurance] `Reform' will redistribute the money, 
not reduce the overall costs. There is much that can be done to 
make our system more efficient. Tort reform is a great place to 
start.''\89\
---------------------------------------------------------------------------
    \89\Stanley Goldfarb, ``The Malpractice Problem: We Can't Have 
Health Care Reform Without Tort Reform,'' The Weekly Standard (October 
27, 2009).
---------------------------------------------------------------------------
    The Department of Health and Human Services concluded that 
the average award in medical malpractice cases has risen 76% in 
recent years, and that ``mega-awards'' for ``pain and 
suffering'' have occurred in states without any limits on what 
a plaintiff can recover.\90\ Large numbers of these cases are 
meritless. The Harvard Medical Practice Study, for example, 
found that over half of the filed medical professional 
liability claims they studied were brought by plaintiffs who 
suffered either no injuries at all, or, if they did, such 
injuries were not caused by their health care providers, but 
rather by the underlying disease.\91\ These findings have been 
confirmed.\92\ Also, before the 1960s, only one physician in 
seven had ever been sued in their entire lifetime,\93\ whereas 
today's rate is about one in seven per year.\94\
---------------------------------------------------------------------------
    \90\Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 9-10 (``These 
mega-awards for non-economic damages have occurred (as would be 
expected) in states that do not have limitations on the amounts that 
can be recovered.'').
    \91\See Harvard Medical Practice Study to the State of New York, 
Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation, 
and Patient Compensation in New York at 11-5 (1990) (``[T]he tort 
system imposes the costs of defending claims on [health care] providers 
who may not even have been involved in an injury, let alone a negligent 
injury.'').
    \92\See D. Studdert et al., ``Negligent Care and Malpractice 
Claiming Behavior in Utah and Colorado,'' 38 Medical Care 3: 250-60, 
250 (2000) (``Eighteen patients from out study sample filed claims: 14 
were made in the absence of discernable negligence and 10 were made in 
the absence of any adverse event ... The poor correlation between 
medical negligence and malpractice claims that was present in New York 
in 1984 is also present in Utah and Colorado in 1992 . . . [W]hen a 
physician is sued, there is a high probability that it will be for 
rendering nonnegligent care.'') (emphasis added).
    \93\See ``Opinion Survey of Medical Professional Liability,'' JAMA 
164:1583-1594 (1957).
    \94\See R. Bovbjerg, ``Medical Malpractice: Problems & Reforms,'' 
The Urban Institute, Intergovernmental Health Policy Project (1995).
---------------------------------------------------------------------------
    The medical insurance crisis caused insurers like St. 
Paul--an insurer of 42,000 doctors, 750 hospitals, 5,800 health 
care facilities, and 72,000 health care providers such as 
nurses--to leave the medical professional liability insurance 
business entirely.\95\ In the words of Thomas A. Bradley, chief 
financial officer of St. Paul, the medical malpractice 
insurance crisis was ``basically another World Trade Center 
loss for us this year.''\96\ Other medical malpractice insurers 
have also left the market,\97\ and many others have become 
insolvent. Licensed carriers' medical professional liability 
insurance business has, on average, been unprofitable since 
1990-2000.\98\
---------------------------------------------------------------------------
    \95\See Joseph T. Hallinan, ``St. Paul Gradually Will Pull Out Of 
Malpractice-Insurance Sector,'' The Wall Street Journal (December 13, 
2001) at B2.
    \96\``St. Paul to Exit Medical Malpractice, Pose $900 Million 
Charge,'' Best's Insurance News (December 12, 2001).
    \97\See Meg Green, ``Med Malcontent: Top medical malpractice writer 
St. Paul Cos. Abandons the Unprofitable Business. Who Will Fill the 
Void?'' Best's Review (February 1, 2002) at 12.
    \98\See American Medical Association, ``Trends Report: Medical 
Professional Liability Insurance'' (April 2002) at 5.
---------------------------------------------------------------------------
    The claim that sharp increases in medical liability 
insurance rates are due to insurer losses in the stock market 
is also dubious, as less than 15% of the assets of medical 
liability insurance companies are stocks.\99\ Additionally, 60% 
of the doctors in the United States are insured by insurance 
companies that are owned and operated by other doctors and 
which operate primarily for their benefit.\100\
---------------------------------------------------------------------------
    \99\See Physician Insurers Association of America, ``Bordering on 
Malpractice: Serious Errors Found in Consumer Federation of America 
Report on Medical Liability Insurance'' (May 9, 2002).
    \100\Physician Insurers Association of America.
---------------------------------------------------------------------------

 THE ``PATIENT PROTECTION AND AFFORDABLE CARE ACT'' (PPACA) IS A TRIAL 
                         LAWYERS'' BAILOUT BILL

    The ``Patient Protection and Affordable Care Act'' (PPACA) 
not only fails to contain any of the tort reforms the CBO 
concluded would save billions in health care costs, but it also 
contains a provision that explicitly allows trial lawyers to 
``opt-out'' of any alternative liability system. This means 
that if their frivolous lawsuit is limited by the alternative 
system, they can simply ``opt-out'' of the alternative system 
and file in court like they always have. Section 10607 of the 
Democrats' bill states that any states' ``proposed 
alternative'' must ``provide[ ] patients the ability to opt out 
of or voluntarily withdraw from participating in the 
alternative at any time and to pursue other options, including 
litigation, outside the alternative.''\101\ So the bill 
literally prohibits any alternative to litigation, or any new 
limits on litigation, from being enforced.
---------------------------------------------------------------------------
    \101\42 U.S.C.A. Sec. 280g-15(c)(2)(g).
---------------------------------------------------------------------------
    Moreover, not only does PPACA prevent non-economic damages 
caps from being enforced, but the law requires that the 
Secretary of Health and Human Services provide states with 
``guidance on [the award] of non-economic damages . . . in 
determining appropriate payment.''\102\ Consequently, not only 
does this legislation prevent states from taking part in the 
demonstration projects if they seek to enforce the reforms the 
CBO said would save billions; it also requires the Secretary of 
Health and Human Services to encourage states to adopt lawsuit 
damages criteria the CBO has concluded would raise health care 
costs, not lower them. That's not tort reform. It's tort 
deform.
---------------------------------------------------------------------------
    \102\42 U.S.C.A. Sec. 280g-15(f)(2)(A).
---------------------------------------------------------------------------
    Further, because the health care bill signed into law by 
President Obama calls for the federal government and its 
regulators to create all manner of new standards and guidelines 
for medical professionals to follow, it opens up many more 
opportunities for trial lawyers to sue doctors if they deviate 
at all from those federal standards and guidelines. The House-
passed version of the legislation, H.R. 3962, contained a 
provision that made clear that the new government guidelines 
provided for by the bill ``shall not be construed to establish 
the standard of care or duty of care owed by health care 
providers to their patients in any medical malpractice action 
or claim.''\103\ But the bill signed into law by President 
Obama fails to contain such a provision, which can only be read 
as an invitation to trial lawyers to sue doctors whenever they 
deviate one iota from whatever guidelines or standards are 
handed down from Washington, D.C. That's a step backward for 
legal reform, and yet another cause of defensive medicine.
---------------------------------------------------------------------------
    \103\See H.R. 3962 (111th Cong. 1st Sess.) (passed November 7, 
2009) (SEC. 261. CONSTRUCTION REGARDING STANDARD OF CARE. (a) IN 
GENERAL.--The development, recognition, or implementation of any 
guideline or other standard under a provision described in subsection 
(b) shall not be construed to establish the standard of care or duty of 
care owed by health care providers to their patients in any medical 
malpractice action or claim ).
---------------------------------------------------------------------------

 THE NEED FOR FEDERAL LAWSUIT REFORM THAT APPROPRIATELY USES CONGRESS' 
                         COMMERCE CLAUSE POWER

    Over 20 State supreme courts have judicially nullified 
reasonable litigation management provisions enacted by State 
legislatures, many of which sought to address the crisis in 
medical professional liability that reduces patients' access to 
health care. Consequently, in such States, passage of federal 
legislation by Congress is the only means of addressing the 
State's current crisis in medical professional liability and 
restoring patients' access to health care. Many more may do so 
unless Congress acts under its Supremacy Clause and Commerce 
Clause authority to let doctors treat patients wherever they 
are, not just where States have enacted legal reforms that can 
be upheld under their state constitutions.\104\
---------------------------------------------------------------------------
    \104\See Rept. 107-693 pt. 1 (107th Cong., 2d Sess.) at 13 and 
n.14.
---------------------------------------------------------------------------
    Furthermore, federal legislation is needed to stem the flow 
of doctors from one state to another, as they flee states to 
avoid excessive liability costs. Doctors should feel free to 
practice medicine wherever they want in this country, and 
patients everywhere should be able to obtain the medical care 
they need.
    While tort reform is usually adopted at the state level in 
the first instance, it can also be adopted at the federal 
level, when the effects of tort law present a threat to state 
autonomy. Indeed, James Madison described the purpose of the 
Constitution's Commerce Clause as follows: ``A very material 
object of this power [of Congress] was the relief of the States 
which import and export through other States, from the improper 
contributions levied on them by the latter. Were these [States] 
at liberty to regulate the trade between State and State, it 
must be foreseen that ways would be found out to load the 
articles of import and export, during the passage through their 
jurisdiction, with duties which would fall on the makers of the 
latter and the consumers of the former. We may be assured by 
past experience, that such a practice would be introduced by 
future contrivances; and both by that and a common knowledge of 
human affairs, that it would nourish unceasing animosities, and 
not improbably terminate in serious interruptions of the public 
tranquility.''\105\ Clearly, Madison predicted that states 
would see in the future the rise of new forms of rules and 
regulations that would increase the costs of things nationwide, 
but which could not be foreseen at the time of the Founding, 
and that Congress would needs its Commerce Clause authority to 
counter those cost-increasing influences.\106\ Indeed, one 
modern manifestation of the problem Madison foresaw is that, 
today, some states' tort law allows unbounded lawsuits that 
increase the costs of selling products or services (including 
medical services) that cross into their jurisdictions. There is 
even a word for this modern phenomenon. It is called the ``tort 
tax,'' and when it's applied to national industries, it's 
passed on to consumers everywhere. The result is higher prices, 
and potentially lost jobs, across multiple states, or 
nationwide. When that happens, Congress can, and often should, 
enact federal tort reform to preserve federalism principles. 
While some argue that businesses can avoid tort liability by 
simply avoiding states that have oppressive tort laws, James 
Madison clearly rejected that argument against Congressional 
action, arguing instead that Congress should have the power to 
enact rules that allow businesses to enter into a state 
``jurisdiction'' without having to worry that doing so would 
dramatically increase the price of their products elsewhere. 
Likewise, Alexander Hamilton wrote in the Federalist Papers 
that ``The government of the Union must be empowered to pass 
all laws, and to make all regulations which have relation to 
them. The same must be the case in respect to commerce, and to 
every other matter to which its jurisdiction is permitted to 
extend.''\107\
---------------------------------------------------------------------------
    \105\The Federalist Papers, Federalist No. 42 at 267-68 (Clinton 
Rossiter ed., 1961) (emphasis added).
    \106\At the time of the Founding and soon thereafter, out-of-
control state litigation was kept in check in the states by strict 
limits on lawyers' fees, which no longer prevail. During the American 
Colonial period, lawyers were roundly despised and subjected to strict 
limits on lawsuits. According to one historian, ''[i]n every one of the 
Colonies, practically throughout the Seventeenth Century, a lawyer or 
attorney was a character of disrepute and of suspicion . . . . In many 
Colonies, persons acting as attorneys were forbidden to receive any 
fee. . . . in all, they were subjected to the most rigid restrictions 
as to fees and procedure.'' Charles Warren, A History of the American 
Bar 4 (William S. Hein & Co., Inc. 1913). Early American observer 
Benjamin Austin wrote, ``if we look through the different counties 
throughout the Commonwealth, we shall find that the troubles of the 
people arise principally from debts enormously swelled by tedious law-
suits.'' Benjamin Austin, Observations on the Pernicious Practice of 
the Law 4 (1786). As one historian summarized the situation in early 
America, ``[l]awsuits were often begun or continued for no other 
purpose than to embarrass an enemy by making him incur legal costs.'' 
Anton-Hermann Chroust, The Rise of the Legal Profession in America: The 
Colonial Experience vol. 1, 82 (U. of Okla. Press 1965). Attorneys were 
so despised in early America that they often inspired violence. As one 
historian wrote:

      During Shay's Rebellion, in 1786 people actually demanded 
      that all inferior courts and all lawyers be entirely 
      eliminated . . . In Vermont and New Hampshire vociferous 
      demands were made to suppress the legal profession 
      completely, or at least to reduce the number of lawyers 
      and, incidentally, to cut down substantially the usual 
      legal fees. In Vermont, where the general populace was 
      particularly vehement in its actions and denouncements, 
      courthouses were set afire . . . As early as 1786 the town 
      of Braintree, Massachusetts, passed a resolve ``to crush . 
      . . that order of Gentlemen denominated Lawyers . . . whose 
      . . . conduct appears . . . to tend rather to the 
---------------------------------------------------------------------------
      destruction than the preservation of this Commonwealth.''

Anton-Hermann Chroust, The Rise of the Legal Profession in America: The 
Revolution and the Post-Revolutionary Era vol. 2, 26-27 (U. of Okla. 
Press 1965) (citing Laws and Resolves of Mass., c. 23, Sec. 2, (1785); 
John Adams, The Adams Papers: Diary and Autobiography of John Adams 
vol. 1, 342 (1902); John Quincy Adams, Three Episodes of Massachusetts 
History 897 (1893)).
---------------------------------------------------------------------------
    Fear that the legal profession would abuse its power to generate 
lawsuits was also reflected in limits on attorneys' fees. In 1784, 
Connecticut by statute limited attorneys' fees according to a ``Table 
of Fees.'' Acts and Laws of the State of Connecticut in America 10-11 
(1784). In 1792, Georgia regulated attorneys' fees as follows: for 
``each cause commenced and tried in the superior or inferior courts,'' 
eighteen shillings and eight pence. A Digest of the Laws of the State 
of Georgia 476 (1800). In 1714, Massachusetts fixed attorneys' fees at 
twelve shillings ``at the superior court of judicature . . . and at the 
inferior court, ten shillings, and no more.'' Acts and Laws, of Her 
Majesties Province of the Massachusetts-Bar in New England 185 (1714). 
In 1719, Rhode Island attorneys' fees were fixed at a maximum of twelve 
shillings. Charter Granted by His Majesty King Charles the Second to 
the Colony of Rhode Island and Providence-Plantations in America 21 
(1719). In 1766 these fees were reduced to a maximum of five shillings. 
Acts and Laws of His Majesty's Colony of Rhode-Island and Providence-
Plantations in America 98 (1767). By 1748, the New Jersey Legislature 
passed a statute establishing an elaborate schedule of lawyer's fees. 
The Acts of the General Assembly of the Province of New Jersey 167 
(Allinson ed. 1776). In 1778, in Virginia, attorneys' fees were fixed 
by statute in the General Court and the High Court of Chancery 
depending on the nature of the action. Anton-Hermann Chroust, The Rise 
of the Legal Profession in America: The Revolution and the Post-
Revolutionary Era vol. 2, 261-62 (U. of Okla. Press 1965) (citing 9 
Statutes at Large of Virginia 529 (Hening ed. 1823)). In 1795, in 
Pennsylvania, attorneys' fees in the Court of Common Pleas were set for 
filing a lawsuit and entering an appearance as follows: ``if the suit 
is ended before or during the sitting of the first court,'' at $1.67; 
for every suit ``ended after the first court and before judgment,'' 
$3.34; and for ``every suit prosecuted to judgment,'' $4.00. 15 
Statutes at Large of Pennsylvania, c. 1863, Sec. 1, 360 (1911). In 
1801, New York enacted the comprehensive Act Regulating the Fees of 
Several Officers and Ministers of Justice within the State, which 
included limits on attorneys' fees. 5 Laws of the State of New York 
Passed at the Session of the Legislature Held in the Year 1801, c. 190, 
553-71 (1871). In 1810, in Maryland, a statute was enacted providing 
``no attorney of any of the county courts shall be authorized to charge 
more . . . than the sum of three dollars and thirty-three cents and one 
third of a cent in any one suit.'' Laws of Maryland of 1810, c. 126, 
Sec. 2; 1 The General Public Statutory Law of Maryland 601 (1840). 
Delaware had its own unique method for reducing litigiousness. In 1793, 
Delaware passed the Act for Regulating and Establishing Fees providing 
that for all pleadings in an action subsequent to a declaration, the 
fee would be one cent for every written line, twelve words to a line. 
Anton-Hermann Chroust, The Rise of the Legal Profession in America: The 
Revolution and the Post-Revolutionary Era vol. 2, 256 (U. of Okla. 
Press 1965).
    \107\The Federalist Papers, Federalist No. 23 at 155 (Clinton 
Rossiter ed., 1961).
---------------------------------------------------------------------------
    James Madison and the Founders clearly supported the power 
of the People's national representatives in Congress to 
preserve citizens' access to privately-provided goods and 
services. Madison said, in the seminal speech he gave defending 
the Commerce Clause at the Virginia convention called to ratify 
the Constitution, that ``All agree that the general government 
ought to have power for the regulation of commerce here are 
regulations in different states which are unfavorable to the 
inhabitants of other states his will not be the case when 
uniform regulations will be made'' by Congress.\108\ Indeed, 
that's what Congress did when it passed the Protection of 
Lawful Commerce in Arms Act in 2006, which prohibits lawsuits 
in either state or federal court against the firearms industry 
for damages resulting from the unlawful use of firearms by 
others. That federal tort reform law was upheld as coming 
within Congress' Commerce Clause authority by the Second 
Circuit Court of Appeals, which said ``We find that Congress 
has not exceeded its authority in this case, where there can be 
no question of the interstate character of the industry in 
question and where Congress rationally perceived a substantial 
effect on the industry of the litigation that the Act seeks to 
curtail.''\109\ The same holds true where there can be no 
question of the interstate character of the health care 
industry and where Congress rationally perceives a substantial 
effect lawsuits have on that industry.\110\ Congress has 
enacted many federal tort reform statutes.\111\
---------------------------------------------------------------------------
    \108\James Madison, ``Speech in the Virginia Ratifying Convention'' 
in Madison: Writings (1999) at 378-79.
    \109\City of New York v. Beretta Corp., 524 F.3d 384, 394 (2008), 
cert. denied 129 S.Ct. 1579 (2009).
    \110\Congress has acted many times to enact federal tort reforms, 
including the Volunteer Protection Act of 1997, which creates immunity 
for volunteers to nonprofits or government bodies. 42 U.S.C.A. 
Sec. Sec. 14501 et seq. Congress has also passed the Partial-Birth 
Abortion Ban Act of 2003, which prohibited a specific medical procedure 
that involves a particularly gruesome form of abortion procedure. That 
Act was upheld by the Supreme Court in Gonzales v. Carhart, 550 U.S. 
124 (2007), in which the Court upheld Congress' ``legislative power, 
exercised in this instance under the Commerce Clause, to regulate the 
medical profession,'' id. at 166, concluding that ``Considerations of 
marginal safety, including the balance of risks, are within the 
legislative competence when the regulation is rational and in pursuit 
of legitimate ends.'' Id.
    \111\See, e.g., Employers Liability Act of 1908, 35 Stat. 65, c. 
149; Price-Anderson Act, 42 U.S.C. Sec. 2210(e); Atomic Testing 
Liability Act, 42 U.S.C. Sec. 2212; National Childhood Vaccine Injury 
Compensation Act of 1986 42 U.S.C. Sec. Sec. 300aa-1-300aa-34; 
Comprehensive Environmental Response, Compensation, and Liability Act 
(Superfund); General Aviation Revitalization Act, P.L. 103-298, 49 
U.S.C. Sec. 40101 note; Cruise Ship Liability, P.L. 104-324, Sec. 1129; 
Bill Emerson Good Samaritan Food Donation Act, P.L. 104-210, 42 U.S.C. 
Sec. 1791; Volunteer Protection Act of 1997, P.L. 105-1, 42 U.S.C. 
Sec. Sec. 14501-14505; Amtrak Reform and Accountability Act of 1997, 
P.L. 105-134, Sec. 161, 49 U.S.C. Sec. 28103; Aviation Medical 
Assistance Act of 1998, P.L. 105-170 (1998), 49 U.S.C. Sec. 44701 note; 
Biomaterials Access Assurance Act of 1998, P.L. 105-230, 21 U.S.C. 
Sec. Sec. 1601-1606; Y2K Act, P.L. 106-37, 15 U.S.C. Sec. Sec. 6601-
6617; Cardiac Arrest Survival Act of 2000, P.L. 106-505, Sec. 404, 42 
U.S.C. Sec. 238q; Air Transportation Safety and System Stabilization 
Act, P.L. 107-42, Sec. 201(b); September 11th Victim Compensation Fund 
of 2001, 49 U.S.C. Sec. 40101 note; Paul D. Coverdell Teacher 
Protection Act of 2001, P.L. 107-110, Sec. Sec. 2361-2368; Multiparty, 
Multiforum Trial Jurisdiction Act of 2002, P.L. 107-273, Sec. 11020; 
Homeland Security Act of 2002, P.L. 107-296, Sec. Sec. 304, 863, 890, 
1201, 1402, and 1714-1717.
---------------------------------------------------------------------------
    Of note, Congress passed the Partial-Birth Abortion Ban Act 
of 2003, which prohibited a specific medical procedure that 
involves a particularly gruesome form of abortion procedure, 
under its Commerce Clause authority. That Act was upheld by the 
Supreme Court in Gonzales v. Carhart,\112\ in which the Court 
upheld Congress' ``legislative power, exercised in this 
instance under the Commerce Clause, to regulate the medical 
profession,''\113\ concluding that ``Considerations of marginal 
safety, including the balance of risks, are within the 
legislative competence when the regulation is rational and in 
pursuit of legitimate ends.''\114\
---------------------------------------------------------------------------
    \112\550 U.S. 124 (2007).
    \113\Id. at 166.
    \114\Id.
---------------------------------------------------------------------------
    Also, federal tort reform regarding vaccine liability has 
been the law for several decades. In the late 1980's, Congress 
enacted the National Vaccine Injury Compensation Program,\115\ 
a federal program that preempts state court tort awards, to 
protect vaccine manufacturers from bankruptcy in the face of 
otherwise unlimited state tort jury awards. The Act overrides 
the state court system, putting compensation decisions in the 
hands of a congressionally created Office of Special Masters, 
which currently consists of one Chief Special Master and seven 
Associate Special Masters who are appointed by the U.S. Court 
of Federal Claims to serve for four-year terms. To this day, 
that Act has never been successfully challenged on 
constitutional grounds. If it were, millions of children could 
be forced to go without necessary vaccines because 
manufacturers would refrain from providing them. Note that 
while the federal vaccine compensation program completely 
overrides state courts and juries, the HEALTH does not go 
nearly so far because the HEALTH Act allows state lawsuits to 
proceed, but with reasonable limits on a narrow category of 
damages and other process reforms.
---------------------------------------------------------------------------
    \115\42 U.S.C. Sec. 300aa-10 through -34.
---------------------------------------------------------------------------
    The Congressional Research Service has concluded that 
``enactment of tort reform legislation generally would appear 
to be within Congress's power to regulate commerce, and would 
not appear to violate principles of due process or federalism . 
. . . In concluding that Congress has the authority to enact 
tort reform `generally,' we refer to reforms that have been 
widely implemented at the state level, such as caps on damages 
and limitations on joint and several liability and on the 
collateral source rule.''\116\ Caps on damages and limitations 
on joint and several liability are precisely the reforms 
contained in the HEALTH Act.
---------------------------------------------------------------------------
    \116\Henry Cohen, Legislative Attorney, American Law Division, CRS 
Report to Congress, Federal Tort Reform Legislation: Constitutionality 
and Summaries of Selected Statutes (February 26, 2003) at 1.
---------------------------------------------------------------------------
    Moreover, laws passed by States that have already provided 
for, or may in the future provide for, different limits on 
damages in health care lawsuits will be preserved under the 
HEALTH Act, as the HEALTH Act provides that ``No provision of 
this Act shall be construed to preempt . . . 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 or not such monetary amount is greater or 
lesser than is provided for under this Act . . . .'' Some 
States have limited noneconomic damages in medical malpractice 
actions, but at levels higher than $250,000. Some States place 
aggregate limits on medical malpractice awards. Those limits 
would be preserved under the HEALTH Act. Additionally, the 
HEALTH Act provides that it ``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.''
    President Ronald Reagan established a special task force to 
study the need for tort reform. That task force, called the 
Tort Policy Working Group, consisted of representatives of ten 
Reagan Administration agencies and the White House. The final 
report of that task force concluded as follows: ``In sum, tort 
law appears to be a major cause of the insurance availability/
affordability crisis which the federal government can and 
should address in a variety of sensible and appropriate ways.'' 
Indeed, the Reagan task force specifically recommended 
``eliminate joint and several liability,''\117\ ``provide for 
periodic payments of future economic damages,''\118\ ``schedule 
[limit] contingency fees''\119\ of attorneys, and ``limit non-
economic damages to a fair and reasonable amount.''\120\ 
Indeed, regarding the limit on non-economic damages, the report 
concluded:
---------------------------------------------------------------------------
    \117\Report of the Tort Policy Working Group on the Causes, Extent 
and Policy Implications of the Current Crisis in Insurance Availability 
and Affordability (February 1986), at 64.
    \118\Id. at 69.
    \119\Id. at 72.
    \120\Id. at 66.

          Recommendation No. 4: Limit non-economic damages to a 
        fair and reasonable amount.
          Non-economic damages such as pain and suffering, 
        mental anguish and punitive damages are inherently 
        open-ended. They are entirely subjective, and often 
        defy quantification. . . . Moreover, because such 
        damages are essentially subjective, awards for similar 
        injuries can vary immensely from case to case, leading 
        to highly inequitable, lottery-like results. 
        Accordingly, such damages are particularly suitable for 
        a specific limitation.''\121\
---------------------------------------------------------------------------
    \121\Id. at 66.

    All of these recommended reforms are part of the HEALTH 
Act. The report also contains an extensive discussion of the 
harmful effects tort law has on ``medical malpractice'' 
insurance,\122\ and a discussion and charts describing the 
impact of rising malpractice jury awards.\123\
---------------------------------------------------------------------------
    \122\Id. at 21-24.
    \123\Id. at 36-37, 39-40.
---------------------------------------------------------------------------
 state laws that limit damages to specific amounts are preserved under 
                             the health act
    Laws passed by States that have already provided for, or 
may in the future provide for, different limits on damages in 
health care lawsuits are preserved under the HEALTH Act. The 
HEALTH Act specifically provides that ``[n]o provision of this 
Act shall be construed to preempt . . . any State statutory 
limit (whether enacted before, on, or after the date of the 
enactment of this Act) on the amount of compensatory or 
punitive damages (or the total amount of damages) that may be 
awarded in a health care lawsuit, whether or not such State 
limit permits the recovery of a specific dollar amount of 
damages that is greater or lesser than is provided for under 
this Act. . . .''
    The following outlines state law in all fifty States and 
the District of Columbia regarding specific limits on damages 
in health care lawsuits.
    Alabama--None; $400,000 cap on non-economic damages; $1 
million cap on wrongful death damages, overturned by Smith v. 
Shulte, 671 So.2d 1331 (1991), cert. denied, 517 U.S. 1220 
(1996).
    Alaska--$250,000 cap on non-economic damages for claims 
involving personal injury, and a $400,000 cap on non-economic 
damages for claims involving wrongful death or a severe 
permanent physical impairment that is more than seventy percent 
disabling. A single cap applies regardless of the number of 
health care providers against whom the claim is asserted or the 
number of causes of action filed. (2005).
    Arizona--None; Article 2 sec. 31 and Article 18 sec. 6 of 
Arizona's constitution prohibits limiting recoverable damages.
    Arkansas--None; Article 5 sec. 32 of Arkansas' constitution 
prohibits limiting damages recoverable for injury or death.
    California--$250,000 cap on non-economic damages (since 
1975); upheld in Fein v. Permanente Medical Group, 38 Cal. 3d 
137, 695 P.2d 665 (1985).
    Colorado--$1 million cap on total damages, including any 
derivative claim by any other claimant, of which non-economic 
losses shall not exceed $250,000 (including any derivative 
claim by any other claimant). Upon good cause shown and if the 
court determines such limit would be unfair, the court may 
award damages in excess of the limit. In this case, the court 
may award the present value of additional future damages only 
for loss of such excess future earnings or such excess future 
medical and other health care costs, or both. (1988). Upheld in 
Scholz v. Metropolitan Pathologists P.C., 851 P.2d 901 (1993). 
Effective July 1, 2003, the non-economic damages cap was raised 
to $300,000.
    Connecticut--None.
    Delaware--None.
    District of Columbia--None.
    Florida--For providers, $500,000 cap on non-economic 
damages for causes of action for injury or wrongful death due 
to medical negligence of physicians and other health care 
providers. Cap applies per claimant regardless of the number of 
defendants. Cap increases to $1 million for certain exceptions. 
For non-providers, $750,000 cap on non-economic damages per 
claimant for causes of action for injury or wrongful death due 
to the medical negligence of nonpractitioners, regardless of 
the number of nonpractitioner defendants. Cap increases to $1.5 
million for certain exceptions. (2003) Previous law upheld but 
subject to rules on voluntary arbitration, Univ. of Miami v. 
Echarte, 618 So.2d 189 (1993).
    Georgia--None; previous reforms included the following but 
were held unconstitutional in Atlanta Oculoplasty Surgery, P.C. 
v. Nestlehutt, 691 S.E.2d 219 (Ga. 2010) (statute limiting 
awards of noneconomic damages in medical malpractice cases to a 
predetermined amount violated state constitutional right to 
jury trial): $350,000 cap on non-economic damages awarded 
against all health care providers and a separate $350,000 cap 
on non-economic damages awarded against a single medical 
facility that can increase to $700,000 if more than one 
facility is involved. No more than $1.05 million can be awarded 
in a medical liability cause of action. Health Care Providers--
Any judgment in a medical liability action, including wrongful 
death, against a health care provider shall not exceed $350,000 
in non-economic damages regardless of the number of defendant 
health care providers against whom the claim is asserted or the 
number of separate causes of action on which the claim is 
based. The cap applies to each claimant, however, the term 
``claimant'' is defined as including all persons claiming to 
have sustained damages as a result of the bodily injury or 
death of a single person. Medical Facilities--Establishes a 
separate $350,000 cap on non-economic damages awarded in 
medical liability actions, including wrongful death, against a 
single medical facility including all persons and entities for 
which vicarious liability theories may apply, regardless of the 
number of separate causes of action on which the claim is 
based. If the lawsuit involves more than one medical facility, 
the total amount of non-economic damages that can be awarded 
against the facilities is $700,000 with a single facility not 
liable for more than $350,000. (2005).
    Hawaii--$375,000 cap on non-economic damages, with 
exceptions for certain types of damages, such as mental 
anguish. (1986).
    Idaho--$250,000 cap on non-economic damages per claimant in 
personal injury and wrongful death actions. The cap will be 
adjusted annually beginning July 1, 2004 based on the average 
annual wage. The limit does not apply to causes of action 
arising out of willful or reckless misconduct, or felonious 
actions. (2003) Upheld, Kirkland v. Blaine County Medical 
Center, 134 Idaho 464, 4 P.3d 1115 (2000).
    Illinois--None; reforms struck down in LeBron v. Gottlieb 
Memorial Hospital, 930 N.E.2d 895 (Ill. 2010) (holding 
unconstitutional caps on non-economic damages and requirement 
of periodic payments of damages). Reforms that were struck down 
included the following: $500,000 cap on non-economic damages 
for awards in a medical liability cause of action, including 
wrongful death, against a physician, the physician's business 
or corporate entity, and personnel or health care 
professionals. Separate $1 million cap on non-economic damages 
for awards in a medical liability cause of action, including 
wrongful death, against a hospital and its personnel or 
hospital affiliates. Both caps apply to all plaintiffs in any 
civil action arising out of the care. The caps apply to 
injuries that occur after the effective date of the act. 
(2005); previous $500,000 cap on non-economic damages, 
overturned Best v. Taylor Machine Works, 689 N.E.2d 1057 (Ill. 
1997). $500,000 cap on economic and non-economic damages, 
overturned Wright v. Central DuPage Hospital Assn., 63 Ill.2d 
313, 347 N.E.2d 736 (1976).
    Indiana--$750,000 cap on total damages for any act of 
malpractice that occurs after 12/31/89 and before 7/1/99. $1.25 
million total cap for any act of malpractice that occurs after 
6/30/99. Health care providers are not liable for more than 
$250,000 for an occurrence of malpractice any amount awarded in 
excess of $250,000 will be paid through the Patient 
Compensation Fund. (1975) Upheld, Johnson v. St. Vincent 
Hospital, 404 N.E. 2d 585 (1980).
    Iowa--None.
    Kansas--$250,000 cap on non-economic damages. This is the 
total amount of non-economic damages recoverable by each party 
from all of the defendants. (1988) Upheld, Samsel v. Wheeler 
Transport Services, Inc., 246 Kan. 336 (1990); previous law 
struck down as unconstitutional, Kansas Malpractice Victims 
Coalition v. Bell, 243 Kan. 333, 757 P.2d 251 (1988).
    Kentucky--None. Section 54 of Kentucky's Constitution 
prohibits cap on damages.
    Louisiana--$500,000 cap on total damages, excluding damages 
recoverable for medical care. A health care provider covered by 
the Patient's Compensation Fund shall not be liable for more 
than $100,000. The Patient's Compensation Fund will cover the 
excess amount awarded up to the cap. (1975); Upheld caps on 
total damages, but future medical expenses are excluded from 
cap, Butler v. Flint Goodrich Hospital of Dillard University, 
607 So. 2d 517 (1992); ruled unconstitutional by Louisiana 
Court of Appeal, Third Circuit in Arrington v. ER Physicians 
Group, No. 04-1235 (La. Ct. App. Sept. 2006). Vacated and set 
aside by Louisiana Supreme Court Arrington v. Galen-Med, Inc. 
(La. 06-2968 Feb. 2007).
    Maine--$400,000 cap on non-economic damages in wrongful 
death actions. (1999).
    Maryland--The limit on non-economic damages is frozen at 
$650,000 until January 1, 2009, after which time the cap will 
increase annually by $15,000 per year. Cap applies in aggregate 
to all claims and defendants arising from the same medical 
injury. (Cap also applies in wrongful death actions if the 
claim involves only one claimant or beneficiary). In wrongful 
death actions involving two or more claimants or beneficiaries, 
then the total cap on non-economic damages is $812,500 (125% of 
the cap). (2005); previous law upheld as constitutional, Murphy 
v. Edmunds, 325 MD 342, 601 A.2d 102 (1992).
    Massachusetts--$500,000 cap on non-economic damages, with 
exceptions for proof of substantial disfigurement or permanent 
loss or impairment, or other special circumstances which 
warrant a finding that imposition of such limitation would 
deprive the plaintiff of just compensation for the injuries 
sustained. (1986).
    Michigan--$280,000 cap on non-economic damages, adjusted 
annually for inflation, except in cases where the plaintiff is 
hemiplegic, paraplegic, or quadriplegic due to an injury to the 
brain or spinal cord, or where the plaintiff has permanently 
impaired cognitive capacity rendering him incapable of making 
independent, responsible life decisions and permanently 
incapable of independently performing the activities of normal, 
daily living, or the plaintiff has had permanent loss or damage 
to a reproductive organ resulting in the inability to 
procreate, then non-economic damages shall not exceed $500,000. 
As of 2003 the $280,000 cap is $359,000 and the $500,000 cap is 
$641,000. (1993) Upheld, Zdrojewski v. Murphy, 202 Mich. App. 
Lexis 1566 (2002); Upheld Smith v. Botsford General Hospital 
(6th Cir. 2005).
    Minnesota--None.
    Mississippi--$500,000 cap on non-economic damages per 
plaintiff for medical liability causes of action filed against 
a health care provider. (2004).
    Missouri--$350,000 cap on non-economic damages per 
plaintiff irrespective of the number of defendants. Law 
specifies that multiple caps cannot apply to a single 
defendant. The law also specifies that in a personal injury 
case a spouse who claims loss of consortium shall be considered 
the same plaintiff as their spouse. In wrongful death cases, 
all individuals asserting a claim shall be considered a single 
plaintiff. (2005); previous law upheld, Adams v. Children's 
Mercy Hospital, 848 S.W. 2d 535 (1993).
    Montana--$250,000 cap on non-economic damages per 
occurrence. If a single incident of malpractice injures 
multiple, unrelated patients, the $250,000 cap applies to each 
patient and all claims deriving from injuries to that patient. 
(1995, 1997).
    Nebraska--$1.75 million in total damages. Health care 
providers who qualify under the Hospital-Medical Liability Act 
(i.e. carry minimum levels of liability insurance and pay 
surcharge into excess coverage fund) shall not be liable for 
more than $500,000 in total damages. Any excess damages shall 
be paid from the excess coverage fund. (1976, 1984, 1986, 1992, 
2003); upheld, Prendergast v. Nelson, 256 N.W.2d 657 (1977); 
Gourley ex. rel Gourley v. Nebraska Methodist Health System 
Inc., 265 Neb. 918, 633 N.W.2d 43 (Neb. 2003).
    Nevada--$350,000 cap on non-economic damages awarded to 
each plaintiff from each defendant. (2004).
    New Hampshire--None; $875,000 cap on non-economic damages, 
overturned, Brannigan v. Usitalso, 587 A.2d 1232 (N.H. 1991). 
$250,000 cap on non-economic damages in medical malpractice, 
overturned, Carson v. Maurer, 424 A.2d 825 (N.H. 1980).
    New Jersey--None.
    New Mexico--$600,000 cap on total damages, excluding 
punitive damages and past and future medical care. Health care 
providers personal liability shall not exceed $200,000, any 
award in excess of this amount shall be paid by the patient 
compensation fund. (1992) Upheld, Fed. Express Corp. v. United 
States, 228 F. Supp. 2d 1267 (NM 2002).
    New York--None.
    North Carolina--None.
    North Dakota--$500,000 cap on non-economic damages. (1995) 
Economic damage awards in excess of $250,000 are subject to 
judicial review for reasonableness. (1987); previous law struck 
down as unconstitutional. Arneson v. Olson, 270 N.W.2d (N.D. 
1978).
    Ohio--Establishes a sliding cap on non-economic damages. 
The cap shall not exceed the greater of $250,000 or three times 
the plaintiff's economic loss up to a maximum of $350,000 for 
each plaintiff or $500,000 per occurrence. The maximum cap will 
increase to $500,000 per plaintiff or $1,000,000 per occurrence 
for a claim based on either (A) a permanent and substantial 
physical deformity, loss of use of a limb, or loss of a bodily 
organ system, or (B) a permanent physical functional injury 
that permanently prevents the injured person from being able to 
independently care for self and person life sustaining 
activities. (2002) Note: The Ohio Legislature's previous 
attempts to enact a law with a cap on non-economic damages were 
overturned by the Ohio Supreme Court. For example, $250,000-
500,000 sliding scale cap on non-economic damages, overturned, 
State ex rel. Ohio Academy of Trial Lawyers v. Sheward, 86 Ohio 
3d 451, 715 N.E. 2d (1999).
    Oklahoma--Two caps, one for obstetric cases and care 
provided in an emergency room and a separate cap for all other 
medical liability causes of action. $300,000 cap on non-
economic damages for cases involving pregnancy, labor and 
delivery, care provided immediately post partum. The cap also 
applies in cases involving emergency-room care or medical 
services provided as a follow up to such care. The judge may 
lift the cap if the judge makes a finding, out of the presence 
of the jury, that there is clear and convincing evidence of 
negligence. The cap applies regardless of the number of parties 
against whom the medical negligence action is brought. (2003). 
$300,000 cap on non-economic damages for all other medical 
liability causes of action. The cap applies only if the 
defendant has made an offer of judgment (i.e. offer to settle) 
and the amount of the verdict awarded to the plaintiff is less 
than 1= times the amount of the final offer of judgment. The 
cap applies to each medical injury regardless of the number of 
actions brought and adjusts annually based on any increases in 
the Consumer Price Index. The cap will not apply if nine or 
more members of the jury find by clear and convincing evidence 
that the defendant committed negligence or if nine or more 
members find by a preponderance of the evidence that the 
defendant's conduct was willful or wanton. These questions, 
however, will only be proposed to the jury if the judge makes a 
threshold finding that there is evidence to support such 
findings. (2004). Neither cap applies in wrongful death cases 
because the Oklahoma Constitution specifically limits damage 
limitations in those types of cases.
    Oregon--None; $500,000 cap on non-economic damages, 
overturned, Lakin v. Senco Products, 987 P.2d 463 (Or. 1999). 
However, an earlier decision, Greist v. Phillips, 322 Or. 281, 
906 P.2d 789 (1995), upheld the cap for wrongful death cases.
    Pennsylvania--None. Article III sec. 18 of Pennsylvania's 
Constitution prohibits limiting damages for personal injuries 
or death. Punitive damages are capped at 2 times actual 
damages.
    Rhode Island--None.
    South Carolina--$350,000 stacked cap on non-economic 
damages. A claim for non-economic damages in a medical 
liability action against a single health care provider or 
single health care institution cannot exceed $350,000. If the 
award is against more than one health care provider or 
institution, the total award for non-economic damages cannot 
exceed $1.05 million, with each defendant not liable for more 
than $350,000. The cap applies separately to each claimant and 
adjusts annually for inflation based on the Consumer Price 
Index. (2005).
    South Dakota--$500,000 cap on total general (non-economic) 
damages. (1985, revived by 1996 court decision). Struck down 
cap on total damages, revived cap on non-economic damages, 
Knowles ex. rel. Knowles v. United States, 544 N.W. 2d 183 (SD 
1996).
    Tennessee--None.
    Texas--$250,000 cap on non-economic damages for claims 
against physicians and other health care providers. The cap 
applies per claimant regardless of the number of defendants. 
Also provides a $250,000 cap on non-economic damages awarded 
against a single health care institution and a $500,000 cap on 
non-economic damages if a judgment is rendered against two or 
more health care institutions, with the total amount of non-
economic damages for each individual institution, not exceeding 
$250,000 per claimant, irrespective of the number defendants, 
causes of action, or vicarious liability theories involved. The 
total amount of noneconomic damages for health care 
institutions cannot exceed $500,000. Combining the liability 
limits for physicians, health care providers, and institutions, 
the maximum non economic damages that a claimant could recover 
in a health care liability claim is capped at $750,000. (2003). 
Proposition 12, a ballot initiative to amend the Texas 
Constitution to specifically allow the legislature to enact 
laws that place limits on non-economic damages in health care 
and medical liability cases, was approved by the voters on 
September 13, 2003. $500,000 cap on all civil damages for 
wrongful death, indexed for inflation since 1977. The cap does 
not apply to medical, hospital, and custodial care received 
before judgment or required in the future. In 2002 the cap 
reached approximately $1.4 million. (1977, limited by 1990 
court decision). $500,000 cap on non-economic damages (adjusted 
annually), overturned as applied to cases other than wrongful 
death, Rose v. Doctors Hospital, 801 S.W. 2d 841 (Tex. 1990).
    Utah--$450,000 cap on non-economic damages.
    Vermont--None.
    Virginia--$1.5 million cap on total damages for acts 
occurring on or after Aug. 1, 1999. This cap is increased by 
$50,000 annually beginning on or after July 1, 2000 until July 
1, 2006. On July 1, 2007 and July 1, 2008 the cap is increased 
by $75,000. The last increase shall be July 1, 2008. (1976, 
1977, 1983, 1999, 2001) Upheld, Etheridge, et.al. v. Medical 
Center Hospitals, 237 Va. 87, 376 S.E.2d 525 (Va. 1989).
    Washington--None; sliding cap on non-economic damages, 
overturned, Sophie v. Fiberboard Corp., 771 P.2d 711 (Wash. 
1989).
    West Virginia--$250,000 cap on non-economic damages per 
occurrence, regardless of the number of plaintiffs and number 
of defendants. The cap increases to $500,000 per occurrence, 
for the following types of injuries; permanent and substantial 
physical deformity, loss of use of a limb or loss of a bodily 
organ system; or permanent physical or mental functional injury 
that permanently prevents the injured person from being able to 
independently care for himself or herself and perform life 
sustaining activities. The limits only apply to defendants who 
have at least $1,000,000 per occurrence in medical liability 
insurance. The limits will be adjusted annually for inflation 
up to $375,000 per occurrence or $750,000 for injuries that 
fall within the exception. (2003). Upheld previous cap on non-
economic damages, Robinson v. Charleston Area Med. Center, 186 
W.Va. 720 (1991); Verba v. Ghaphery 552 S.E. 2d 406 (W.Va. 
2001).
    Wisconsin--$750,000 cap on non-economic damages. (Enacted 
2006). $350,000 cap on non economic medical malpractice damages 
overturned as unconstitutional. Ferdon v. Wisconsin Patients 
Compensation Fund, 701 N.W.2d. 440 (Wis. 2005).
    Wyoming--None; constitution prohibits caps.

 STATES WHOSE COURTS HAVE ABUSED ``OPEN COURTS'' PROVISIONS TO STRIKE 
            DOWN TORT REFORMS ENACTED BY STATE LEGISLATURES

    State constitutions often contain provisions that are very 
malleable in the hands of activist state judges and provide an 
opportunity for a judge who perceives the judiciary to be the 
dominant branch of government to easily forget the appropriate 
powers of its co-equal branch, the legislature. For example, a 
number of state constitutions have so-called ``open courts'' 
provisions. As a practical matter, they are intended to provide 
citizens of a state with justice and reasonable access to the 
courts. Open court provisions, however, can be stretched to 
suggest that any time a legislature in any way limits any 
person's rights to sue, it is violative of the ``open courts'' 
provision. There is no state constitutional history that 
suggests this extreme result. Respect for fundamental 
principles of separation of powers counsels against such an 
interpretation. Nevertheless, in the area of civil justice 
reform and judicial nullification of legislative efforts to 
improve the system of justice, such interpretations have 
spread.
    The following cases are representative of those in which 
state courts have used a generic state constitutional provision 
providing that ``the courts shall be open'' to prohibit state 
legislatures from enacting tort reform:
          Jackson v. Mannesmann Demag Corp., 435 So. 2d 725 
        (Ala. 1983) (holding statute of repose regarding 
        improvements to real property violated open courts 
        provision of state constitution)
          Smith v. Dep't of Ins., 507 So. 2d 1080 (Fla. 1987) 
        (statute setting $450,000 limit on noneconomic damages 
        awards violated access to courts provision of state 
        constitution); Owens-Corning Fiberglass Corp. v. 
        Corcoran, 679 So. 2d 291 (Fla. Dist. Ct. App. 1996) 
        (holding application of former statute of repose to 
        latent asbestos injury violated access to courts 
        provision of state constitution)
          Martin v. Richey, 711 N.E.2d 1273 (Ind. 1999) 
        (finding two-year occurrence-based statute of 
        limitations as applied to plaintiff was an 
        unconstitutional violation of the privileges and 
        immunities clause and the open courts provision of the 
        Indiana Constitution); Van Dusen v. Stotts, 712 N.E.2d 
        491 (Ind. 1999) (holding same); Harris v. Raymond, 715 
        N.E.2d 388 (Ind. 1999) (holding same)
          McCollum v. Sisters of Charity of Nazareth Health 
        Corp., 799 S.W.2d 15 (Ky. 1990) (holding five-year 
        statute of repose for health care liability actions 
        violated open courts provision of state constitution); 
        Perkins v. N.E. Log Homes, 808 S.W.2d 809 (Ky. 1991) 
        (holding that seven-year statute of repose for 
        improvements to real property violated state 
        constitutional prohibition against ``special 
        legislation'' and, according to the court, any remedial 
        legislation would violate provisions in the state 
        constitution providing for open courts and limits on 
        the power of the legislature)
          Strahler v. St. Luke's Hosp., 706 S.W.2d 7 (Mo. 1986) 
        (finding statute of limitations for health care 
        liability actions violated access to courts provision 
        of state constitution insofar as the statute applied to 
        minors)
          Sorrell v. Thevenir, 633 N.E.2d 504 (Ohio 1994) 
        (holding statute providing offset of collateral source 
        benefits received by plaintiff violated right to jury 
        trial, due process, equal protection, right to open 
        courts, and right to meaningful recovery provisions of 
        state constitution); Samuels v. Coil Bar Corp., 579 
        N.E.2d 558 (Ohio 1991) (finding same as applied to 
        wrongful death actions)
          Daugaard v. Baltic Coop. Bldg. Supply Ass'n, 349 
        N.W.2d 419 (S.D. 1984) (holding that six-year statute 
        of repose for improvements to real property violated 
        open courts provision of state constitution)

       LIMITS ON ATTORNEYS' FEES MEAN MORE MONEY GOES TO VICTIMS

    The HEALTH Act's limits on attorneys' fees--the same as 
those provided for in California's law--will reduce lawyers' 
incentives to bring frivolous lawsuits while allowing more 
money to go directly to injured patients.
    Currently, limited resources can either fund lawyers or 
they can fund patients in our health care system. Under the 
HEALTH Act, the larger a victim's demonstrable, real-life, 
quantifiable economic damages are, the more they will receive 
because lawyers will be allowed to take only 15% of awards over 
$600,000. Standard attorney contingency fee agreements allow 
lawyers to take one-third--a full 33.3%--of their client's 
awards, so victims are left with only 66%. The HEALTH Act would 
allow victims to keep roughly 75% of awards under $600,000, and 
85% of awards over $600,000. Under the HEALTH Act, victims who 
demonstrate large losses get more, and lawyers get less.

            THE HEALTH ACT ALLOWS UNLIMITED ECONOMIC DAMAGES

    Nothing in the HEALTH Act denies injured plaintiffs the 
ability to obtain adequate redress, including compensation for 
100% of their economic losses (essentially anything to which a 
receipt can be attached), including their medical costs, the 
costs of pain relief medication, their lost wages, their future 
lost wages, rehabilitation costs, and any other economic out-
of-pocket loss suffered as the result of a health care injury. 
``Economic damages'' include anything whose value can be 
quantified, including lost wages or home services (including 
lost services provided by stay-at-home mothers), medical costs, 
the costs of pain reducing drugs and lifetime rehabilitation 
care, and anything to which a receipt can be attached. Indeed, 
the terms ``noneconomic damages'' and ``pain and suffering 
damages'' (which the federal legislation limits to $250,000 
unless a state law provides for a higher or lower limit) are 
misnomers: only ``economic damages,'' which the federal 
legislation does not limit, can be used to pay for drugs and 
services that actually reduce pain.
    Consequently, the HEALTH Act does nothing to hurt women and 
children. Any lawyer can easily produce charts proving the 
economic value of a stay-at-home-mom's services. Anything 
necessary to replace those services are economic damages that 
the HEALTH Act does not limit one bit. Similarly, the future 
income lost by an injured child constitutes economic damages 
that are easily proved and which would be fully available from 
responsible parties under the HEALTH Act.
    The following are some recent, very large awards to victims 
of medical malpractice under California's legal reforms, which 
cap non-economic damages at $250,000, but which do not cap 
quantifiable economic damages. The HEALTH Act is modeled on 
California's legal reform. These cases show that reasonable 
legal reforms such as those in the HEALTH Act still allow for 
very large, multi-million dollar awards to deserving victims. 
Also, loses due to disfigurement can be economically 
quantified. The Veterans Administration, for example, has a 
rating schedule that quantifies the economic costs of 
disfigurement.\124\
---------------------------------------------------------------------------
    \124\See L.E. Johnson, Robert D. Ley, and Paul T. Benshoof, 
``Estimating Economic Loss for a Facially Disfigured Minor: A Case 
Study,'' Journal of Legal Economics (July, 1993) (The V.A. rating 
schedule was obtained from a Veterans Benefits Office at the V.A. 
Center in St. Paul, Minnesota after being advised that the V.A. 
disability ratings are for economic loss exclusively. The percentage 
disability ratings contained in the V.A. S-R-D are based on case study 
data on economic loss from facial disfigurement. This data was 
initially collected during World War II by the V.A. and has been 
updated from that time . . . The first component of economic loss is 
termed social loss. Social loss refers to the additional cost of job 
search which results from facial disfigurement. The second component of 
economic loss is what the V.A. terms industrial loss. Industrial loss 
refers to lost income because of lost earning capacity.'').
---------------------------------------------------------------------------
          August 2010, Contra Costa County--$5,500,000
          February 2010, Riverside County--$16,500,000
          February 2010, Los Angeles County--$12,000,000
          November 2009, Los Angeles County--$5,000,000
          October 2009, Sacramento County--$5,750,000
          September 2009, Los Angeles County--$7,300,000
          January 2009, San Diego County--$16,000,000
          September 2008, Los Angeles County--$9,000,000
          April 2008, San Francisco County--$5,100,000
          July 2007, Los Angeles County--$96,400,000
          June 2007, Orange County--$11,700,000
          May 2007, San Diego County--$5,700,000

  THE KEY TO REDUCING HEALTH CARE COSTS IS A FIRM CAP ON NONECONOMIC 
                                DAMAGES

    Caps on noneconomic damages are essential to the success of 
the HEALTH Act's reforms. Indeed, the savings of $54 billion 
over ten years that CBO concluded would be significantly 
diminished if the cap were raised over time. The key to the 
success of the legal reforms in California is its cap on 
noneconomic damages at $250,000, which is not indexed to 
inflation. The recent reforms in Texas also do not index the 
caps to inflation. The California cap has stood the test of 
time and remains an effective check on medical professional 
liability rates precisely because it was not indexed to 
inflation back in 1975. What may have been described by some as 
an arbitrary figure in 1975 has become the keystone of the only 
proven, long-term, legislative solution to the current crisis 
in access to medical care. A 2010 study showed that doubling 
California's cap on noneconomic damages would cost that state 
between $1.3 and $2.4 billion in employee and retiree benefits 
over a 10-year period.\125\ If one extrapolates from that 
number, it becomes clear that linking the HEALTH Act's cap on 
noneconomic damages to the Consumer Price Index, or similarly 
linking it to inflation, would cost federal taxpayers around 
$14 billion or more.
---------------------------------------------------------------------------
    \125\C. Paul Wazzan, Ph.D. and Dawn Eash, M.S., ``Estimated 
Increases in State of California Employee and Retiree Costs Caused by 
Doubling the MICRA Cap'' (June 9, 2010) at 3.
---------------------------------------------------------------------------
    The Consumer Price Index and noneconomic damages are also 
apples and oranges. ``Pain and suffering'' cannot be measured 
and there is no consumer price index for ``pain and 
suffering.'' However, quantifiable economic damages are not 
limited by the HEALTH Act, and because those damages can be 
measured, they can and are adjusted upward in future years to 
account for inflationary effects on economic goods and services 
that can be quantified.

                CONGRESS SHOULD ENACT A FAIR SHARE RULE

    Respect for the law is fostered when it is fair and just 
and punishments are proportionate to the wrongs committed. As 
Thomas Jefferson noted, ``if the punishment were only 
proportional to the injury, men would feel that their 
inclination as well as their duty to see the laws 
observed.''\126\
---------------------------------------------------------------------------
    \126\Thomas Jefferson, A Bill for Proportioning Crimes and 
Punishments in Cases Heretofore Capital, in 2 The Papers of Thomas 
Jefferson 492, 493 (Julian P. Boyd ed., 1950).
---------------------------------------------------------------------------
    The rule of joint liability, commonly called joint and 
several liability, provides that when two or more persons 
engage in conduct that might subject them to individual 
liability and their conduct produces a single injury, each 
defendant will be liable for the total amount of damages.\127\ 
Joint liability is unfair because it puts full responsibility 
on those who may have been only marginally at fault.\128\
---------------------------------------------------------------------------
    \127\See Coney v. J.L.G. Indus., Inc., 454 N.E.2d 197 (Ill. 1983).
    \128\For example, in Walt Disney World Co. v. Wood, 515 So.2d 198 
(Fla. 1987), Disney was required to pay an entire damages award, even 
though it was found only 1% at fault for the claimant's harm.
---------------------------------------------------------------------------
    Relevant to the ``fair share'' rule in the HEALTH Act are 
Senator Lieberman's observations that

          There is a concept, joint and several liability, 
        started out in the law as a way of proportioning 
        responsibility when an accident was caused by a number 
        of different parties working together in a way that 
        caused negligence, and often it was not clear which one 
        actually caused it. So they said everybody could be 
        held liable regardless of the percentage of negligence. 
        It now has grown to a point where what it really means 
        is that somebody who is not liable, or liable very 
        little, if they happen to have deep pockets, they can 
        be held fully liable. That is the wrong message to send 
        . . . . If you hurt somebody, you have to pay. If you 
        do not, you should not have to pay. What kind of 
        cynicism is developed when somebody who did little or 
        no wrong ends up having to pay the whole bill because 
        somebody else slipped up.\129\
---------------------------------------------------------------------------
    \129\Senator Lieberman, floor statement on the Common Sense Product 
Liability and Legal Reform Act (April 27, 1995).

    Joint and several liability, although motivated by a desire 
to insure that plaintiffs are made whole, leads to a search by 
plaintiffs' attorneys for ``deep pockets'' and to a 
proliferation of lawsuits against those minimally liable or not 
liable at all. The HEALTH Act, by providing for a ``fair 
share'' rule that apportions damages in proportion to a 
defendant's degree of fault, prevents unjust situations in 
which hospitals can be forced to pay for all damages resulting 
from an injury even when the hospital is minimally at fault. 
For example, say a drug dealer staggers into the emergency room 
with a gunshot wound after a deal goes bad. The surgeon who 
works on him does the best he can, but it is not perfect. The 
drug dealer sues.\130\ The jury finds the drug dealer 
responsible for the vast majority of his own injuries, but it 
also finds the hospital 1% responsible because the physician 
was fatigued after working too long. Today the hospital can be 
made to pay 100% of the damages if no other defendant has the 
means to pay their share of the damages. That is unfair.
---------------------------------------------------------------------------
    \130\This hypothetical is not fanciful. See Ray Flanagan, ``After 
Stabbing Son, Mom Sues Doctors,'' The Scranton Time Tribune (May 29, 
2002) (``Mrs. Taylor and her husband, Brian, are suing . . . the 
obstetricians who treated her in the months before she exploded in 
violence that left her son, Zachary, with two punctured lungs, a 
severed jugular vein and scalp wounds on July 14, 2000 . . . They 
accuse the doctors and their employers of not adequately responding as 
she became more psychotic, delusional and depressed as the end of her 
pregnancy neared.'').
---------------------------------------------------------------------------
    The Volunteer Protection Act of 1997\131\ abolished joint 
liability for non-economic damages for volunteers of nonprofit 
organizations. That law was overwhelmingly supported by a 
bipartisan majority of Congress.\132\ Joint liability also 
brought about a serious public health crisis that critically 
threatened the availability of implantable medical devices, 
such as pacemakers, heart valves, artificial blood vessels, and 
hip and knee joints. Companies had ceased supplying raw 
materials and component parts to medical implant manufacturers 
because they found the costs of responding to litigation far 
exceeded potential sales revenues, even though courts were not 
finding the suppliers liable. Congress responded to the crisis 
and enacted legislation, the Biomaterials Access Assurance Act 
of 1998,\133\ that allows medical device suppliers to obtain 
early dismissal, without extensive discovery or other legal 
costs, in certain tort suits involving finished medical 
implants.
---------------------------------------------------------------------------
    \131\Pub. L. No. 105-19, 111 Stat. 218.
    \132\See Dan Carney, Volunteer Liability Limit Heads to President, 
Cong. Q., May 24, 1997, at 1199 (``The measure passed the House on May 
21 by a vote of 390-35, and the Senate cleared it by voice vote later 
that day. An earlier Senate version passed May 1 by a vote of 99-1.'') 
(omitting references to bill numbers).
    \133\P.L. No. 105-230, 21 U.S.C. Sec. Sec. 1601-1606.
---------------------------------------------------------------------------

    THE HEALTH ACT DOES NOT CAP PUNITIVE DAMAGES, BUT DOES INCLUDE 
                  REASONABLE GUIDELINES FOR THEIR USE

    The United States Supreme Court has observed that punitive 
damages have ``run wild'' in the United States, jeopardizing 
fundamental constitutional rights.\134\ The Supreme Court has 
also emphasized that ``the impact of [a punitive damages award] 
is unpredictable and potentially substantial.''\135\
---------------------------------------------------------------------------
    \134\Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 18 (1991). 
See also Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 432 (1994) 
(stating that punitive damages ``pose an acute danger of arbitrary 
deprivation of property,'' raising serious due process concerns).
    \135\International Bhd. of Elec. Workers v. Foust, 442 U.S. 42, 50 
(1979).
---------------------------------------------------------------------------
    The HEALTH Act does not cap punitive damages. Rather, it 
includes reasonable guidelines that would govern their award. 
Under these guidelines, a punitive damages award could not 
exceed the greater of $250,000, or two times the amount of 
economic damages that are awarded (and economic damages under 
the HEALTH Act are not limited at all). Federal legislation 
should put reasonable parameters on punitive damages to make 
the punishment fit the offense.\136\ Proportionality has been 
an important part of the United States Supreme Court's 
consideration of the validity of criminal punishment.\137\ Even 
serious crimes such as larceny, robbery, and arson have 
sentences defined with a maximum set forth in a statute.\138\ 
As former Supreme Court Justice Lewis Powell wrote, ``It is 
long past time to bring the law of punitive damages into 
conformity with our notions of just punishment.''\139\ Under 
the HEALTH Act, the larger the economic losses suffered by the 
victim, the larger the punishment can be.
---------------------------------------------------------------------------
    \136\Congress included a cap on punitive damages for individuals 
and small businesses in the Year 2000 Readiness and Responsibility Act, 
Pub. L. 106-37, 113 Stat. 135 (1999). The ``Y2K Act'' established 
procedures and legal standards for lawsuits stemming from Year 2000 
date-related computer failures.
    \137\See Solem v. Helm, 463 U.S. 277, 284 (1983) (``The principle 
that a punishment should be proportionate to the crime is deeply rooted 
and frequently repeated in common-law jurisprudence''); Weems. v. 
United States, 217 U.S. 349, 366-67 (1910) (it is ``a precept of the 
fundamental law'' as well as ``a precept of justice that punishment 
should be graduated and proportioned to the offense'').
    \138\ Some examples of federal criminal fines, even for 
particularly egregious crimes, do not exceed $250,000 and include the 
following: tampering with consumer products ($250,000 if death 
results), U.S. Sentencing Guidelines Manual Sec. Sec. 2N1.1, 5E1.2 
(1998); assault on the President ($30,000), U.S. Sentencing Guidelines 
Manual Sec. Sec. 2A6.1, 5E1.2 (1998); bank robbery ($75,000), U.S. 
Sentencing Guidelines Manual Sec. Sec. 2B3.1, 5E1.2; and sexual 
exploitation of children ($100,000), U.S. Sentencing Guidelines Manual 
Sec. Sec. 2G2, 5E1.2 (1998). See generally Jonathan Kagan, Comment, 
``Toward a Uniform Application of Punishment: Using the Federal 
Sentencing Guidelines as a Model for Punitive Damages Reform,'' 40 UCLA 
L. Rev. 753 (1993).
    \139\Lewis Powell, ``The Bizarre Results of Punitive Damages,'' 
Wall Street Journal (March 8, 1995), at A21.
---------------------------------------------------------------------------
    At the state level, ten States base punitive damages awards 
on a similar formula.\140\ Academic groups have also 
recommended limiting punitive damages to prevent excessive 
punitive damages awards.\141\
---------------------------------------------------------------------------
    \140\AL, AK, CO, CT, FL, IN, NJ, NC, ND, TX.
    \141\See American Bar Association, Special Committee on Punitive 
Damages of the American Bar Association, Section on Litigation, 
Punitive Damages: A Constructive Examination (1986) at 64-66 
(recommending that punitive damages awards in excess of three-to-one 
ratio to compensatory damages be considered presumptively 
``excessive''); American College of Trial Lawyers, Report on Punitive 
Damages of the Committee on Special Problems in the Administration of 
Justice 15-16 (1989), at 15 (proposing that punitive damages be awarded 
up to two times a plaintiff's compensatory damages or $250,000, 
whichever is greater); American Law Institute, 2 Enterprise 
Responsibility for Personal Injury--Reporters' Study (1991), at 258-59 
(endorsing concept of ratio coupled with alternative monetary ceiling).
---------------------------------------------------------------------------
    Opponents of punitive damages reform argue that changes in 
the law are not needed because large punitive damages awards 
are often reduced on appeal. However, the practical reality is 
that the impact of potentially infinite punitive damages 
stretches beyond an actual award. As Yale law professor George 
Priest has observed: ``[T]he availability of unlimited punitive 
damages affects the 95% to 98% of cases that settle out of 
court prior to trial. It is obvious and indisputable that a 
punitive damages claim increases the magnitude of the ultimate 
settlement and, indeed, affects the entire settlement process, 
increasing the likelihood of litigation.''\142\
---------------------------------------------------------------------------
    \142\George L. Priest, Punitive Damages Reform: The Case of 
Alabama, 56 La. L. Rev. 825, 830 (1996).
---------------------------------------------------------------------------
    It has also been argued that unlimited punitive damages are 
needed to police wrongdoing. However, there is no credible 
evidence that the behavior of profit-making enterprises is less 
safe in either those states that have set limits on punitive 
damages or in the six states--Louisiana, Nebraska, Washington, 
New Hampshire, Massachusetts, and Michigan--that do not permit 
punitive damages at all.\143\ Furthermore, plaintiffs in these 
six states have no more difficulty obtaining legal 
representation than in those states where punitive damages are 
potentially limitless.
---------------------------------------------------------------------------
    \143\See W. Kip Viscusi, ``Punitive Damages: The Social Costs of 
Punitive Damages Against Corporations In Environmental and Safety 
Torts,'' 87 Geo. L.J. 285, 294 (1998).
---------------------------------------------------------------------------
    Regarding reasonable guidelines for punitive damages, 
Senator Lieberman has supported an amendment providing that 
``punitive damages, which have been much discussed here and are 
an essential part of the continued bullying and bluffing that 
goes on in our tort system--be limited to $250,000 or three 
times economic damages.''\144\The HEALTH Act limits punitive 
damages to two times economic damages.
---------------------------------------------------------------------------
    \144\Senator Lieberman, floor statement on the Common Sense Product 
Liability and Legal Reform Act (April 27, 1995).
---------------------------------------------------------------------------

 THE ``CLEAR AND CONVINCING'' RULE IS APPROPRIATELY APPLIED TO CLAIMS 
                  FOR QUASI-CRIMINAL PUNITIVE DAMAGES

    The HEALTH Act provides that punitive damages may be 
awarded against a person in a health care lawsuit only if it 
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. The ``clear and convincing evidence'' burden of proof 
standard is appropriate because it reflects the quasi-criminal 
nature of punitive damages. Such a standard takes a middle 
ground between the burden of proof standard ordinarily used in 
civil cases--that is, proof by a ``preponderance of the 
evidence'' --and the criminal law standard--that is, proof 
``beyond a reasonable doubt.''
    The ``clear and convincing evidence'' standard is the law 
in twenty-nine states and the District of Columbia\145\ and it 
has been recommended by the principal academic groups that have 
analyzed the law of punitive damages over the past 15 years, 
including the American Bar Association, the American College of 
Trial Lawyers, and the National Conference of Commissioners on 
Uniform State Laws.\146\ The Supreme Court has also 
specifically endorsed the ``clear and convincing evidence'' 
standard in punitive damages cases.\147\ There is also support 
for the ``clear and convincing evidence'' standard at the 
federal level. The Volunteer Protection Act of 1997,\148\ which 
was enacted with strong bipartisan support, requires ``clear 
and convincing evidence'' of punitive damages liability before 
punitive damages can be imposed against volunteers of nonprofit 
organizations.
---------------------------------------------------------------------------
    \145\See Ala. Code Sec. 6-11-20; Alaska Stat. Sec. 09.17.020; Cal. 
Civ. Code Sec. 3294(a); Fla. Stat. ch. 768.73; Ga. Code Ann. Sec. 51-
12-5.1; Iowa Code Ann. Sec. 668A.1; Kan. Stat. Ann. Sec. 60-3701(c); 
Ky. Rev. Stat. Ann. Sec. 411.184(2); Minn. Stat. Ann. Sec. 549.20; 
Miss. Code Ann. Sec. 11-1-65(1)(a); Mont. Code Ann. Sec. 27-1-221(5); 
N.J. Stat. Ann. Sec. 2A:15-5.12; Nev. Rev. Stat. Ann. Sec. 42-005(1); 
N.C. Gen. Stat. 10-15(b); N.D. Cent. Code Sec. 32-03.2-11; Ohio Rev. 
Code Ann. Sec. 2307.80(A); Okla. Stat. Ann. tit. 23, Sec. 9.1; Or. Rev. 
Stat. Sec. 18.537; S.C. Code Ann. Sec. 15-33-135; S.D. Codified Laws 
Ann. Sec. 21-1-4.1; Tex. Civ. Prac. & Rem. Code Sec. 41.003; Utah Code 
Ann. Sec. 78-18-1; Linthicum v. Nationwide Life Ins. Co., 723 P.2d 675 
(Ariz. 1986); Jonathan Woodner, Co. v. Breeden, 665 A.2d 929 (D.C. 
1995); Masaki v. General Motors Corp., 780 P.2d 566 (Haw. 1989); 
Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349 (Ind. 1982); Tuttel 
v. Raymond, 494 A.2d 1353 (Me. 1985); Owens-Illinois v. Zenobia, 601 
A.2d 633 (Md. 1992); Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104 
(Mo. 1996); Hodges v. S.C. Toof & Co., 833 S.W.2d 896 (Tenn. 1992); 
Wangen v. Ford Motor Co., 294 N.W.2d 437 (Wis. 1980). One state, 
Colorado, requires proof ``beyond a reasonable doubt'' in punitive 
damages cases. See Colo. Rev. Stat. Sec. 13-25-127(2).
    \146\See American Bar Association, Special Committee on Punitive 
Damages of the American Bar Association, Section on Litigation, 
Punitive Damages: A Constructive Examination 19 (1986); American 
College of Trial Lawyers, Report on Punitive Damages of the Committee 
on Special Problems in the Administration of Justice 15-16 (1989); 
National Conference Of Commissioners On Uniform State Laws, Uniform Law 
Commissioners' Model Punitive Damages Act Sec. 5 (approved on July18, 
1996); see also American Law Institute, 2 Enterprise Responsibility for 
Personal Injury--Reporters' Study 248-49 (1991).
    \147\See Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 23 
n.11 (1991) (stating that ([t]here is much to be said in favor of a 
state's requiring, as many do . . . a standard of `clear and convincing 
evidence''').
    \148\Pub. L. No. 105-19, 111 Stat. 218.
---------------------------------------------------------------------------
    The HEALTH Act also contains a procedural reform called 
``bifurcation.'' Under such a procedure, at either party's 
request, a trial would be divided so that the proceedings on 
punitive damages would be separate from and subsequent to the 
proceedings on compensatory damages. This procedure would 
achieve judicial economy by having the same jury determine both 
compensatory damages and punitive damages issues.
    Bifurcated trials are fair because they prevent evidence 
that is highly prejudicial and relevant only to the issue of 
punishment from being heard by jurors and improperly considered 
when they are determining underlying liability. For example, 
plaintiffs' lawyers routinely introduce evidence of a company's 
net worth. Although a jury is often instructed to ignore such 
evidence unless it decides to punish the defendant, this is 
very difficult as a practical matter for jurors to do. The net 
result may be that jurors overlook key issues regarding whether 
a defendant is liable for compensatory damages and make an 
award simply because they believe the defendant can afford to 
pay it. Bifurcation would help prevent that unfair result 
because evidence of the defendant's net worth would be 
inadmissible in the first, compensatory damages phase of the 
case. Bifurcation also helps jurors compartmentalize a trial, 
allowing them to more easily separate the burden of proof that 
is required for compensatory damage awards--that is, proof by a 
preponderance of the evidence--from a higher burden of proof 
for punitive damages, that is, proof by clear and convincing 
evidence.
    Bifurcation of punitive damages is supported by the 
American Bar Association, the American College of Trial 
Lawyers, and the National Conference of Commissioners on 
Uniform State Laws, among other well-known organizations.\149\
---------------------------------------------------------------------------
    \149\See American Bar Association, Special Committee on Punitive 
Damages of the American Bar Association, Section on Litigation, 
Punitive Damages: A Constructive Examination (1986) at 19; American 
College of Trial Lawyers, Report on Punitive Damages of the Committee 
on Special Problems in the Administration of Justice (1989) at 18-19; 
National Conference Of Commissioners On Uniform State Laws, Uniform Law 
Commissioners' Model Punitive Damages Act Sec. 5 (approved on July 18, 
1996) at Sec. 11; American Law Institute, 2 Enterprise Responsibility 
for Personal Injury--Reporters' Study 248-49 (1991) at 255 n.41.
---------------------------------------------------------------------------

   CONGRESS SHOULD ENACT A SAFE HARBOR FROM PUNITIVE DAMAGES FOR FDA 
                               COMPLIANCE

    Litigation is threatening the viability of the life-saving 
drug industry.\150\ To help encourage new drug development and 
contain the costs of life-saving drugs, the HEALTH Act contains 
a safe harbor from punitive damages for defendants whose drugs 
or medical products comply with rigorous regulations.
---------------------------------------------------------------------------
    \150\See Michael Freedman, ``The Tort Mess'' Forbes (May 13, 2002) 
(``The pharmaceutical industry has always been a ripe target for suits. 
The difference nowadays is simply that the dollar amounts have gotten 
bigger . . . . If a drug saves 100 lives for every one it loses, 
someone who faces certain death should not hesitate to use it. But what 
happens if the tort system says every death must be paid for? The 
average payout on a wrongful death claim increased from $1 million in 
1994 to $5.7 million in 2000 (the most recent data point available), 
according to Jury Verdict Research. To merely break even, the drug's 
maker would have to charge $57,000 for every dose. It can't get away 
with that. So a potential wonder drug may never see the light of day. A 
study in the Journal of the American Medical Association estimates that 
100,000 people die each year in the U.S. from drug-related deaths. If 
the families of each sued and won that average of $5.7 million, total 
liability would hit $570 billion. That's twice the combined revenues of 
the top 12 drug companies . . . Steven Garber, a researcher at the Rand 
Research Institute for Civil Justice, says drug companies are willing 
to take on the risk of lawsuits in marketing blockbusters like Viagra 
and Vioxx. But in other cases the chance of liability is too great. 
Garber says companies once stopped making new products for use during 
pregnancy because of the high risk of birth defects. Companies also 
limit research on orphan drugs--those that cure rare, often fatal 
illnesses--because the potential tort liability outweighs the profit 
potential.'').
---------------------------------------------------------------------------
    FDA standards and regulations are rigorous. The regulatory 
objectives of the Food, Drug, and Cosmetics Act (``FDCA'') are 
to ensure that the manufacturer shares all risk information 
with the FDA so that the agency may make informed risk-benefit 
judgments about the utility of a pharmaceutical. These 
judgments occur throughout the life of the drug. The agency 
determines which drugs reach the market and the labeling for 
those that do. The receipt of new safety information can lead 
the agency, after holding a hearing, to withdraw approval for 
marketing of a drug.\151\ The Secretary of Health and Human 
Services also has the authority to order the withdrawal of 
marketing approval without a hearing where there appears to be 
an ``imminent hazard to public health.''\152\
---------------------------------------------------------------------------
    \151\See 21 U.S.C. Sec. 355(e)(1); 21 C.F.R. Sec. 5.82.
    \152\See 21 U.S.C. Sec. 355(e).
---------------------------------------------------------------------------
    To obtain FDA approval for marketing a prescription drug, a 
pharmaceutical applicant must generate substantial pre-
marketing safety and efficacy information through human 
clinical trials. The FDA must ensure that the proposed new drug 
complies with the FDCA mandate that safety be established and 
that ``substantial evidence'' of efficacy be demonstrated for 
the drug's proposed uses.\153\ The FDA review process often 
takes years of evaluation. Ultimately, approval by the FDA 
reflects a risk-benefit judgment that the product will enhance 
public health. The entire process is a lengthy one, typically 
taking between five and seven years to complete.
---------------------------------------------------------------------------
    \153\See 21 U.S.C. Sec. 355(d) (1988) (``[S]ubstantial evidence'' 
means evidence consisting of adequate and well- controlled 
investigations, including clinical investigations, by experts qualified 
. . . to evaluate the effectiveness of the drug involved, on the basis 
of which it could fairly and responsibly be concluded by such experts 
that the drug will have the effect it purports or is represented to 
have under the conditions of use prescribed, recommended, or suggested 
in the labeling or proposed labeling thereof.'').
---------------------------------------------------------------------------
    The FDCA and its implementing regulations ensure that a 
manufacturer shares risk information with the FDA even after 
the product has been marketed.\154\ Post-marketing surveillance 
consists of two primary components: reports of individual 
adverse experiences and epidemiologic studies. Serious 
reactions must be reported within fifteen working days of 
receipt of the information.\155\ A comprehensive, post-
marketing system of reporting and record-keeping requirements 
ensures that the manufacturer reports adverse drug experiences 
discovered in clinical, epidemiological, or surveillance 
studies, through review of the medical literature, or 
otherwise.\156\ Post-marketing reporting obligations include 
the disclosure of data regarding adverse reactions outside the 
United States.
---------------------------------------------------------------------------
    \154\See 21 C.F.R. Sec. 314.80.
    \155\See 21 C.F.R. Sec. 314.80(c)(1).
    \156\See 21 C.F.R. Sec. Sec. 310.303(a), 314.80(c).
---------------------------------------------------------------------------
    A few states have already specifically focused on 
pharmaceuticals and punitive damages and statutorily provide an 
FDA regulatory compliance defense against such damages.\157\
---------------------------------------------------------------------------
    \157\The five states that have proscribed punitive damages where 
the manufacturer has complied with the FDCA are Arizona, 
Az.Rev.State.Ann. Sec. 12-701; New Jersey, N.J.Sata.Ann. Sec. 2A:58C-
5(c); Ohio, Ohio.Rev.Code Ann. Sec. 2307.80(c); Oregon, Or.Rev.Stat. 
Sec. 30.927; and Utah, Utah Code Ann. Sec. 78-18-2.
---------------------------------------------------------------------------
    Research has also confirmed that the reason drug prices 
generally are so high in the United States compared to Canada, 
for example, is because of the much larger liability risks 
drugs are exposed to in this country. One researcher, for 
example, has concluded that

          A large part of the observed variation in the price 
        differential [of drugs in the United States and Canada] 
        is attributable to anticipated liability cost, and 
        liability effects explain virtually all of the very big 
        price differences observed . . . . [T]his work 
        indicates that liability costs must have a role in any 
        complete explanation of international price 
        differences. The fact that liability risk plays such a 
        vital role in the model implies that any study of 
        international drug pricing which ignores differences in 
        tort law environments across countries is seriously 
        flawed. The size of these effects is simply too large 
        to ignore.\158\
---------------------------------------------------------------------------
    \158\Richard Manning, ``Products Liability and Prescription Drug 
Prices in Canada and the United States,'' 40 Journal of Law and 
Economics 203, 234 (1997).
---------------------------------------------------------------------------

                         STATUTE OF LIMITATIONS

    Statutes of limitation define the time period following an 
injury in which a suit must be brought, in order to protect 
defendants from the prejudice of stale claims by requiring 
trials while the best evidence is still available. The best way 
to allow every patient her day in court while preventing 
prejudice to health care providers is to codify a reasonable 
statute of limitations, which the HEALTH Act does.
    The HEALTH Act provides that a medical malpractice lawsuit 
must be filed no later than one year after a person discovers 
an injury, or within three years at the latest. The HEALTH Act 
makes an exception for minors under the age of six, extending 
the time within which a suit must be filed to the longer of 
three years or the date on which the minor reaches the age of 
eight. These provisions are based on California's MICRA 
law.\159\ The HEALTH Act's statute of limitations provisions 
are designed to protect, for example, OB-GYNS's, who should not 
have to worry about being sued a decade or more after they have 
delivered a baby. Also, like the HEALTH Act, California's MICRA 
law includes no exception for latent injuries.
---------------------------------------------------------------------------
    \159\See Cal.C.C.P. Sec. 340.5.
---------------------------------------------------------------------------

                  Report Language: Section-by-Section

    The following discussion describes the bill as reported by 
the Committee.
    Section 1. Short title.
    Section 2. Provides for a 3-year statute of limitations 
with certain exceptions for minors, fraud, intentional 
concealment, and the presence of a foreign body.
    Section 3. Provides for a $250,000 cap on noneconomic 
damages. Additionally, this section provides for a ``fair 
share'' rule, by which damages are allocated fairly, in direct 
proportion to fault.
    Section 4. Provides for a sliding scale limits on the 
contingency fees lawyers can charge.
    Section 5. Provides guidelines for the award of punitive 
damages, including guidelines for punitive damages awards not 
to exceed the greater of $250,000 or twice economic damages. 
Also provides a safe harbor from punitive damages for products 
that meet applicable FDA safety requirements, with exceptions 
for cases in which information required to be given to the FDA 
was withheld, in which illegal payments were made to the FDA, 
and in which the medical product was misbranded or adulterated. 
Additionally, includes a provision protecting pharmacists and 
doctors from being named in lawsuits for forum-shopping 
purposes.
    Section 6. Provides authorization for courts to require 
periodic payments for future damages.
    Section 7. Definitions.
    Section 8. Provides that except as provided in the Act 
nothing in the Act shall affect any federal vaccine-related 
injury or any defense available to a defendant in a health care 
lawsuit or action under any other provision of Federal law.
    Section 9. Provides a savings clause that saves from 
preemption state laws that limit damages to specific amounts or 
that provide greater procedural or substantive protections than 
the provisions of this Act.
    Section 10. Provides that the Act shall apply to any health 
care lawsuit brought in a federal or State court 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.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, the HEALTH Act does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                   Constitutional Authority Statement

    The Committee finds authority for this legislation in 
article I, section 8, clause 3 of the Constitution.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of the HEALTH Act:
    1. An amendment by Mr. Scott to strike the provision in the 
bill creating the fair share rule. Defeated 7 to 11.
    2. An amendment by Mr. Johnson to specify that nothing in 
the bill shall preempt any applicable State constitutional 
provisions. Defeated 10 to 15.
    3. An amendment by Ms. Waters to exclude lawsuits involving 
preexisting conditions, as defined in the Patient Protection 
and Affordable Care Act, from the HEALTH Act's coverage. 
Defeated 9 to 15.
    4. An amendment by Ms. Waters to exempt claims involving 
rescission of health insurance from the HEALTH Act's coverage. 
Defeated 10 to 15.
    5. An amendment by Ms. Waters to allow for unlimited non-
economic damages in cases that involve catastrophic injury, 
vegetative state, or death. Defeated 11 to 15.
    6. An amendment by Mr. Nadler to increase the $250,000 caps 
on noneconomic damages and punitive damages to $1,977,500 and 
index the caps to the Consumer Price Index. Defeated 10 to 15.
    7. An amendment by Mr. Nadler to index the $250,000 caps 
for noneconomic and punitive damages to the Consumer Price 
Index. Defeated 9 to 14.
    8. An amendment by Mr. Nadler to strike the HEALTH Act's 
provisions related to medical products. Defeated 9 to 13.
    9. An amendment by Mr. Nadler to add restrictions on when 
judges may issue protective orders and the sealing of cases and 
settlements. Defeated 7 to 9.
    10. An amendment by Ms. Jackson Lee to add a section to the 
HEALTH Act exempting actions by minors from the limits on 
damages. Defeated 9 to 14.
    11. An amendment by Ms. Jackson Lee to modify the HEALTH 
Act's statute of limitation provision to change the timeframe 
related to the manifestation or discovery of an injury related 
to a minor. Defeated 9 to 12.
    12. An amendment by Mr. Cohen to exclude from the bill's 
limits on damages lawsuits related to a foreign object being 
left inside a patient or performing a procedure on the wrong 
patient or body part. Defeated 9 to 13.
    13. An amendment by Mr. Deutch to apply the bill's 
provisions to lawsuits brought by health care providers, health 
care organizations, and pharmaceutical and device 
manufacturers. Defeated 11 to 16.
    14. An amendment by Mr. Deutch and Mr. Quigley to strike 
the punitive damages exemption for products that comply with 
FDA Standards. Defeated 10 to 16.
    15. An amendment by Mr. Johnson to strike the references in 
the bill to ``State or Federal court or pursuant to an 
alternative dispute resolution system'' and replaces those 
references with ``Federal Court.'' Defeated 14 to 16.
    16. Motion to order the HEALTH Act favorably transmitted to 
the House Budget Committee. Approved 16 to 14.

                        Changes in Existing Law

    The Committee on the Judiciary advises that existing law 
will not change as a result of the enactment of this title.

                           Performance Goals

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
HEALTH Act will improve patient access to health care services 
and provide improved medical care by reducing the excessive 
burden the liability system places on the health care delivery 
system.
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 26, 2012.
Hon. Lamar Smith,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Help Efficient, 
Accessible, Low-cost, Timely Healthcare Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Tom Bradley.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Help Efficient, Accessible, Low-cost, Timely Healthcare Act of 2011

    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of that reconciliation 
process, the House Committee on the Judiciary has approved 
legislation that would impose limits on medical malpractice 
litigation in state and federal courts by capping awards and 
attorney fees, modifying the statute of limitations, and 
eliminating joint and several liability.
    In total, CBO and the staff of the Joint Committee on 
Taxation (JCT) estimate that enacting the legislation would not 
have any budgetary effect in fiscal year 2012, and would reduce 
deficits by $0.1 billion over the 2012-2013 period, $13.6 
billion over the 2012-2017 period, and $48.6 billion over the 
2012-2022 period. (About $1.9 billion of that $48.6 billion 
total would be off-budget because of effects on revenues from 
Social Security payroll taxes).
    CBO expects that those changes would, on balance, lower 
costs for health care both directly and indirectly: directly, 
by lowering premiums for medical liability insurance; and 
indirectly, by reducing the use of health care services 
prescribed by providers when faced with less pressure from 
potential malpractice suits. Those reductions in costs would, 
in turn, lead to lower spending in federal health programs and 
to lower private health insurance premiums.
    Because employers would pay less for health insurance for 
employees, more of their employees' compensation would be in 
the form of taxable wages and other fringe benefits. As 
discussed below, the bill would also increase revenues because 
it would result in lower subsidies for health insurance. In 
total, CBO and JCT estimate that enacting the legislation would 
increase federal revenues by about $7 billion over the 2012-
2022 period. Enacting the legislation also would reduce direct 
spending for Medicare, Medicaid, the government's share of 
premiums for annuitants under the Federal Employees Health 
Benefits (FEHB) program, subsidies for individuals enrolled in 
health insurance through health insurance exchanges, and other 
federal health benefits programs. CBO and JCT estimate that 
direct spending would decline by about $41 billion over the 
2012-2022 period.
    Federal spending for active workers participating in the 
FEHB program is included in the appropriations for federal 
agencies, and is therefore discretionary. The legislation would 
also affect discretionary spending for health care services 
paid by the Departments of Defense (DoD) and Veterans Affairs 
(VA). CBO estimates that implementing the legislation would 
reduce discretionary costs by about $1 billion over the 2012-
2022 period, assuming appropriation actions consistent with the 
legislation.
    The legislation contains an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA) because it 
would preempt state laws that provide less protection for 
health care providers and organizations from liability, loss, 
or damages (other than caps on awards for damages). CBO 
estimates the cost of complying with the mandate would be small 
and would fall well below the threshold established in UMRA for 
intergovernmental mandates ($73 million in 2012, adjusted 
annually for inflation).
    The legislation contains several mandates on the private 
sector, including caps on damages and on attorney fees, the 
statute of limitations, and the fair share rule. The cost of 
those mandates would exceed the threshold established in UMRA 
for private-sector mandates ($146 million in 2012, adjusted 
annually for inflation) in four of the first five years in 
which the mandates were effective.
    Estimated Cost to the Federal government: The estimated 
budgetary impact of the legislation is shown in the following 
table. The spending effects of this legislation fall within 
multiple budget functions, primarily functions 550 (health) and 
570 (Medicare).
    These estimates are based on CBO's assumption that the 
legislation will be enacted on or near October 1, 2012. 
Assuming an earlier enactment date would not change CBO's 
estimate of the budgetary effects of the legislation.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   By Fiscal year, in millions of dollars 2012--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CHANGES IN DIRECT SPENDING

Estimated Budget Authority.......................          0       -100       -650     -2,250     -3,850     -4,850     -5,200     -5,500     -5,900     -6,300     -6,700    -11,700    -41,300
Estimated Outlays................................          0       -100       -650     -2,250     -3,850     -4,850     -5,200     -5,500     -5,900     -6,300     -6,700    -11,700    -41,300

                                                                                       CHANGES IN REVENUE

Estimated Revenues
    On-budget....................................          0          4         54        231        411        651        731        760        802        850        900      1,352      5,394
    Off-budget...................................          0          4         29         93        167        231        255        266        280        295        310        524      1,929
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
        Total....................................          0          8         83        324        578        882        985      1,026      1,082      1,145      1,210      1,875      7,323

                                                    NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND RECEIPTS

Impact on the Deficit:
    On-budget....................................          0       -104        704     -2,481     -4,261     -5,501     -5,931     -6,260     -6,702     -7,150     -7,600    -13,052    -46,694
    Off-budget...................................          0         -4        -29        -93       -167       -231       -255       -266       -280       -295       -310       -524     -1,929
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
        Total....................................          0       -108       -733     -2,574     -4,428     -5,732     -6,185     -6,526     -6,982     -7,445     -7,910    -13,575    -48,623

                                                                          CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level....................          0          0         -5        -40        -95       -140       -155       -165       -175       -180       -190       -280     -1,145
Estimated Outlays................................          0          0         -5        -40        -95       -140       -155       -165       -175       -180       -190       -280     -1,145
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: The legislation would establish:
           A three-year statute of limitations for 
        medical malpractice claims, with certain exceptions, 
        from the date of discovery of an injury;
           A cap of $250,000 on awards for noneconomic 
        damages;
           A cap on awards for punitive damages that 
        would be the larger of $250,000 or twice the economic 
        damages, and restrictions on when punitive damages may 
        be awarded;
           Replacement of joint-and-several liability 
        with a fair-share rule, under which a defendant in a 
        lawsuit would be liable only for the percentage of the 
        final award that was equal to his or her share of 
        responsibility for the injury;
           Sliding-scale limits on the contingency fees 
        that lawyers can charge; and
           A safe harbor from punitive damages for 
        products that meet applicable safety requirements 
        established by the Food and Drug Administration.
    Over the 2012-2022 period, CBO and the staff of the Joint 
Committee on Taxation estimate that enacting the legislation 
would reduce direct spending by about $41 billion and increase 
federal revenues by about $7 billion. The combined effect of 
those changes in direct spending and revenues would reduce 
federal deficits by almost $49 billion over that period, with 
changes in off-budget revenues accounting for nearly $2 billion 
of that reduction in deficits.
    In addition, CBO estimates that implementing the 
legislation would reduce discretionary costs for the FEHB 
program, DoD, and VA by about $1 billion over the 2012-2022 
period.

Effects on National Spending for Health Care

    CBO reviewed recent research on the effects of proposals to 
limit costs related to medical malpractice (``tort reform''), 
and estimates that enacting the legislation would reduce 
national health spending by about 0.4 percent.\1\ That figure 
comprises a direct reduction in spending for medical liability 
premiums and an additional indirect reduction from slightly 
less utilization of health care services. CBO's estimate takes 
into account the fact that, because many states have already 
implemented some elements of the legislation, a significant 
fraction of the potential cost savings has already been 
realized. Moreover, the estimate assumes that the spending 
reduction of about 0.4 percent would be realized over a period 
of four years, as providers gradually change their practice 
patterns.
---------------------------------------------------------------------------
    \1\See Congressional Budget Office, letter to the Honorable Orrin 
G. Hatch regarding CBO's Analysis of the Effects of Proposals to Limit 
Costs Related to Medical Malpractice, (October 9, 2009). http://
www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort--Reform.pdf. The 
estimated effect on national health spending reported in that letter is 
different from the estimated effect for this legislation because the 
two proposals would impose different limits on medical malpractice 
litigation.
---------------------------------------------------------------------------

Revenues

    CBO estimates that private health spending would be reduced 
by about 0.4 percent. Much of private-sector health care is 
paid for through employment-based insurance that represents 
nontaxable compensation. In addition, beginning in 2014, 
refundable tax credits will be available to certain individuals 
and families to subsidize health insurance purchased through 
new health insurance exchanges. (The portion of those tax 
credits that exceed taxpayers' liabilities are classified as 
outlays, while the portions that reduce taxpayers' liabilities 
are recorded as reductions in revenues.)
    Lower costs for health care arising from enactment of the 
legislation would lead to an increase in taxable compensation 
and a reduction in subsidies for health insurance purchased 
through an exchange. Those changes would increase federal tax 
revenues by an estimated $7.3 billion over the 2012-2022 
period, according to estimates by JCT. Social Security payroll 
taxes, which are off-budget, account for $1.9 billion of that 
increase in revenues.

Direct Spending

    CBO estimates that enacting the legislation would reduce 
direct spending for Medicare, Medicaid, the Children's Health 
Insurance Program, the Federal Employees Health Benefits 
program, the Defense Department's TRICARE for Life program, and 
subsidies for enrollees in health insurance exchanges. We 
estimate those reductions would total roughly $41 billion over 
the 2012-2022 period.
    For programs other than Parts A and B of Medicare, the 
estimate assumes that federal spending for acute care services 
would be reduced by about 0.4 percent, in line with the 
estimated reductions in the private sector.
    CBO estimates that the reduction in federal spending for 
services covered under Parts A and B of Medicare would be 
larger--about 0.5 percent--than in the other programs or in 
national health spending in general. That estimate is based on 
empirical evidence showing that the impact of tort reform on 
the utilization of health care services is greater for Medicare 
than for the rest of the health care system.\2\
---------------------------------------------------------------------------
    \2\One possible explanation for that disparity is that the bulk of 
Medicare's spending is on a fee-for-service basis, whereas most private 
health care spending occurs through plans that manage care to some 
degree. Such plans limit the use of services that have marginal or no 
benefit to patients (some of which might otherwise be provided as 
``defensive'' medicine), thus leaving less potential for savings from 
the reduction of utilization in those plans than in fee-for-service 
systems.
---------------------------------------------------------------------------

Spending Subject to Appropriation

    CBO estimates that implementing the legislation would 
reduce federal costs for health insurance for federal employees 
covered through the FEHB program by about 0.4 percent--in line 
with the estimated reductions in the private sector--and would 
reduce costs for health insurance and health care services paid 
for by the Departments of Defense and Veterans Affairs by 
lesser amounts. CBO expects that the impact on those agencies 
would be proportionally smaller than the impact on overall 
health spending because medical malpractice costs are already 
lower than average for entities covered by the Federal Tort 
Claims Act. In CBO's estimation, the cost of health insurance 
and health care services funded through appropriation acts 
would be reduced by $1.1 billion over the 2012-2022 period, 
assuming appropriation actions consistent with the legislation.
    Estimated impact on state, local, and tribal governments: 
The legislation contains an intergovernmental mandate as 
defined in UMRA because it would preempt state laws that 
provide less protection for health care providers and 
organizations from liability, loss, or damages (other than caps 
on awards for damages). CBO estimates the cost of complying 
with the mandate would be small and would fall well below the 
threshold established in UMRA for intergovernmental mandates 
($73 million in 2012, adjusted annually for inflation).
    Estimated impact on the private sector: The legislation 
contains several mandates on the private sector, including caps 
on damages and on attorney fees, the statute of limitations, 
and the fair share rule.\3\ The cost of those mandates would 
exceed the threshold established in UMRA for private-sector 
mandates ($146 million in 2012, adjusted annually for 
inflation) in four of the first five years in which the 
mandates were effective.
---------------------------------------------------------------------------
    \3\Under the fair share rule, a defendant in a lawsuit would be 
liable only for the percentage of the final award that was equal to his 
or her share of responsibility for the injury.
---------------------------------------------------------------------------
    Previous CBO estimate: On March 19, 2012, CBO transmitted a 
cost estimate for H.R. 5 as posted on the Web site of the House 
Committee on Rules on March 12, 2012. Title I of that bill was 
very similar to the reconciliation legislation, and CBO's cost 
estimates for this legislation and for title I of H.R. 5 are 
identical.
    Estimate prepared by: Federal Costs: Tom Bradley and 
Kirstin Nelson Impact on State, Local, and Tribal Governments: 
Lisa Ramirez-Branum; Impact on the Private Sector: Stuart 
Hagen.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

                            DISSENTING VIEWS

                              Introduction

    Under H. Con. Res. 112, the Committee on the Judiciary is 
instructed to ``submit changes in laws within its jurisdiction 
sufficient to reduce the deficit'' by $100,000,000 for the 
period of fiscal years 2012 and 2013; by $11,200,000,000 for 
the period of fiscal years 2012 through 2017; and by 
$39,700,000,000 for the period of fiscal years 2012 through 
2022.''\1\ I By design, these numbers parallel the reduction in 
spending projected by the Congressional Budget Office when it 
last analyzed H.R. 5, the ``Help Efficient, Accessible, Low-
cost, Timely Healthcare (HEALTH) Act).''\2\
---------------------------------------------------------------------------
    \1\H.R. Con. Res. 112, 112th Cong. Sec. 201(b)(4) (2012).
    \2\U.S. Congressional Budget Office, ``Cost Estimate for H.R. 5 as 
ordered Reported by the House Committee on the Judiciary on February 
16, 2011,'' March 10, 2011, available at http://cbo.gov/ftpdocs/120xx/
doc12095/hr5.pdf.
---------------------------------------------------------------------------
    As a consequence, instead of addressing jobs or the 
economy--or even the rising cost of healthcare--the Committee 
has now considered H.R. 5\3\ twice in the same Congress. The 
HEALTH Act, like the ``reconciliation'' vehicle that carries 
it, is dead on arrival in the Senate. Nevertheless, the 
substance of the bill is as dangerous and one-sided as it was 
when it was first proposed almost two decades ago.\4\ The 
medical malpractice ``crisis'' it purports to address does not 
exist--and, if it did exist, H.R. 5 would not solve it.
---------------------------------------------------------------------------
    \3\Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) 
Act of 2011, H.R. 5, 112th Cong. (2012) (as considered in the H. Comm. 
on the Judiciary on April 17, 2012) [hereinafter HEALTH Act].
    \4\See Common Sense Product Liability and Legal Reform Act of 1995, 
H.R. 956, 104th Cong. (1995).
---------------------------------------------------------------------------

                             I. Background

    A medical malpractice claim is a tort-based legal claim for 
damages arising out of an injury caused by a health care 
provider. Tort claims are part of the ``common law,'' or judge-
made law, of the United States civil justice system. 
Traditionally, tort claims have been reserved to the states.\5\ 
All fifty states have considered some version of limited 
liability for medical malpractice.\6\ The National Conference 
of State Legislatures maintains that ``American federalism 
contemplates diversity among the states in establishing these 
rules.''\7\
---------------------------------------------------------------------------
    \5\``Tort law at present is almost exclusively state law rather 
than federal law.'' U.S. Congressional Research Service, Federal Tort 
Reform Legislation: Constitutionality and Summaries of Selected 
Statutes, 95-797 (Jan. 28, 2010), at 1.
    \6\See Michael I Krauss & Robert A. Levy, Can Tort Reform and 
Federalism Coexist? 514 Cato Inst. Pol'y Anaylsis (2004).
    \7\National Conference of State Legislatures, 2010-2011 Policies 
for the Jurisdiction of the Law and Criminal Justice Committee: Medical 
Malpractice, http://www.ncsl.org/
default.aspx?TabID=773&tabs=855,27,671#Medical_Malpractice (last 
visited April 24, 2012) [hereinafter NCSL Policy].
---------------------------------------------------------------------------
    The tort system provides various benefits to society. 
First, it compensates patients who have been injured by the bad 
acts of others. Second, it deters future misconduct and 
carelessness that may cause injury and punishes wrongdoers who 
inflict such injury. Third, it prevents future injury by 
removing dangerous products and practices from the marketplace. 
Fourth, it informs an otherwise unknowing public of these 
harmful products or practices, thereby adding to public health 
and public safety.\8\
---------------------------------------------------------------------------
    \8\Joan Claybrook, Consumers and Tort Law, 34 Fed. B. News & J. 127 
(1987).
---------------------------------------------------------------------------
    Most medical malpractice claims are based on the tort of 
``negligence,'' defined as conduct ``which falls below the 
standard established by law for the protection of others 
against unreasonable risk and harm.''\9\ In medical malpractice 
cases, this legal standard is based on the practices of the 
medical profession,\10\ and is usually determined based on the 
testimony of expert witnesses.
---------------------------------------------------------------------------
    \9\Restatment (Second) of Torts Sec. 282 (1965).
    \10\David M. Harney, Medical Malpractice 413 (2d ed. 1987).
---------------------------------------------------------------------------
    As with other torts, there are two types of remedy for 
medical malpractice. Courts may award compensatory damages for 
economic and noneconomic losses such as medical expenses, lost 
wages, pain and suffering, reduced life expectancy and 
diminished quality of life. Courts may also award punitive 
damages to punish and deter willful and wanton conduct.
    Medical malpractice liability reform has historically 
attracted the attention of Congress during insurance industry 
``crisis'' periods, which occurred during the mid-1970s, the 
mid-1980s, and the early 2000s.\11\ These periods were marked 
by increases in insurance premiums, reported difficulties in 
finding malpractice insurance for certain medical specialties, 
and reports of physicians leaving geographical areas or 
retiring to avoid insurance difficulties. Currently, the 
medical liability insurance market does not exhibit crisis 
symptoms.\12\ Moreover, the industry's cycle of ``crisis'' and 
``calm'' appears to be driven more by the investment practices 
of insurance companies than by litigation or the legal 
system.\13\
---------------------------------------------------------------------------
    \11\U.S. Congressional Research Service, Medical Malpractice: 
Overview and Legislation in the 112th Congress, R41693 (March 16, 
2012).
    \12\Id.
    \13\Id.
---------------------------------------------------------------------------
    Still, the federal government has a role to play in 
encouraging the states to adopt more efficient medical 
malpractice liability systems. In September 2009, President 
Obama directed the Department of Health and Human Services to 
help state governments and health care providers try 
alternative methods of resolving malpractice allegations.\14\ 
Under this directive, the Agency for Healthcare Research and 
Quality has already funded seven demonstration and various 
planning grants, for a total amount of $25 million, and is 
currently soliciting applications for additional demonstration 
projects.\15\ These grants support evidence-based patient 
safety and medical liability projects designed to reduce 
preventable harms, inform injured patients promptly, and 
promote settlement of cases through alternative dispute 
resolution.\16\
---------------------------------------------------------------------------
    \14\See The White House, Office of the Press Secretary, FACT SHEET: 
Patient Safety and Medical Liability Reform Demonstration (Sept. 17, 
2009), available at http://www.whitehouse.gov/the-press-office/fact-
sheet-patient-safety-and-medical-liabilityreform-demonstration.
    \15\See U.S. Dep't of Health & Human Services, Agency for Health 
Care Research and Quality, Medical Liability Reform & Patient Safety 
Initiative, http://www.ahrq.gov/qual/liability/.
    \16\Id.
---------------------------------------------------------------------------
    On March 23, 2010, President Obama signed into law 
comprehensive health care reform, the Patient Protection and 
Affordable Care Act.\17\ Among other important reforms, the 
bill authorizes $50 million for grants to the states to 
develop, implement, and evaluate alternatives to current tort 
litigation systems.\18\ Preference is given to states that have 
developed alternatives in consultation with relevant 
stakeholders to enhance patient safety, reduce medical errors 
and adverse events, and improve access to medical malpractice 
liability insurance.\19\
---------------------------------------------------------------------------
    \17\Pub. L. No. 111-148.
    \18\Id. Sec. 10607.
    \19\Id.
---------------------------------------------------------------------------
    President Obama's FY2012 budget called for ``a more 
aggressive effort to reform our medical malpractice system'' 
and encouraged ``Republicans to work constructively with him on 
medical malpractice as part of an overall effort to restrain 
health costs.''\20\ In addition, the President's FY2012 budget 
requested funding for ``250 million in grants to states to 
reform the way they resolve medical malpractice reform.''\21\ 
Although Congress did not fund these grants in FY2012, the 
President made the same $250 million request in FY2013.\22\
---------------------------------------------------------------------------
    \20\The White House Office of Management and Budget, Fiscal Year 
2012 Budget of the United States Government, at 25, http://
www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/
budget.pdf.
    \21\Id. at 737.
    \22\The White House Office of Management and Budget, Fiscal Year 
2013 Budget of the United States Government, at 231, http://
www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/
budget.pdf.
---------------------------------------------------------------------------

                   II. Description of the Legislation

    H.R. 5 is not ``designed brilliantly to cooperate with the 
States in trying to encourage better practices in medicine,'' 
as its supporters maintain.\23\ Rather, the bill preempts state 
law in all fifty states with a rigid, uniform set of rules 
designed to cut off restitution for victims of medical 
malpractice.\24\
---------------------------------------------------------------------------
    \23\Continued Consideration of H.R. 5, The Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 and the 
Committee's Oversight Plan, 112th Cong., Feb. 16, 2011 (statement of 
Rep. Trent Franks, Member, House Comm. on the Judiciary).
    \24\U.S. Congressional Research Service, Medical Malpractice 
Liability Reform: Legal Issues and 50-State Surveys on Tort Reform 
Proposals, R41661 (March 28, 2011).
---------------------------------------------------------------------------
    Although it is often described as a ``medical malpractice'' 
bill, H.R. 5 extends far beyond the field of medical 
malpractice liability. The bill applies to all ``health care 
lawsuits,'' and defines the term as ``any health care liability 
claim concerning the provision of health care goods or services 
or any medical product . . . brought in a State or a Federal 
court or pursuant to an alternative dispute resolution 
system.''\25\ Because this definition is so broad, the bill 
offers new protections to medical device and pharmaceutical 
manufacturers, nursing homes, hospitals, HMOs, and insurance 
companies, among others.
---------------------------------------------------------------------------
    \25\HEALTH Act, 112th Cong. Sec. 7(7).
---------------------------------------------------------------------------
    This legislation limits the amount of non-economic 
damages--i.e., damages for pain and suffering--to $250,000. In 
addition, H.R. 5 eliminates joint and several liability for 
economic and non-economic loss.\26\ Joint and several liability 
ensures that injured patients are fully compensated for their 
losses.
---------------------------------------------------------------------------
    \26\Id. Sec. 3(d). The so-called ``Fair Share'' rule provides: ``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. A separate judgment shall be rendered against each 
such party for the amount allocated to such party.'' Id.
---------------------------------------------------------------------------
    The bill dramatically limits a patient's ability to recover 
punitive damages. First, the bill imposes a heightened standard 
for the recovery of punitive damages, requiring either clear 
and convincing evidence that the defendant acted with malicious 
intent to injure the victim, or that the defendant understood 
that the defendant understood the victim was substantially 
certain to suffer unnecessary injury yet deliberately failed to 
avoid such injury.\27\ Even if a patient can meet this burden, 
the bill limits punitive damages to two times the amount of 
economic damages or $250,000, whichever is greater.\28\
---------------------------------------------------------------------------
    \27\HEALTH Act, 112th Cong. Sec. 5(a).
    \28\Id. Sec. 5(b)(2).
---------------------------------------------------------------------------
    The second category of punitive damages affected by the 
bill relates to manufacturers and distributors of drugs and 
medical devices. Specifically, the bill bans punitive damage 
liability for: (1) manufacturers of drugs and devices that are 
approved by the FDA, (2) manufacturers of drugs and devices 
that are not FDA-approved but are ``generally recognized as 
among qualified experts as safe and effective,'' and (3) all 
manufacturers or sellers of drugs with respect to packaging or 
labeling defects.\29\ These changes have the effect of 
sidestepping federal safety regulations in addition to limiting 
a patient's ability to recover damages in court.
---------------------------------------------------------------------------
    \29\Id. Sec. 7(c)(1).
---------------------------------------------------------------------------
    H.R. 5 sets strict limits on the amount an attorney may 
receive in contingency fee payments. The total amount of all 
contingent fees for representing all claimants in a health care 
lawsuit may not exceed: (1) 40% of the first $50,000 recovered 
by the claimant(s); (2) 33\1/3\ % of the next $50,000 recovered 
by the claimant(s); (3) 25% of the next $500,000 recovered by 
the claimant(s); and (4) 15% of any amount by which the 
recovery by the claimant(s) is in excess of $600,000.\30\ The 
bill also gives courts the authority to approve fees lower than 
those provided for by this formula.
---------------------------------------------------------------------------
    \30\Id. Sec. 4(a).
---------------------------------------------------------------------------
    H.R. 5 also imposes a restrictive statute of limitations 
for medical malpractice actions. A ``health care lawsuit may be 
commenced no later than 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.''\31\ Although disguised as a 
three-year statute of limitations, the effect of this provision 
is that a claimant often has only one year from the date of 
discovering the injury to file suit. A claimant will, quite 
often, discover an injury on the same day an injury manifests 
itself. This provision cuts in the opposite direction for 
patients whose injuries have long latency periods. A patient 
might manifest symptoms of HIV or hepatitis long before 
discovering the cause of the injury, but have no recourse if 
the three-year deadline has expired.
---------------------------------------------------------------------------
    \31\Id. Sec. 2 (emphasis added).
---------------------------------------------------------------------------
    H.R. 5 further disadvantages patients by requiring judges 
to permit periodic payments at the request of the 
defendant.\32\ To the extent that a patient can successfully 
negotiate the obstacles set up by the bill, actual payment of 
damages could take years--assuming the defendant remains 
solvent.
---------------------------------------------------------------------------
    \32\Id. Sec. ``In any health care lawsuit, if an award of future 
damages . . . 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.'' Id. (emphasis added).
---------------------------------------------------------------------------
    Finally, the provisions of H.R. 5 is written to be ``one-
way preemptive''--i.e., with one limited exception, they only 
supersede state laws that are more favorable to victims. The 
Congressional Research Service has conducted a fifty-state 
survey and concluded that H.R. 5 would preempt important 
patient and consumer protections in all fifty states.\33\ 
Moreover, because the bill applies to all ``health care 
liability claims'' regardless of the ``theory of liability on 
which the claim is based,'' the legislation limits recovery 
against insurance companies for violations of even the most 
popular provisions of the Affordable Care Act--such as the 
prohibition on denying coverage for a pre-existing condition, 
the lifting of lifetime recovery ceilings, and mandated 
coverage for adult children under the age of 26.
---------------------------------------------------------------------------
    \33\U.S. Congressional Research Service, Medical Malpractice 
Liability Reform: Legal Issues and 50-State Surveys on Tort Reform 
Proposals, R41661 (March 28, 2011).
---------------------------------------------------------------------------

                         III. General Concerns

    A review of the empirical evidence gathered over the last 
two decades supports a number of conclusions. First, despite 
perennial claims to the contrary, the judicial system is not in 
crisis with respect to medical malpractice liability. Second, 
no significant savings are likely to be realized through 
federal ``tort reform.'' Third, medical malpractice is a 
serious problem in the United States.
    Opposition to the HEALTH Act includes, but is not limited 
to: Alliance for Justice, the Center for Justice and Democracy, 
the Consumer Federation of America, Consumer Watchdog, the 
National Consumers League, the National Consumer Voice for 
Quality Long-Term Care, the National Women's Health Network, 
and Public Citizen.

  A. THE CYCLE OF ``CRISIS'' AND ``CALM'' IS DRIVEN BY THE INVESTMENT 
                    PRACTICES OF INSURANCE COMPANIES

    In past sessions of Congress, supporters of the bill have 
pointed to a common set of symptoms in the insurance market--
most often, ``skyrocketing'' insurance premiums and 
difficulties in finding medical malpractice liability 
coverage.\34\ Restricting the ability of patients to recover 
damages for malpractice, they argued, would reduce the 
frequency of malpractice lawsuits. This would, in theory, lower 
medical malpractice premiums, making insurance more available 
to doctors and doctors more available to patients. This policy 
assumption--that discouraging litigation mitigates the 
insurance ``crisis''--does not square with the facts.
---------------------------------------------------------------------------
    \34\See, e.g., 151 Cong. Rec. H6990 (daily ed. July 28, 2005). 
``The costs of the tort system continue to take their toll on the 
Nation's economy. Medical professional liability insurance rates have 
skyrocketed, causing major insurers to drop coverage or raise premiums 
to unaffordable levels. We have heard case after case where this last 
occurred nationwide. . . . The HEALTH Act . . . addresses this crisis 
by eliminating frivolous lawsuits by making health care more accessible 
and more affordable.'' Id. (statement of Rep. Steve Chabot).
---------------------------------------------------------------------------
    From a historical perspective, Congress paid closest 
attention to medical malpractice liability insurance during 
``crisis'' periods in the mid-1970s, the mid-1980s, and the 
early 2000s.\35\ These periods are punctuated by the same 
symptoms described by supporters of H.R. 5--increases in 
malpractice insurance premiums, claims of insurance scarcity, 
and stories of physicians abandoning specialties or communities 
because of the high cost of insurance.\36\ In each instance, 
the ``crisis'' abated when the financial market stabilized.\37\
---------------------------------------------------------------------------
    \35\U.S. Congressional Research Service, Medical Malpractice: 
Overview and Legislation in the 112th Congress, R41693 (March 16, 
2012).
    \36\Id.
    \37\See, e.g., U.S. Congressional Research Service, Medical 
Malpractice Insurance: An Economic Introduction and Review of 
Historical Experience, RL31886 (Oct. 2, 2009).
---------------------------------------------------------------------------
    Experts attribute this cycle of crisis and calm to the 
investment practices of the insurance industry--not to the 
frequency of litigation or the size of jury awards. Joanne 
Doroshow, Executive Director for the Center for Justice and 
Democracy, testified at a hearing of the Subcommittee on 
Commercial and Administrative law in the 108th Congress and 
explained:

        Insurers make their money from investment income. 
        During years of high interest rates and/or insurer 
        profits, insurance companies engage in fierce 
        competition for premium dollars to invest for maximum 
        return. More specifically, insurers engage in severe 
        underpricing to insure very poor risks just to get 
        premium dollars to invest. But when investment income 
        decreases because interest rates drop, the stock market 
        plummets, and/or cumulative price cuts make profits 
        become unbearably low, the industry responds by sharply 
        increasing premiums and reducing coverage, creating a 
        ``liability insurance crisis.''\38\
---------------------------------------------------------------------------
    \38\Health Care Litigation Reform: Does Limitless Litigation 
Restrict Access to Health Care? Hearing on H.R. 4600 Before the 
Subcomm. on Commercial and Admin. Law of the H. Comm. On the Judiciary, 
107th Cong. 15 (2002) (statement of Joanne Doroshow, Executive 
Director, Center for Justice & Democracy).

    This market-driven cycle repeats itself over and over 
again.
    During the ``crisis'' of the 1970s, insurance companies 
increased premiums for medical malpractice insurance by large 
margins and denied coverage to doctors in certain 
specialties.\39\ In response, the states initiated reforms 
designed to provide alternative sources of insurance and to 
reduce the volume and costs of medical malpractice claims. 
Physician- and hospital-owned insurance companies emerged as an 
alternative to traditional insurance providers, and, for at 
least a decade, insurance was accessible and affordable in a 
market dominated by these companies.
---------------------------------------------------------------------------
    \39\U.S. Congress, Office of Technology Assessment, Impact of Legal 
Reforms on Medical Malpractice Costs, Pub. No. OTA-BP-H-119. at 13 
(1993).
---------------------------------------------------------------------------
    Prior to the ``crisis'' of the mid-1980s, a favorable 
investment market allowed the insurance industry to offer 
stable and affordable premium rates for medical malpractice 
insurance. When interest rates dropped in 1984, however, 
insurance providers responded by drastically increasing the 
cost of medical malpractice insurance.\40\ In some instances, 
insurance rates more than tripled for manufacturers, 
municipalities, doctors, nurses, midwives, daycare centers, 
nonprofit groups, and other customers of liability 
insurance.\41\
---------------------------------------------------------------------------
    \40\Id. at 15.
    \41\Id.
---------------------------------------------------------------------------
    The roots of the most recent ``crisis'' were described by 
Raul King, an economist and insurance industry expert with 
Congressional Research Service, at a forum held by House 
Democrats in 2003:

          What has happened in the 1990s, after the last 
        medical malpractice in the mid-'80s, is that in the 
        1990s the markets were up. For an extended period of 
        time, interest rates were relatively low, but the 
        bottom line is that investments were very, very high, 
        and they can continue to price their business in such a 
        way to maximize premium for investment purposes.
          Some would argue that, starting in 2000, when not 
        only the medical malpractice area but insurance in 
        general, not just medical malpractice but all P&C, 
        property and casualty insurance, when the market cycle 
        started to turn, investments were not what they 
        expected. Interest rates were low, and across the board 
        rates started firming up.
          Incidentally, when the market is considered soft, 
        coverage is readily available. Prices are relatively 
        low. The insurance company will make their products 
        available in the marketplace, and they will 
        aggressively sell as much as they can because they want 
        the business, and it's intensely competitive.
          Some would argue that this soft market that went 
        beyond the six years but right close to ten years, and 
        this is what the consumer groups have argued is cash 
        flow underwriting--what Bob Hunter, for example, would 
        argue is cash flow underwriting. They run into a 
        problem. Their investments can't cover their premium 
        losses and underwriting losses.
          So what they have to do is increase premiums 
        dramatically. They have to in some cases withdraw from 
        the marketplace, change the amount of insurance they'll 
        make available, in the marketplace. Rather than selling 
        a $500,000 policy, they'll sell only a $250,000 policy, 
        and that's all that's available in a given state.\42\
---------------------------------------------------------------------------
    \42\Democratic Forum on Malpractice, Feb. 11, 2003, Transcript at 
32-33.

    Once again, when the bottom dropped out on the investment 
market, premiums increased and availability of coverage 
declined. Although each crisis ``brought about attempts at 
malpractice reform in many states, it only subsided when the 
economy fmally recovered and interest rates rose.''\43\
---------------------------------------------------------------------------
    \43\Mitchell J. Nathanson, It's the Economy (and Combined Ratio), 
Stupid: Examining the Medical Malpractice Litigation Crisis Myth and 
the Factors Critical to Reform, 108 Penn. St. L. Rev. 1077 (2004).
---------------------------------------------------------------------------
    Both the American Medical Association and members of the 
insurance industry acknowledge that these periods of ``crisis'' 
are market driven. In a 2003 internal memo, the AMA's Board of 
Trustees recognized that ``the insurance underwriting cycle is 
now at a point where insurers have both pricing power and a 
need to increase revenues through premiums as returns on 
investments are no longer able to subsidize underwriting losses 
and as insurers have suffered large claim losses in other 
areas.''\44\ The memo explains further:
---------------------------------------------------------------------------
    \44\American Medical Ass'n, Report 35 of the Board of Trustees (A-
02) on Liability Reform, at 2.

          For several years, insurers kept prices artificially 
        low while competing for market share and new revenue to 
        invest in a booming stock market. As the bull market 
        surged, investments by these historically conservative 
        insurers rose to 10.6% in 1999, up from a more typical 
        3% in 1992. With the market now in a slump, the 
        insurers can no longer use investment gains to 
        subsidize low rates. The industry reported realized 
        capital gains of $381 million last year, down 30% from 
        the high point in 1998, according to the A.M. Best 
        Company, one of the most comprehensive sources of 
        insurance industry data.\45\
---------------------------------------------------------------------------
    \45\Id.

    When investment income became scarce, insurance companies 
increased premiums to turn a profit. This observation has been 
confumed by the National Conference of State Legislatures.\46\ 
The Physicians Insurers Association of America reported that 
investment income constituted 47% of insurance company income 
during the ``calm'' of 1995, but only 31% during the ``crisis'' 
of 2001.\47\
---------------------------------------------------------------------------
    \46\Peter Eisler, et al., Hype Outraces Facts in Malpractice 
Debate, USA Today, Mar. 5, 2003 available at http://
www.usatoday.cominews/nation/2003-03-04-malpractice-cover--x.htm.
    \47\Id.
---------------------------------------------------------------------------
    H.R. 5 does nothing to address this boom-and-bust cycle. It 
does nothing about the investment practices of the insurance 
industry. It does nothing to repeal the anomalous McCarran-
Ferguson antitrust exemption for the insurance industry, which 
is critical to stabilizing the medical malpractice insurance 
market.\48\ It does nothing to require that premium increases 
be justified, or to permit health care providers to challenge 
increases when they occur. Instead, H.R. 5 pretends that a 
series of restrictions on patients' rights will prevent the 
next ``crisis.''
---------------------------------------------------------------------------
    \48\See Medical Liability Reform--Cutting Costs, Spurring 
Investment, Creating Jobs, Hearing Before the H. Comm. on the 
Judiciary, 112th Cong., Jan. 20, 2011 (statement of Joanne Doroshow, 
Executive Director, Center for Justice and Democracy).
---------------------------------------------------------------------------

                B. NO INSURANCE ``CRISIS'' EXISTS TODAY

    Although supporters of H.R. 5 may suggest otherwise, the 
evidence shows that there is no insurance ``crisis'' today. 
According to the Medical Liability Monitor, premiums for 
medical malpractice insurance ``have eased nationwide.''\49\ In 
2009, 58 percent of premiums stayed level and 36 percent of 
premiums fell.\50\ According to A.M. Best, after reaching an 
average annual increase of 14.2 percent during the height of 
the ``crisis'' in 2003, medical malpractice premiums began to 
fall--declining by 6.6 percent in 2007, and by an additional 
5.3 percent in 2008.\51\ Without any of the federal 
intervention contemplated by H.R. 5, the ``crisis'' of the mid-
2000s appears to have peaked in 2004 and abated by 2006. 
Premiums have dropped in every state--whether or not court 
systems have been modified to limit liability for medical 
malpractice defendants.\52\
---------------------------------------------------------------------------
    \49\Amy Lynn Sorrel, Liability Premiums Stay Stable, but Insurers 
Warn This Might Not Last, Am. Med. News (Nov. 23, 2009) available at 
http://www.ama-assn.org/amendnews/2009/11/23//pr1121123.htm. http://
www.amaassn.org/amendnews/2009/11/23//pr121123.htm. See also Medical 
Liability Monitor (Oct. 2008).
    \50\Id.
    \51\U.S. Congressional Research Service, Medical Malpractice 
Insurance: An Economic Introduction and Review of Historical 
Experience, RL31886 (October 2, 2009) (citing A.M. Best Statistical 
Study, Continued Improvement in 2005 Results as Medical Malpractice 
Premium Growth Subsides (Aug. 28, 2006), and A.M. Best's Special 
Report, U.S. Medical Professional Liability 2008 Market Review (Apr. 
27, 2009).
    \52\Americans for Ins. Reform, True Risk: Medical Liability, 
Malpracitce Insurance and Health Care (July 2009) available at http://
insurance-reforrn.orepr/090722.html.
---------------------------------------------------------------------------
    Medical malpractice cases are also rare and declining in 
number. According to the National Center for State Courts, only 
4.4 percent of the civil caseload is comprised of tort cases; 
of these, only 2.8 percent are medical negligence cases.\53\ 
Even that share has declined by fifteen percent over the past 
ten years.\54\ The National Practitioner Databank, which tracks 
all medical malpractice payments by all physicians in the 
United States, confirms the same downward trend.\55\
---------------------------------------------------------------------------
    \53\Nat'l Center for State Courts, Examining the Work of State 
Courts: An Analysis of 2008 State Court Caseloads (2010) available at 
http://www.ncsconline.org/d_researchksp/2008_fi1es/EWSC-2008-
Online%20Version%20v2.pdf.
    \54\Id.
    \55\Nat'l Practitioner Databank, Annual Report (2006) available at 
http://www.npdbhipdb.hrsa.gov/pubs/stats/2006_NPDB_Annual_Report.pdf.
---------------------------------------------------------------------------
    Juries decide against medical malpractice plaintiffs more 
than three-quarters of the time, and damage awards in medical 
malpractice cases are generally proportionate to the severity 
of the injury.\56\ In addition, jury awards are stable. An 
actuarial analysis conducted by J. Robert Hunter, Director of 
Insurance of the Consumer Federation of America, shows that the 
average medical malpractice payout hovered at just under 
$30,000 for an entire decade--from 1990 to 2000--without 
adjustment for inflation.\57\ According to a more recent study 
by the National Center for State Courts, medical malpractice 
claims actually declined 15 percent from 1999 to 2008.\58\ 
Insurance industry data shows that claims have dropped 45 
percent after adjusting for inflation.\59\
---------------------------------------------------------------------------
    \56\Nat'l Center for State Courts, Caseload Highlights: Medical 
Malpractice Litigation in State Courts (April 2011) available at http:/
/www.courtstatistics.org//media/Microsites/Files/CSP/Highlights/
18_1_Medical_Malpractice_In_State_Courts.ashx.
    \57\Letter from J. Robert Hunter, Director of Insurance, Consumer 
Federation of America, to Joanne Doroshow, Executive Director, Center 
for Justice & Democracy (Oct. 13, 2001).
    \58\National Center for State Courts, supra note 55.
    \59\See Americans for Ins. Reform, supra note 52.
---------------------------------------------------------------------------
    H.R. 5 attempts to contain allegedly ``rampant'' punitive 
damages, but the evidence shows that punitive damages are 
rarely rewarded. According to the Bureau of Justice Statistics, 
in 1996 only 1.1 percent of medical malpractice plaintiffs who 
prevailed at trial were awarded punitive damages.\60\ Only 1.2 
percent of those awards were awarded by juries.\61\ In 2005, 
there were too few medical malpractice cases in which punitive 
damages were awarded to provide a statistically reliable 
estimate of the amount of punitive damages in state courts.\62\
---------------------------------------------------------------------------
    \60\U.S. Dep't of Justice, Bureau of Justice Stat., Tort Bench and 
Jury Trials in State Courts, 2005 (Nov. 2009).
    \61\Id.
    \62\Id.
---------------------------------------------------------------------------

               C. MEDICAL MALPRACTICE IS THE REAL CRISIS

    At best, H.R. 5 is untimely--it is designed to lower 
premium rates that have already dropped, and curb damages that 
are rare and trending downward. In practice, the bill ignores 
the real medical malpractice crisis in America.
    Medical error is the fifth leading cause of death in the 
United States.\63\ In 1999, the Institute of Medicine of the 
National Academy of Sciences estimated that between 44,000 and 
98,000 hospital deaths in the United States each year are 
attributable to medical mismanagement--at a cost of $29 billion 
annually.\64\ This estimate does not include losses for medical 
errors at outpatient centers, physician offices, or clinics. 
During the period of study, the number of deaths due to medical 
malpractice was greater than the number of people who died due 
to motor vehicle accidents (43,458), breast cancer (42,297), or 
AIDS (16,516).\65\
---------------------------------------------------------------------------
    \63\Centers for Disease Control, Nat'l Center for Health Care 
Stat., Deaths/Mortality, 2010, http://www.cdc.gov/nchs/fastats/
deaths.htm.
    \64\To Err is Human: Building a Safer Health System, (Linda T. 
Kohn, Janet M. Corrigan, and Molla S. Donaldson, eds. Institute of 
Medicine, National Academy Press 1999) [hereinafter IOM Report].
    \65\Id.
---------------------------------------------------------------------------
    The Congressional Budget Office estimated 181,000 severe 
injuries occurred due to medical negligence in 2003.\66\ 
According to a 2008 report by the Institute for Healthcare 
Improvement, there are fifteen million incidents of negligent 
medical harm each year.\67\ The Joint Commission Center on 
Transforming Healthcare reports as many as forty wrong site, 
wrong side, and wrong patient procedures every week.\68\ The 
Journal of American Medicine reports that there are 1,500 
incidents of surgical tools left in patients each year.\69\
---------------------------------------------------------------------------
    \66\U.S. Congressional Budget Office, Key Issues 150-54 (Dec. 
2008).
    \67\Institute for Healthcare Improvement, Campaign--FAQs, http://
www.ihi.org/IHI/Programs/Campaign/Campaign.htm?TabId=6.
    \68\American Ass'n for Justice, Medical Negligence: The Role of 
America's Civil Justice System in Protecting Patients' Rights (Feb. 
2011) (citing Joint Commission Center for Transforming Healthcare, 
Wrong Site Surgery Project http://
www.centerfortransforminghealthcare.org/projects/
display.aspx?projectid=4).
    \69\See Nagy, et al., Radio Frequency Identification Systems 
Technology in the Surgical Setting, Surgical Innovation, Vol. 13, No. 1 
(March 2006).
---------------------------------------------------------------------------
    Medical malpractice pervades American society. A November 
2010 study by the Office of the Inspector General of the 
Department of Health and Human Services found that 
approximately one in seven hospital patients experience a 
medical error, and that these errors cost Medicare $4.4 billion 
every year.''\70\ This sum does not include ``additional costs 
required for follow-up care after the sample 
hospitalizations.''\71\ Medical errors occur in more than one 
in ten cases involving children with complex medical 
problems.\72\ Two in five chronically ill patients receive care 
inconsistent with medical literature.\73\ One fifteen-year 
observational study showed that 45.8 percent of patients 
experience at least some error while receiving medical 
treatment.\74\
---------------------------------------------------------------------------
    \70\U.S. Dept't of Health and Human Services, Office of the 
Inspector General, Adverse Events in Hospitals: National Incidence 
Among Medicare Beneficiaries (Nov. 2010), at i-ii.
    \71\Id. at ii-iii.
    \72\Eisler et al., supra note 46.
    \73\Lee Harris, Tort Reform as Carrot-and-Stick, 46 HARV. J. ON 
LEGIS. 163, 169 (2009).
    \74\Id. (citing Lori Andrews, Studying Medical Error in Situ: 
Implications for Malpractice Law and Policy, 54 DEPAUL L. REV. 357 
(2005)).
---------------------------------------------------------------------------
    These figures may even be under-reported. Twenty-three 
states have no medical error detection programs, and even those 
with mandatory programs likely miss a majority of the harm.\75\ 
The New England Journal of Medicine reports that ``Most medical 
centers continue to depend on voluntary reporting to track 
institutional safety, despite repeated studies showing the 
inadequacy of such reporting.''\76\ The only national database 
of malpractice claims, the National Practitioners Databank, 
remains closed to the public.\77\ The American Medical 
Association goes so far as to offer its members a primer on 
``How to evade a report to the NPDB.''\78\
---------------------------------------------------------------------------
    \75\Cathleen F. Crowle & Eric Nalder, Year After Report, Patients 
Still Face Risks, Times Union, Sept. 20, 2010.
    \76\Christopher P. Landrigan et al., Temporal Trends in Rates of 
Patient Harm Resulting from Medical Care, 363 N. Engl. J. Med 2124-34 
(2010).
    \77\American Ass'n for Justice, supra note 68, at 9.
    \78\AMA webpage on the National Practitioner Databank, http://
www.ama-assn.org/ama/pub/physician-resources/legal-topics/business-
management-topics/national-practitioner-data-bank.shtml.
---------------------------------------------------------------------------
    Changes to court systems that ignore patient safety do 
little to reverse this trend. After Texas enacted its cap on 
non-economic damages, complaints against Texas doctors to the 
state medical board rose from 2,942 to 6,000, more than half of 
which were focused on poor quality of medical care.\79\ And 
yet, according to a lengthy investigation by the Houston 
Chronicle, ``Texas has fumbled attempts to establish a medical 
error reporting system, often leaving patients to discover 
errors the hard way--when a mistake costs them their livelihood 
or the life of a loved one.''\80\
---------------------------------------------------------------------------
    \79\Terry Langford, Texas Laws are Vague, Abandoned or Unfunded, 
Houston Chronicle, July 30, 2009.
    \80\Id.
---------------------------------------------------------------------------
    The costs of medical malpractice are staggering. CRS has 
found that ``the damage from medical malpractice usually 
requires additional treatment to repair, sometimes an entire 
lifetime of medical treatment.''\81\ In addition to these human 
costs, the total financial cost of medical malpractice--
including lost income, lost household production, disability 
and health care costs--is estimated by the Centers for Disease 
Control to be between $17 billion and $29 billion each 
year.\82\
---------------------------------------------------------------------------
    \81\U.S. Congressional Research Service, supra note 51.
    \82\See Centers for Disease Control, supra note 63.
---------------------------------------------------------------------------
    And yet, there is a profound disconnect between the actual 
incidence of medical malpractice and the insurance industry. 
According to one analysis published in the Harvard Journal on 
Legislation: ``Bad doctors are not penalized by insurance 
companies, which do not normally take into account previous 
performance when assessing medical malpractice insurance 
rates.''\83\ Instead, insurance companies charge premiums based 
on general factors like physician speciality, without giving an 
``account for the competence skill, and quality of medical 
services provided by the physician.''\84\ The problem is 
compounded by lax discipline for habitually negligent health 
care providers. In one study published by N.Y.U., state 
licensing boards were found to have disciplined less than 17 
percent of doctors with five or more medical malpractice 
payouts on record.\85\
---------------------------------------------------------------------------
    \83\Lee Harris, supra note 78 at 178.
    \84\Id. (citing Catherine Sharkey, Unintended Consequences of 
Medical Malpractice Damage Caps, 80 N.Y.U.L. REV. 391, 410 (2005) 
(noting that physicians are not experience-rated and, thus, both 
``negligent and non-negligent physicians pay similar premiums'')).
    \85\Id.
---------------------------------------------------------------------------
    This disconnect between medical malpractice and insurance 
coverage is the foundation for H.R. 5. By enacting sweeping 
changes to the court systems in all fifty states, this bill 
gives all health care providers--all physicians, hospitals, 
clinics, pharmaceutical manufacturers, device manufacturers, 
and insurance companies--the benefit of additional liability 
protection in cases of medical malpractice. By forcing the 
states to cap non-economic damages, the bill disproportionately 
penalizes members of vulnerable groups, such as women, 
children, and minorities, all of whom are more likely to 
realize comparatively substantial non-economic losses. Capping 
damages ``only serves to compel the most grievously injured at 
the hands of the most clearly negligent and/or reckless to bear 
the brunt of reform.''\86\
---------------------------------------------------------------------------
    \86\Mitchell J. Nathanson, supra note 46 at 1109.
---------------------------------------------------------------------------
    Fortunately, there appear to be effective policy solutions 
for addressing the medical malpractice crisis. For example, the 
Wall Street Journal has found that, by committing to patient 
safety, anesthesiologists have halved the rate with which they 
are sued for malpractice, and pay for malpractice insurance at 
rates lower than the rates they paid twenty years ago.\87\
---------------------------------------------------------------------------
    \87\Joseph Hallinan, Heal Thyself: Once Seen as Risky, One Group of 
Doctors Changes Its Ways, WALL ST. J., June 21, 2005, at 1.
---------------------------------------------------------------------------
    Along these lines and under the leadership of the Obama 
Administration, the Affordable Care Act provides fmancial 
incentives for health care providers to improve care and reduce 
unnecessary errors. For example, Medicare payments will be 
reduced for ``hospital acquired conditions''\88\ and high rates 
of readmission.\89\ The Act also creates the ``Hospital Value 
Based Purchasing Program,'' which gives health care providers 
incentives to perform well on a set of quality measures that 
include efficiency, outcome, and patient experience of 
care.\90\ These reforms are the first steps towards a national 
plan to address medical malpractice. The Act instructs the 
Center for Medicare and Medicaid Innovation to develop new 
concepts for improving patient care and reducing costs.\91\
---------------------------------------------------------------------------
    \88\Central line infections and surgical site infections are common 
examples of ``hospital acquired conditions.'' Pub. L. No. 111-148 
Sec. 3008.
    \89\Id. Sec. 3025.
    \90\Id. Sec. 3001.
    \91\Id. Sec. 3021.
---------------------------------------------------------------------------
    Unfortunately, H.R. 5 ignores this progress. Instead of 
encouraging health care providers to make fewer mistakes, the 
bill cuts off a patient's right to be made whole when mistakes 
are made. Effective legislation would address the real crisis 
directly. H.R. 5 addresses a crisis that does not exist.

    D. EVEN IF THE CRISIS DID EXIST, H.R. 5 WOULD NOT LOWER MEDICAL 
                     MALPRACTICE INSURANCE PREMIUMS

    In his pitch for H.R. 5, Chairman Smith argued that, 
because of a statewide $250,000 cap on noneconomic damages, 
``the rate of increase in medical professional liability 
premiums in California since 1976 has been 280% lower than the 
rate of increase experienced in other states.''\92\ A closer 
look at the evidence will show that regulation of the insurance 
industry, not ``tort reform,'' stabilized the cost of insurance 
in California.\93\
---------------------------------------------------------------------------
    \92\Markup of H.R. 5, The Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2011 and the Committee's Oversight 
Plan, 112th Cong., Feb. 9, 2011 (statement of Rep. Lamar Smith, 
Chairman, House Comm. on the Judiciary).
    \93\See Study Finds No Link Between Tort Reforms and Insurance 
Rates, Liability Week, July 19, 1999 (quoting Sherman Joyce, President, 
American Tort Reform Association); Michael Prince, Tort Reforms Don't 
Cut Liability Rates, Study Says, Bus. Ins., July 19, 1999 (quoting 
Victor Schwartz, General Counsel, American Tort Reform Association); 
Press Release, AIA Cites Fatal Flaws in Critic's Reports on Tort 
Reform, Am. Ins. Ass'n, Mar. 13, 2002.
---------------------------------------------------------------------------
    The California experience is instructive. H.R. 5 is based 
largely on California's ``Medical Injury Compensation Reform 
Act'' (MICRA).\94\ Enacted in 1975, MICRA caps noneconomic 
damages at $250,000,\95\ eliminates joint and several liability 
for noneconomic damages,\96\ limits attorneys' fees on a 
sliding scale,\97\ and imposes a strict statute of limitations 
on medical malpractice claims.\98\ These new protections for 
defendants had mixed success, at best.
---------------------------------------------------------------------------
    \94\H.R. 5 incorporates ``California's time-tested reforms at the 
Federal level.'' Markup of H.R. 5, The Help Efficient, Accessible, Low-
cost, Timely Healthcare (HEALTH) Act of 2011 and the Committee's 
Oversight Plan, 112th Cong., Feb. 9, 2011 (statement of Rep. Lamar 
Smith, Chairman, House Comm. on the Judiciary).
    \95\Cal. Civ. Code Sec. 3333.2.
    \96\Id. Sec. 1431.2.
    \97\Cal. Bus. & Prof. Code Sec. 6146.
    \98\Cal. Civ. Proc. Code Sec. 340.5.
---------------------------------------------------------------------------
    In 1995, a comprehensive study of MICRA's impact found: (1) 
per capita health care expenditures in California exceeded the 
national average every year between 1975 and 1993; (2) the rise 
in the cost of health care in California exceeded the rate of 
inflation every year between 1975 and 1993; (3) hospital 
patient costs were higher in California than in almost any 
other state; and (4) California's medical malpractice liability 
premiums nearly doubled in the twelve years following the 
enactment of MICRA.\99\ In 1999, the California State Assembly 
Committee on the Judiciary concluded that medical malpractice 
premiums had not declined since the enactment of MICRA--
California had, at best, experienced a slower rate of premium 
increase.\100\ Further, MICRA altogether failed to decrease the 
number of malpractice cases filed in California courts.\101\
---------------------------------------------------------------------------
    \99\Proposition 103 Enforcement Project, MICRA: The Impact on 
Health Care Costs of California's Experiment with Restrictions on 
Medical Malpractice Lawsuits, 1995.
    \100\Brian A. Liang & LiLan Ren, Medical Liability Insurance and 
Damage Caps: Getting Beyond Band Aids to Substantive Systems Treatment 
to Improve Quality and Safety in Healthcare, 30 Am. J. L. & Med. 501, 
506 (2004).
    \101\Id.
---------------------------------------------------------------------------
    To the extent that the cost of insurance stabilized in 
California after 1975, much of the credit is owed to 
Proposition 103, which became law in 1988. Among other reforms 
of the insurance industry, Proposition 103 required insurance 
companies to hold public hearings before increasing premiums 
more than 15 percent. This requirement effectively froze the 
cost of medical malpractice liability insurance for many health 
care providers.\102\ Under the rollback provisions of 
Proposition 103, insurance companies refunded over $1.2 million 
to policyholders.\103\ Within three years, medical malpractice 
insurance had dropped in cost, on average, by 20.2 
percent.\104\ Reform of the insurance industry, not of the 
court system, lowered the cost of insurance.
---------------------------------------------------------------------------
    \102\Testimony of Harvey Rosenfeld, Before the House Comm. on 
Energy and Commerce, Feb. 10, 2003; see also Joseph B. Treaster, 
Malpractice Insurance: No Clear or Easy Answers, N.Y. Times, Mar. 5, 
2003.
    \103\Id.
    \104\Id.
---------------------------------------------------------------------------

  E. H.R. 5 WILL HAVE NO SUBSTANTIAL EFFECT ON ``DEFENSIVE MEDICINE''

    Supporters of H.R. 5 frequently invoke ``the waste in our 
health care system caused by so-called `defensive 
medicine.'''\105\ Defensive medicine occurs, they argue, ``when 
doctors are forced by the threat of lawsuits to conduct tests 
and prescribe drugs that aren't medically required.''\106\ The 
majority's briefing memo for the markup of H.R. 5 cites to a 
``survey from Emergency Physicians Monthly'' as proof that 
``the HEALTH Act's limits on non-economic damages are essential 
to reducing defensive medicine,'' mostly because ``non-economic 
caps are . . . physicians''' preferred choice of malpractice 
reform.'''\107\ Although doctors certainly have financial 
incentives to prefer damage caps, there is little evidence that 
the practice of defensive medicine exists, and even less to 
suggest that H.R. 5 would reduce its frequency.
---------------------------------------------------------------------------
    \105\Markup of H.R. 5, The Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2011 and the Committee's Oversight 
Plan, 112th Cong., Feb. 9, 2011 (statement of Rep. Lamar Smith, 
Chairman, House Comm. ont he Judiciary).
    \106\ Id.
    \107\ Memorandum from Lamar Smith, Chairman, House Comm. on the 
Judiciary, to Members of the Committee (Feb. 4, 2011) at 2 (on file 
with author).
---------------------------------------------------------------------------
    A landmark study by the non-partisan Office of Technology 
Assessment found that ``[c]onventional tort reforms that tinker 
with the existing process for resolving malpractice claims 
while retaining the personal liability of the physician are 
[unlikely to] alter physician behavior.''\108\ Most defensive 
medicine studies since have failed to demonstrate any real 
impact on medical practice arising from higher malpractice 
premiums.\109\
---------------------------------------------------------------------------
    \108\ U.S. Congress, Office of Technology Assessment, supra note 
42, at 92.
    \109\ Michelle M. Mello & Troyen A. Brennan, Deterrence of Medical 
Errors: Theory and Evidence for Malpractice Reform, 80 Tex. L. Rev. 
1595 (2002).
---------------------------------------------------------------------------
    The reality is that much of ``defensive medicine'' results, 
not from threat of litigation, but from financial incentives to 
order unnecessary tests and procedures. In a fee-for-service 
health care system, health care providers benefit fmancially by 
providing additional services.\110\ The GAO has criticized the 
use of ``self-serving'' defensive medicine surveys--such as the 
one highlighted by the majority in its briefing memo--citing to 
low response rates and unscientific questioning, and concluding 
that ``so-called defensive medicine may be motivated less by 
liability concerns than by the income it generates for 
physicians or by positive (albeit small) benefits to 
patients.''\111\
---------------------------------------------------------------------------
    \110\ Id.
    \111\ U.S. General Accounting Office, Analysis of Medical 
Malpractice: Implications of Rising Premiums on Access to Health Care, 
GA0-03-836 (Aug. 29, 2003).
---------------------------------------------------------------------------
    A June 1, 2009, article in New Yorker magazine framed the 
issue in more direct terms. Why had the cost of health care 
risen so high in McAllen, Texas?

          ``It's malpractice,'' a family physician who had 
        practiced here for thirty-three years said. ``McAllen 
        is legal hell,'' the cardiologist agreed. Doctors order 
        unnecessary tests just to protect themselves, he said. 
        Everyone thought the lawyers here were worse than 
        elsewhere.
          That explanation puzzled me. Several years ago, Texas 
        passed a tough malpractice law that capped pain-and-
        suffering awards at two hundred and fifty thousand 
        dollars. Didn't lawsuits go down? ``Practically to 
        zero,'' the cardiologist admitted.
          ``Come on,'' the general surgeon finally said. ``We 
        all know these arguments are bullshit. There is 
        overutilization here, pure and simple.'' Doctors, he 
        said, were racking up charges with extra tests, 
        services, and procedures.''\112\
---------------------------------------------------------------------------
    \112\Atul Gawande, The Cost Conundrum: What a Texas Town Can Teach 
Us About Health Care, New Yorker, June 1, 2009.

    Additional studies have shown that doctors' fear of 
lawsuits is ``out of proportion to the risk of being sued,'' 
that damage caps have little impact on these perceptions, and 
that many doctors will, wittingly or unwittingly, ``exaggerate 
their concern about being sued, using it as a justification for 
high-spending behavior that is rewarded by fee-for-service 
payment systems.''\113\
---------------------------------------------------------------------------
    \113\ David Katz, Physicians Still Fear Malpractice Lawsuits, 
Despite Tort Reforms, Health Affairs, Sept. 2010, Vol. 29, Issue 9 
available at http://content.healthaffairs.org/content/29/9.toc.
---------------------------------------------------------------------------
    That type of overstatement was evident in the Committee's 
January hearing on medical liability reform, where one 
Republican witness testified that ``the cost of the practice of 
defensive medicine [is estimated] to be between $70 billion and 
$126 billion per year.''\114\ When pressed by Rep. Scott, 
however, Dr. Hoven had difficulty justifying her claim:
---------------------------------------------------------------------------
    \114\Medical Liability Reform--Cutting Costs, Spurring Investment, 
Creating Jobs, Hearing Before the H. Comm. on the Judiciary, 112th 
Cong., Jan. 20, 2011 (unofficial transcript) (testimony of Dr. Ardis 
Hoven, Chair, Board of Trustees of the American Medical Association).

          Mr. SCOTT. And are you suggesting that $70 billion to 
        $126 billion worth of cases, services were rendered 
        that were not medically necessary, were not needed?
          Dr. HOVEN. That is not what I said, Congressman.
          Mr. SCOTT. Well, what are you saying?
          Dr. HOVEN. I am saying that health care delivered in 
        the examining room, in the operating room, is driven by 
        what is based on clinical judgment and based on 
        assurance testing, which is documentation and proving 
        that, in fact, that is what is wrong with a patient.
          When we talk about cost control in this country, we 
        are talking about the fact that--and this goes to the 
        whole issue of cost containment, which is, if, in fact, 
        you would recognize my medical judgment and allow me to 
        decide when it is important to do a test or not, then 
        our patients would be better served.
          Mr. SCOTT. By not providing the services?
          Dr. HOVEN. If, in my judgment, they don't need it.
          Mr. SCOTT. And you are not able to--and you charge 
        for services that, in your judgment, are not needed to 
        the tune of $70 billion to $126 billion?
          Dr. HOVEN. I do not do that.\115\
---------------------------------------------------------------------------
    \115\Id.

    Supporters of H.R. 5 can speak about defensive medicine in 
the abstract, but their expert on the phenomenon was unwilling 
or unable to discuss specifics.
    A nonpartisan analysis confirms that the changes proposed 
by H.R. 5 will have a negligible impact on the behavior of 
physicians. The CBO has not found significant evidence that 
``defensive medicine'' exists as a pervasive problem, and 
projects a scant 0.3 percent savings ``from slightly less 
utilization of health care services'' if H.R. 5 were to be 
enacted.\116\ Once again, supporters of H.R. 5 point to a 
crisis that does not exist, and propose legislation that would 
not solve the problem if it did.
---------------------------------------------------------------------------
    \116\U.S. Congressional Budget Office, Analysis of the Effects of 
Proposals to Limit Costs Related to Medical Malpractice (``Tort 
Reform''), Letter to the Hon. Orrin G. Hatch, Oct. 9, 2009, available 
at http://www.cbo.gov/doccfm?index=10641 [hereinafter CBO Letter].
---------------------------------------------------------------------------

F. H.R. 5 WILL NOT HAVE A SIGNIFICANT IMPACT ON THE COST OF HEALTH CARE 
                         OR ON FEDERAL SPENDING

    Although supporters of H.R. 5 argue that limits on medical 
malpractice liability will help lower the cost of health care, 
they have targeted a minuscule segment of annual health care 
spending. According to the National Association of Insurance 
Commissioners, medical malpractice premiums totaled 
approximately $11.2 billion in 2008.\117\ The overall cost of 
health care that year totaled $2.6 trillion.\118\ In practice, 
H.R. 5 purports to impact health care spending by taking aim at 
0.004 percent of the annual health care budget.
---------------------------------------------------------------------------
    \117\ NAIC, Countrywide Summary of Medical Malpractice Insurance, 
Calendar Years 1991-2008 (Sept. 1, 2009).
    \118\CBO Letter, supra note 116.
---------------------------------------------------------------------------
    Proponents of H.R. 5 also mention the possibility of 
federal budget savings, citing to a 2009 CBO study that 
concludes a proposal like H.R. 5 would result in a $54 billion 
in budget savings over ten years\119\ and a 2012 CBO review of 
H.R. 5 as it was considered on the House floor.\120\ Their use 
of these CBO reports are troubling for several reasons. First, 
it is ironic that the same House Republicans who casually 
dismissed $230 billion in savings identified by the CB) in the 
Affordable Care Act now apply such importance to asserted 
savings from H.R. 5. Second, $13 billion of the savings 
identified by the CBO has nothing to do with federal spending; 
rather, it results from the increased taxes health 
professionals will pay if H.R. 5 is enacted.\121\
---------------------------------------------------------------------------
    \119\ Id.
    \120\U.S. Congressional Budget Office, ``Cost Estimate for H.R. 5 
as ordered Reported by the House Committee on the Judiciary on February 
16, 2011,'' March 10, 2011, available at http://cbo.gov/flpdocs/120xx/
doc12095/hr5.pdf.
    \121\ CBO letter, supra note 116.
---------------------------------------------------------------------------
    Third, at least one provision of H.R. 5 is projected to 
increase costs. The CBO concluded that ``reform of joint-and-
several liability rules .  .  . is likely to increase the 
financial liability of the providers assigned the greatest 
share of responsibility in malpractice cases--typically 
physicians.''\122\ Fourth, ``because many states have already 
implemented some of the changes in the package, a significant 
fraction of the potential cost savings has already been 
realized.''\123\
---------------------------------------------------------------------------
    \122\Id.
    \123\Id.
---------------------------------------------------------------------------
    Finally, supporters of H.R. 5 miss the narrow scope of the 
CBO analysis. CBO only concerns itself with the immediate 
effects of this legislation on the federal budget. It does not 
account for the full social and financial cost of enacting H.R. 
5. The CBO admits as much: ``There is less evidence about the 
effects of tort reform on people's health, however, than about 
the effects health care spending--because many studies of 
malpractice costs do not examine health outcomes.''\124\
---------------------------------------------------------------------------
    \124\Id.
---------------------------------------------------------------------------
    In the long term, victims of malpractice who are injured 
but denied full restitution require additional support from 
Medicare, Medicaid, and other government programs. Moreover, 
the CBO letter acknowledges that, if the changes contemplated 
in H.R. 5 are enacted, the U.S. morality rate will increase by 
as much as 0.2%.\125\ That constitutes an additional 4,853 
Americans killed every year, or 48,250 Americans over the ten-
year period CBO examines.\126\ In our judgment, that is too 
high a price to pay for this legislation. H.R. 5 leaves the 
families of these patients without full recourse, and leans on 
the federal government to make up much of the difference.
---------------------------------------------------------------------------
    \125\CBO letter, supra note 116.
    \126\Based on 2,436,264 annual deaths, according to the Center for 
Disease Control and Prevention. Centers for Disease Control, supra note 
63.
---------------------------------------------------------------------------

               IV. States' Rights and Federalism Concerns

    The majority has sent decidedly mixed messages with respect 
to states' rights. In the first markup of the bill, supporters 
of H.R. 5 argued that ``bringing a medical liability lawsuit is 
an activity that substantially affects interstate commerce. 
There is no federalism concern with this legislation.''\127\ 
This claim did not sit well with many members of the 
majority.\128\ Notably, six members of the majority did not 
support H.R. 5 when it was on the House floor: Reps. Chaffetz 
and Marino did not vote; Reps. King and Sensenbrenner voted 
``present''; Reps. Gohmert and Poe voted ``no.''
---------------------------------------------------------------------------
    \127\Markup of H.R. 5, The Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2011 and the Committee's Oversight 
Plan, 112th Cong., Feb. 9, 2011 (statement of Rep. Lamar Smith, 
Chairman, House Comm. on the Judiciary).
    \128\``I got problems with that. I think it's a violation of the 
Tenth Amendment, and I don't believe the Federal Government has any 
more authority to regulate health care under the Commerce Clause than 
it does to regulate liability caps in states under the Commerce 
Clause.'' Id. (statement of Rep. Ted Poe, Member, House Comm. on the 
Judiciary).
---------------------------------------------------------------------------
    Proponents of H.R. 5 conceded at least the existence of a 
states' rights problem, promising to work on an amendment to 
address the issue prior to debate on the House floor.\129\ No 
such amendment was ever shared with the Democratic members of 
the committee, and none was introduced on the House floor. In 
fact, in both 2011 and 2012, the majority voted down amendments 
that would have addressed this issue directly.
---------------------------------------------------------------------------
    \129\``I want to reassure the gentleman from Georgia and the 
gentleman from North Carolina, and particularly two gentlemen from 
Texas on my side, that we are actively working on an amendment for the 
House floor that would empower States to have control over what aspect 
of this law would apply to the States or whether the law would apply to 
those States at all.'' Continued Consideration of H.R. 5, The Help 
Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 
and the Committee's Oversight Plan, 112th Cong., Feb. 16, 2011 
(statement of Rep. Lamar Smith, Chairman, House Comm. on the 
Judiciary).
---------------------------------------------------------------------------
    Simply put, H.R. 5 is a direct attack on states' rights. 
The Congressional Research Service has concluded that the bill 
preempts the law in all fifty states. Its so-called ``state 
flexibility'' provision does almost nothing to mitigate serious 
federalism concerns.

A. THE STATES SET THE RULES FOR THEIR OWN COURT SYSTEMS, AND FEDERALISM 
                   PERMITS DIVERSE SYSTEMS TO COEXIST

    Historically, the states have been allowed to set their own 
rules for their own court systems. The two litigants in a 
medical malpractice case are usually an in-state plaintiff and 
an in-state physician.\130\ Except in limited circumstances, 
malpractice cases can only be filed in state court.\131\ Even 
when malpractice cases can be filed in federal court, those 
courts apply state malpractice law.
---------------------------------------------------------------------------
    \130\See Michael I. Krauss & Robert A. Levy, supra note 6.
    \131\Medical malpractice cases filed in federal court are based on 
diversity jurisdiction; e.g., where the parties reside in different 
states.
---------------------------------------------------------------------------
    All fifty states have considered some changes to their tort 
systems, and different states have adopted different approaches 
to the issue of medical malpractice liability. The National 
Conference of State Legislatures (NCSL), a bipartisan 
organization representing the elected legislators and 
professional staffs of all fifty state legislatures, maintains 
that ``American federalism contemplates diversity among the 
states in establishing these rules.''\132\
---------------------------------------------------------------------------
    \132\CSL Policy, supra note 7.
---------------------------------------------------------------------------
    All fifty states have statutes of limitations in place with 
respect to negligence cases.\133\ All fifty states have rules 
of evidence to provide for the full and fair adjudication of 
lawsuits.\134\ Some states--Colorado, Florida, Illinois, 
Maryland, Michigan, Texas, and West Virginia, among others--
have already enacted medical malpractice damage caps of their 
own.\135\ Other states--including Arizona, Connecticut, Iowa, 
Kentucky, New York, Oregon, Tennessee, and Wyoming--have 
expressly chosen not to limit medical malpractice damages, in 
some instances by amendment to the state constitution or 
popular referendum.\136\ Federalism allows each state to choose 
the rules for medical malpractice cases that best fit the 
particular needs of its citizens, and permits diverse systems 
to flourish and to coexist.
---------------------------------------------------------------------------
    \133\Id.
    \134\Id.
    \135\Colo. Rev. Stat. Sec. 12-64-302; Fla. Stat. Sec. Sec. 766.118 
and 768.73; 735 Ill. Comp. Stat. Sec. 5/2-1115; Md. Code, Cts. & Jud. 
Proc 3-2A-09; Mich. Comp. Laws Sec. 600.1483; Tex. Civ. Proc. & Rem. 
Code Sec. 74.301; W. Va. Code Sec. 55.7B.8.
    \136\See, e.g., Ariz. Const., Art. 2, sec. 31. ``No law shall be 
enacted in this state limiting the amount of damages to be recovered 
for causing the death or injury of any person.'' Id. See also Ark. 
Const. Art. 5, sec. 32; Ky. Const. Sec. 54; Penn. Const., Art. III, 
sec. 18.
---------------------------------------------------------------------------

            B. H.R. 5 PREEMPTS STATE LAW IN ALL FIFTY STATES

    H.R. 5 overturns this entire federalist approach to medical 
malpractice liability reform to impose a uniform set of rules 
on the states. No state is immune.\137\ No state has adopted 
the bill's precise regime of $250,000 caps on noneconomic 
damages, $250,000 caps on punitive damages, elimination of 
joint-and-several liability, and a three-year limited statute 
of limitations.\138\ Moreover, no state has attempted to 
capture every action 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,''\139\ 
in a law to reform ``medical malpractice'' liability.
---------------------------------------------------------------------------
    \137\U.S. Congressional Research Service, Medical Malpractice 
Liability Reform: Legal Issues and Fifty-State Survey of Caps on 
Punitive Damages and Noneconomic Damages, RL31692 (Jan. 18, 2006).
    \138\Id.
    \139\HEALTH Act, 112th Cong. Sec. 7(7).
---------------------------------------------------------------------------
    The National Conference of State Legislatures categorically 
rejects the ``one-size-fits-all approach to medical malpractice 
envisioned in H.R. 5'' and has reached the ``resounding 
bipartisan conclusion'' that ``federal medical malpractice 
legislation is unnecessary.''\140\ In a letter to the Chairman 
and Ranking Member of the Judiciary Committee, NCSL argues 
further that its opposition to H.R. 5 ``will extend to any bill 
or amendment that directly or indirectly preempts any state law 
governing the awarding of damages by mandatory, uniform amounts 
or the awarding of attorney's fees.''\141\
---------------------------------------------------------------------------
    \140\Letter from Nevada Assemblyman William Horne, Chair, NCSL, and 
Texas Rep. Jerry Madden, Immediate Past Chair, NCSL, to Rep. Lamar 
Smith and Rep. John Conyers, Feb. 16, 2011. See also Letter from South 
Dakota Sen. Joni Cutler, Co-Chair, NCSL Committee on Law and Criminal 
Justice, and Mississippi Rep. Tommy Reynolds, Co-Chair, NCSL Committee 
on law and Criminal Justice, to Speaker John Boehner and Minority 
Leader Nancy Pelosi, March 14, 2012.
    \141\Id.
---------------------------------------------------------------------------
    With two limited exceptions, H.R. 5 explicitly preempts the 
states in every area of law it reaches--statutes of limitation, 
attorney's fees, rules of evidence, suits against 
pharmaceutical and device manufacturers, and caps on punitive 
damages.\142\
---------------------------------------------------------------------------
    \142\HEALTH Act, 112th Cong. Sec. 9(a).
---------------------------------------------------------------------------
    The first exception exists solely to further disadvantage 
victims of medical malpractice. H.R. 5 does not preempt any law 
``that imposes greater procedural or substantive protections 
for healthcare providers and healthcare organizations.''\143\ 
In effect, any state law that goes further than H.R. 5 to favor 
defendants--e.g., a law that provides for shorter statutes of 
limitation, imposes lower caps on punitive damages, or removes 
consumer protections in instances of fraud\144\ or 
bribery\145\--stays on the books.
---------------------------------------------------------------------------
    \143\Id. Sec. 9(b)(2).
    \144\Id. Sec. 5(c)(4).
    \145\Id.
---------------------------------------------------------------------------
    The second exception to general preemption--the ``State 
Flexibility'' provision--is, at best, misnamed. Any state law 
that ``specifies a particular monetary amount of compensatory 
or punitive damages'' avoids preemption by the $250,000 cap on 
noneconomic damages imposed by H.R. 5.\146\ This provision 
allows existing monetary caps on medical liability damages to 
stand. But it also forces states without the full range of 
damage caps contemplated by H.R. 5 to adopt a specific scheme. 
For example:
---------------------------------------------------------------------------
    \146\Id. 9(c).
---------------------------------------------------------------------------
          Arizona. The Arizona state constitution explicitly 
        prohibits any statutory limit on the amount of damages 
        recoverable by a plaintiff in a medical malpractice 
        suit.\147\ H.R. 5 would preempt the state constitution 
        and force Arizona to adopt a $250,000 cap on 
        noneconomic damages in all health care lawsuits. H.R. 5 
        also preempts similar provisions in the state 
        constitutions of Arkansas, Kentucky, and Pennsylvania.
---------------------------------------------------------------------------
    \147\Ariz. Const., Art. 2, sec. 31.
---------------------------------------------------------------------------
          Connecticut. Connecticut imposes several procedural 
        requirements on medical malpractice litigants, but does 
        not include caps on damages.\148\ H.R. 5 would preempt 
        state law and force Connecticut to adopt a $250,000 cap 
        on noneconomic damages in all health care lawsuits.
---------------------------------------------------------------------------
    \148\Conn. Gen. Stat. Sec. Sec. 51-251c and 52-584.2.
---------------------------------------------------------------------------
          California. California caps only noneconomic damages 
        for medical malpractice claims involving licensed 
        medical professionals.\149\ Under H.R. 5, it would be 
        forced to cap damages on cases involving nursing homes, 
        pharmaceutical companies, and the insurance industry.
---------------------------------------------------------------------------
    \149\Cal. Civ. Code Sec. 3333.2.
---------------------------------------------------------------------------
          Indiana. Indiana caps total compensatory damages at 
        $1,250,000 overall and $250,000 per health care 
        provider, with no limit for wrongful death claims.\150\ 
        Under H.R. 5, it would be forced to cap damages in 
        wrongful death suits, as well as in cases involving 
        nursing homes, pharmaceutical manufacturers, and 
        insurance companies.
---------------------------------------------------------------------------
    \150\Ind. Code Sec. 34-18-4-3.
---------------------------------------------------------------------------
          Texas. Texas caps noneconomic damages in cases 
        involving medical professionals and health care 
        institutions, but not in cases involving the drug and 
        device industry.\151\ Under H.R. 5, it would be forced 
        adopt a $250,000 cap in such cases.
---------------------------------------------------------------------------
    \151\Tex. Civ. Proc. & Rem. Code Sec. 74.301.

    In sum, no state will go unaffected by the H.R. 5. The 
``state flexibility'' provision provides for very little actual 
flexibility.

   C. THE MAJORITY SENDS MIXED MESSAGES ON STATES' RIGHTS AND H.R. 5

    The federal government has an important role to play in 
controlling the costs of health care. Supporters of H.R. 5 have 
invoked a broad ``effect on interstate commerce'' as 
constitutional justification for the bill.\152\ Specifically, 
they find that ``the health care insurance industries affecting 
interstate commerce and the health care liability litigation 
systems existing throughout the United States are activities 
that affect interstate commerce by contributing to the high 
costs of health care.''\153\ Because the health care and 
insurance industries have a massive impact on the national 
economy, Congress has the authority and reason to act where the 
individual states are unable to address the issue separately.
---------------------------------------------------------------------------
    \152\Help Efficient, Accessible, Low-cost, Timely Healthcare 
(HEALTH) Act of 2011, H.R. 5, 112th Cong. (2011) (as considered in the 
H. Comm. on the Judiciary on Feb. 9, 2011; the findings section was 
struck in the version considered this year), Sec. 2(a)(2).
    \153\Id.
---------------------------------------------------------------------------
    For the past two years, supporters of H.R. 5 have argued 
precisely the opposite with respect to the Affordable Care 
Act.\154\
---------------------------------------------------------------------------
    \154\See, e.g., Rep. Lamar Smith, Updated Health Care Frequently 
Asked Questions (FAQ) available at http://lamarsmith.house.gov/Issues/
Issue/?IssueID=13970 (``I co-sponsored legislation that increases 
funding for state-based programs providing health insurance to 
individuals unable to obtain affordable insurance from private 
insurers. This bill passed by Congress is a massive overreach of 
government control.'').
---------------------------------------------------------------------------
    In fact, the majority has argued both sides of the states' 
rights question on the same day. On the morning of February 16, 
2011, in a full committee hearing on ``The Constitutionality of 
the Patient Individual Mandate,'' Republican members described 
the Affordable Care Act as a massive overreach of the federal 
government and a clear violation of the Tenth Amendment.\155\ 
Chairman Smith argued further that ``if the individual mandate 
is upheld'' by the Supreme Court, ``it would be the end of 
federalism.\156\ Later that afternoon, in the continued markup 
of H.R. 5, Republican members of the committee voted twice--by 
party line both times--to reject amendments to the bill that 
would have allowed existing state laws to stand.\157\
---------------------------------------------------------------------------
    \155\``I think that [the Affordable Care Act] expanded the Commerce 
Clause beyond the intentions of the Founding Fathers and the concepts 
that we basically hold today. . . . [I]f Obamacare is upheld as 
constitutional . . . then what could be constrained by the Commerce 
Clause?'' The Constitutionality of the Patient Individual Mandate: 
Hearing Before the H. Comm. on the Judiciary, 112th Cong. (Feb. 16, 
2011) (statement of Rep. Steve King, member, H. Comm. on the 
Judiciary).
    \156\Id. (statement of Rep. Lamar Smith, chairman, H. Comm. on the 
Judiciary).
    \157\Continued Consideration of H.R. 5, The Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 and the 
Committee's Oversight Plan, 112th Cong., Feb. 16, 2011. Amendments 
introduced by Rep. Hank Johnson would have struck preemption language 
in H.R. 5 and permitted existing state medical malpractice liability 
laws (or, in the alternative, relevant provisions of state 
constitutions) to remain in effect. At least two members of the 
majority were ``noticeably absent from the room'' when these amendments 
were rejected. Brett Coughlin, House Judiciary Approves Tort Reform, 
Politico, Feb. 16, 2011 available at 
http://www.politico.cominews/stories/0211/49703.html.
---------------------------------------------------------------------------
    The majority's position on states' rights took an even 
stranger turn when the committee considered an amendment to 
``repair certain provisions in the McCarran-Ferguson Act which 
currently exempt medical malpractice insurers from Federal 
antitrust laws.''\158\ In opposition to the amendment, the 
majority argued:
---------------------------------------------------------------------------
    \158\Continued Consideration of H.R. 5, The Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 and the 
Committee's Oversight Plan, 112th Cong., Feb. 16, 2011 (statement of 
Rep. Maxine Waters, member, H. Comm. on the Judiciary).

          Under our current system, Mr. Chairman, State 
        regulation of health insurance, State regulators have 
        authority to prevent rates that are excessive, 
        inadequate, or unfairly discriminatory . . . . By 
        letting Department of Justice and FTC second guess 
        State insurance regulator's competition policies, this 
        amendment would disrupt subtle law in nearly every 
        State in the Union.\159\
---------------------------------------------------------------------------
    \159\Id. (statement of Rep. Trent Franks, member, H. Comm. on the 
Judiciary).

    The majority opposed this amendment because it would have 
preempted state law. To summarize: the majority was in favor of 
states' rights in the morning and opposed to states' rights in 
the afternoon--except while debating this amendment, when the 
majority favored states' rights again.
    To their credit, some members of the majority have made 
public comments pointing out this inconsistency.\160\ Others 
are content to repeat the fiction that H.R. 5 ``specifically 
exempts state laws and does not change what states have already 
adopted.''\161\
---------------------------------------------------------------------------
    \160\Comparing the Affordable Care Act to H.R. 5, Rep. Ted Poe 
remarked: ``to be consistent, they're both not covered under the 
Interstate Commerce [Clause]. I don't think the Constitution gives the 
Federal government any authority in either one of those areas.'' Markup 
of H.R. 5, The Help Efficient, Accessible, Low-cost, Timely Healthcare 
(HEALTH) Act of 2011 and the Committee's Oversight Plan, 112th Cong., 
Feb. 9, 2011 (statement of Rep. Ted Poe, member, H. Comm. on the 
Judiciary). Notably, Rep. Poe voted against final passage of H.R. 5 on 
the House floor on March 22, 2012.
    \161\Id. (statement of Rep. Lamar Smith, Chairman, H. Comm. on the 
Judiciary).
---------------------------------------------------------------------------

               V. Specific Concerns with the Legislation

    H.R. 5 imposes new restrictions on medical malpractice 
cases. It applies these restrictions across the board--no 
matter how much merit a case may have, regardless of the 
negligence at issue or the severity of the injury. The 
provisions of H.R. 5 are unjust and unfair. The following are 
just a few of the most pressing problems with the bill.

       A. THE $250,000 CAP ON NONECONOMIC DAMAGES IS UNFAIR AND 
                            DISCRIMINATORY.

    The $250,000 cap on noneconomic damages is manifestly 
unfair. It discriminates against women, children, and other 
vulnerable members of society and does account for the effects 
of inflation. The bill's sweeping definition of ``health care 
lawsuit'' gives the cap a particularly insidious reach.
    H.R. 5 imposes an arbitrarily low cap on noneconomic 
damages in every case, regardless of the negligence or the 
extent of injury involved. This one-size-fits-all approach 
objectifies patients and gives the courts little room to 
restore any loss that does not come with a price tag. The cap 
does nothing but stop the most severely injured patients from 
receiving adequate compensation.\162\ It is patently unfair.
---------------------------------------------------------------------------
    \162\A survey by the RAND Corporation found that the ``most 
significant impact'' of California's $250,000 cap ``falls on patients 
and families who are severely injured or killed as a result of medical 
negligence or mistakes.'' ConstunerWatchDog.com, RAND Study: California 
Patients Killed or Maimed by Malpractice Lose Most Under Damage Caps, 
http://www.consumerwatchdog.org/newsrelease/rand-study-california-
patients-killed-or-maimed-malpractice-lose-most-under-damage-caps.
---------------------------------------------------------------------------
    Some malpractice cases clearly call for damages that exceed 
$250,000. At a forum hosted by Democratic members in 2003, 
Kathy Olsen described her son's injuries.\163\ When Steve Olsen 
was two-years-old, he fell on a stick in the woods. His 
infection was severe enough that the Olsens asked for a CAT 
scan, but Steve's doctor administered a steroid injection and 
sent him home without further treatment. The next day, Steve 
returned to the hospital in a coma, permanently blind and brain 
damaged from a growing brain abscess. At trial, a jury 
concluded that the doctor had committed malpractice. Given the 
magnitude of the injury--Steve had no lost wages, but he would 
never play sports, work, or enjoy normal relationships with his 
peers--the jury awarded the Olsens $7.1 million in 
``noneconomic'' damages. Because the case was subject to 
California's medical malpractice cap, the judge was forced to 
reduce the award to $250,000.
---------------------------------------------------------------------------
    \163\Democratic Forum on Malpractice, Feb. 11, 2003, Transcript at 
60.
---------------------------------------------------------------------------
    Mrs. Olsen testified: ``California's malpractice law has 
failed innocent patients, consumers, and taxpayers. Under this 
law people are victimized twice, once by the wrongdoer and 
again by the laws that deny them the right to hold the 
wrongdoer accountable.''\164\ As to the cap on damages, Mrs. 
Olsen observed that the ``law is regressive by hurting the most 
seriously injured victims, those who are permanently and 
catastrophically injured by medical negligence. . . . In 
California, and now proposed nationwide, no matter how old you 
are or how disabled you become or how catastrophic your 
injuries are, there is a one size fits all limit on your pain 
and suffering.''\165\
---------------------------------------------------------------------------
    \164\Id. at 62.
    \165\Id.
---------------------------------------------------------------------------
    The $250,000 cap is a particular burden on women, children, 
seniors, and the poor. Proportionally, these patients have more 
trouble demonstrating lost wages and other economic losses. 
Studies of medical malpractice cases show that women recover 
economic damages in lower amounts because they receive lower 
overall wages.\166\ Women are three times more likely than men 
to receive noneconomic damages.\167\ Women are far more likely 
to suffer severe noneconomic loss (e.g., loss of fertility or 
disfigurement) or to be a victim of the type of conduct that 
leads to punitive damages (e.g., sexual assault, fraud, false 
imprisonment, and extreme violation of medical standards).\168\ 
With the cap on noneconomic damages in place, a woman without a 
salary is limited to $250,000 to compensate for these injuries.
---------------------------------------------------------------------------
    \166\See Thomas Koenig & Michael Rustad, His and Her Tort Reform: 
Gender Injustice in Disguise, 70 Wash. L. Rev. 1 (1995).
    \167\Id. at 84.
    \168\Id.
---------------------------------------------------------------------------
    These effects are more than theoretical. After undergoing a 
double mastectomy, Linda McDougal was told that she had never 
had breast cancer--a pathologist had mixed up her charts with 
those of another patient.\169\ Although she recovered $8,000 in 
lost wages and $48,000 in medical bills, her actual losses were 
profound:
---------------------------------------------------------------------------
    \169\Democratic Forum on Malpractice, February 11, 2003, Transcript 
at 48.

          My scars are not only physical, but emotional as well 
        . . . . My disfigurement from medical negligence is 
        almost entirely noneconomic . . . . I could never have 
        predicted or imagined in my worst nightmare that I 
        would end up having both of my breasts removed 
        needlessly because of a medical error. No one plans on 
        being a victim of medical malpractice, but it 
        happened.\170\
---------------------------------------------------------------------------
    \170\Id. at 50-51.

    The cap on non-economic damages puts a price tag on the 
worst types of physical and psychological trauma. Under H.R. 5, 
Mrs. McDougal would be entitled to $250,000 for her permanent 
disfigurement, nothing more.
    On May 29, 2010, Connie Spears went to a San Antonio 
hospital reporting excruciating leg pain. Mrs. Spears had 
experienced blood clots before, so frequently and some so 
severe that doctors had installed a filter in one of her 
heart's main veins. In the San Antonio emergency room, however, 
the doctor on call diagnosed Mrs. Spears with ``bilateral leg 
pain'' and told her to follow up with her primary care 
physician. Three days later, in immense pain and with her legs 
a burgundy color, Spears called 911 and was transported by 
ambulance to a different hospital. This time, doctors 
determined that the 54-year-old's vein filter was severely 
clotted and had led to tissue death in her legs and kidney 
failure. When Mrs. Spears regained consciousness weeks later, 
she learned that doctors had amputated both of her legs to save 
her life.\171\ ```Do you know what it's like not to have any 
legs?' Mrs. Spears asked tearfully, trembling as she lifted her 
dress to reveal the thick pink scars stretched like pillow 
seams across her thighs. `It's ruined all of our lives.'''\172\ 
Under H.R. 5, Mrs. Spears would be limited to $250,000 as 
compensation for the trauma of losing her legs.
---------------------------------------------------------------------------
    \171\Emily Ramshaw, State's Tort Reform Makes Lawyers Wary of 
Taking on Patients, N.Y. Times, Dec. 19, 2010, at A39.
    \172\Id.
---------------------------------------------------------------------------
    The $250,000 cap in H.R. 5 is pegged to the amount adopted 
by California in 1975, at a time when noneconomic damages 
rarely exceeded $250,000. More than thirty years later, 
inflation has taken its to11.\173\ Translated into 2011 
dollars, the $250,000 cap imposed in 1975 is worth about 
$61,000 today. If adjusted to reflect inflation in medical care 
value, the cap would be worth almost $2 million today.
---------------------------------------------------------------------------
    \173\See U.S. Congressional Research Service, Medical Malpractice 
Liability Reform: Legal Issues and 50-State Surveys on Tort Reform 
Proposals, R41661 (March 28, 2011).
---------------------------------------------------------------------------
    Many states have adopted some form of cap on medical 
malpractice damages, but no state has capped damages in all 
``health care lawsuits,'' as H.R. 5 defines the term.\174\ H.R. 
5 reaches all suits ``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.''\175\ The bill is an 
unprecedented experiment in limiting the rights of patients as 
they face insurance companies, HMOs, pharmaceutical and device 
manufacturers, and other entities that have nothing to do with 
traditional medical malpractice.
---------------------------------------------------------------------------
    \174\Id.
    \175\HEALTH Act, 112th Cong. Sec. 7(7).
---------------------------------------------------------------------------
    Because of the uncertain interaction between the bill's 
definition of ``economic damages'' and existing state law, caps 
on noneconomic damages have a particularly harmful effect on 
children. In the 2011 markup, Rep. Debbie Wasserman Schultz 
offered an amendment to exempt minors from the $250,000 cap on 
noneconomic damages. She reasoned: ``the basis of the amendment 
is just common sense. Children don't work. Like women and the 
elderly who tend to be in lower wage jobs, children are even 
more disproportionately impacted by these noneconomic 
damage.''\176\ In response, supporters of H.R. 5 argued that 
``the reality is that the economic damages accrue to the 
parents, and the parents certainly have the right to sue on 
behalf of economic damages in a limitless capacity.''\177\ 
Although the majority was unable to name a single malpractice 
case in which parents recovered economic damages on behalf of 
an injured child, they defeated the amendment along party 
lines.\178\
---------------------------------------------------------------------------
    \176\Continued Consideration of H.R. 5, The Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 and the 
Committee's Oversight Plan, 112th Cong., Feb. 16, 2011 (statement of 
Rep. Debbie Wasserman Schultz, member, H. Comm. on the Judiciary).
    \177\Id. (statement of Rep. Trent Franks, member, H. Comm. on the 
Judiciary).
    \178\Rep. Jackson-Lee offered these amendments again on April 17, 
2012. They were again defeated on party lines. Full Committee Markup 
of: Committee Print of Material to be Transmitted to the Committee on 
the Budget Pursuant to Section 201 of H. Con. Res. 112, 112th Cong. 
April 17, 2012.
---------------------------------------------------------------------------
    H.R. 5 defines ``economic damages'' as ``objectively 
verifiable monetary losses . . . such as past and future 
medical expense, loss of past and future earnings, cost of 
obtaining domestic services, loss of employment, and loss of 
business or employment opportunities.''\179\ On its face, this 
provision appears to be of limited use to children, who do not 
work, and the elderly, who may not have significant future 
earnings.
---------------------------------------------------------------------------
    \179\HEALTH Act, 112th Cong. Sec. 7(6).
---------------------------------------------------------------------------
    These limits on recovery have real consequences. In 2008, 
17-year-old Olivia Cull was in the process of finishing her 
senior year at the Archer School for Girls, where she was an 
accomplished scholar, actress, and musician. She had been 
accepted early into Smith College and planned to major in 
Classical Studies and Ancient Arts and Languages. That year, 
Olivia underwent a routine cardiac catheterization to assess a 
congenital heart condition. The procedure was without incident, 
but later, while Olivia was still under general anesthesia, a 
cardiology fellow-in-training pulled the catheter lines and 
caused Olivia's heart rate, pulse, and blood pressure to drop 
rapidly. Basic cardiopulmonary resuscitation was not started 
for more than ten minutes. Olivia suffered severe and extensive 
brain damage, never regained consciousness, and died on January 
20, 2009.\180\ It is difficult to put a price tag on the loss 
caused to Olivia's parents, but it cannot be measured by 
``objectively verifiable monetary losses'' and should not be 
capped at $250,000.
---------------------------------------------------------------------------
    \180\American Ass'n for Justice, The Real Victims of HR. 5 (Feb. 
2011).
---------------------------------------------------------------------------

   B. THE ABOLITION OF JOINT AND SEVERAL LIABILITY CREATES AN UNFAIR 
                STANDARD FOR THE PATIENT (SECTION 3(D))

    Joint and several liability has been part of American 
common law for centuries.\181\ The doctrine provides that all 
tortfeasors who are responsible for an injury are ``jointly and 
severally'' liable for the claimant's damages. A patient can 
sue all responsible defendants and recover from each one in 
proportion to degree of fault, or sue any one defendant and 
recover the total amount of damages. A defendant who pays more 
than his or her share is then entitled, under the doctrine of 
contribution, to seek compensation from other responsible 
parties based on their degree of fault.\182\ The doctrine is 
designed to ensure that patients of wrongful conduct are able 
to fully recover damages for their injuries, especially when 
one or more of the defendants is insolvent.
---------------------------------------------------------------------------
    \181\See, e.g., Michael L. Rustad & Thomas H. Koenig, Taming the 
Tort Monster: The American Civil Justice System As A Battleground of 
Social Theory, 68 BROOK L. REV. 1 (Fall 2002); Matthew W. Light, Who's 
the Boss?: Statutory Damage Caps, Courts, and State Constitutional Law, 
58 Wash. & Lee L. Rev. 315 (Winter, 2001).
    \182\Restatement (Third) of Torts Sec. 23 (1999).
---------------------------------------------------------------------------
    H.R. 5 replaces this doctrine with its so-called ``Fair 
Share'' rule, which provides: ``each party shall be liable for 
that party's share of any damages only and not for the share of 
any other person. . . . A separate judgment shall be rendered 
against each party for the amount allocated to such 
party.''\183\ In practice, H.R. 5 would require a patient to 
demonstrate each defendant's proportional responsibility for an 
injury.
---------------------------------------------------------------------------
    \183\ HEALTH Act, 112th Cong. Sec. 3(d).
---------------------------------------------------------------------------
    This burden is unfair. Plaintiffs would be required to 
bring a separate case against each defendant, ``each requiring 
a fmding of duty of care, a breach of that duty, proximate 
cause, fmding damages, and a determination of what part of 
total damages are attributed to which malpractice. Each case 
requires an expert witness, depositions, and the full expense 
of complicated litigation.''\184\ The rule is also unnecessary. 
As Rep. Scott argued in the 2011 markup: ``Health care 
providers already can agree, in advance, how to apportion 
responsibility and they provide insurance and all pay premiums 
and set fees for services accordingly.''\185\ Although H.R. 5 
is based on California's medical malpractice law, not even 
California eliminates joint and several liability for economic 
damages. The CBO notes that this particular proposal will 
actually increase the overall cost of health care.\186\
---------------------------------------------------------------------------
    \184\Continued Consideration of H.R. 5, The Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 and the 
Committee's Oversight Plan, 112th Cong., Feb. 16, 2011 (statement of 
Rep. Robert Scott, member, H. Comm. on the Judiciary).
    \185\Id.
    \186\CBO letter, supra note 116. http://
www.cbo.govicloc.cfm?index=10641.
---------------------------------------------------------------------------
    Rather than engage in debate on the facts, supporters of 
H.R. 5 turned to a tired anecdote to support this provision:
    Say a drug dealer staggers into an emergency room with a 
gunshot wound after a deal dealing drugs goes bad. The surgeon 
works on him, does the best he possibly can, but it is not 
perfect, and drug dealer sues him. The jury finds the drug 
dealer 99 percent responsible for his own injuries. But it also 
fmds the hospital 1 percent responsible because the physician 
was fatigued after working too long. But today, the hospital 
can be made to pay 100 percent of the damages because the drug 
dealer is without means.\187\
---------------------------------------------------------------------------
    \187\Continued Consideration of H.R. 5, The Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 and the 
Committee's Oversight Plan, 112th Cong., Feb. 16, 2011 (statement of 
Rep. Trent Franks, member, H. Comm. on the Judiciary).
---------------------------------------------------------------------------
    First, this story is borrowed from past debates. It has 
been used by the majority to defend this proposal nearly every 
time H.R. 5 has been considered by the committee.\188\ Second, 
its premise is factually incorrect. All fifty states have 
adopted some form of contributory negligence or comparative 
negligence standard that bars plaintiffs from recovering for 
damages for which they are substantially responsible.\189\ Even 
if the ``drug dealer'' could somehow bring a colorable 
malpractice claim against the ``hospital,'' he would not be 
entitled to recover damages if he were ``99 percent'' 
responsible. Third, it goes to show how little consideration 
has been given to the effect of preempting state law in all 
fifty states. Supporters of H.R. 5 appear to be unaware of how 
state law applies in instances of joint and several liability, 
let alone prepared for the unintended consequences of wiping 
out centuries of jurisprudence in the United States.
---------------------------------------------------------------------------
    \188\See, e.g., Markup of Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2002, 107th Cong. (statement of Rep. 
Bachus, member, H. Comm. on the Judiciary).
    \189\See, e.g., Board of County Comm 'r of Garret County v. Bell 
Atlantic, 695 A.2d 171 (Md. 1997) (outlining a standard of pure 
contributory negligence in Maryland); Liv v. Yellow Cab, 119 Cal. Rptr. 
858 (1975) (outlining a standard of pure comparative fault in 
California); 0.C.G.A. Sec. 51-11-7 (codifying a 50 percent bar rule in 
Georgia); and Tex. Civ. Prac. & Rem. Code Sec. Sec. 33.001-33.017 
(codifying a 51 percent bar rule in Texas).
---------------------------------------------------------------------------

   C. PUNITIVE DAMAGES CAPS PROTECT THE MOST EGREGIOUS INSTANCES OF 
                  MALPRACTICE (SECTIONS 5(A) AND (B))

    The bill's limits on punitive damages are problematic for 
two reasons. First, the heightened standard is practically 
impossible for patients to prove. Second, the $250,000 cap is 
inadequate in cases extreme enough to warrant punitive damages.
    Under H.R. 5, punitive damages are only available if a 
plaintiff can prove by ``clear and convincing evidence'' that a 
defendant ``acted with malicious intent to injure the 
claimant'' or ``deliberately failed to avoid unnecessary 
injury'' that he or she was ``substantially certain'' the 
patient would suffer.\190\ Because proving state of mind in 
this manner is virtually impossible, perpetrators of the most 
extreme forms of malpractice will now go unpunished.
---------------------------------------------------------------------------
    \190\HEALTH Act, 112th Cong. Sec. 5(a).
---------------------------------------------------------------------------
    Even if a patient is somehow able to show malicious intent, 
recovery of punitive damages is limited at $250,000 or two 
times the amount of economic damages awarded.\191\ This cap 
eliminates much of the deterrent effect of punitive damages--
$250,000 for grossly negligent conduct would merely be the 
price of doing business for many hospitals, pharmaceutical 
manufacturers, insurance companies, and other wealthy health 
care providers. Worse, the cap applies in the most outrageous 
instances of medical malpractice, including cases involving 
drug abuse, alcohol abuse, and sexual assault.\192\ Under H.R. 
5, the patients in this case--children, some as young as three 
months old, with no economic damages to prove--would be 
entitled seek no more than $250,000 in punitive damages.
---------------------------------------------------------------------------
    \191\Id. Sec. 5(b)(2).
    \192\Public Citizen found that ``47.7% of doctors [found to have 
been disciplined for sexual abuse or misconduct by a disciplinary 
board] were allowed to continue practicing, their behavior probably 
unknown to most if not all of their patients.'' Sidney Wolfe et al., 
20,125 Questionable Doctors (2000).
---------------------------------------------------------------------------

D. SHIELDING DRUG AND DEVICE MANUFACTURERS FROM PUNITIVE DAMAGES PLACES 
                 CONSUMERS AT GRAVE RISK (SECTION 5(C))

    H.R. 5 provides blanket immunity from punitive damages to 
the manufacturers of drugs and devices that have been approved 
by the Federal Drug Administration.\193\ This provision alone 
would be troubling enough. Simply because a product has been 
approved by the FDA does not mean that a company should be 
immunized from punitive liability when that product causes 
sever harm to a consumer. Medical devices cause approximately 
53 deaths and more than 1,000 serious injuries every year, with 
a cost of more than $26 billion annually.\194\ Government 
safety standards, at their best, establish only a minimum level 
of protection for the public. At their worst, they are 
outdated, under-protective, and under-enforced.
---------------------------------------------------------------------------
    \193\HEALTH Act, 112th Cong. Sec. 5(c)(1)(A)(i).
    \194\See Robert Cohen & J. Scott Orr, Faulty Medical Implants Enter 
Market Through Flawed System, Newhouse News Service, 2002.
---------------------------------------------------------------------------
    Moreover, the bill completely insulates manufacturers and 
distributors of drugs and devices from defects arising during 
the manufacturing process, which occurs after the FDA has given 
its approval of the device. This means that a drug company 
distributing an FDA-approved product that is manufactured in a 
flawed manner and harms consumers would be insulated from 
punitive damages, even if the flawed manufacture was 
intentional or reckless.
    H.R. 5 goes even further, extending this immunity to 
manufacturers and distributors of drugs and devices that are 
``generally recognized among qualified experts as safe and 
effective,'' whether or not FDA approval has been sought.\195\ 
In these cases, so long as a defendant can find an expert 
witness to vouch for its product, federal safety standards are 
sidestepped altogether. Unless the defendant company has 
withheld or misrepresented information from the FDA or 
attempted to bribe an FDA officia1,\196\ punitive damages are 
not available, no matter how flagrant the harm.
---------------------------------------------------------------------------
    \195\HEALTH Act, 112th Cong. Sec. 7(c)(1)(A)(ii).
    \196\Id. Sec. 7(c)(4).
---------------------------------------------------------------------------

   E. LIMITS ON CONTINGENCY FEES DENY PATIENTS ACCESS TO THE JUSTICE 
                                 SYSTEM

    Contingency fee arrangements--where attorneys forgo 
immediate payment in exchange for a share of the damages if a 
plaintiff prevails in court--serve a useful and essential 
function in the legal system.\197\ Because contingency fee 
agreements require little or no money up front, injured 
plaintiffs who could not otherwise afford legal representation 
have access to counsel. And because attorneys who take losing 
cases are paid little or nothing for their efforts, contingency 
fees also serve as a screening mechanism for ``frivolous'' 
cases.\198\ Lawyers will not incur the risk of taking a 
contingency fee case with little merit.
---------------------------------------------------------------------------
    \197\See Herbert M. Kritzer, Lawyer Fees and Lawyer Behavior in 
Litigation: What does the Empirical Literature Really Say?, 80 TEX. L. 
REV. 1943 (2002); and Herbert M. Kritzer, Economic Policy Litigation 
Conference Seven Dogged Myths Concerning Contingency Fees, 80 WASH. 
U.L.Q. 739 (Fall 2002).
    \198\Id.
---------------------------------------------------------------------------
    In an unusual position for the traditionally free-market 
majority, supporters of H.R. 5 prefer that state and federal 
courts to step into attorney-client agreements and ``supervise 
the arrangements for payment of damages.''\199\ The bill 
requires that all contingency fee arrangements adhere to a 
specific formula: ``(1) Forty percent of the first $500,000 
recovered by the claimant(s). (2) Thirty-three percent and one-
third percent of the next $500,000 recovered by the 
claimant(s). (3) Twenty-five percent of the next $500,000 
recovered by the claimant(s). (4) Fifteen percent of the next 
$500,000 recovered by the claimant.''\200\
---------------------------------------------------------------------------
    \199\HEALTH Act, 112th Cong. Sec. 4.
    \200\Id.
---------------------------------------------------------------------------
    This provision purports to limit conflict of interest ``in 
any health care lawsuit in which the attorney for a party 
claims a financial stake in the outcome,''\201\ but the 
contingency fees formula will have the effect of making it more 
difficult for poor patients to secure legal representation in 
medical malpractice cases. Although the stated purpose of this 
bill is curb the costs of lawsuits and lower insurance 
premiums, contingency fees do not change the size of a jury 
award or an insurance company's obligation to pay damages on 
behalf of a health care provider. Moreover, the one-sided 
formula does nothing to limit conflicts of interest on the 
other side of the case. Defense counsels are paid by the hour 
and have direct financial incentive to engage in unnecessary 
litigation and drive up costs. The bill's stated concern about 
legal ethics notwithstanding, this proposal is a naked attempt 
to prevent plaintiffs from accessing the courts.
---------------------------------------------------------------------------
    \201\Id.
---------------------------------------------------------------------------

   F. PERIODIC PAYMENTS SHIFT THE RISKS OF BANKRUPTCY TO INDIVIDUAL 
                                PATIENTS

    If H.R. 5 passes, courts will no longer have discretion in 
structuring payment of damages over time. At the request of a 
defendant found to have committed malpractice, ``the court 
shall . . . enter a judgment ordering that future damages be 
paid by periodic payments.''\202\ As with the other defendant-
friendly provisions of this bill, this requirement harms 
patients and protects proven bad actors.
---------------------------------------------------------------------------
    \202\Id. Sec. 6(a) (emphasis added).
---------------------------------------------------------------------------
    Periodic payment plans allow a negligent party to stall 
while the patient assumes the risk. The defendant (or the 
defendant's insurance company) can invest and earn interest on 
compensation owed to the patient. If a defendant files for 
bankruptcy--or simply refuses to pay--it is the patient's 
responsibility to retain counsel and press the matter in court. 
There may be instances where a court, in its discretion, finds 
good reason to structure payment of damages over time. H.R. 5 
removes that discretion, however, and the one-sidedness of this 
provision is unjustifiable.

G. A STRICT STATUTE OF LIMITATIONS DENIES PATIENTS A CHANCE TO BE HEARD 
                                IN COURT

    H.R. 5 requires that a health care lawsuit commence ``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.''\203\ The bill provides an oddly limited exception for 
minors under the age of six.\204\
---------------------------------------------------------------------------
    \203\ Id. Sec. 2.
    \204\``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 six years shall be commenced within 3 
years of manifestation of injury or prior to the minor's 8th 
birthday.'' Id.
---------------------------------------------------------------------------
    In most cases, this three-year statute of limitations is, 
in effect, a one-year statute of limitations in disguise. 
Because most patients will discover an injury when it manifests 
itself, the one-year statute of limitations will begin to run 
immediately. In other cases, the three-year statute of 
limitations alone cuts off patients from bringing legitimate 
claims--particularly in cases that involve diseases with long 
latency periods. For example, a child infected with HIV from a 
tainted blood infusion may manifest symptoms long before a 
diagnosis is sought. If the child is at least six and more than 
three years have passed since the symptoms first began to 
manifest, H.R. 5 cuts off all legal recourse. These patients 
deserve their day in court.

                              CONCLUSION 

    Collectively, the ``reforms'' proposed by H.R. 5 would 
limit a patient's ability to recover compensation for damages 
caused by medical negligence, defective products, and 
irresponsible insurance practices. In addition to raising core 
issues of fairness, H.R. 5 preempts the law in all fifty 
states, with little regard for the consequences. This 
legislation was designed more than twenty years ago to resolve 
an insurance ``crisis,'' but all available evidence shows that 
the insurance market is not in crisis today. H.R. 5 does not 
make insurance more available, does not cut spending to any 
appreciable degree, and does not address issues of access to 
justice or patient safety. Because H.R. 5 solves few problems 
facing Americans and exacerbates many real ones, we believe 
that Congress should reject this bill.

                                   John Conyers, Jr.
                                   Howard Berman.
                                   Jerrold Nadler.
                                   Robert C. Scott.
                                   Melvin L. Watt.
                                   Sheila Jackson-Lee.
                                   Maxine Waters.
                                   Steve Cohen.
                                   Henry C. ``Hank'' Johnson.
                                   Mike Quigley.
                                   Ted Deutch.
                                   Jared Polis.
       TITLE V--THE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
 Chairman, Committee on the Budget,
Washington, DC.
    Dear Chairman Ryan: On behalf of the Committee on Oversight 
and Government Reform, I am transmitting the recommendations 
required by section 201 of H. Con. Res. 112, the Concurrent 
Resolution on the Budget for Fiscal Year 2013.
            Sincerely,
                                              Darrell Issa,
                                                          Chairman.
    Enclosure.
         TITLE V--COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

        Summary of the Major Policy Decisions in the Legislation

    The President's National Commission on Fiscal 
Responsibility and Reform (Simpson-Bowles) found that federal 
civilian employee pensions were out of line with pension 
benefits available to the average private sector worker. It 
therefore recommended that Congress change the federal employee 
pension system to bring it more in line with private sector 
practice. Simpson-Bowles recommended that the employee and his 
employing agency make equal contributions toward pension costs. 
In his Plan for Economic Growth and Deficit Reduction: Living 
Within Our Means and his FY2013 Budget, the President called on 
federal employees to contribute an additional percentage of 
salary toward their defined benefit pension, and proposed 
eliminating the FERS minimum supplement for new hires not 
subject to mandatory retirement.
    Building on these recommendations, Title V increases 
federal employees' contribution to their defined benefit 
pension by 5 percent of salary over five years. Members of 
Congress and their staff enrolled in the Civil Service 
Retirement System (CSRS) will pay an additional 8.5 percent of 
salary over five years. Members of Congress enrolled in the 
Federal Employee Retirement System (FERS) will pay an 
additional 8.5 percent of salary, and congressional employees 
will pay an additional 7.5 percent of salary over five years. 
For new hires in the executive branch, the employee 
contribution rate is set at 5.8 percent; 6.3 percent for 
special occupational groups such as law enforcement. At the end 
of the phase in period, the contribution rate for existing FERS 
employees will equal the contribution rate for new hires. The 
increased contributions bring the employee contribution rate to 
approximately 50 percent of the normal pension cost, and will 
help reduce the CSRS shortfall covered by the taxpayer.
    Under current law federal employees receive a special 
benefit not available to those in the private sector. Federal 
employees who voluntarily early retire before age 62 receive a 
special benefit on top of their retirement until they reach 
Social Security retirement age. Consistent with the President's 
FY2013 Budget, the legislation eliminates the FERS supplemental 
payment for federal employees and Members of Congress entering 
service after December 31, 2012 who voluntarily retire before 
age 62.
    To better align federal employee benefits with the private 
sector, the legislation allows retiring federal employees to 
deposit lump-sum payments for unused annual leave into their 
Thrift Savings Plan accounts. These contributions would be 
subject to the existing Internal Revenue Service (IRS) annual 
contribution limits. In September 2009, the IRS issued 
regulations allowing employees to deposit any cash payment they 
received from their employer for accumulated leave into their 
401(k) plans.

                           Section-by-Section

Section 501. Retirement contributions
    Section 501(a) increases the employee contribution to the 
Civil Service Retirement System (CSRS) by 5 percent of salary 
over five years, beginning in calendar year 2013. In 2013, CSRS 
employees will pay 8.5 percent of salary, an increase of 1.5 
percent over the current contribution rate. CSRS employees will 
pay an additional 0.5 percent in 2014, and it will increase by 
an additional 1 percent each year, for calendar years 2015-
2017.
    Section 501(b) increases the employee contribution to the 
Federal Employee Retirement System (FERS) by 5 percent of 
salary over five years, beginning in calendar year 2013. In 
2013, FERS employees will pay 2.3 percent of salary, an 
increase of 1.5 percent over the current contribution rate. 
FERS employees will pay an additional 0.5 percent in 2014, and 
an additional 1 percent in calendar years 2015-2017.
    Members of Congress will pay an additional 8.5 percent of 
salary over five years. CSRS congressional employees will 
contribute an additional 8.5 percent of salary over five years, 
and FERS congressional employees will contribute an additional 
7.5 percent of salary over five years. The rate increases for 
Members of Congress and congressional employees reflect the 
higher normal pension cost for these occupational groups.
    Section 501(b) also revises the employee contribution rate 
for federal employees and Members of Congress entering service 
after December 31, 2012, who have less than 5 years of 
creditable service for retirement purposes. The employee 
contribution rate will equal 5.8 percent for most federal 
employees and 6.3 percent for special occupational groups such 
as law enforcement (who receive a more generous defined benefit 
pension).
Section 502. Annuity supplement
    Section 502 eliminates the supplemental payment to FERS 
employees hired on or after January 1, 2013 who voluntarily 
retire before the age of eligibility for social security. 
Individuals subject to mandatory retirement include law 
enforcement officers, fire fighters, air traffic controllers, 
and nuclear materials couriers. These special occupational 
groups will remain eligible for the FERS minimum supplement.
Section 503. Contributions to Thrift Savings Fund of Payments for 
        Accrued or Accumulated Leave
    Section 503 allows retiring federal employees and Members 
of Congress to deposit any lump-sum payment for unused annual 
leave into their Thrift Savings Plan account.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of Rule XIII and clause 
(2)(b)(1) of Rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

                            Committee Votes

    The following votes occurred during the consideration of 
the committee print:
    1. Mr. Chaffetz and Mr. Lynch offered an amendment to the 
committee print to allow retiring federal employees and Members 
of Congress to deposit payments for accrued and annual leave in 
their Thrift Savings Plan accounts. The amendment was agreed to 
by voice vote.
    2. The committee print, as amended, was ordered transmitted 
to the Budget Committee, a quorum being present, by a recorded 
vote of 19 Ayes to 15 Nays.
    Ayes: Issa, Burton, Turner, Chaffetz, Mack, Walberg, 
Lankford, Amash, Buerkle, Gosar, Labrador, Meehan, DesJarlais, 
Walsh, Gowdy, Ross, Guinta, Farenthold, Kelly.
    Nays: Cummings, Towns, Norton, Kucinich, Tierney, Clay, 
Lynch, Cooper, Connolly, Quigley, Davis, Welch, Yarmuth, 
Murphy, Speier.

                           Performance Goals

    In accordance with clause 3(c)(4) of Rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                  Congressional Budget Office Estimate

                                                    April 27, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the reconciliation 
recommendations of the House Committee on Oversight and 
Government Reform.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Amber G. 
Marcellino, who can be reached at 226-2880.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.
Reconciliation Recommendations of the House Committee on Oversight and 
        Government Reform
    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of this process, the House 
Committee on Oversight and Government Reform was instructed to 
recommend changes to current law that would reduce the deficit 
by $78.9 billion for fiscal years 2012 through 2022.
    The proposal by the House Committee on Oversight and 
Government Reform would make several changes to the current 
federal employee retirement program. Specifically, the 
legislation would increase the percentage of salary that 
federal employees in the Civil Service Retirement System (CSRS) 
and Federal Employees Retirement System (FERS) are required to 
pay towards their retirement and eliminate the FERS retirement 
supplement that would be paid under current law to certain 
future retirees under the age of 62. The proposal also would 
allow federal employees to contribute to their Thrift Savings 
Plan (TSP) accounts any payment received at retirement for 
accumulated and accrued annual leave.
    CBO and the staff of the Joint Committee on Taxation (JCT) 
estimate that this proposal would have no impact in 2012, and 
would reduce deficits by $2.3 billion in 2013 and by $83.3 
billion over the 2013-2022 period. Those estimates are relative 
to CBO's March baseline projections and assume enactment on or 
near October 1, 2012. The reduction is achieved mostly through 
an increase in estimated revenues--$2.4 billion in 2013 and 
$87.8 billion over the 10-year period--partially offset by 
higher direct spending ($0.2 billion in 2013 and nearly $4.5 
billion over the 2013-2022 period). The estimate of budgetary 
effects would be the same whether enactment is assumed to occur 
by July 1, 2012, or around October 1, 2012, because the 
retirement proposals would not take effect until January 1, 
2013, while the TSP proposal would not take effect until one 
year after enactment.
    The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA) and would impose no costs on state, local or tribal 
governments.
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of the proposal is shown in the following 
table. The costs of this legislation fall within nearly all 
functions of the budget.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      By fiscal year, in millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                              2012-      2012-
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022       2017       2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      CHANGES IN REVENUESa

Estimated Revenues...............................          0      2,426      4,505      6,625      8,633     10,514     10,671     10,849     11,009     11,212     11,350     32,704     87,794

                                                                              CHANGES IN ON-BUDGET DIRECT SPENDING

Estimated Budget Authority.......................          0        313        565        800        998      1,161      1,117      1,077      1,030        987        938      3,838      8,987
Estimated Outlays................................          0        313        565        800        998      1,161      1,117      1,077      1,030        987        938      3,838      8,987

                                                                              CHANGES IN OFF-BUDGET DIRECT SPENDING

Estimated Budget Authority.......................          0       -157       -283       -400       -499       -581       -559       -539       -515       -494       -469     -1,919     -4,493
Estimated Outlays................................          0       -157       -283       -400       -499       -581       -559       -539       -515       -494       -469     -1,919     -4,493

                                                    NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND RECEIPTS

Impact on Deficits...............................          0     -2,269     -4,223     -6,225     -8,134     -9,933    -10,112    -10,310    -10,494    -10,718    -10,881    -30,785    -83,301

                                                                          CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level....................          0     -1,887     -3,633     -5,439     -7,191     -8,882     -9,149     -9,446     -9,722    -10,026    -10,265    -27,032    -75,641
Estimated Outlays................................          0     -1,887     -3,633     -5,439     -7,191     -8,882     -9,149     -9,446     -9,722    -10,026    -10,265    -27,032    -75,641
Memorandum:
    Reduction in Offsetting Receipts Resulting             0      1,887      3,633      5,439      7,191      8,882      9,149      9,446      9,722     10,026     10,265     27,032    75,641
     from Lower Employer Contributionsb..........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office and the staff of the Joint Committee on Taxation.
Note: The estimate of budgetary effects in the table above would apply whether the enactment date is assumed to be July 1, 2012, or around October 1, 2012.
a For revenues, positive numbers indicate a decrease in the deficit.
b Employer contributions are intragovernmental transactions that do not affect the deficit; positive numbers indicate a decrease in such intragovernmental receipts. The receipts shown in the
  memorandum result from federal employer contributions financed by future appropriations; such receipts are not considered to be an offset to direct spending because they are contingent on
  future appropriations.

    Basis of Estimate: CBO estimates that the proposal would 
increase revenues by nearly $88 billion over the 10-year period 
because of changes to the retirement contribution rates for 
federal employees ($88 billion), offset slightly by lower 
revenues ($355 million) from a proposal to allow employees to 
contribute any payment received for accumulated and accrued 
annual leave to their TSP accounts.
    Proposed reductions in the rates that the U.S. Postal 
Service pays into the Civil Service Retirement and Disability 
Fund (CSRDF) on behalf of its employees subject to FERS would 
increase direct spending by a net of roughly $4 billion over 
the 2013-2022 period, CBO estimates. That increase results from 
additional on-budget outlays of nearly $9 billion (because of 
fewer receipts into the CSRDF), partially offset by more than 
$4 billion in off-budget savings (because of lower Postal 
Service agency contributions).
    Similar reductions in the rates that agencies other than 
the Postal Service would pay into the CSRDF on behalf of their 
FERS employees would reduce spending subject to appropriation 
by $76 billion over the 2013-2022 period, CBO estimates. Those 
lower payments from agencies would also reduce the amount of 
offsetting receipts received by the CSRDF; together, those 
changes would offset each other.

Changes in employee and agency contributions

    The proposal would increase the required contribution rates 
paid by federal employees and Members of Congress (in both CSRS 
and FERS), phased in over five years, beginning in January 
2013. Under current law, most CSRS employees contribute 7 
percent of their salary towards retirement, and most FERS 
employees contribute 0.8 percent.
    The proposed annual increases in employee contribution 
rates would be as follows:

----------------------------------------------------------------------------------------------------------------
                                                                       2013     2014     2015     2016     2017
----------------------------------------------------------------------------------------------------------------
CSRS...............................................................     1.5%     0.5%     1.0%     1.0%     1.0%
CSRS Members of Congress...........................................     2.5%     1.5%     1.5%     1.5%     1.5%
CSRS Congressional staff...........................................     2.5%     1.5%     1.5%     1.5%     1.5%

FERS...............................................................     1.5%     0.5%     1.0%     1.0%     1.0%
FERS Members of Congress...........................................     2.5%     1.5%     1.5%     1.5%     1.5%
FERS Congressional staff...........................................     1.5%     1.5%     1.5%     1.5%     1.5%
----------------------------------------------------------------------------------------------------------------

    By the end of the phase-in period, most CSRS employees 
would contribute 12 percent of salary, and most FERS employees 
would contribute 5.8 percent. (Employees hired on January 1, 
2013, or later with less than five years of federal service 
would immediately begin contributing at a rate of 5.8 percent.) 
The rate paid by Members of Congress in CSRS would increase 
from 8.0 percent to 16.5 percent, while the rate paid by 
Members of Congress in FERS would increase from 1.3 percent to 
9.8 percent.
    Contributions by federal employees for their retirement are 
shown as revenues to the federal government; CBO estimates that 
the proposed increase in the contribution rates would boost 
revenues by $88 billion over the 2013-2022 period.
    Federal agencies are also required to make contributions 
toward their employees' retirement. For each of the proposed 
rate increases for FERS employees and Members described above, 
the proposal would make a corresponding reduction in the rate 
required to be paid by the employing agencies. (Rate reductions 
are not proposed for CSRS; agencies would continue to pay the 
rate in current law on behalf of their CSRS employees.) 
Reducing the employer contribution rates for FERS employees in 
agencies other than the Postal Service would lower spending 
subject to appropriation by $76 billion over the 2013-2022 
period, CBO estimates. Such a reduction in employer retirement 
payments would lower the intragovernmental offsetting receipts 
of the CSRDF by an equal amount, but because that budgetary 
action is contingent on future appropriations, the drop in 
offsetting receipts is not considered an offset to direct 
spending.
    Under the legislation, the total amount of retirement 
contributions (employee plus agency shares) paid into the CSRDF 
for FERS employees would remain the same as under current law. 
That is, the legislation would replace some of the payments by 
agencies with payments by federal employees. Budgetary savings 
would be attributed to the proposal because of the different 
budgetary classification of the employee share (revenues) 
versus the agency share (an intragovernmental transfer subject 
to future appropriation action).
    CBO estimates that reducing the Postal Service's 
contribution rate for its employees subject to FERS would lower 
its required payments by nearly $9 billion over the 2013-2022 
period. However, CBO expects that lower retirement expenses 
would lead the agency to modify its ongoing efforts under 
current law to reduce spending by doing so less aggressively; 
CBO estimates that the resulting increase in Postal Service 
outlays over the 10-year period would be about half of the 
total estimated reduction in retirement payments. Because the 
activities of the Postal Service are considered mandatory 
spending and classified as off-budget, such outlay reductions 
would result in a total savings of more than $4 billion in off-
budget direct spending. In addition, reducing the payments made 
by the Postal Service on behalf of their FERS employees would 
result in correspondingly fewer receipts to the CSRDF, which 
CBO estimates would increase on-budget direct spending by 
nearly $9 billion over the 2013-2022 period.

Eliminate the FERS annuity supplement

    Under current law, certain FERS employees who retire before 
the age of 62 receive a supplement to their annuity that is 
intended to equal what they would receive from the Social 
Security Administration if they were eligible for Social 
Security benefits at the time of retirement. The supplement 
ends when the retiree turns 62 or becomes eligible to receive 
actual Social Security benefits. The proposal would eliminate 
that supplement for all FERS employees other than law 
enforcement officers, fire fighters, air traffic controllers 
and nuclear materials couriers who enter into federal service 
after December 31, 2012. That provision would have no impact 
over the next 10 years (employees hired in 2013 or later would 
not be eligible to receive the supplement under current law 
until at least 2033), but would reduce direct spending in later 
years.

Leave payout contributions to the Thrift Savings Plan

    The legislation would allow any employee of the federal 
government who is eligible to make contributions to the TSP to 
contribute to it any payment received for accumulated and 
accrued annual leave. Such contributions would be subject to 
the annual limits that otherwise apply--annual contributions 
are currently limited to $17,000 for individuals ages 49 or 
younger and $22,500 for individuals ages 50 or older.
    Because income taxes are deferred on contributions to 
regular (non-Roth) TSP accounts, and earnings within the 
accounts would not be taxable, the anticipated increase in 
contributions would initially result in lower revenues from 
income taxes. JCT estimates that the legislation would reduce 
revenues by $355 million over the 2013-2022 period.
    Intergovernmental and private-sector impact: The 
legislation contains no intergovernmental or private-sector 
mandates as defined in UMRA and would impose no costs on state, 
local, or tribal governments.
    Estimate prepared by: Federal costs: Amber G. Marcellino; 
Impact on state, local, and tribal governments: Elizabeth Cove 
Delisle; Impact on the private sector: Paige Piper/Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *


PART III--EMPLOYEES

           *       *       *       *       *       *       *


SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *


CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *


SUBCHAPTER III--CIVIL SERVICE RETIREMENT

           *       *       *       *       *       *       *


Sec. 8334. Deductions, contributions, and deposits

  (a)(1)(A) * * *
  (B)(i) [Except as provided in clause (ii),] Except as 
provided in clause (ii) or (iii), an equal amount shall be 
contributed from the appropriation or fund used to pay the 
employee or, in the case of an elected official, from an 
appropriation or fund available for payment of other salaries 
of the same office or establishment. When an employee in the 
legislative branch is paid by the Chief Administrative Officer 
of the House of Representatives, the Chief Administrative 
Officer may pay from the applicable accounts of the House of 
Representatives the contribution that otherwise would be 
contributed from the appropriation or fund used to pay the 
employee.

           *       *       *       *       *       *       *

  (iii) The amount to be contributed under clause (i) shall, 
with respect to a period in any year beginning after December 
31, 2012, be equal to--
          (I) the amount which would otherwise apply under 
        clause (i) with respect to such period, reduced by
          (II) the amount by which, with respect to such 
        period, the withholding under subparagraph (A) exceeds 
        the amount which would otherwise have been withheld 
        from the basic pay of the employee or elected official 
        involved under subparagraph (A) based on the percentage 
        applicable under subsection (c) for calendar year 2012.

           *       *       *       *       *       *       *

  [(c) Each] (c)(1) Each employee or Member credited with 
civilian service after July 31, 1920, for which retirement 
deductions or deposits have not been made, may deposit with 
interest an amount equal to the following percentages of his 
basic pay received for that service:


------------------------------------------------------------------------
                           Percentage of basic pay     Service period
------------------------------------------------------------------------
Employee                   2 1/2                    August 1, 1920, to
                                                     June 30, 1926.
                           3 1/2                    July 1, 1926, to
                                                     June 30, 1942.
                           5                        July 1, 1942, to
                                                     June 30, 1948.
                           6                        July 1, 1948, to
                                                     October 31, 1956.
                           6 1/2                    November 1, 1956, to
                                                     December 31, 1969.
                           7                        January 1, 1970, to
                                                     December 31, 1998.
                           7.25                     January 1, 1999, to
                                                     December 31, 1999.
                           7.4                      January 1, 2000, to
                                                     December 31, 2000.
                           7                        After December 31,
                                                     2000.
      *         *         *         *         *         *         *
------------------------------------------------------------------------

  (2) Notwithstanding any other provision of this subsection, 
the applicable percentage of basic pay under this subsection 
shall--
          (A) except as provided in subparagraph (B) or (C), 
        for purposes of computing an amount--
                  (i) for a period in calendar year 2013, be 
                equal to the applicable percentage under this 
                subsection for calendar year 2012, plus an 
                additional 1.5 percentage points;
                  (ii) for a period in calendar year 2014, be 
                equal to the applicable percentage under this 
                subsection for calendar year 2013 (as 
                determined under clause (i)), plus an 
                additional 0.5 percentage point;
                  (iii) for a period in calendar year 2015, 
                2016, or 2017, be equal to the applicable 
                percentage under this subsection for the 
                preceding calendar year (as determined under 
                clause (ii) or this clause, as the case may 
                be), plus an additional 1.0 percentage point; 
                and
                  (iv) for a period in any calendar year after 
                2017, be equal to the applicable percentage 
                under this subsection for calendar year 2017 
                (as determined under clause (iii));
          (B) for purposes of computing an amount with respect 
        to a Member for Member service--
                  (i) for a period in calendar year 2013, be 
                equal to the applicable percentage under this 
                subsection for calendar year 2012, plus an 
                additional 2.5 percentage points;
                  (ii) for a period in calendar year 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this subsection for the 
                preceding calendar year (as determined under 
                clause (i) or this clause, as the case may be), 
                plus an additional 1.5 percentage points; and
                  (iii) for a period in any calendar year after 
                2017, be equal to the applicable percentage 
                under this subsection for calendar year 2017 
                (as determined under clause (ii)); and
          (C) for purposes of computing an amount with respect 
        to a Member or employee for Congressional employee 
        service--
                  (i) for a period in calendar year 2013, be 
                equal to the applicable percentage under this 
                subsection for calendar year 2012, plus an 
                additional 2.5 percentage points;
                  (ii) for a period in calendar year 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this subsection for the 
                preceding calendar year (as determined under 
                clause (i) or this clause, as the case may be), 
                plus an additional 1.5 percentage points; and
                  (iii) for a period in any calendar year after 
                2017, be equal to the applicable percentage 
                under this subsection for calendar year 2017 
                (as determined under clause (ii)).

           *       *       *       *       *       *       *


Sec. 8351. Participation in the Thrift Savings Plan

  (a) * * *
  (b)(1) * * *
  [(2)(A) An employee or Member may contribute to the Thrift 
Savings Fund in any pay period any amount not exceeding the 
maximum percentage of such employee's or Member's basic pay for 
such pay period allowable under subparagraph (B).
  [(B) The maximum percentage allowable under this subparagraph 
shall be determined in accordance with the following table:


------------------------------------------------------------------------
    [In the case of a pay period       The maximum percentage allowable
     beginning in fiscal year:                       is:
------------------------------------------------------------------------
2001                                 6
2002                                 7
2003                                 8
2004                                 9
2005                                 10
2006 or thereafter                   100.]
------------------------------------------------------------------------

  (2)(A) An employee or Member may contribute to the Thrift 
Savings Fund in any pay period any amount of such employee's or 
Member's basic pay for such pay period, and may contribute (by 
direct transfer to the Fund) any part of any payment that the 
employee or Member receives for accumulated and accrued annual 
or vacation leave under section 5551 or 5552. Notwithstanding 
section 2105(e), in this paragraph the term ``employee'' 
includes an employee of the United States Postal Service or of 
the Postal Regulatory Commission.
  [(C)] (B) Notwithstanding any limitation under this 
paragraph, an eligible participant (as defined by section 
414(v) of the Internal Revenue Code of 1986) may make such 
additional contributions to the Thrift Savings Fund as are 
permitted by such section 414(v) and regulations of the 
Executive Director consistent therewith.

           *       *       *       *       *       *       *


CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *


SUBCHAPTER II--BASIC ANNUITY

           *       *       *       *       *       *       *


Sec. 8421. Annuity supplement

  (a)(1) Subject to [paragraph (3)] paragraphs (3) and (4), an 
individual shall, if and while entitled to an annuity under 
subsection (a), (b), (d), or (e) of section 8412, or under 
section 8414(c), also be entitled to an annuity supplement 
under this section.
  (2) Subject to [paragraph (3)] paragraphs (3) and (4), an 
individual shall, if and while entitled to an annuity under 
section 8412(f), or under subsection (a) or (b) of section 
8414, also be entitled to an annuity supplement under this 
section if such individual is at least the applicable minimum 
retirement age under section 8412(h).

           *       *       *       *       *       *       *

  (4)(A) Except as provided in subparagraph (B), no annuity 
supplement under this section shall be payable in the case of 
an individual who first becomes subject to this chapter after 
December 31, 2012.
  (B) Nothing in this paragraph applies in the case of an 
individual separating under subsection (d) or (e) of section 
8412.

           *       *       *       *       *       *       *


Sec. 8422. Deductions from pay; contributions for other service; 
                    deposits

  (a)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) * * *
  (B) Notwithstanding any other provision of this paragraph, 
the applicable percentage under this paragraph shall--
          (i) except as provided in clause (ii) or (iii), for 
        purposes of computing an amount--
                  (I) for a period in calendar year 2013, be 
                equal to the applicable percentage under this 
                paragraph for calendar year 2012, plus an 
                additional 1.5 percentage points;
                  (II) for a period in calendar year 2014, be 
                equal to the applicable percentage under this 
                paragraph for calendar year 2013 (as determined 
                under subclause (I)), plus an additional 0.5 
                percentage point;
                  (III) for a period in calendar year 2015, 
                2016, or 2017, be equal to the applicable 
                percentage under this paragraph for the 
                preceding calendar year (as determined under 
                subclause (II) or this subclause, as the case 
                may be), plus an additional 1.0 percentage 
                point; and
                  (IV) for a period in any calendar year after 
                2017, be equal to the applicable percentage 
                under this paragraph for calendar year 2017 (as 
                determined under subclause (III));
          (ii) for purposes of computing an amount with respect 
        to a Member--
                  (I) for a period in calendar year 2013, be 
                equal to the applicable percentage under this 
                paragraph for calendar year 2012, plus an 
                additional 2.5 percentage points;
                  (II) for a period in calendar year 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this paragraph for the 
                preceding calendar year (as determined under 
                subclause (I) or this subclause, as the case 
                may be), plus an additional 1.5 percentage 
                points; and
                  (III) for a period in any calendar year after 
                2017, be equal to the applicable percentage 
                under this paragraph for calendar year 2017 (as 
                determined under subclause (II)); and
          (iii) for purposes of computing an amount with 
        respect to a Congressional employee--
                  (I) for a period in calendar year 2013, 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this paragraph for the 
                preceding calendar year (including as increased 
                under this subclause, if applicable), plus an 
                additional 1.5 percentage points; and
                  (II) for a period in any calendar year after 
                2017, be equal to the applicable percentage 
                under this paragraph for calendar year 2017 (as 
                determined under subclause (I)).
  [(B)] (C) The applicable percentage under this paragraph for 
civilian service by revised annuity employees shall be as 
follows:


------------------------------------------------------------------------

------------------------------------------------------------------------
Employee                 [9.3] 12                 After December 31,
                                                   2012.
Congressional employee   [9.3] 12                 After December 31,
                                                   2012.
Member                   [9.3] 12                 After December 31,
                                                   2012.
Law enforcement          [9.8] 12.5               After December 31,
 officer, firefighter,                             2012.
 member of the Capitol
 Police, member of the
 Supreme Court Police,
 or air traffic
 controller
Nuclear materials        [9.8] 12.5               After December 31,
 courier                                           2012.
Customs and border       [9.8] 12.5               After December 31,
 protection officer                                2012.
------------------------------------------------------------------------

                                                   

           *       *       *       *       *       *       *
SUBCHAPTER III--THRIFT SAVINGS PLAN

           *       *       *       *       *       *       *


Sec. 8432. Contributions

  [(a)(1) An employee or Member may contribute to the Thrift 
Savings Fund in any pay period, pursuant to an election under 
subsection (b), an amount not to exceed the maximum percentage 
of such employee's or Member's basic pay for such pay period 
allowable under paragraph (2). Contributions under this 
subsection pursuant to such an election shall, with respect to 
each pay period for which such election remains in effect, be 
made in accordance with a program of regular contributions 
provided in regulations prescribed by the Executive Director.
  [(2) The maximum percentage allowable under this paragraph 
shall be determined in accordance with the following table:


------------------------------------------------------------------------
    [In the case of a pay period       The maximum percentage allowable
     beginning in fiscal year:                       is:
------------------------------------------------------------------------
2001                                 11
2002                                 12
2003                                 13
2004                                 14
2005                                 15
2006 or thereafter                   100.]
------------------------------------------------------------------------

  (a)(1) An employee or Member--
          (A) may contribute to the Thrift Savings Fund in any 
        pay period, pursuant to an election under subsection 
        (b), any amount of such employee's or Member's basic 
        pay for such pay period; and
          (B) may contribute (by direct transfer to the Fund) 
        any part of any payment that the employee or Member 
        receives for accumulated and accrued annual or vacation 
        leave under section 5551 or 5552.
  (2) Contributions made under paragraph (1)(A) pursuant to an 
election under subsection (b) shall, with respect to each pay 
period for which such election remains in effect, be made in 
accordance with a program of regular contributions provided in 
regulations prescribed by the Executive Director.

           *       *       *       *       *       *       *

  (4) Notwithstanding section 2105(e), in this subsection the 
term ``employee'' includes an employee of the United States 
Postal Service or of the Postal Regulatory Commission.

           *       *       *       *       *       *       *


   DISSENTING VIEWS ON THE MAJORITY'S RECONCILIATION RECOMMENDATIONS

    Committee Democrats strongly oppose the Majority's 
Reconciliation Recommendations, as ordered reported by the 
Committee on April 27, 2012.
    The House Republican Budget directed the Oversight 
Committee to identify mandatory savings of $78.9 billion over 
ten years. Despite our limited budgetary jurisdiction, this 
Committee has been assigned to identify more cuts than the Ways 
and Means Committee, which has authority over the entire 
federal tax code, and to make deeper cuts than the Financial 
Services and Judiciary Committees combined.
    This $80 billion mandate is a continuation of the 
Majority's relentless attacks on the federal workforce. The 
measure adopted by the Committee would require federal 
employees to contribute an additional 5% of their annual 
salaries toward their retirement benefits, effectively 
resulting in a 5% cut in the take-home pay of three million 
middle-class American workers. In addition, the legislation 
would eliminate the FERS annuity supplement for new workers who 
retire before they are eligible for Social Security at age 62, 
except those who are subject to mandatory retirement. This 
would result in the reduction of retirement benefits for these 
new employees by as much as $700 per month, according to the 
Office of Personnel Management.
    These dedicated public servants have already sacrificed $75 
billion toward deficit reduction and other priorities, more 
than their fair share, and they are still subject to a two-year 
federal pay freeze. Nevertheless, the Majority continues to 
view middle-income federal workers as an endless source of 
government offsets; first to fund the federal budget deficit, 
then to pay for the extension of the payroll tax cut and 
unemployment benefits, and now to pay for extending tax cuts 
for the rich.
    Federal employees dedicate their lives day in and day out 
to public service by protecting our borders, supporting our 
troops, caring for our wounded veterans, ensuring the safety of 
our food and water, and providing services to millions of 
Americans. If this measure is enacted into law, however, these 
three million middle-class federal employees will have 
sacrificed a staggering total of $155 billion.
    The Majority argues that this measure is necessary in order 
to reduce our nation's deficit. However, House Republicans have 
consistently refused to ask the wealthiest Americans to 
contribute even one additional penny to help address our 
nation's fiscal challenges. Even more astounding, House 
Republicans would go even further by rewarding the rich with 
additional tax breaks even beyond those passed during the Bush 
Administration.
    On April 12, 2012, the nonpartisan Center on Budget and 
Policy Priorities issued a report examining how much more money 
the House Republican Budget would give in additional tax breaks 
to the richest Americans. The report concludes that those 
earning over $1 million a year would receive an additional 
$265,000 in new tax breaks every year. The report also states 
that the Republican budget ``would enact new tax cuts that 
would provide huge windfalls to households at the top of the 
income scale.'' It also states that these new tax breaks will 
``disproportionately harm lower-income Americans . . . 
disproportionately help those at the top of the income scale . 
. . significantly worsen inequality . . . and increase poverty 
and hardship.''\1\
---------------------------------------------------------------------------
    \1\Center on Budget and Policy Priorities, New Tax Cuts in Ryan 
Budget Would Give Millionaires $265,000 on Top of Bush Tax Cuts (Apr. 
12, 2012).
---------------------------------------------------------------------------
    House Republicans claim that they care about the deficit, 
yet these new tax breaks would make it worse. It is not shared 
sacrifice when Republicans keep coming back to the same group 
of middle-class workers to fund deficit reduction, other 
government programs, and, in this case, additional tax breaks 
for the wealthy.
    Committee Democrats reject the premise that we need to take 
an additional $80 billion out of the pockets of millions of 
middle-class American families across the country. We take a 
stand supporting these families and opposing more new tax 
breaks for millionaires and billionaires. Ranking Member 
Cummings offered an Amendment in the Nature of a Substitute 
that would have protected middle-class federal workers and 
called for no new tax breaks for the wealthiest Americans, but 
Republicans argued that the amendment was not ``germane'' to 
the debate.
    House Republicans have taken a similar approach in other 
committees. Last week, the Agriculture Committee slashed the 
food stamp program by $33 billion as part of this 
reconciliation exercise. They reduced assistance to every 
single household receiving benefits under the Supplemental 
Nutrition Assistance Program, which serves 46 million people. 
They totally eliminated food assistance for 1.8 million people 
across the country, and nearly three hundred thousand children 
will lose their meals at school, on top of losing their food 
stamp benefits at home.
    The Ways and Means Committee eliminated the Social Services 
Block Grant, which helps 23 million children, seniors, and 
people with disabilities. It also provides Meals on Wheels and 
other services for 1.7 million seniors, child protective 
services for 1.8 million children at risk, and child care and 
other assistance for 4.4 million children.
    Oversight Committee Democrats are committed to reducing the 
deficit. However, we believe that it needs to be done using a 
balanced approach that asks for shared sacrifice from everyone. 
Congress cannot lavish ridiculous new tax breaks on the rich 
while slashing programs and benefits for poor and middle-class 
families.

                                                Elijah E. Cummings.
               TITLE VI--THE COMMITTEE ON WAYS AND MEANS
                         LETTER OF TRANSMITTAL

                              ----------                              

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on the Budget,
Washington, DC.
    Dear Chairman Ryan: Pursuant to section 201(a) of the 
Concurrent Resolution on the Budget for Fiscal Year 2013, I 
hereby transmit these recommendations, which have been approved 
by vote of the Committee on Ways and Means, and the appropriate 
materials including dissenting views, to the House Committee on 
the Budget. This submission is in order to comply with 
reconciliation directives included inH. Con. Res. 112, the 
fiscal year 2013 budget resolution and is consistent with 
section 310 of the Congressional Budget and Impoundment Control 
Act of 1974.
            Sincerely,
                                                 Dave Camp,
                                                          Chairman.
SUBTITLE A--RECAPTURE OF OVERPAYMENTS RESULTING FROM CERTAIN FEDERALLY-
                      SUBSIDIZED HEALTH INSURANCE

                                CONTENTS

                                                                   Page
Summary and Background...........................................   475
Explanation of Provision.........................................   476
Votes of the Committee...........................................   479
Budget Effects of the Provisions.................................   480
Other Matters To Be Discussed Under the Rules of the House.......   486
Changes in Existing Law Made by the Budget Reconciliation 
  Legislative Recommendation as Transmitted......................   487
Dissenting Views.................................................   489

                         Summary and Background

    In partial fulfillment of the reconciliation instructions 
included in section 201(b)(6) of the Concurrent Resolution on 
the Budget for Fiscal Year 2013 (H. Con. Res. 112), the 
Committee on Ways and Means, by voice vote and without 
amendment (with a quorum being present), favorably transmitted 
the Budget Reconciliation Legislative Recommendations Relating 
to Recapture of Federally-Subsidized Health Insurance 
Overpayments. The Committee recommends a full repeal of the 
repayment limits on certain federally subsidized insurance 
premium tax credit overpayments. The Patient Protection and 
Affordable Care Act of 2010 (PPACA), Pub. L. No. 111-148 (March 
23, 2010) provided for refundable tax credits for certain 
federally subsidized health insurance policies and capped the 
amount of credit overpayments that can be recouped. The 
Committee's recommendation repeals section 36B(f)(2)(B) of the 
Internal Revenue Code of 1986, as added by PPACA and 
subsequently amended by Pub. L. No. 111-309 and Pub. L. No. 
112-9.
    Given the Federal government's current fiscal situation and 
growing financial commitment to health care services, it is 
imperative that Congress scrutinize the Federal budget to 
identify potential improper payments resulting from waste, 
fraud, and abuse. Once identified, it is incumbent on Congress 
to amend statutes and address programs that fail to fully 
protect taxpayer dollars. PPACA's design of advanceable and 
refundable tax credits for the purchase of certain government-
approved health insurance creates the potential for such waste, 
fraud, and abuse. The combination of income determination 
rules, limits on the amount of subsidy overpayments that can be 
recouped, and the large amount of federal funds (over $800 
billion between 2014 and 2022) being expended make the program 
particularly susceptible to overpayments. Accordingly, the bill 
seeks to reduce waste, fraud, and abuse by repealing the limit 
on the amount of overpayments the government can recoup.

                          Legislative History


Budget resolution

    On March 29, 2012, the House of Representatives approved H. 
Con. Res. 112, the budget resolution for fiscal year 2013. 
Pursuant to section 201(b)(6) of H. Con. Res. 112, the 
Committee on Ways and Means was directed to submit to the 
Committee on the Budget recommendations for changes in law 
within the jurisdiction of the Committee on Ways and Means 
sufficient to reduce the deficit by $1,200,000,000 for the 
period of fiscal years 2012 and 2013; by $23,000,000,000 for 
the period of fiscal years 2012 through 2017; and by 
$53,000,000,000 for the period of fiscal years 2012 through 
2022.

Committee action

    On April 18, 2012, in partial fulfillment of its 
instructions under the budget resolution, the Committee on Ways 
and Means marked up the budget reconciliation legislative 
recommendation relating to recapture of overpayments resulting 
from certain Federally-subsidized health insurance and ordered 
the legislative recommendation favorably transmitted.

Committee hearings

    The Committee on Ways and Means held hearings regarding the 
President's Fiscal Year 2012 budget submission on February 15, 
2011, and February 16, 2011, with Secretary of the Treasury 
Timothy F. Geithner and Secretary of Health and Human Services 
Kathleen Sebelius, respectively, in which implementation of 
PPACA and the Health Care and Education Reconciliation Act of 
2010, Pub. L. No. 111-152 (March 30, 2010) was a focal point. 
The Committee on Ways and Means held hearings regarding the 
President's Fiscal Year 2013 budget submission on February 15, 
2012, and February 28, 2012, with Secretary of the Treasury 
Timothy F. Geithner and Secretary of Health and Human Services 
Kathleen Sebelius, respectively, in which projected increases 
in PPACA's subsidy expenditures and management of the law's 
implementation, particularly at the Internal Revenue Service, 
were discussed.

                        Explanation of Provision


 RECAPTURE OF OVERPAYMENTS RESULTING FROM CERTAIN FEDERALLY-SUBSIDIZED 
                            HEALTH INSURANCE

Present Law

Premium assistance credit

    For taxable years ending after December 31, 2013, section 
36B provides a refundable tax credit (the ``premium assistance 
credit'') for eligible individuals and families who purchase 
health insurance through an American Health Benefit Exchange. 
The premium assistance credit, which is refundable and payable 
in advance directly to the insurer, subsidizes the purchase of 
certain health insurance plans through an American Health 
Benefit Exchange.
    The premium assistance credit is available for individuals 
(single or joint filers) with household incomes between 100 and 
400 percent of the Federal poverty level (``FPL'') for the 
family size involved who do not receive health insurance 
through an employer or a spouse's employer.\1\ Household income 
is defined as the sum of: (1) the taxpayer's modified adjusted 
gross income, plus (2) the aggregate modified adjusted gross 
incomes of all other individuals taken into account in 
determining that taxpayer's family size (but only if such 
individuals are required to file a tax return for the taxable 
year). Modified adjusted gross income is defined as adjusted 
gross income increased by: (1) any amount excluded by section 
911 (the exclusion from gross income for citizens or residents 
living abroad), (2) any tax-exempt interest received or accrued 
during the tax year, and (3) an amount equal to the portion of 
the taxpayer's social security benefits (as defined in section 
86(d)) that is excluded from income under section 86 (that is, 
the amount of the taxpayer's Social Security benefits that are 
excluded from gross income).\2\ To be eligible for the premium 
assistance credit, taxpayers who are married (within the 
meaning of section 7703) must file a joint return. Individuals 
who are listed as dependents on a return are ineligible for the 
premium assistance credit.
---------------------------------------------------------------------------
    \1\Individuals who are lawfully present in the United States but 
are not eligible for Medicaid because of their immigration status are 
treated as having a household income equal to 100 percent of FPL (and 
thus eligible for the premium assistance credit) as long as their 
household income does not actually exceed 100 percent of FPL.
    \2\The definition of modified adjusted gross income used in section 
36B is incorporated by reference for purposes of determining 
eligibility to participate in certain other healthcare-related 
programs, such as reduced cost-sharing (section 1402 of the Patient 
Protection and Affordable Care Act, Pub. L. No.111-148 (``PPACA'')), 
Medicaid for the nonelderly (section 1902(e) of the Social Security Act 
(42 U.S.C. 1396a(e)) as modified by section 2002(a) of PPACA) and the 
Children's Health Insurance Program (section 2102(b)(1)(B) of the 
Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) as modified by section 
2101(d) of PPACA).
---------------------------------------------------------------------------
    As described in Table 1 below, premium assistance credits 
are available on a sliding scale basis for individuals and 
families with household incomes between 100 and 400 percent of 
FPL to help subsidize the cost of private health insurance 
premiums. The premium assistance credit amount is determined 
based on the percentage of income the cost of premiums 
represents, rising from two percent of income for those at 100 
percent of FPL for the family size involved to 9.5 percent of 
income for those at 400 percent of FPL for the family size 
involved. After 2014, the percentages of income are indexed to 
the excess of premium growth over income growth for the 
preceding calendar year. After 2018, if the aggregate amount of 
premium assistance credits and cost-sharing reductions\3\ 
exceeds 0.504 percent of the gross domestic product for that 
year, the percentage of income is also adjusted to reflect the 
excess (if any) of premium growth over the rate of growth in 
the consumer price index for the preceding calendar year. For 
purposes of calculating family size, individuals who are in the 
country illegally are not included.
---------------------------------------------------------------------------
    \3\As described in section 1402 of PPACA.

                                TABLE 1.--THE PREMIUM ASSISTANCE CREDIT PHASE-OUT
----------------------------------------------------------------------------------------------------------------
                                                                    Initial premium           Final premium
       Household income  (expressed as a percent of FPL)              (percentage)             (percentage)
----------------------------------------------------------------------------------------------------------------
100% up to 133%...............................................                     2.0                      2.0
133% up to 150%...............................................                     3.0                      4.0
150% up to 200%...............................................                     4.0                      6.3
200% up to 250%...............................................                     6.3                      8.05
250% up to 300%...............................................                     8.05                     9.5
300% up to 400%...............................................                     9.5                      9.5
----------------------------------------------------------------------------------------------------------------

Minimum essential coverage and employer offer of health insurance 
        coverage

    Generally, if an employee is offered minimum essential 
coverage\4\ in the group market, including employer-provided 
health insurance coverage, the individual is ineligible for the 
premium assistance credit for health insurance purchased 
through an American Health Benefit Exchange.
---------------------------------------------------------------------------
    \4\As defined in section 5000A(f).
---------------------------------------------------------------------------
    If an employee's share of the premium for self-only 
coverage exceeds 9.5 percent of an employee's household income 
or the plan's share of total allowed cost of provided benefits 
is less than 60 percent of such costs, the employee can be 
eligible for the premium assistance credit. Premium assistance 
tax credit eligibility requires that an employee decline 
enrollment in employer-offered coverage and satisfy the 
conditions for receiving a premium assistance tax credit 
through an American Health Benefit Exchange.

                             Reconciliation

    If the premium assistance credit received through advance 
payment exceeds the amount of premium assistance credit to 
which the taxpayer is entitled for the taxable year, the 
liability for the overpayment must be reflected on the 
taxpayer's income tax return for the taxable year subject to a 
limitation on the amount of such liability. For persons with 
household income below 400 percent of FPL, the liability for 
the overpayment for a taxable year is limited to a specific 
dollar amount (the ``applicable dollar amount'') as shown in 
Table 2 below (one-half of the applicable dollar amount shown 
in Table 2 for unmarried individuals who are not surviving 
spouses or filing as heads of households).\5\
---------------------------------------------------------------------------
    \5\Section 36B(f)(2), as amended by section208 of the Medicare and 
Medicaid Extenders Act of 2010, Pub. L. No.111-309, and section 4 of 
the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange 
Subsidy Overpayments Act of 2011, P.L. 112-9.

                        TABLE 2.--RECONCILIATION
------------------------------------------------------------------------
Household income  (expressed as a percent
                 of FPL)                      Applicable dollar amount
------------------------------------------------------------------------
Less than 200%...........................                          $600
At least 200% but less than 300%.........                        $1,500
At least 300% but less than 400%.........                        $2,500
------------------------------------------------------------------------

    If the premium assistance credit for a taxable year 
received through advance payment is less than the amount of the 
credit to which the taxpayer is entitled for the year, the 
shortfall in the credit is also reflected on the taxpayer's tax 
return for the year.

Reasons for change

    The Committee believes that overpayments resulting from 
certain Federally subsidized health insurance programs should 
be fully recouped and that failure to do so will result in the 
mismanagement of taxpayer funds. The Committee believes that it 
is appropriate to align repayment requirements for this program 
with those of similar tax credits, like the earned income tax 
credit. Given that, in the case of an exchange subsidy 
underpayment, the Federal government is required to pay the 
filer the additional appropriate amount of funds, the Committee 
believes it is appropriate for the government to be able to 
recoup overpayments. Thus, the Committee believes that 
recipients should be required to repay the full amount of any 
overpayment of the advance premium assistance credit.

Explanation of provision

    The legislative recommendation repeals the present-law 
provision under which, in the case of an individual with 
household income below 400 percent of FPL, liability for an 
overpayment resulting from excess advance payments is limited 
to the applicable dollar amount. Thus, under the legislative 
recommendation, an individual would be required to repay the 
full amount of the overpayment.

Effective date

    The legislative recommendation is effective for taxable 
years ending after December 31, 2013.

                         Votes of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of ``Budget Reconciliation Legislative 
Recommendations Relating to Recapture of Federally-Subsidized 
Health Insurance Overpayments.''

Motion to transmit recommendation

    The budget reconciliation legislative recommendation was 
ordered favorably transmitted without amendment by a voice vote 
(with a quorum being present).

Votes on amendments

    Roll call votes were conducted on the following amendments 
to the budget reconciliation legislative recommendation.
    An amendment by Mr. Stark, which would preclude the 
application of the proposal for a taxable year with respect to 
which the Department of the Treasury makes a specified 
certification, was not agreed to by roll call vote of 22 nays 
to 14 yeas (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................  ........        X   .........  Mr. Levin........        X   ........  .........
Mr. Herger.....................  ........        X   .........  Mr. Rangel.......  ........  ........  .........
Mr. Johnson....................  ........        X   .........  Mr. Stark........        X   ........  .........
Mr. Brady......................  ........        X   .........  Mr. McDermott....        X   ........  .........
Mr. Ryan.......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Becerra......        X   ........  .........
Mr. Davis......................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Boustany...................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Gerlach....................  ........        X   .........  Mr. Kind.........        X   ........  .........
Mr. Price......................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Ms. Berkley......        X   ........  .........
Mr. Smith......................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Schock.....................  ........        X   .........  .................  ........  ........  .........
Ms. Jenkins....................  ........        X   .........  .................  ........  ........  .........
Mr. Paulsen....................  ........        X   .........  .................  ........  ........  .........
Mr. Marchant...................  ........        X   .........  .................  ........  ........  .........
Mr. Berg.......................  ........        X   .........  .................  ........  ........  .........
Ms. Black......................  ........        X   .........  .................  ........  ........  .........
Mr. Reed.......................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Crowley, which would preclude the 
application of the proposal for a taxable year with respect to 
which the Department of the Treasury makes a specified 
certification, was not agreed to by roll call vote of 22 nays 
to 14 yeas (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................  ........        X   .........  Mr. Levin........        X   ........  .........
Mr. Herger.....................  ........        X   .........  Mr. Rangel.......  ........  ........  .........
Mr. Johnson....................  ........        X   .........  Mr. Stark........        X   ........  .........
Mr. Brady......................  ........        X   .........  Mr. McDermott....        X   ........  .........
Mr. Ryan.......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Becerra......        X   ........  .........
Mr. Davis......................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Boustany...................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Gerlach....................  ........        X   .........  Mr. Kind.........        X   ........  .........
Mr. Price......................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Ms. Berkley......        X   ........  .........
Mr. Smith......................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Schock.....................  ........        X   .........  .................  ........  ........  .........
Ms. Jenkins....................  ........        X   .........  .................  ........  ........  .........
Mr. Paulsen....................  ........        X   .........  .................  ........  ........  .........
Mr. Marchant...................  ........        X   .........  .................  ........  ........  .........
Mr. Berg.......................  ........        X   .........  .................  ........  ........  .........
Ms. Black......................  ........        X   .........  .................  ........  ........  .........
Mr. Reed.......................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

                    Budget Effects of the Provisions


Committee estimate of budgetary effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the ``Budget 
Reconciliation Legislative Recommendations Relating to 
Recapture of Federally-Subsidized Health Insurance 
Overpayments,'' as transmitted.
    The budget reconciliation legislative recommendation, as 
transmitted, is estimated to have the following effects on 
budget receipts for fiscal years 2013-2022:

                                                                       FISCAL YEARS
                                                                  [Billions of Dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Item                      2013     2014     2015     2016     2017     2018     2019     2020     2021     2022    2013-17    2013-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recapture of Overpayments Resulting from  .......      1.1      2.6      4.1      5.0      5.5      5.9      6.1      6.6      6.9       12.9       43.9
 Certain Federally-Subsidized Health
 Insurance[1]...........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
[1]Estimate includes the following effects:



                                            2013     2014     2015     2016     2017     2018     2019     2020     2021     2022    2013-17    2013-22

Off-budget effects......................      [2]    [\2\]     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1       -0.2       -0.6
Outlay effects..........................  .......     -0.9     -1.9     -3.0     -3.6     -4.0     -4.2     -4.4     -4.8     -5.1       -9.3      -31.9

[2]Loss of less than $50 million.

Statement Regarding New Budget Authority and Tax Expenditures Budget 
        Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
budget reconciliation legislative recommendation involves no 
new or increased budget authority. The Committee states further 
that the budget reconciliation legislative recommendation 
involves no new or increased tax expenditures.

Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by the CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 24, 2012.
Hon. Dave Camp,
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 the committee's 
reconciliation recommendation related to the Recapture of 
Overpayments Resulting From Certain Federally Subsidized Health 
Insurance, as approved on April 18, 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The staff contact is Sarah Anders, who 
can be reached at 226-9010.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Recapture of Overpayments Resulting From Certain Federally Subsidized 
        Health Insurance

    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of that reconciliation 
process, the House Committee on Ways and Means has approved 
three separate provisions as reconciliation recommendations. 
The following analysis presents estimated budgetary effects for 
one of those three provisions.
    The legislation would require collections of certain 
overpayments of health insurance subsidies. The staff of the 
Joint Committee on Taxation (JCT) and CBO estimate that this 
proposal would have no impact in 2012 or 2013, and would reduce 
the deficit by $12.9 billion over the 2013-2017 period and 
$43.9 billion over the 2013-2022 period. This reduction would 
come from net increases in revenue as well as decreases in 
direct spending. The estimate of budgetary effects would be the 
same for any assumed enactment date this year because those 
effects would not begin until 2014.
    JCT has determined that the provision contains no 
intergovernmental mandates and one private-sector mandate as 
defined in the Unfunded Mandates Reform Act (UMRA). Based on 
information provided by JCT, the cost of the provision's 
private-sector mandate would exceed the annual threshold 
established in UMRA for private-sector mandates ($146 million 
in 2012, adjusted annually for inflation) beginning in 2014.
    Estimated cost to the Federal Government: The estimated 
budgetary effects of the proposal are shown in the following 
table. The spending effects of this proposal fall within budget 
function 550 (health).

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      By fiscal year, in billions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CHANGES IN DIRECT SPENDING

Estimated Budget Authority.......................          0          0       -0.9       -1.9       -3.0       -3.6       -4.0       -4.2       -4.4       -4.8       -5.1       -9.4      -31.9
Estimated Outlays................................          0          0       -0.9       -1.9       -3.0       -3.6       -4.0       -4.2       -4.4       -4.8       -5.1       -9.4      -31.9

                                                                                       CHANGES IN REVENUES

Estimated Revenues...............................          0          0        0.2        0.7        1.1        1.4        1.5        1.7        1.7        1.7        1.9        3.5       12.0
    On-budget....................................          0          0        0.3        0.7        1.2        1.5        1.6        1.7        1.8        1.8        2.0        3.6       12.6
    Off-budgeta..................................          0          0          *          *       -0.1       -0.1       -0.1       -0.1       -0.1       -0.1       -0.1       -0.2       -0.6

                                                    NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES

Impact on Deficits...............................          0          0       -1.1       -2.6       -4.1       -5.0       -5.5       -5.9       -6.1       -6.6       -6.9      -12.9      -43.9
    On-budget....................................          0          0       -1.1       -2.6       -4.2       -5.1       -5.6       -6.0       -6.2       -6.6       -7.0      -13.0      -44.4
    Off-budgeta..................................          0          0          *          *        0.1        0.1        0.1        0.1        0.1        0.1        0.1        0.2       0.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Notes: Numbers may not sum to totals because of rounding.
    * = decrease in revenues of less than $50 million.
a. All off-budget effects would come from changes in revenues. (Payroll taxes for Social Security are classified as ``off-budget.'')

    Basis of estimate: Under current law, starting in 2014, 
qualified taxpayers will become eligible to receive refundable 
tax credits to assist in the purchase of health insurance 
through the health insurance exchanges established by the 
Affordable Care Act. The amount of those premium assistance 
credits will be based on family size and income, and the 
advance payments of the credits will be based on income 
estimated from tax returns for prior years. If taxpayers' 
circumstances change to the extent that their advance payments 
exceed the premium assistance credits to which they are 
entitled, they may be required to repay some or all of the 
credits, subject to certain limits based on income.
    Enacting the overpayments provision would eliminate 
existing limits on the amounts to be repaid by taxpayers whose 
advance payments exceed the premium assistance credits to which 
they are entitled. Taxpayers would therefore be liable for the 
full amount of overpayments. CBO and JCT expect that, under the 
provision, fewer people would apply for premium assistance 
credits and purchase insurance through exchanges than under 
current law. Some people would not apply for the credits 
because of concern that unforeseen changes in their income or 
family composition could result in a large repayment liability 
they would have difficulty meeting. Others would anticipate 
changes in income or family composition that would reduce the 
subsidy they would receive to purchase health insurance or 
could cause a larger increase in liability under the proposal.
    Reduced enrollment in exchanges is expected to result in an 
increase in the number of people who obtain health insurance 
through an employer and an increase in the number of people 
without health insurance. Among individuals who continue to 
apply for and receive premium assistance credits, some would 
update their income information to reduce overpayments while 
others would end up repaying more as a result of the proposal. 
JCT estimates that the proposal would reduce net outlays for 
premium assistance credits and cost-sharing subsidies by nearly 
$32 billion over the 2013-2022 period and increase net revenues 
by about $12 billion over the same period. That effect on 
revenues includes reductions of less than $1 billion from 
payroll taxes for Social Security, which are off-budget.
    Intergovernmental and private-sector impact: JCT has 
determined that the provision related to overpayments of health 
insurance subsidies contains no intergovernmental mandates and 
one private-sector mandate as defined in UMRA. That mandate 
would eliminate existing limits on the amounts taxpayers would 
be required to repay for advance premium assistance tax credits 
associated with health insurance exchanges, in the event of an 
overpayment. Based on information provided by JCT, the cost of 
the mandate would exceed the annual threshold established in 
UMRA for private-sector mandates ($146 million in 2012, 
adjusted annually for inflation) beginning in 2014.
    Estimate prepared by: JCT and Sarah Anders.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

Macroeconomic impact analysis

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the budget reconciliation legislative 
recommendation amending the Internal Revenue Code of 1986: the 
effects of the legislative recommendation on economic activity 
are so small as to be incalculable within the context of a 
model of the aggregate economy.

       Other Matters To Be Discussed Under the Rules of the House


Committee oversight findings and recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of the budget 
reconciliation legislative recommendation that the Committee 
concluded that it is appropriate to transmit the legislative 
recommendation to the Committee on the Budget.

Statement of general performance goals and objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
budget reconciliation legislative recommendation contains no 
measure that authorizes funding, so no statement of general 
performance goals and objectives for which any measure 
authorizing funding is required.

Constitutional authority statement

    The Committee states that the Committee's action in 
transmitting this budget reconciliation legislative 
recommendation is derived from Article I of the United States 
Constitution, Section 8, Clause 1 (``The Congress shall have 
Power To lay and collect Taxes, Duties, Imposts and Excises . . 
. ''), and from the 16th Amendment to the United States 
Constitution.

Information relating to unfunded mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the budget reconciliation 
legislative recommendation contains one private sector mandate: 
changes to the limitations on recapture of overpayments 
resulting from advance premium assistance tax credits for 
Federally-subsidized health insurance. The Committee has 
determined that the budget reconciliation legislative 
recommendation does not impose a Federal intergovernmental 
mandate on State, local, or tribal governments.

Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the provisions of the budget reconciliation 
legislative recommendation, and states that the provisions of 
the legislative recommendation do not involve any Federal 
income tax rate increases within the meaning of the rule.
            Tax complexity analysis
    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the budget reconciliation legislative recommendation contains 
no provisions that amend the Code and that have ``widespread 
applicability'' to individuals or small businesses, within the 
meaning of the rule.

Congressional earmarks, limited tax benefits, and limited tariff 
        benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the budget reconciliation legislative 
recommendation, and states that the provisions of the 
legislative recommendation do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

            SECTION 36B OF THE INTERNAL REVENUE CODE OF 1986

SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED HEALTH PLAN.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Reconciliation of credit and advance credit.--
          (1) * * *
          [(2) Excess advance payments.--
                  [(A) In general.--If the]
          (2) Excess advance payments.--If the advance payments 
        to a taxpayer under section 1412 of the Patient 
        Protection and Affordable Care Act for a taxable year 
        exceed the credit allowed by this section (determined 
        without regard to paragraph (1)), the tax imposed by 
        this chapter for the taxable year shall be increased by 
        the amount of such excess.
                  [(B) Limitation on increase.--
                          [(i) In general.--In the case of a 
                        taxpayer whose household income is less 
                        than 400 percent of the poverty line 
                        for the size of the family involved for 
                        the taxable year, the amount of the 
                        increase under subparagraph (A) shall 
                        in no event exceed the applicable 
                        dollar amount determined in accordance 
                        with the following table (one-half of 
                        such amount in the case of a taxpayer 
                        whose tax is determined under section 
                        1(c) for the taxable year):


------------------------------------------------------------------------
[If the household income (expressed
 as a percent of poverty line) is:     The applicable dollar amount is:
------------------------------------------------------------------------
Less than 200%                       $600
At least 200% but less than 300%     $1,500
At least 300% but less than 400%     $2,500
------------------------------------------------------------------------

                          [(ii) Indexing of amount.--In the 
                        case of any calendar year beginning 
                        after 2014, each of the dollar amounts 
                        in the table contained under clause (i) 
                        shall be increased by an amount equal 
                        to--
                                  [(I) such dollar amount, 
                                multiplied by
                                  [(II) the cost-of-living 
                                adjustment determined under 
                                section 1(f)(3) for the 
                                calendar year, determined by 
                                substituting ``calendar year 
                                2013'' for ``calendar year 
                                1992'' in subparagraph (B) 
                                thereof.
                        If the amount of any increase under 
                        clause (i) is not a multiple of $50, 
                        such increase shall be rounded to the 
                        next lowest multiple of $50.]

           *       *       *       *       *       *       *


 DISSENTING VIEWS ON RECOMMENDATION TO CUT AFFORDABLE CARE ACT PREMIUM 
                              TAX CREDITS

    These recommendations to the Budget Committee follow a 
disturbing but familiar pattern. Once again, the Majority has 
targeted seniors, children, people with disabilities, and 
middle-income families rather than ask the very wealthiest 
Americans to pay their fair share. We strongly oppose this 
unfair approach, these specific legislative proposals, and the 
complete lack of consultation, public discussion, or analysis 
of the consequences of these policies that preceded our 
Committee action. We support a fair and balanced approach to 
deficit reduction. The Majority's recommendation is neither 
fair nor balanced.
    We oppose the provision that would amend the premium tax 
credits that are provided under the Affordable Care Act (ACA). 
This provision is designed to undercut the ACA's guarantee of 
quality, affordable health care for all.
    The Affordable Care Act uses tax credits to make health 
coverage affordable to those with lower and middle incomes. 
While most uninsured individuals and families (or those at risk 
of becoming uninsured) have incomes at or below 200 percent of 
the poverty level--approximately $45,000 for a family of four 
in 2012--the premium tax credits are adjusted according to 
income and are fully phased-out at 400 percent of poverty. 
These tax credits are provided in advance to the insured's 
insurance company based on the individual or family's prior 
year income and then are reconciled with the individual or 
family's actual income for the year the health coverage is 
purchased.
    Advance payment of the credits is critical to providing 
quality, affordable health care because individuals and 
families need real-time assistance in purchasing coverage. A 
credit that is reimbursed to the individual or family via their 
tax refund two or four or more months after the end of the year 
for which they were paying premiums is no assistance at all. 
Because people necessarily must use income information from 
prior tax years to qualify for advance payment of the tax 
credits, it is very possible that their actual incomes will be 
higher or lower for the year for which they are purchasing 
coverage.
    Naturally, income from a previous year cannot reflect 
income fluctuations resulting from job loss or changes, raises 
or bonuses; likewise, it cannot anticipate or reflect changes 
in family size, including those due to death or divorce, which 
will affect the poverty level calculation and size of the 
credit. While the ACA requires some repayment in recognition of 
this income fluctuation, it also recognizes that full repayment 
may create an unacceptably large and unanticipated burden on 
families that are struggling to get back on their feet. 
Therefore, the ACA also limited the amounts individuals and 
families would need to pay back if income increases.
    Already Congress has revised this provision several times. 
The first modification, enacted at the end of 2010 in the 
Medicare and Medicaid Extenders Act of 2010 (Public Law 111-
309), contained a significant improvement in that it eliminated 
payment cliffs at 400 percent of poverty. The second 
modification, enacted early in 2011 in the Comprehensive 1099 
Taxpayer Protection and Repayment of Exchange Subsidy 
Overpayments Act of 2011 (Public Law 112-9), eliminated this 
improvement. The Joint Committee on Taxation (JCT) estimated 
that 265,000 individuals would lose health coverage as a 
result.
    Now, the majority seeks to eliminate the payment cap 
protection entirely.
    We oppose this provision because it will lead to further 
coverage losses and unfairly penalize individuals and families 
for economic progress or personal tragedy. JCT estimates that 
350,000 individuals would lose coverage as a result of this 
provision.
    We also oppose this provision because it is a tax increase 
on lower-income and middle-class individuals and families. 
According to JCT, this provision raises revenues by $43.9 
billion dollars. This is clearly a tax increase on the middle 
class. The language of the section of the Internal Revenue Code 
that this provision amends makes that abundantly clear: ``If 
the advance payments to a taxpayer . . . exceed the credit 
allowed by this section . . ., the tax imposed by this chapter 
for the taxable year shall be increased by the amount of such 
excess.'' Section 36B(f)(2) of the Internal Revenue Code 
(emphasis added). The reference to ``this chapter'' is to the 
income tax that is contained in Subtitle A and Chapter 1 of the 
Internal Revenue Code.
    A final reason for our opposition is because the ACA 
already contains a strong penalty in the case of fraud in the 
application for advance payment of the premium tax credits. 
Section 1411(h)(1)(B) of the ACA provides for a civil penalty 
of up to $250,000 in such cases. This budget reconciliation 
legislative proposal does not prevent fraud or abuse. It is not 
an effort to penalize only those who intentionally misrepresent 
their income and receive a credit under dubious circumstances. 
This proposal only serves to raise taxes on families in certain 
circumstances, including families where one spouse is able to 
finally find full-time employment in his or her field, after a 
substantial period of unemployment or under-employment--due 
perhaps to a prior layoff, finishing job training or education, 
or raising children or caring for a dependent relative. For 
this reason, this provision will impose a significant and 
unexpected tax burden on middle-class individuals and American 
families whose employment or family circumstances have changed 
unexpectedly, or because of events beyond their control, and 
are still struggling financially on account of these 
circumstances.
    We are committed to bringing our budget into balance, but 
do not believe that children, senior citizens and the disabled 
should be targeted for massive cuts, as the wealthiest among us 
are asked to contribute nothing. We attempted to substitute 
these and other cuts with an equal amount of deficit reduction 
through the so-called ``Buffett Rule,'' which would have 
affected only those with annual incomes of $1 million or more a 
year. Regrettably, the majority refused to allow a vote on this 
more equitable approach for reducing our deficit.
                                                      Sander Levin.
  SUBTITLE B--SOCIAL SECURITY NUMBER REQUIRED TO CLAIM THE REFUNDABLE 
                    PORTION OF THE CHILD TAX CREDIT

                                CONTENTS

                                                                   Page
Summary and Background...........................................   493
Explanation of Provision.........................................   494
Votes of the Committee...........................................   495
Budget Effects of the Provisions.................................   496
Other Matters To Be Discussed Under The Rules of the House.......   499
Changes in Existing Law Made by the Legislative Recommendations, 
  as Transmitted.................................................   501
Dissenting Views.................................................   503

                         Summary and Background


                          PURPOSE AND SUMMARY

    In partial fulfillment of the reconciliation instructions 
included in section 201(b)(6) of the Concurrent Resolution on 
the Budget for Fiscal Year 2013 (H. Con. Res. 112), the 
Committee on Ways and Means favorably transmitted the Budget 
Reconciliation Legislative Recommendations Relating to Social 
Security Number Requirements for the Refundable Portion of the 
Child Tax Credit without amendment (with a quorum being 
present). The Committee recommends that a Social Security 
Number (SSN) be required in order to claim the refundable 
portion of the child tax credit (sometimes referred to as the 
``additional child tax credit'' or ACTC). Under current law, 
individuals must earn income in the United States in order to 
obtain the ACTC; however, the absence of an SSN requirement 
effectively permits individuals who are not authorized to work 
in the U.S.--and who, therefore, cannot legally earn the income 
that is necessary to qualify for the credit--to claim it. The 
Committee's recommendation ensures that only those with an SSN, 
and thus only those who are eligible to earn income in the 
United States, may obtain the ACTC.

                  BACKGROUND AND NEED FOR LEGISLATION

    Given the Federal government's current fiscal situation, it 
is imperative that Congress scrutinize the Federal budget to 
identify potential improper payments resulting from waste, 
fraud, and abuse. Once identified, it is incumbent on Congress 
to amend statutes and address programs that fail to fully 
protect taxpayer dollars. According to a July 7, 2011 report by 
the Treasury Inspector General for Tax Administration (TIGTA), 
the number of filers without an SSN whose ACTC claims were 
processed in 2010 was 2.3 million, and those individuals 
claimed approximately $4.2 billion in benefits that year. TIGTA 
also found that filers without an SSN received 15 percent of 
all ACTC payments processed in 2010. In 1996, Congress enacted 
legislation making those without SSNs ineligible to receive the 
earned income tax credit (EITC), a similar refundable tax 
credit. The proposal embodied in this recommendation--based on 
legislation (H.R. 1956) introduced by Rep. Sam Johnson (R-TX)--
would bring the pertinent rules applicable to the ACTC in line 
with those of the EITC, reflecting ongoing bipartisan concerns 
about payments to individuals who are not authorized to work in 
the United States.

                          LEGISLATIVE HISTORY

Budget resolution

    On March 29, 2012, the House of Representatives approved H. 
Con. Res. 112, the budget resolution for fiscal year 2013. 
Pursuant to section 201(b)(6) of H. Con. Res. 112, the 
Committee on Ways and Means was directed to submit to the 
Committee on the Budget recommendations for changes in law 
within the jurisdiction of the Committee on Ways and Means 
sufficient to reduce the deficit by $1,200,000,000 for the 
period of fiscal years 2012 and 2013; by $23,000,000,000 for 
the period of fiscal years 2012 through 2017; and by 
$53,000,000,000 for the period of fiscal years 2012 through 
2022.

Committee action

    On April 18, 2012, in partial fulfillment of its 
instructions under the budget resolution, the Committee on Ways 
and Means marked up the budget reconciliation legislative 
recommendation, and ordered the recommendation relating to 
Social Security Number Requirements for the Refundable Portion 
of the Child Tax Credit favorably transmitted.

Committee hearings

    On May 25, 2011, the Oversight Subcommittee held a hearing 
on improper payments in the administration of refundable tax 
credits, which explored the $106 billion in improper refundable 
tax credits paid out in recent years. This hearing featured 
testimony regarding improper ACTC payments, including on the 
increase of such improper payments, from $62 million in 2000 to 
$4.2 billion in 2010, to non-SSN holders.

                        Explanation of Provision


SOCIAL SECURITY NUMBER REQUIRED TO CLAIM THE REFUNDABLE PORTION OF THE 
                            CHILD TAX CREDIT

Present Law

    An individual may claim a tax credit for each qualifying 
child under the age of 17. The maximum amount of the credit per 
child is $1,000 through 2012 and $500 thereafter. A child who 
is not a citizen, national, or resident of the United States 
cannot be a qualifying child.
    For taxable years beginning in 2012, the child tax credit 
is allowable against both the regular tax and the alternative 
minimum tax. For taxable years beginning after 2012, the credit 
is allowable only to the extent the regular tax exceeds the 
tentative minimum tax.
    To the extent that the child tax credit is not allowed to 
offset the taxpayer's tax liability, the taxpayer may be 
eligible for an additional credit which is refundable. For 
taxable years beginning in 2012, the additional credit is in an 
amount equal to the greater of (1) 15 percent of the taxpayer's 
earned income in excess of $3,000, or (2) in the case of a 
family with three or more children, the amount by which the 
taxpayer's social security taxes exceed the earned income 
credit. For taxable years beginning after 2012, the additional 
credit applies only in the case of a family with three or more 
children in the amount described in (2) above.
    No credit is allowed to any taxpayer with respect to any 
qualifying child unless the taxpayer includes the name and the 
taxpayer identification number of the qualifying child on the 
tax return for the taxable year.
    Any taxpayer required to file a Federal income tax return 
must furnish his or her own taxpayer identification number on 
the return. For individual filers, a taxpayer identification 
number may be either a SSN or an IRS individual taxpayer 
identification number (ITIN).

Reasons for change

    Given that the refundable portion of the child tax credit 
requires earned income as a condition of eligibility, the 
Committee believes that additional steps should be taken to 
ensure that those who cannot legally earn income in the United 
States cannot collect the refundable portion of this credit. 
The Committee observes that, in 1996, Congress enacted 
legislation making those without SSNs ineligible to receive the 
EITC, a similar refundable tax credit. The Committee believes 
that in order to prevent abuse in the refundable portion of the 
child tax credit--such as that identified in the July 7, 2011 
TIGTA report--that SSN requirement should be extended to the 
refundable portion of the child tax credit as well.

Explanation of provision

    The legislative recommendation adds a requirement that the 
additional child tax credit is allowable only if the tax return 
includes the taxpayer's SSN (or in the case of a joint return, 
the SSN of either spouse).
    The rule does not apply to the extent the taxpayer's 
tentative minimum tax exceeds his or her earned income credit 
for the taxable year. Thus, under the legislative 
recommendation, a taxpayer can offset income tax liability with 
an ACTC, despite not entering a SSN as the taxpayer's 
identification number on the tax return.

Effective date

    The legislative recommendation is effective for taxable 
years beginning after the date of enactment.

                         Votes of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of ``Budget Reconciliation Legislative 
Recommendations Relating to Social Security Number Requirements 
for Refundable Portion of the Child Tax Credit.''
    The budget reconciliation legislative recommendation was 
ordered favorably transmitted without amendment by a roll call 
vote of 22 yeas to 12 nays (with a quorum being present). The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Herger.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Ryan.......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Davis......................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Gerlach....................        X   ........  .........  Mr. Kind.........  ........        X   .........
Mr. Price......................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Ms. Berkley......  ........        X   .........
Mr. Smith......................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Schock.....................        X   ........  .........  .................  ........  ........  .........
Ms. Jenkins....................        X   ........  .........  .................  ........  ........  .........
Mr. Paulsen....................        X   ........  .........  .................  ........  ........  .........
Mr. Marchant...................        X   ........  .........  .................  ........  ........  .........
Mr. Berg.......................        X   ........  .........  .................  ........  ........  .........
Ms. Black......................        X   ........  .........  .................  ........  ........  .........
Mr. Reed.......................        X   ........  .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

                    Budget Effects of the Provision


                COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the ``Budget 
Reconciliation Legislative Recommendations Relating to Social 
Security Number Requirements for Refundable Portion of the 
Child Tax Credit,'' as transmitted.
    The budget reconciliation legislative recommendation, as 
transmitted, is estimated to have the following effect on 
budget receipts for fiscal years 2013-2022:

                                                                      FISCAL YEARS
                                                                  [Billions of Dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Item                    2013     2014     2015     2016     2017     2018     2019     2020     2021     2022     2013-17      2013-22
--------------------------------------------------------------------------------------------------------------------------------------------------------
Social Security Number Required to    .......      1.0      1.0      0.9      0.9      0.8      0.8      0.8      0.8      0.7          3.7          7.6
 Claim the Refundable Portion of the
 Child Tax Credit\1\................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details do not add to totals due to rounding.
\1\Estimate includes the following outlay effects:



                                        2013     2014     2015     2016     2017     2018     2019     2020     2021     2022     2013-17      2013-22

                                      .......     -1.0     -1.0     -0.9     -0.9     -0.8     -0.8     -0.8     -0.8     -0.7         -3.7         -7.6


 STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET 
                               AUTHORITY

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
budget reconciliation legislative recommendation involves no 
new or increased budget authority. The Committee states further 
that the budget reconciliation legislative recommendation 
involves no new or increased tax expenditures.

       COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by the CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 24, 2012.
Hon. Dave Camp,
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 the committee's 
reconciliation recommendation related to a Social Security 
Number Required to Claim the Refundable Portion of the Child 
Tax Credit, as approved on April 18, 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The staff contact is Kalyani 
Parthasarathy, who can be reached at 6-2800.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Social Security Number Required to Claim the Refundable Portion of the 
        Child Tax Credit

    H. Con. Res. 112, the Concurrent Budget Resolution for 
fiscal year 2013, as passed by the House of Representatives on 
March 29, 2012, instructed several committees of the House to 
recommend legislative changes that would reduce deficits over 
the 2012-2022 period. As part of that reconciliation process, 
the House Committee on Ways and Means has approved three 
separate provisions as reconciliation recommendations. The 
following analysis presents estimated budgetary effects for one 
of those three provisions.
    The legislation would require taxpayers to provide their 
Social Security Number (SSN) in order to claim the refundable 
portion of the child tax credit. The staff of the Joint 
Committee on Taxation (JCT) estimates that the legislation 
would have no budgetary impact in 2012 or 2013, but would 
reduce outlays by $3.7 billion over the 2012-2017 period and by 
$7.6 billion over the 2012-2022 period. Because the legislation 
would have no budgetary impact in 2012 or 2013, those estimates 
would be the same for any enactment date this year.
    Under current law, taxpayers who have either an individual 
taxpayer identification number or an SSN and include it on 
their income tax return can claim a tax credit--$1,000 this 
year and $500 starting in 2013--for each of their qualifying 
children under the age of 17. If the credit exceeds the tax 
liability of the taxpayer, the excess may be refunded depending 
on the taxpayer's earnings, and the refunded portion is 
classified as an outlay in the federal budget. The legislation 
would allow only taxpayers who provide their SSN to claim the 
refundable portion of the credit, starting in 2013. JCT's 
estimate of the legislation's impact is shown in the following 
table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               By Fiscal Year, in Billions of Dollars
                                           -------------------------------------------------------------------------------------------------------------
                                             2012    2013    2014    2015    2016    2017    2018    2019    2020    2021    2022   2012-2017  2012-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Estimated Budget Authority................       0       0    -1.0    -1.0    -0.9    -0.9    -0.8    -0.8    -0.8    -0.8    -0.7      -3.7       -7.6
Estimated Outlays.........................       0       0    -1.0    -1.0    -0.9    -0.9    -0.8    -0.8    -0.8    -0.8    -0.7      -3.7       -7.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    JCT has determined that the legislation contains no 
intergovernmental mandates and one private-sector mandate as 
defined in the Unfunded Mandates Reform Act (UMRA). Based on 
information provided by JCT, the cost of the private-sector 
mandate would exceed the annual threshold established in UMRA 
for private-sector mandates ($146 million in 2012, adjusted 
annually for inflation) beginning in 2014.
    The CBO staff contact for this estimate is Kalyani 
Parthasarathy. This estimate was approved by Frank Sammartino, 
Assistant Director for Tax Analysis.

                     MACROECONOMIC IMPACT ANALYSIS

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the budget reconciliation legislative 
recommendation amending the Internal Revenue Code of 1986: the 
effects of the legislative recommendation on economic activity 
are so small as to be incalculable within the context of a 
model of the aggregate economy.

       Other Matters to be Discussed Under the Rules of the House


            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of the budget 
reconciliation legislative recommendation that the Committee 
concluded that it is appropriate to transmit the legislative 
recommendation to the Committee on the Budget.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
budget reconciliation legislative recommendation contains no 
measure that authorizes funding, so no statement of general 
performance goals and objectives for which any measure 
authorizing funding is required.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    The Committee states that the Committee's action in 
transmitting this budget reconciliation legislative 
recommendation is derived from Article of the United States 
Constitution, Section 8, Clause 1 (``The Congress shall have 
Power To lay and collect Taxes, Duties, Imposts and Excises . . 
.''), and from the 16th Amendment to the United States 
Constitution.

               INFORMATION RELATING TO UNFUNDED MANDATES

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the budget reconciliation 
legislative recommendation contains one private sector mandate: 
requiring those who claim the refundable child tax credit to 
enter a Social Security Number on their tax return. The 
Committee has determined that the budget reconciliation 
legislative recommendation does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                  APPLICABILITY OF HOUSE RULE XXI 5(B)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the provisions of the budget reconciliation 
legislative recommendation, and states that the provisions of 
the legislative recommendation do not involve any Federal 
income tax rate increases within the meaning of the rule.

                        TAX COMPLEXITY ANALYSIS

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the budget reconciliation legislative recommendation contains 
no provisions that amend the Code and that have ``widespread 
applicability'' to individuals or small businesses, within the 
meaning of the rule.

   CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF 
                                BENEFITS

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the budget reconciliation legislative 
recommendation, and states that the provisions of the 
legislative recommendation do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986

Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *


Subpart A--Nonrefundable Personal Credits

           *       *       *       *       *       *       *


SEC. 24. CHILD TAX CREDIT.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Portion of credit refundable.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Identification requirement with respect to 
        taxpayer.--
                  (A) In general.--Paragraph (1) shall not 
                apply to any taxpayer for any taxable year 
                unless the taxpayer includes the taxpayer's 
                Social Security number on the return of tax for 
                such taxable year.
                  (B) Joint returns.--In the case of a joint 
                return, the requirement of subparagraph (A) 
                shall be treated as met if the Social Security 
                number of either spouse is included on such 
                return.
                  (C) Limitation.--Subparagraph (A) shall not 
                apply to the extent the tentative minimum tax 
                (as defined in section 55(b)(1)(A)) exceeds the 
                credit allowed under section 32.
  (e) Identification Requirement With Respect to Qualifying 
Children.--No credit shall be allowed under this section to a 
taxpayer with respect to any qualifying child unless the 
taxpayer includes the name and taxpayer identification number 
of such qualifying child on the return of tax for the taxable 
year.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 63--ASSESSMENT

           *       *       *       *       *       *       *


  Subchapter B--Deficiency Procedures in the Case of Income, Estate, 
Gift, and Certain Excise Taxes

           *       *       *       *       *       *       *


SEC. 6213. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX 
                    COURT.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Definitions.--For purposes of this section--
          (1) * * *
          (2) Mathematical or clerical error.--The term 
        ``mathematical or clerical error'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(I) an omission of a correct TIN required 
                under section 24(e) (relating to child tax 
                credit) to be included on a return,]
                  (I) an omission of a correct Social Security 
                number required under section 24(d)(5) 
                (relating to refundable portion of child tax 
                credit), or a correct TIN under section 24(e) 
                (relating to child tax credit), to be included 
                on a return,

           *       *       *       *       *       *       *


 DISSENTING VIEWS ON RECOMMENDATION TO REDUCE THE AVAILABILITY OF THE 
                      REFUNDABLE CHILD TAX CREDIT

    These recommendations to the Budget Committee follow a 
disturbing but familiar pattern. Once again, the Majority has 
targeted seniors, children, people with disabilities, and 
middle-income families rather than ask the very wealthiest 
Americans to pay their fair share. We strongly oppose this 
unfair approach, these specific legislative proposals, and the 
complete lack of consultation, public discussion, or analysis 
of the consequences of these policies that preceded our 
Committee action. We support a fair and balanced approach to 
deficit reduction. The Majority's recommendation is neither 
fair nor balanced.
    In 2013 alone, this recommendation is estimated to affect 
one million families and more than three million children. We 
urge the Majority to slow down and proceed in a manner that 
ensures that no United States citizens would be harmed by this 
recommendation.
    We have three primary concerns.
    First, we are concerned that this recommendation would harm 
low-income families. In 2010, over 21 million families claimed 
the Additional Child Tax Credit. The average adjusted gross 
income of families claiming this credit was about $22,000, and 
the average amount claimed was $1,800. This recommendation 
would take an average of $1,800 from one million, very low-
income families.
    Second, we are concerned that this recommendation would 
harm children living in low-income families. More than one in 
five children--over 16 million children--in the United States 
live in families with income below the federal poverty level. 
From 2006 to 2010, the poverty rate increased for children from 
17.4 percent (12.8 million children) to 22.0 percent (16.4 
million children), respectively. Children of immigrants account 
for over one-quarter of all children in the United States 
living in low-income families. More than one in three Latino 
children lived in poverty in 2010. Unlike the Earned Income Tax 
Credit that is designed to promote work, the child tax credit 
is designed to fight child poverty and ensure the well-being of 
children. In 2009, the child tax credit kept nearly 1.3 million 
children out of poverty. This recommendation would reduce the 
effectiveness of the child tax credit as an anti-poverty 
measure for more than three million children.
    Third, we are concerned that this recommendation would harm 
millions of children who are United States citizens. More 
specifically, it would harm millions of American children who 
are United States citizens living in immigrant families. In 
2010, more than nine in ten children (92 percent) claimed under 
the child tax credits were United States citizens. In 2010, 
there were 4.5 million U.S.-born children (i.e., United States 
citizens) living in mixed-status, immigrant families. Overall, 
an estimated 85 percent of families that would be affected by 
this recommendation are Hispanic.
    We are committed to bringing our budget into balance, but 
do not believe that children, senior citizens and the disabled 
should be targeted for massive cuts, as the wealthiest among us 
are asked to contribute nothing. We attempted to substitute 
these and other cuts with an equal amount of deficit reduction 
through the so-called ``Buffett Rule,'' which would have 
affected only those with annual incomes of $1 million or more a 
year. Regrettably, the majority refused to allow a vote on this 
more equitable approach for reducing our deficit.
                                                      Sander Levin.
                 SUBTITLE C--HUMAN RESOURCES PROVISIONS

                                CONTENTS

                                                                   Page
Summary of the Major Policy Decisions in the Legislation.........   505
Report Language: Section-by-Section..............................   513
Committee Oversight Findings.....................................   513
Constitutional Authority Statement...............................   514
Committee Votes..................................................   514
Congressional Budget Office Estimate.............................   515
Changes in Existing Law Made by the Budget Reconcilliation 
  Legislative....................................................   517
Dissenting Views.................................................   539

        Summary of the Major Policy Decisions in the Legislation

    The predecessor to the current Social Services Block Grant 
(SSBG) began in 1956 as a way to match targeted State spending 
on specific services to help families leave welfare. Over the 
ensuing decades, SSBG evolved in both structure and purpose, 
and is now a 100 percent Federal funding stream used to support 
a wide range of services to individuals regardless of their 
income. The Committee, after conducting an oversight hearing on 
program duplication and reviewing related reports by the 
nonpartisan Government Accountability Office (GAO), has 
determined that the SSBG program has critical program flaws 
that argue for its elimination, which will both minimize 
program duplication and achieve significant savings for 
taxpayers. Accordingly, the Committee legislation eliminates 
the SSBG effective on October 1, 2012 (that is, for FY 2013 and 
beyond), saving just under $1.4 billion in FY 2013 and almost 
$17 billion over 10 years.
    The Committee is not opposed to the specific services 
funded by the SSBG, nor does the Committee believe that 
individuals receiving these services are not in need of 
assistance. Indeed, as is described in greater detail below, an 
important argument for ending the SSBG is the fact that it 
duplicates so many other programs, which generally provide far 
greater support than SSBG currently offers for many of the same 
services, such as child care, child welfare and Meals on 
Wheels. Further, the Committee is concerned with the design of 
this program, which President Clinton's FY 1999 budget 
suggested lacks ``statutory performance goals or measures of 
progress'' in arguing for substantial reductions in funding for 
SSBG.\1\
---------------------------------------------------------------------------
    \1\Budget of the United States Government. Fiscal Year 1999. 
Available online: http://www.gpo.gov/fdsys/pkg/BUDGET-1999-BUD/pdf/
BUDGET-1999-BUD.pdf
---------------------------------------------------------------------------
    In sum, the following key flaws in the SSBG program reflect 
how it clearly does not serve taxpayers well:
     No focus: SSBG spends $1.7 billion per year to 
support 29 different types of social services, including a 
catchall category called ``other.'' The program has no Federal 
eligibility requirements for persons receiving social services 
funded from the SSBG.
     Duplicative: Since the predecessor to the current 
SSBG was created in the 1950s, programs that today provide more 
than $446 billion per year in specific social services have 
been created. In nearly all cases, those other programs--
including child care, Head Start, foster care, adoption 
assistance, SSI, and Medicaid--provide far more support than 
SSBG for various social services, but also require State 
financial participation and contain accountability measures to 
track results.
     No State partnership: Unlike other anti-poverty 
programs under the jurisdiction of the Committee on Ways and 
Means, SSBG does not require any State investment to match 
Federal dollars spent through the program. As a result, SSBG is 
structured more like a permanent State aid program than a 
focused anti-poverty program with shared Federal and State 
responsibilities.
     No accountability: SSBG includes no accountability 
for results. State reporting on recipients is limited to a 
simple count of the number of people receiving services funded 
with SSBG dollars, and there is no information collected on the 
demographics of recipients, their earnings, or their progress 
out of poverty and toward self-sufficiency.

History of the Social Services Block Grant

    The SSBG began as many Federal programs do--as a relatively 
small program focused on helping a specific population achieve 
specific goals. But in ensuing years it devolved into a simple 
transfer from Federal taxpayers to States for a broad array of 
services with no accountability for real results.
    Created in 1956, the precursor to the SSBG began as a 50/50 
Federal/State match program designed to provide services to 
help families on welfare move off public assistance. When many 
States declined to participate, in 1962 the Federal match rate 
was increased to 75 percent, allowable spending was expanded to 
include child welfare, adult disability services, and elderly 
services, and eligibility was broadened to include potential 
welfare recipients.
    In 1967, the program was again expanded to cover job 
training and child care services, and the Federal match rate 
was raised yet again to 85 percent. As a result, spending 
exploded from $282 million in FY 1967 to $1.7 billion in FY 
1972, leading Congress to cap Federal spending at $2.5 billion 
per year. In 1974, program services were broadened yet again to 
include an even wider range of social services, and eligibility 
was expanded to include anyone below 85 percent of state median 
income (which is about $43,000 in current terms).
    This prior funding stream officially became the SSBG in 
1981, when annual funding was set at $2.4 billion and all State 
matching and eligibility requirements were eliminated. Since 
1981, annual SSBG funding rose to $2.8 billion in 1991 through 
1995 before falling in the late 1990s and finally settling at 
$1.7 billion since 2001.

Duplication between the SSBG and other Social Service Programs

    On March 1, 2011, the Government Accountability Office 
(GAO) released its first annual report identifying duplicative 
and wasteful government programs, agencies, and offices.\2\ The 
report highlighted billions of dollars spent on redundant 
federal programs. In an April 5, 2011 hearing of the Ways and 
Means Subcommittee on Human Resources on the GAO report on 
program duplication, GAO provided testimony on fragmentation, 
overlap, and duplication among programs under the 
Subcommittee's jurisdiction, including SSBG.
---------------------------------------------------------------------------
    \2\U.S. Government Accountability Office. Opportunities to Reduce 
Potential Duplication in Government Programs, Save Tax Dollars, and 
Enhance Revenue. March 1, 2011. Available online: http://www.gao.gov/
products/GAO-11-318SP
---------------------------------------------------------------------------
    Summarizing their work on human services programs, GAO 
reported that: ``This array of programs plays a key role in 
supporting those in need, but our work has shown it to be too 
fragmented and overly complex--for clients to navigate, for 
program operators to administer efficiently, and for program 
managers and policymakers to assess program performance.''\3\
---------------------------------------------------------------------------
    \3\U.S. Government Accountability Office. Human Services Programs: 
Opportunities to Reduce Inefficiencies. April 5, 2011. Available 
online: http://www.gao.gov/assets/130/125910.pdf
---------------------------------------------------------------------------
    States report spending SSBG funds on 29 different types of 
social services, including a catchall category called 
``other.'' A significant portion of this State-reported SSBG 
spending is for services funded under a variety of other 
Federal programs, including a number under the jurisdiction of 
the Committee, as described in detail below.

Child Care

    The largest category of SSBG spending reported by States is 
day care for children. However, a 2000 GAO report cited the 
SSBG as one of 69 programs, administered by nine different 
Federal agencies, funding early education and care for children 
under five.\4\ Total SSBG spending on child care in FY 2009 was 
$391 million (including $110 million spent from State's annual 
allotments for SSBG and $280 million in funds transferred to 
SSBG from the Temporary Assistance for Needy Families or TANF 
program). However, this SSBG spending on child care is less 
than four percent of all Federal funding for child care. Direct 
funding for the Child Care and Development Fund, the major 
Federal child care program, rose from $3.5 billion in 2000 to 
$5.1 billion in 2011. States spent another $5.4 billion from 
the TANF block grant on child care in FY 2010. An additional $2 
billion in child care funding was awarded to States through the 
American Recovery and Reinvestment Act. The credit for child 
and dependent care, the exclusion of employer-provided child 
care, and the credit for employer-provided dependent care also 
help individuals offset the cost of paying for child care, and 
the Joint Committee on Taxation's Estimates of Federal Tax 
Expenditures for Fiscal Years 2011-2015, estimated that these 
provisions would result in $4.6 billion of forgone revenue for 
2011.\5\
---------------------------------------------------------------------------
    \4\U.S. Government Accountability Office. Early Education and Care: 
Overlap Indicates Need to Assess Crosscutting Programs. April, 2000. 
Available online: http://www.gao.gov/new.items/he00078.pdf.
    \5\Joint Committee on Taxation. Estimates of Federal Tax 
Expenditures for Fiscal Years 2011-2015, JCS-1-12, page 46. Available 
online: http://www.jct.gov/publications.html?func=startdown&id=4386, 
page 42.
---------------------------------------------------------------------------

Child Welfare

    Child welfare is a shared responsibility between the States 
and the Federal government. Federal foster care and adoption 
assistance programs match State spending on child welfare 
services. In contrast, spending on child welfare under the SSBG 
program includes no State matching requirement. Recent and 
ongoing trends in child welfare funding suggest that, even 
without SSBG funds, Federal support for various child welfare 
services and supports will only continue to grow in the years 
ahead.
    Recent non-SSBG child welfare spending growth has been 
larger than all current SSBG spending on child welfare. Total 
SSBG spending in FY 2009 on all child welfare services 
(including foster care, adoption, and child protective 
services) totaled $714 million; meanwhile, other Federal 
spending on child welfare grew by $753 million in the past five 
years alone. States also spend a significant amount of money 
from TANF on child welfare. A report on child welfare spending 
in 2006 revealed that TANF funds spent on child welfare ($2.4 
billion) comprised 19 percent of total Federal and State child 
welfare spending; it is likely that both that share as well as 
absolute TANF spending on child welfare have increased since 
that survey was completed.\6\
---------------------------------------------------------------------------
    \6\Child Trends. Federal, State, and Local Spending to Address 
Child Abuse and Neglect in SFY 2006. December, 2008. Available online: 
http://www.childtrends.org/Files/Child_Trends-
2009_02_17_FR_CWFinancePaper.pdf.
---------------------------------------------------------------------------
    Major Federal child welfare programs are scheduled to 
continue to grow in the years ahead. Due to Federal changes 
enacted in 2008, States will receive Federal funding to support 
an increasing proportion of adoptions in future years. Overall 
Federal funding for supporting adoption is expected to rise by 
more than $1 billion in the next six years, dwarfing current 
SSBG spending on adoption, as well as all other child welfare 
activities. Also as a result of this additional federal 
investment, State spending on adoption is expected to decrease 
in the coming years, freeing State funds that can and should be 
reinvested into other child welfare services.
    States are also beginning to receive new Federal 
entitlement funding to support children placed with relatives. 
As the Federal government begins paying for the cost of kinship 
care (i.e. when a child is placed with a relative or close 
family friend) CBO projects that Federal reimbursement for 
kinship care will rise from $53 million per year in FY 2012 to 
$568 million per year by 2018, constituting a significant new 
source of child welfare funding for States and families with 
child welfare needs.\7\
---------------------------------------------------------------------------
    \7\Congressional Budget Office. Foster Care and Adoption 
Assistance--March 2012 Baseline. April 10, 2012. Available online: 
http://www.cbo.gov/publication/43068.
---------------------------------------------------------------------------

Disability Services

    In FY 2009, States reported spending 11 percent of their 
SSBG funds on special services for the disabled. A GAO report 
published in 2005 identified almost 200 programs in 20 agencies 
that provided over $120 billion in federal funds to serve 
people with disabilities.\8\ In addition to these programs, the 
GAO determined that Medicare and Medicaid spent $132 billion in 
2002 on services for the disabled.
---------------------------------------------------------------------------
    \8\Government Accountability Office. Federal Disability Assistance: 
Wide Array of Programs Needs to be Examined in Light of 21st Century 
Challenges. June 2, 2005. Available online: http://gao.gov/products/
GAO-05-626.
---------------------------------------------------------------------------

Meals on Wheels

    Eighteen States reported spending a small portion of their 
SSBG funds on home-delivered meals. According to the 
nonpartisan Congressional Research Service, ``home-delivered 
meals'' constituted just one percent of SSBG expenditures in FY 
2009.\9\ Other current government programs provide far more 
support for meals on wheels than SSBG, showing how it is 
duplicative.
---------------------------------------------------------------------------
    \9\Congressional Research Service. Social Services Block Grant: 
Background and Funding (Report 94-953). January 3, 2012.
---------------------------------------------------------------------------
    Primary funding for what is commonly referred to as ``meals 
on wheels'' is provided under the Elderly Nutrition Services 
program authorized under Title III of the Older Americans Act. 
This program, under the jurisdiction of the Committee on 
Education and the Workforce, provides grants to state agencies 
on aging to support congregate and home-delivered meals for 
people aged 60 and older. According to CRS, Title III of the 
Older Americans Act spent $217 million on meals on wheels 
services in 2011 (out of a total of $818 million the program 
spent on all nutrition assistance).\10\ The share of Older 
Americans Act spending on meals on wheels has been rising in 
recent years. As a result, the program has grown by almost 47 
percent from FY 1990 to FY 2009.
---------------------------------------------------------------------------
    \10\Congressional Research Service. Older Americans Act: Title III 
Nutrition Services Program (Report RS21202). June 17, 2011.
---------------------------------------------------------------------------
    Significant funding for meals on wheels also comes from 
private sources. For example, the Meals on Wheels Association 
of America, ``the oldest and largest organization in the United 
States representing those who offer meal services to people in 
need,'' reports that 92 percent of their funding comes from 
sources other than government grants.\11\
---------------------------------------------------------------------------
    \11\Meals on Wheels Association of America. Where Your Dollars Go. 
Retrieved April 26, 2012. Available online: http://www.mowaa.org/
yourdollars.
---------------------------------------------------------------------------

Adult Protective Services

    States report that about eight percent of their SSBG 
spending is for Adult Protective Services. However, a separate 
Federal program was recently created for this specific purpose. 
Created as part of the Patient Protection and Affordable Care 
Act (P.L. 111-148), Subtitle B of Title XX of the Social 
Security Act titled ``Elder Justice'' established 1) an Elder 
Justice Coordinating Council; 2) an Advisory Board on Elder 
Abuse, Neglect, and Exploitation; 3) a new grant program for 
forensic centers to help organizations develop specialized 
expertise related to elder abuse, neglect, and exploitation; 
and 4) a number of new grant programs to promote elder justice. 
Together, the provisions in the Elder Justice subtitle are 
authorized at a level of $165 million per year.
    In addition to the Elder Justice program, Medicaid funds 
are also used for this purpose. In a March 2011 report, GAO 
reported that based on their State survey States received at 
least $42 million in FY 2009 from Medicaid for Adult Protective 
Services programs.\12\
---------------------------------------------------------------------------
    \12\U.S. Government Accountability Office. Elder Justice: Stronger 
Federal Leadership Could Enhance National Response to Elder Abuse. 
March, 2011. Available online: http://www.gao.gov/new.items/d11208.pdf.
---------------------------------------------------------------------------
    Beyond Federal funding provided for this purpose, States 
are--and should be--a critical source of funding for Adult 
Protective Services as well. In the same March 2011 GAO report 
and survey, States reported that more than half of the budget 
for Adult Protective Services came from State and local 
revenues. In some States, the entire budget came from these 
sources.

Education and Training

    States reported spending $22 million in SSBG funds on 
education and training services. A recent GAO report on 
education and training programs revealed that in FY2009 the 
federal government spent $18 billion through 47 different 
education and training programs across 9 federal agencies, not 
including SSBG; only one in 10 of these programs had been 
evaluated for effectiveness in the prior seven years.\13\
---------------------------------------------------------------------------
    \13\Multiple Employment and Training Programs: Providing 
Information on Colocating Services and Consolidating Administrative 
Structures Could Promote Efficiencies. Available online: http://
www.gao.gov/products/GAO-11-92.
---------------------------------------------------------------------------

Other Funds Provided in the Recovery Act for Similar Purposes

    Many other Federal programs exist that fund services 
covered by SSBG, such as child care, child welfare, education 
and training, housing services, and disability services as 
described above. In addition to such programs, the 2009 
stimulus law (officially titled the ``American Recovery and 
Reinvestment Act of 2009'') provided significant shares of its 
$787 billion in total funding for many of the services the SSBG 
is designed to support, such as:
           $20.8 billion in additional nutrition 
        assistance funding;
           $11.8 billion for special education and 
        services for disabled children;
           $5.0 billion in additional funds for low-
        income families through TANF;
           $4.2 billion in additional funds for 
        employment and training;
           $2.1 billion additional for Head Start;
           $2.0 billion in additional child care 
        funding;
           $1.5 billion in additional funding for 
        homeless prevention;
           $1.0 billion in additional funding for the 
        Community Services Block Grant, which has almost 
        identical purposes to SSBG;
           $1.0 billion in additional child welfare 
        funding for foster care and adoption;
           $500 million for health professions training 
        programs (a new program);
           $100 million for senior nutrition programs; 
        and
           $50 million for new grants for nonprofit 
        organizations to provide social services.

State Partnership Lacking in the SSBG

    Although the SSBG program is referred to as a block grant, 
SSBG lacks many features commonly associated with block grants 
and related Federal funding streams. First, the program 
contains no match requirement. Other block grant programs, such 
as Temporary Assistance for Needy Families (TANF) and the Child 
Care and Development Fund (CCDF) require States to maintain a 
specified spending level in order to receive Federal funding. 
Although the SSBG originally began as a program requiring 
States to match Federal spending, the match was eliminated over 
30 years ago and States are no longer required to invest State 
dollars to receive funding. Since the State match was 
eliminated, States have received over $70 billion in Federal 
SSBG without having to spend even a single dollar in State 
funds.

No Accountability

    Unlike other block grants, the SSBG is not targeted to a 
specific population through Federal eligibility requirements. 
The program also lacks data on recipients or program services 
that would reveal the impact and effectiveness of the program. 
Due to the lack of eligibility requirements and metrics on 
program performance, the program does not include financial 
penalties for State failure to satisfy program purposes and 
thus States cannot be held accountable for achieving any 
specific outcomes such as reducing poverty, promoting work, or 
ending dependence on government benefits.
    These ongoing flaws have resulted in the SSBG being 
repeatedly cited in both Democrat and Republican budgets as a 
program lacking accountability for results. For example, 
President Clinton's FY 1999 budget proposed substantial 
reductions in funding for the SSBG, stating that ``the budget 
targets funding to programs that can better demonstrate 
positive performance. The Social Services Block Grant supports 
a broad range of social service programs, but without statutory 
performance goals or measures of progress.''\14\
---------------------------------------------------------------------------
    \14\Budget of the United States Government. Fiscal Year 1999. 
Available online: http://www.gpo.gov/fdsys/pkg/BUDGET-1999-BUD/pdf/
BUDGET-1999-BUD.pdf.
---------------------------------------------------------------------------
    In proposing a reduction in funding for the SSBG in 
President Bush's FY 2007 budget, the Administration stated that 
``the SSBG program was rated Results Not Demonstrated in the 
PART process, was found to lack a national system of 
performance measures against which program performance can be 
measured and improvements sought, and critiqued for an absence 
of evaluations of sufficient scope of SSBG-funded activities 
and programs. The program's flexibility and lack of State 
reporting requirements pose a challenge in developing 
measures.''\15\ In later proposing the elimination of funding 
for the program, the Bush Administration stated, ``The 
program's minimal requirements maximize State flexibility but, 
at the same time, do not ensure that funded activities are 
effective. This is because SSBG is a funding stream rather than 
a program with measurable performance objectives.''\16\
---------------------------------------------------------------------------
    \15\U.S. Department of Health and Human Services. FY 2007 ACF 
Congressional Justification: Social Services Block Grant. Available 
online: http://www.acf.hhs.gov/programs/olab/budget/2007/cj2007/
sec3h_ssbg_/_2007cj.pdf.
    \16\House Document 110-123. A Request for Budget Amendment for 
Fiscal Year 2009. Available online: http://www.gpo.gov/fdsys/pkg/CDOC-
110hdoc123/pdf/CDOC-110hdoc123.pdf.
---------------------------------------------------------------------------

Conclusion

    The SSBG began as a focused program created to match State 
spending on helping welfare recipients reduce their dependence 
on government benefits. Over ensuing decades, the program 
evolved to cover more services, at greater Federal cost, for 
more beneficiaries, and with less accountability and fewer 
measurable results. Since its creation, dozens of other 
programs have been created to fund similar services, most of 
which contain focused objectives, include better oversight, and 
can point to tangible results.
    Congress has generally agreed to share the cost of social 
services with States. For those services not funded by the 
Federal government, States support services with their own 
State funds, local funds, or even private dollars. The role of 
the Federal government has never been to pay for the full cost 
of all types of programs and services that States provide to 
assist families in need, nor should it be. Ending the 
duplicative and unaccountable SSBG program means that States 
will have to make choices in prioritizing assistance and 
services. However, to support them and individuals in need, 
States will continue to receive significant and rising funding 
from the Federal government for a range of other social service 
programs, most of which requires some State contribution--
unlike the SSBG. The Committee believes this will provide for a 
stronger partnership between the Federal government and States 
and in the long run better social services for those in need.
    The decision to end funding for this program is based on 
the Committee's view of the Federal government's proper role in 
helping States administer social services, as well as on 
serious flaws in the design of the SSBG program. The Committee 
does not believe continued funding for the SSBG represents a 
wise and effective use of taxpayer dollars, especially as the 
Congress continues to provide hundreds of billions of dollars 
each year to States for a range of social services in programs 
that are more focused and more accountable than the SSBG.
    Such spending on means-tested benefits has grown rapidly in 
recent years--by more than 50 percent from FY 2007 through FY 
2011. This range of means-tested programs provide for a broad 
array of programs and services to low-income families, and 
these programs often serve the same individuals who receive 
services through the SSBG.
---------------------------------------------------------------------------
    \17\Robert Rector, Testimony before the Committee on the Budget, 
U.S. House of Representatives. April 17, 2012. Available online: http:/
/budget.house.gov/UploadedFiles/rectortestimony04172012.pdf

                                  TABLE 1. GROWTH IN MEANS-TESTED SPENDING\17\
----------------------------------------------------------------------------------------------------------------
                                                       Federal Spending     State Spending    Total Spending (in
                                                         (in billions)       (in billions)         billions)
----------------------------------------------------------------------------------------------------------------
FY 2007.............................................             $468.7              $189.2              $657.9
FY 2008.............................................              522.3               191.6               714.1
FY 2009.............................................              612.7               167.2               779.9
FY 2010.............................................              695.3               192.7               888.0
FY 2011.............................................              717.1               210.1               927.2
----------------------------------------------------------------------------------------------------------------

    In this time of staggering deficits, the Federal government 
cannot afford to award money to States with no focus, no 
accountability, and no proven results. President Obama said as 
much in his FY 2013 budget document, stating ``for far too 
long, many Government programs have been allowed to continue or 
to grow even when their objectives are no longer clear and they 
lack rigorous assessment of whether the programs are achieving 
the desired goals. The result has been the profusion of 
programs that are duplicative, ineffective, or outdated--at a 
significant cost to taxpayers.''\18\ When a program is known to 
fund the same services that are provided in literally dozens of 
other Federal programs, as well as having been repeatedly cited 
as ineffective, the Committee believes it is our responsibility 
to say it should end.
---------------------------------------------------------------------------
    \18\Fiscal Year 2013 Budget of the U.S. Government: Cutting Waste, 
Reducing the Deficit, and Asking all to Pay their Fare Share. Available 
online: http://www.whitehouse.gov/sites/default/files/omb/budget/
fy2013/assets/cutting.pdf
---------------------------------------------------------------------------

                  Report Language: Section-by-Section


Section 1. Repeal of the program of block grants to states for social 
        services

    Subsection (a) of this section repeals sections 2001 
through 2007 of Title XX of the Social Security Act, which now 
provides authorization for the Social Services Block Grant 
(SSBG).
    Subsection (b) of this section makes various conforming 
amendments to the Social Security Act and other laws to remove 
references to the SSBG given its repeal.
    Subsection (c) of this section specifies the effective date 
of the repeal of the SSBG, which is October 1, 2012.

                      Committee Oversight Findings

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee concluded that it was appropriate and timely to 
repeal the Social Services Block Grant program as specified in 
the bill, as transmitted.
    In reviewing the effectiveness of social services under the 
jurisdiction of the Committee on Ways and Means, in April 2011 
the Subcommittee on Human Resources heard testimony from GAO on 
fragmentation, overlap, and duplication in SSBG and other 
programs. While GAO reiterated the importance of Federal 
support for social services, they noted that ``at the same 
time, the federal government is facing a structural imbalance 
in its budget, causing policymakers to carefully consider the 
effectiveness and efficiency of all federal programs. In 
particular, concerns have been raised about the multiplicity of 
programs that may show signs of fragmentation, overlap, and 
duplication that could introduce inefficiencies and increase 
costs.''
    The decision to repeal this program was reached as the 
result of this hearing on duplication in social services 
programs, a review of the structure and purpose of the program, 
a study of other programs providing similar services to low-
income families and others in need, an analysis of prior budget 
submissions from both Democratic and Republican 
administrations, and a review of accountability and performance 
measures for the program.

                   Constitutional Authority Statement

    Congress has the power to enact this legislation pursuant 
to the following:

          Article I, Section 8, Clause 1 of the United States 
        Constitution, to ``provide for the common Defence and 
        general Welfare of the United States.''

                         Votes of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the committee print.
    The committee print was ordered favorably transmitted by a 
roll call vote of 22 yeas to 14 nays (with a quorum being 
present).
    The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................  ........        X   .........  Mr. Levin........        X   ........  .........
Mr. Herger.....................  ........        X   .........  Mr. Rangel.......  ........  ........  .........
Mr. Johnson....................  ........        X   .........  Mr. Stark........        X   ........  .........
Mr. Brady......................  ........        X   .........  Mr. McDermott....        X   ........  .........
Mr. Ryan.......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Becerra......        X   ........  .........
Mr. Davis......................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Boustany...................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Gerlach....................  ........        X   .........  Mr. Kind.........        X   ........  .........
Mr. Price......................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Ms. Berkley......        X   ........  .........
Mr. Smith......................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Schock.....................  ........        X   .........
Ms. Jenkins....................  ........        X   .........
Mr. Paulsen....................  ........        X   .........
Mr. Marchant...................  ........        X   .........
Mr. Berg.......................  ........        X   .........
Ms. Black......................  ........        X   .........
Mr. Reed.......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

                           Performance Goals

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation: To end funding for the Social Services Block 
Grant, beginning October 1, 2012.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 23, 2012.
Hon. Dave Camp,
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 the Repeal of the 
Program of Block Grants to States for Social Services.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jonathan 
Morancy.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Repeal of the Program of Block Grants to States for Social Services

    H. Con. Res. 112, the Concurrent Budget Resolution for 
fiscal year 2013, as passed by the House of Representatives on 
March 29, 2012, instructed several committees of the House to 
recommend legislative changes that would reduce deficits over 
the 2012-2022 period. As part of that reconciliation process, 
the House Committee on Ways and Means has approved three 
separate provisions as reconciliation recommendations. The 
following analysis presents estimated budgetary effects for one 
of those three provisions.
    This legislation would repeal sections 2001 through 2007 of 
the Social Security Act, relating to the Social Services Block 
Grant (SSBG) program, starting in fiscal year 2013. SSBG, which 
is administered by the Department of Health and Human Services, 
supports a variety of programs, including child welfare 
services, day care for both children and adults, home-delivered 
meals, disabilities services, and transportation.
    SSBG has a permanent authorization of $1.7 billion per 
year. Spending for this program is classified as direct 
spending; the program's funding, however, is provided in annual 
appropriation acts.
    As shown in the following table, enacting a repeal of the 
SSBG programs would reduce direct spending by nearly $1.4 
billion in 2013 and by about $16.7 billion over the 2012-2022 
period, relative to CBO's current baseline projections.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, in millions of dollars--
                                                    --------------------------------------------------------------------------------------------------------------------------------------------
                                                            2012          2013      2014      2015      2016      2017      2018      2019      2020      2021      2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CHANGES IN DIRECT SPENDING

Repeal Block Grants for Social Services:
    Budget Authority...............................                  0    -1,700    -1,700    -1,700    -1,700    -1,700    -1,700    -1,700    -1,700    -1,700    -1,700     -8,500    -17,000
    Estimated Outlays..............................                  0    -1,360    -1,666    -1,802    -1,717    -1,700    -1,700    -1,700    -1,700    -1,700    -1,700     -8,245    -16,745
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    For this estimate, CBO assumes that the legislation will be 
enacted by October 1, 2012. Because the SSBG repeal would take 
effect in fiscal year 2013 under the legislation proposed by 
the Committee on Ways and Means, the estimate of budgetary 
savings would be unchanged for enactment any time prior to 
October 1 (the beginning of that fiscal year). In other words, 
there would be no effect on spending in fiscal year 2012 even 
if the legislation is enacted sometime during the remainder of 
this fiscal year.
    The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Jonathan 
Morancy. The estimate was approved by Peter H. Fontaine, 
Assistant Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


TITLE IV--GRANTS TO STATES FOR AID AND SERVICES TO NEEDY FAMILIES WITH 
CHILDREN AND FOR CHILD-WELFARE SERVICES

           *       *       *       *       *       *       *


   PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
FAMILIES

           *       *       *       *       *       *       *


SEC. 404. USE OF GRANTS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Authority To Use Portion of Grant for Other Purposes.--
          (1) In general.--Subject to paragraph (2), a State 
        may use not more than 30 percent of the amount of any 
        grant made to the State under section 403(a) for a 
        fiscal year to carry out a State program pursuant to 
        [any or all of the following provisions of law:
                  [(A) Subtitle A of title XX of this Act.
                  [(B) The] the Child Care and Development 
                Block Grant Act of 1990.
          [(2) Limitation on amount transferable to subtitle 1 
        of title xx programs.--
                  [(A) In general.--A State may use not more 
                than the applicable percent of the amount of 
                any grant made to the State under section 
                403(a) for a fiscal year to carry out State 
                programs pursuant to subtitle 1 of title XX.
                  [(B) Applicable percent.--For purposes of 
                subparagraph (A), the applicable percent is 
                4.25 percent in the case of fiscal year 2001 
                and each succeeding fiscal year.]
          [(3)] (2) Applicable [rules.--
                  [(A) In general.--Except as provided in 
                subparagraph (B) of this paragraph, any amount 
                paid] rules.--Any amount paid to a State under 
                this part that is used to carry out a State 
                program pursuant to [a provision of law 
                specified in paragraph (1)] the Child Care and 
                Development Block Grant Act of 1990 shall not 
                be subject to the requirements of this part, 
                but shall be subject to the requirements that 
                apply to Federal funds provided directly under 
                the provision of law to carry out the program, 
                and the expenditure of any amount so used shall 
                not be considered to be an expenditure under 
                this part.
                  [(B) Exception relating to subtitle 1 of 
                title xx programs.--All amounts paid to a State 
                under this part that are used to carry out 
                State programs pursuant to subtitle 1 of title 
                XX shall be used only for programs and services 
                to children or their families whose income is 
                less than 200 percent of the income official 
                poverty line (as defined by the Office of 
                Management and Budget, and revised annually in 
                accordance with section 673(2) of the Omnibus 
                Budget Reconciliation Act of 1981) applicable 
                to a family of the size involved.]

           *       *       *       *       *       *       *


                   PART B--CHILD AND FAMILY SERVICES

Subpart 1--Stephanie Tubbs Jones Child Welfare Services Program

           *       *       *       *       *       *       *


                 STATE PLANS FOR CHILD WELFARE SERVICES

  Sec. 422. (a) * * *
  (b) Each plan for child welfare services under this subpart 
shall--
          (1) provide that (A) the individual or agency that 
        [administers or supervises] administered or supervised 
        the administration of the State's services program 
        under [subtitle 1 of title XX] subtitle A of title XX 
        (as in effect before the repeal of such subtitle) will 
        administer or supervise the administration of the plan 
        (except as otherwise provided in section 103(d) of the 
        Adoption Assistance and Child Welfare Act of 1980), and 
        (B) to the extent that child welfare services are 
        furnished by the staff of the State agency or local 
        agency administering the plan, a single organizational 
        unit in such State or local agency, as the case may be, 
        will be responsible for furnishing such child welfare 
        services;
          (2) provide for coordination between the services 
        provided for children under the plan and the services 
        and assistance provided [under subtitle 1 of title XX,] 
        under the State program funded under part A, under the 
        State plan approved under subpart 2 of this part, under 
        the State plan approved under the State plan approved 
        under part E, and under other State programs having a 
        relationship to the program under this subpart, with a 
        view to provision of welfare and related services which 
        will best promote the welfare of such children and 
        their families;

           *       *       *       *       *       *       *


Part E--Federal Payments for Foster Care and Adoption Assistance

           *       *       *       *       *       *       *


           STATE PLAN FOR FOSTER CARE AND ADOPTION ASSISTANCE

  Sec. 471. (a) In order for a State to be eligible for 
payments under this part, it shall have a plan approved by the 
Secretary which--
          (1) * * *

           *       *       *       *       *       *       *

          (4) provides that the State shall assure that the 
        programs at the local level assisted under this part 
        will be coordinated with the programs at the State or 
        local level assisted under parts A and B of this 
        title[, under subtitle 1 of title XX of this Act,] and 
        under any other appropriate provision of Federal law;

           *       *       *       *       *       *       *

          (8) subject to subsection (c), provides safeguards 
        which restrict the use of or disclosure of information 
        concerning individuals assisted under the State plan to 
        purposes directly connected with (A) the administration 
        of the plan of the State approved under this part, the 
        plan or program of the State under part A, B, or D of 
        this title (including activities under part F) or under 
        title I, V, X, XIV, XVI (as in effect in Puerto Rico, 
        Guam, and the Virgin Islands), [XIX, or XX] or XIX, or 
        the supplemental security income program established by 
        title XVI, (B) any investigation, prosecution, or 
        criminal or civil proceeding, conducted in connection 
        with the administration of any such plan or program, 
        (C) the administration of any other Federal or 
        federally assisted program which provides assistance, 
        in cash or in kind, or services, directly to 
        individuals on the basis of need, (D) any audit or 
        similar activity conducted in connection with the 
        administration of any such plan or program by any 
        governmental agency which is authorized by law to 
        conduct such audit or activity, and (E) reporting and 
        providing information pursuant to paragraph (9) to 
        appropriate authorities with respect to known or 
        suspected child abuse or neglect; and the safeguards so 
        provided shall prohibit disclosure, to any committee or 
        legislative body (other than an agency referred to in 
        clause (D) with respect to an activity referred to in 
        such clause), of any information which identifies by 
        name or address any such applicant or recipient; except 
        that nothing contained herein shall preclude a State 
        from providing standards which restrict disclosures to 
        purposes more limited than those specified herein, or 
        which, in the case of adoptions, prevent disclosure 
        entirely;

           *       *       *       *       *       *       *


                FOSTER CARE MAINTENANCE PAYMENTS PROGRAM

  Sec. 472. (a) * * *

           *       *       *       *       *       *       *

  (h)(1) For purposes of title XIX, any child with respect to 
whom foster care maintenance payments are made under this 
section is deemed to be a dependent child as defined in section 
406 (as in effect as of July 16, 1996) and deemed to be a 
recipient of aid to families with dependent children under part 
A of this title (as so in effect). [For purposes of subtitle 1 
of title XX, any child with respect to whom foster care 
maintenance payments are made under this section is deemed to 
be a minor child in a needy family under a State program funded 
under part A of this title and is deemed to be a recipient of 
assistance under such part.]

           *       *       *       *       *       *       *


              ADOPTION AND GUARDIANSHIP ASSISTANCE PROGRAM

  Sec. 473. (a) * * *
  (b)(1) For purposes of title XIX, any child who is described 
in paragraph [(3)] (2) is deemed to be a dependent child as 
defined in section 406 (as in effect as of July 16, 1996) and 
deemed to be a recipient of aid to families with dependent 
children under part A of this title (as so in effect) in the 
State where such child resides.
  [(2) For purposes of subtitle 1 of title XX, any child who is 
described in paragraph (3) is deemed to be a minor child in a 
needy family under a State program funded under part A of this 
title and deemed to be a recipient of assistance under such 
part.]
  [(3)] (2) A child described in this paragraph is any child--
          (A) * * *

           *       *       *       *       *       *       *

  [(4)] (3) For purposes of [paragraphs (1) and (2)] paragraph 
(1), a child whose costs in a foster family home or child-care 
institution are covered by the foster care maintenance payments 
being made with respect to the child's minor parent, as 
provided in section 475(4)(B), shall be considered a child with 
respect to whom foster care maintenance payments are being made 
under section 472.

           *       *       *       *       *       *       *


TITLE V--MATERNAL AND CHILD HEALTH SERVICES BLOCK GRANT

           *       *       *       *       *       *       *


                         USE OF ALLOTMENT FUNDS

  Sec. 504. (a) * * *
  (b) Amounts described in subsection (a) may not be used for--
          (1) * * *

           *       *       *       *       *       *       *

          (6) payment for any item or service (other than an 
        emergency item or service) furnished--
                  (A) by an individual or entity during the 
                period when such individual or entity is 
                excluded under this title or title XVIII, [XIX, 
                or XX] or XIX pursuant to section 1128, 1128A, 
                1156, or 1842(j)(2), or
                  (B) at the medical direction or on the 
                prescription of a physician during the period 
                when the physician is excluded under this title 
                or title XVIII, [XIX, or XX] or XIX pursuant to 
                section 1128, 1128A, 1156, or 1842(j)(2) and 
                when the person furnishing such item or service 
                knew or had reason to know of the exclusion 
                (after a reasonable time period after 
                reasonable notice has been furnished to the 
                person).

           *       *       *       *       *       *       *


     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION

                       Part A--General Provisions

                              DEFINITIONS

  Sec. 1101. (a) When used in this Act--
          (1) The term ``State'', except where otherwise 
        provided, includes the District of Columbia and the 
        Commonwealth of Puerto Rico, and when used in titles 
        IV, V, VII, XI, XIX, and XXI includes the Virgin 
        Islands and Guam. Such term when used in titles III, 
        IX, and XII also includes the Virgin Islands. Such term 
        when used in title V and in part B of this title also 
        includes American Samoa, the Northern Mariana Islands, 
        and the Trust Territory of the Pacific Islands. Such 
        term when used in titles XIX and XXI also includes the 
        Northern Mariana Islands and American Samoa. In the 
        case of Puerto Rico, the Virgin Islands, and Guam, 
        titles I, X, and XIV, and title XVI (as in effect 
        without regard to the amendment made by section 301 of 
        the Social Security Amendments of 1972) shall continue 
        to apply, and the term ``State'' when used in such 
        titles (but not in title XVI as in effect pursuant to 
        such amendment after December 31, 1973) includes Puerto 
        Rico, the Virgin Islands, and Guam. [Such term when 
        used in title XX also includes the Virgin Islands, 
        Guam, American Samoa, and the Northern Mariana 
        Islands.] Such term when used in title IV also includes 
        American Samoa.

           *       *       *       *       *       *       *


  EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM PARTICIPATION IN 
                MEDICARE AND STATE HEALTH CARE PROGRAMS

  Sec. 1128. (a) * * *

           *       *       *       *       *       *       *

  (h) Definition of State Health Care Program.--For purposes of 
this section and sections 1128A and 1128B, the term ``State 
health care program'' means--
          (1) * * *
          (2) any program receiving funds under title V or from 
        an allotment to a State under such title, or
          [(3) any program receiving funds under subtitle 1 of 
        title XX or from an allotment to a State under such 
        subtitle, or]
          [(4)] (3) a State child health plan approved under 
        title XXI.

           *       *       *       *       *       *       *


                        CIVIL MONETARY PENALTIES

  Sec. 1128A. (a) * * *

           *       *       *       *       *       *       *

  (i) For the purposes of this section:
          (1) The term ``State agency'' means the agency 
        established or designated to administer or supervise 
        the administration of the State plan under title XIX of 
        this Act or designated to administer the State's 
        program under title V [or subtitle 1 of title XX] of 
        this Act.

           *       *       *       *       *       *       *


            PERIOD WITHIN WHICH CERTAIN CLAIMS MUST BE FILED

  Sec. 1132. (a) Notwithstanding any other provision of this 
Act (but subject to subsection (b)), any claim by a State for 
payment with respect to an expenditure made during any calendar 
quarter by the State--
          (1) in carrying out a State plan approved under title 
        I, IV, X, XIV, XVI, [XIX, or XX] or XIX of this Act, or

           *       *       *       *       *       *       *


TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *


                   STATE PLANS FOR MEDICAL ASSISTANCE

  Sec. 1902. (a) * * *

           *       *       *       *       *       *       *

  (e)(1) * * *

           *       *       *       *       *       *       *

  (13) Express Lane Option.--
          (A) * * *

           *       *       *       *       *       *       *

          (F) Express lane agency.--
                  (i) * * *

           *       *       *       *       *       *       *

                  (iii) [Exclusions] Exclusion.--Such term does 
                not include [an agency that determines 
                eligibility for a program established under the 
                Social Services Block Grant established under 
                title XX or] a private, for-profit 
                organization.

           *       *       *       *       *       *       *


     TITLE XX--[BLOCK GRANTS TO STATES FOR SOCIAL SERVICES] HEALTH 
PROFESSIONS DEMONSTRATIONS AND ENVIRONMENTAL HEALTH CONDITION DETECTION

           *       *       *       *       *       *       *


    Subtitle A--[Block Grants to States for Social Services] Health 
Professions Demonstrations and Environmental Health Condition Detection

          [PURPOSES OF TITLE; AUTHORIZATION OF APPROPRIATIONS

  [Sec. 2001. For the purposes of consolidating Federal 
assistance to States for social services into a single grant, 
increasing State flexibility in using social service grants, 
and encouraging each State, as far as practicable under the 
conditions in that State, to furnish services directed at the 
goals of--
          [(1) achieving or maintaining economic self-support 
        to prevent, reduce, or eliminate dependency;
          [(2) achieving or maintaining self-sufficiency, 
        including reduction or prevention of dependency;
          [(3) preventing or remedying neglect, abuse, or 
        exploitation of children and adults unable to protect 
        their own interests, or preserving, rehabilitating or 
        reuniting families;
          [(4) preventing or reducing inappropriate 
        institutional care by providing for community-based 
        care, home-based care, or other forms of less intensive 
        care; and
          [(5) securing referral or admission for institutional 
        care when other forms of care are not appropriate, or 
        providing services to individuals in institutions, 
        there are authorized to be appropriated for each fiscal 
        year such sums as may be necessary to carry out the 
        purposes of this title.

                          [PAYMENTS TO STATES

  [Sec. 2002. (a)(1) Each State shall be entitled to payment 
under this title for each fiscal year in an amount equal to its 
allotment for such fiscal year, to be used by such State for 
services directed at the goals set forth in section 2001, 
subject to the requirements of this title.
  [(2) For purposes of paragraph (1)--
          [(A) services which are directed at the goals set 
        forth in section 2001 include, but are not limited to, 
        child care services, protective services for children 
        and adults, services for children and adults in foster 
        care, services related to the management and 
        maintenance of the home, day care services for adults, 
        transportation services, family planning services, 
        training and related services, employment services, 
        information, referral, and counseling services, the 
        preparation and delivery of meals, health support 
        services and appropriate combinations of services 
        designed to meet the special needs of children, the 
        aged, the mentally retarded, the blind, the emotionally 
        disturbed, the physically handicapped, and alcoholics 
        and drug addicts; and
          [(B) expenditures for such services may include 
        expenditures for--
                  [(i) administration (including planning and 
                evaluation);
                  [(ii) personnel training and retraining 
                directly related to the provision of those 
                services (including both short-and long-term 
                training at educational institutions through 
                grants to such institutions or by direct 
                financial assistance to students enrolled in 
                such institutions); and
                  [(iii) conferences or workshops, and training 
                or retraining through grants to nonprofit 
                organizations within the meaning of section 
                501(c)(3) of the Internal Revenue Code of 1954 
                or to individuals with social services 
                expertise, or through financial assistance to 
                individuals participating in such conferences, 
                workshops, and training or retraining (and this 
                clause shall apply with respect to all persons 
                involved in the delivery of such services).
  [(b) The Secretary shall make payments in accordance with 
section 6503 of title 31, United States Code, to each State 
from its allotment for use under this title.
  [(c) Payments to a State from its allotment for any fiscal 
year must be expended by the State in such fiscal year or in 
the succeeding fiscal year.
  [(d) A State may transfer up to 10 percent of its allotment 
under section 2003 for any fiscal year for its use for that 
year under other provisions of Federal law providing block 
grants for support of health services, health promotion and 
disease prevention activities, or low-income home energy 
assistance (or any combination of those activities). Amounts 
allotted to a State under any provisions of Federal law 
referred to in the preceding sentence and transferred by a 
State for use in carrying out the purposes of this title shall 
be treated as if they were paid to the State under this title 
but shall not affect the computation of the State's allotment 
under this title. The State shall inform the Secretary of any 
such transfer of funds.
  [(e) A State may use a portion of the amounts described in 
subsection (a) for the purpose of purchasing technical 
assistance from public or private entities if the State 
determines that such assistance is required in developing, 
implementing, or administering programs funded under this 
title.
  [(f) A State may use funds provided under this title to 
provide vouchers, for services directed at the goals set forth 
in section 2001, to families, including--
          [(1) families who have become ineligible for 
        assistance under a State program funded under part A of 
        title IV by reason of a durational limit on the 
        provision of such assistance; and
          [(2) families denied cash assistance under the State 
        program funded under part A of title IV for a child who 
        is born to a member of the family who is--
                  [(A) a recipient of assistance under the 
                program; or
                  [(B) a person who received such assistance at 
                any time during the 10-month period ending with 
                the birth of the child.

                              [ALLOTMENTS

  [Sec. 2003. (a) The allotment for any fiscal year to each of 
the jurisdictions of Puerto Rico, Guam, the Virgin Islands, and 
the Northern Mariana Islands shall be an amount which bears the 
same ratio to the amount specified in subsection (c) as the 
amount which was specified for allocation to the particular 
jurisdiction involved for the fiscal year 1981 under section 
2002(a)(2)(C) of this Act (as in effect prior to the enactment 
of this section) bore to $2,900,000,000. The allotment for 
fiscal year 1989 and each succeeding fiscal year to American 
Samoa shall be an amount which bears the same ratio to the 
amount allotted to the Northern Mariana Islands for that fiscal 
year as the population of American Samoa bears to the 
population of the Northern Mariana Islands determined on the 
basis of the most recent data available at the time such 
allotment is determined.
  [(b) The allotment for any fiscal year for each State other 
than the jurisdictions of Puerto Rico, Guam, the Virgin 
Islands, American Samoa, and the Northern Mariana Islands shall 
be an amount which bears the same ratio to--
          [(1) the amount specified in subsection (c), reduced 
        by
          [(2) the total amount allotted to those jurisdictions 
        for that fiscal year under subsection (a), as the 
        population of that State bears to the population of all 
        the States (other than Puerto Rico, Guam, the Virgin 
        Islands, American Samoa, and the Northern Mariana 
        Islands) as determined by the Secretary (on the basis 
        of the most recent data available from the Department 
        of Commerce) and promulgated prior to the first day of 
        the third month of the preceding fiscal year.
  [(c) The amount specified for purposes of subsections (a) and 
(b) shall be--
          [(1) $2,400,000,000 for the fiscal year 1982;
          [(2) $2,450,000,000 for the fiscal year 1983;
          [(3) $2,700,000,000 for the fiscal years 1984, 1985, 
        1986, 1987, and 1989;
          [(4) $2,750,000,000 for the fiscal year 1988;
          [(5) $2,800,000,000 for each of the fiscal years 1990 
        through 1995;
          [(6) $2,381,000,000 for the fiscal year 1996;
          [(7) $2,380,000,000 for the fiscal year 1997;
          [(8) $2,299,000,000 for the fiscal year 1998;
          [(9) $2,380,000,000 for the fiscal year 1999;
          [(10) $2,380,000,000 for the fiscal year 2000; and
          [(11) $1,700,000,000 for the fiscal year 2001 and 
        each fiscal year thereafter.

                         [STATE ADMINISTRATION

  [Sec. 2004. Prior to expenditure by a State of payments made 
to it under section 2002 for any fiscal year, the State shall 
report on the intended use of the payments the State is to 
receive under this title, including information on the types of 
activities to be supported and the categories or 
characteristics of individuals to be served. The report shall 
be transmitted to the Secretary and made public within the 
State in such manner as to facilitate comment by any person 
(including any Federal or other public agency) during 
development of the report and after its completion. The report 
shall be revised throughout the year as may be necessary to 
reflect substantial changes in the activities assisted under 
this title, and any revision shall be subject to the 
requirements of the previous sentence.

                     [LIMITATIONS ON USE OF GRANTS

  [Sec. 2005. (a) Except as provided in subsection (b), grants 
made under this title may not be used by the State, or by any 
other person with which the State makes arrangements to carry 
out the purposes of this title--
          [(1) for the purchase or improvement of land, or the 
        purchase, construction, or permanent improvement (other 
        than minor remodeling) of any building or other 
        facility;
          [(2) for the provision of cash payments for costs of 
        subsistence or for the provision of room and board 
        (other than costs of subsistence during rehabilitation, 
        room and board provided for a short term as an integral 
        but subordinate part of a social service, or temporary 
        emergency shelter provided as a protective service);
          [(3) for payment of the wages of any individual as a 
        social service (other than payment of the wages of 
        welfare recipients employed in the provision of child 
        day care services);
          [(4) for the provision of medical care (other than 
        family planning services, rehabilitation services, or 
        initial detoxification of an alcoholic or drug 
        dependent individual) unless it is an integral but 
        subordinate part of a social service for which grants 
        may be used under this title;
          [(5) for social services (except services to an 
        alcoholic or drug dependent individual or 
        rehabilitation services) provided in and by employees 
        of any hospital, skilled nursing facility, intermediate 
        care facility, or prison, to any individual living in 
        such institution;
          [(6) for the provision of any educational service 
        which the State makes generally available to its 
        residents without cost and without regard to their 
        income;
          [(7) for any child day care services unless such 
        services meet applicable standards of State and local 
        law;
          [(8) for the provision of cash payments as a service 
        (except as otherwise provided in this section);
          [(9) for payment for any item or service (other than 
        an emergency item or service) furnished--
                  [(A) by an individual or entity during the 
                period when such individual or entity is 
                excluded under this title or title V, XVIII, or 
                XIX pursuant to section 1128, 1128A, 1156, or 
                1842(j)(2), or
                  [(B) at the medical direction or on the 
                prescription of a physician during the period 
                when the physician is excluded under this title 
                or title V, XVIII, or XIX pursuant to section 
                1128, 1128A, 1156, or 1842(j)(2) and when the 
                person furnishing such item or service knew or 
                had reason to know of the exclusion (after a 
                reasonable time period after reasonable notice 
                has been furnished to the person); or
          [(10) in a manner inconsistent with the Assisted 
        Suicide Funding Restortation Act of 1997.
  [(b) The Secretary may waive the limitation contained in 
subsection (a)(1) and (4) upon the State's request for such a 
waiver if he finds that the request describes extraordinary 
circumstances to justify the waiver and that permitting the 
waiver will contribute to the State's ability to carry out the 
purposes of this title.

                          [REPORTS AND AUDITS

  [Sec. 2006. (a) Each State shall prepare reports on its 
activities carried out with funds made available (or 
transferred for use) under this title. Reports shall be 
prepared annually, covering the most recently completed fiscal 
year, and shall be in such form and contain such information 
(including but not limited to the information specified in 
subsection (c)) as the State finds necessary to provide an 
accurate description of such activities, to secure a complete 
record of the purposes for which funds were spent, and to 
determine the extent to which funds were spent in a manner 
consistent with the reports required by section 2004. The State 
shall make copies of the reports required by this section 
available for public inspection within the State and shall 
transmit a copy to the Secretary. Copies shall also be 
provided, upon request, to any interested public agency, and 
each such agency may provide its views on these reports to the 
Congress.
  [(b) Each State shall, not less often than every two years, 
audit its expenditures from amounts received (or transferred 
for use) under this title. Such State audits shall be conducted 
by an entity independent of any agency administering activities 
funded under this title, in accordance with generally accepted 
auditing principles. Within 30 days following the completion of 
each audit, the State shall submit a copy of that audit to the 
legislature of the State and to the Secretary. Each State shall 
repay to the United States amounts ultimately found not to have 
been expended in accordance with this title, or the Secretary 
may offset such amounts against any other amount to which the 
State is or may become entitled under this title.
  [(c) Each report prepared and transmitted by a State under 
subsection (a) shall set forth (with respect to the fiscal year 
covered by the report)--
          [(1) the number of individuals who received services 
        paid for in whole or in part with funds made available 
        under this title, showing separately the number of 
        children and the number of adults who received such 
        services, and broken down in each case to reflect the 
        types of services and circumstances involved;
          [(2) the amount spent in providing each such type of 
        service, showing separately for each type of service 
        the amount spent per child recipient and the amount 
        spent per adult recipient;
          [(3) the criteria applied in determining eligibility 
        for services (such as income eligibility guidelines, 
        sliding fee scales, the effect of public assistance 
        benefits, and any requirements for enrollment in school 
        or training programs); and
          [(4) the methods by which services were provided, 
        showing separately the services provided by public 
        agencies and those provided by private agencies, and 
        broken down in each case to reflect the types of 
        services and circumstances involved. The Secretary 
        shall establish uniform definitions of services for use 
        by the States in preparing the information required by 
        this subsection, and make such other provision as may 
        be necessary or appropriate to assure that compliance 
        with the requirements of this subsection will not be 
        unduly burdensome on the States.
  [(d) For other provisions requiring States to account for 
Federal grants, see section 6503 of title 31, United States 
Code.

[SEC. 2007. ADDITIONAL GRANTS.

  [(a) Entitlement.--
          [(1) In general.--In addition to any payment under 
        section 2002, each State shall be entitled to--
                  [(A) 2 grants under this section for each 
                qualified empowerment zone in the State; and
                  [(B) 1 grant under this section for each 
                qualified enterprise community in the State.
          [(2) Amount of grants.--
                  [(A) Empowerment grants.--The amount of each 
                grant to a State under this section for a 
                qualified empowerment zone shall be--
                          [(i) if the zone is designated in an 
                        urban area, $50,000,000, multiplied by 
                        that proportion of the population of 
                        the zone that resides in the State; or
                          [(ii) if the zone is designated in a 
                        rural area, $20,000,000, multiplied by 
                        each proportion.
                  [(B) Enterprise grants.--The amount of the 
                grant to a State under this section for a 
                qualified enterprise community shall be 1/95 of 
                $280,000,000, multiplied by that proportion of 
                the population of the community that resides in 
                the State.
                  [(C) Population determinations.--The 
                Secretary shall make population determinations 
                for purposes of this paragraph based on the 
                most recent decennial census data available.
          [(3) Timing of grants.--
                  [(A) Qualified empowerment zones.--With 
                respect to each qualified empowerment zone, the 
                Secretary shall make--
                          [(i) 1 grant under this section to 
                        each State in which the zone lies, on 
                        the date of the designation of the zone 
                        under part I of subchapter U of chapter 
                        1 of the Internal Revenue Code of 1986; 
                        and
                          [(ii) 1 grant under this section to 
                        each such State, on the 1st day of the 
                        1st fiscal year that begins after the 
                        date of the designation.
                  [(B) Qualified enterprise communities.--With 
                respect to each qualified enterprise community, 
                the Secretary shall make 1 grant under this 
                section to each State in which the community 
                lies, on the date of the designation of the 
                community under part I of subchapter U of 
                chapter 1 of the Internal Revenue Code of 1986.
          [(4) Funding.--$1,000,000,000 shall be made available 
        to the Secretary for grants under this section.
  [(b) Program Options.--Notwithstanding section 2005(a):
          [(1) In order to prevent and remedy the neglect and 
        abuse of children, a State may use amounts paid under 
        this section to make grants to, or enter into contracts 
        with, entities to provide residential or nonresidential 
        drug and alcohol prevention and treatment programs that 
        offer comprehensive services for pregnant women and 
        mothers, and their children.
          [(2) In order to prevent to assist disadvantaged 
        adults and youths in achieving and maintaining self-
        sufficiency, a State may use amounts paid under this 
        section to make grants to, or enter into contracts 
        with--
                  [(A) organizations operated for profit or not 
                for profit, for the purpose of training and 
                employing disadvantaged adults and youths in 
                construction, rehabilitation, or improvement of 
                affordable housing, public infrastructure, and 
                community facilities; and
                  [(B) nonprofit organizations and community or 
                junior colleges, for the purpose of enabling 
                such entities to provide short-term training 
                courses in entrepreneurism and self-employment, 
                and other training that will promote individual 
                self-sufficiency and the interests of the 
                community.
          [(3) A State may use amounts paid under this section 
        to make grants to, or enter into contracts with, 
        nonprofit community-based organizations to enable such 
        organizations to provide activities designed to promote 
        and protect the interests of children and families, 
        outside of school hours, including keeping schools open 
        during evenings and weekends for mentoring and study.
          [(4) In order to assist disadvantaged adults and 
        youths in achieving and maintain economic self-support, 
        a State may use amounts paid under this section to--
                  [(A) fund services designed to promote 
                community and economic development in qualified 
                empowerment zones and qualified enterprise 
                communities, such as skills training, job 
                counseling, transportation services, housing 
                counseling, financial management, and business 
                counseling;
                  [(B) assist in emergency and transitional 
                shelter for disadvantaged families and 
                individuals; or
                  [(C) support programs that promote home 
                ownership, education, or other routes to 
                economic independence for low-income families 
                and individuals.
  [(c) Use of Grants.--
          [(1) In general.--Subject to subsection (d) of this 
        section, each State that receives a grant under this 
        section with respect to an area shall use the grant--
                  [(A) for services directed only at the goals 
                set forth in paragraphs (1), (2), and (3) of 
                section 2001;
                  [(B) in accordance with the strategic plan 
                for the area; and
                  [(C) for activities that benefit residents of 
                the area for which the grant is made.
          [(2) Technical assistance.--A State may use a portion 
        of any grant made under this section in the manner 
        described in section 2002(e).
  [(d) Remittance of Certain Amounts.--
          [(1) Portion of grant upon termination of 
        designation.--Each State to which an amount is paid 
        under this subsection during a fiscal year with respect 
        to an area the designation of which under part I of 
        subchapter U of chapter 1 of the Internal Revenue Code 
        of 1986 ends before the end of the fiscal year shall 
        remit to the Secretary an amount equal to the total of 
        the amounts so paid with respect to the area, 
        multiplied by that proportion of the fiscal year 
        remaining after the designation ends.
          [(2) Amounts paid to the states and not obligated 
        within 2 years.--Each State shall remit to the 
        Secretary any amount paid to the State under this 
        section that is not obligated by the end of the 2-year 
        period that begins with the date of the payment.
  [(e) Reallocation of Remaining Funds.--
          [(1) Remitted amounts.--The amount specified in 
        section 2003(c) for any fiscal year is hereby increased 
        by the total of the amounts remitted during the fiscal 
        year pursuant to subsection (d) of this section.
          [(2) Amounts not paid to the states.--The amount 
        specified in section 2003(c) for fiscal year 1998 is 
        hereby increased by the amount made available for 
        grants under this section that has not been paid to any 
        State by the end of fiscal year 1997.
  [(f) Definitions.--As used in this section:
          [(1) Qualified empowerment zone.--The term 
        ``qualified empowerment zone'' means, with respect to a 
        State, an area--
                  [(A) which has been designated (other than by 
                the Secretary of the Interior) as an 
                empowerment zone under part I of subchapter U 
                of chapter 1 of the Internal Revenue Code of 
                1986;
                  [(B) with respect to which the designation is 
                in effect;
                  [(C) the strategic plan for which is a 
                qualified plan; and
                  [(D) part or all of which is in the State.
          [(2) Qualified enterprise community.--The term 
        ``qualified enterprise community'' means, with respect 
        to a State, an area--
                  [(A) which has been designated (other than by 
                the Secretary of the Interior) as an enterprise 
                community under part I of subchapter U of 
                chapter 1 of the Internal Revenue Code of 1986;
                  [(B) with respect to which the designation is 
                in effect;
                  [(C) the strategic plan for which is a 
                qualified plan; and
                  [(D) part or all of which is in the State.
          [(3) Strategic plan.--The term ``strategic plan'' 
        means, with respect to an area, the plan contained in 
        the application for designation of the area under part 
        I of subchapter U of chapter 1 of the Internal Revenue 
        Code of 1986.
          [(4) Qualified plan.--The term ``qualified plan'' 
        means, with respect to an area, a plan that--
                  [(A) includes a detailed description of the 
                activities proposed for the area that are to be 
                funded with amounts provided under this 
                section;
                  [(B) contains a commitment that the amounts 
                provided under this section to any State for 
                the area will not be used to supplant Federal 
                or non-Federal funds for services and 
                activities which promote the purposes of this 
                section;
                  [(C) was developed in cooperation with the 
                local government or governments with 
                jurisdiction over the area; and
                  [(D) to the extent that any State will not 
                use the amounts provided under this section for 
                the area in the manner described in subsection 
                (b), explains the reasons why not.
          [(5) Rural area.--The term ``rural area'' has the 
        meaning given such term in section 1393(a)(2) of the 
        Internal Revenue Code of 1986.
          [(6) Urban area.--The term ``urban area'' has the 
        meaning given such term in section 1393(a)(3) of the 
        Internal Revenue Code of 1986.]

           *       *       *       *       *       *       *

                              ----------                              


            SECTION 16 OF THE FOOD AND NUTRITION ACT OF 2008

            ADMINISTRATIVE COST-SHARING AND QUALITY CONTROL

  Sec. 16. (a) * * *

           *       *       *       *       *       *       *

  (k) Reductions in Payments for Administrative Costs.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Allocation of administrative costs.--
                  (A) * * *
                  (B) Funds and expenditures.--Subparagraph (A) 
                applies to--
                          (i) funds made available to carry out 
                        part A of title IV[, or title XX,] of 
                        the Social Security Act (42 U.S.C. 601 
                        et seq., 1397 et seq.);

           *       *       *       *       *       *       *

                              ----------                              


    SECTION 402 OF THE PERSONAL RESPONSIBILITY AND WORK OPPORTUNITY 
                       RECONCILIATION ACT OF 1996

SEC. 402. LIMITED ELIGIBILITY OF QUALIFIED ALIENS FOR CERTAIN FEDERAL 
                    PROGRAMS.

  (a) * * *
  (b) Limited Eligibility for Designated Federal Programs.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Designated federal program defined.--For purposes 
        of this title, the term ``designated Federal program'' 
        means any of the following:
                  (A) * * *
                  [(B) Social services block grant.--The 
                program of block grants to States for social 
                services under title XX of the Social Security 
                Act.]
                  [(C)] (B) Medicaid.--A State plan approved 
                under title XIX of the Social Security Act, 
                other than medical assistance described in 
                section 401(b)(1)(A).

           *       *       *       *       *       *       *

                              ----------                              


     SECTION 245A OF THE IMMIGRATION REFORM AND CONTROL ACT OF 1986

  ADJUSTMENT OF STATUS OF CERTAIN ENTRANTS BEFORE JANUARY 1, 1982, TO 
              THAT OF PERSON ADMITTED FOR LAWFUL RESIDENCE

  Sec. 245A. (a) * * *

           *       *       *       *       *       *       *

  (h) Temporary Disqualification of Newly Legalized Aliens From 
Receiving Certain Public Welfare Assistance.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Treatment of certain programs.--Assistance 
        furnished under any of the following provisions of law 
        shall not be construed to be financial assistance 
        described in paragraph (1)(A)(i):
                  (A) * * *

           *       *       *       *       *       *       *

                  (I) Titles V[, XVI, and XX] and XVI, and 
                parts B, D, and E of title IV, of the Social 
                Security Act (and titles I, X, XIV, and XVI of 
                such Act as in effect without regard to the 
                amendment made by section 301 of the Social 
                Security Amendments of 1972).
                              ----------                              


     SECTION 17 OF THE RICHARD B. RUSSELL NATIONAL SCHOOL LUNCH ACT

SEC. 17. CHILD AND ADULT CARE FOOD PROGRAM.

  (a) Program Purpose, Grant Authority and Institution 
Eligibility.--
          (1) * * *
          (2) Definition of institution.--In this section, the 
        term ``institution'' means--
                  (A) * * *
                  (B) any other private organization providing 
                nonresidential child care or day care outside 
                school hours for school children, if[--
                          [(i)] at least 25 percent of the 
                        children served by the organization 
                        meet the income eligibility criteria 
                        established under section 9(b) for free 
                        or reduced price meals; [or]
                          [(ii) the organization receives 
                        compensation from amounts granted to 
                        the States under title XX of the Social 
                        Security Act (42 U.S.C. 1397 et seq.) 
                        (but only if the organization receives 
                        compensation under that title for at 
                        least 25 percent of its enrolled 
                        children or 25 percent of its licensed 
                        capacity, whichever is less);]

           *       *       *       *       *       *       *

                  (D) any other private organization acting as 
                a sponsoring organization for, and that is part 
                of the same legal entity as, one or more 
                organizations that are--
                          (i) * * *
                          (ii) proprietary title XIX [or title 
                        XX] centers (as defined in subsection 
                        (o)(2));

           *       *       *       *       *       *       *

  (o)(1) * * *
  (2) For purposes of this subsection--
          (A) * * *
          (B) the term ``proprietary title XIX [or title XX] 
        center'' means any private, for-profit center providing 
        adult day care services for which it receives 
        compensation from amounts granted to the States under 
        title XIX [or XX] of the Social Security Act and which 
        title XIX [or title XX] beneficiaries were not less 
        than 25 percent of enrolled eligible participants in a 
        calendar month preceding initial application or annual 
        reapplication for program participation.

           *       *       *       *       *       *       *

                              ----------                              


          SECTION 201 OF THE INDIAN CHILD WELFARE ACT OF 1978

  Sec. 201. (a) * * *
  (b) Funds appropriated for use by the Secretary in accordance 
with this section may be utilized as non-Federal matching share 
in connection with funds provided under [titles IV-B and XX] 
part B of title IV of the Social Security Act or under any 
other Federal financial assistance programs which contribute to 
the purpose for which such funds are authorized to be 
appropriated for use under this Act. The provision or 
possibility of assistance under this Act shall not be a basis 
for the denial or reduction of any assistance otherwise 
authorized under [titles IV-B and XX] part B of title IV of the 
Social Security Act or any other federally assisted program. 
For purposes of qualifying for assistance under a federally 
assisted program, licensing or approval of foster or adoptive 
homes or institutions by an Indian tribe shall be deemed 
equivalent to licensing or approval by a State.

           *       *       *       *       *       *       *

                              ----------                              


              SECTION 3803 OF TITLE 31, UNITED STATES CODE

Sec. 3803. Hearing and determinations

  (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *
  (2)(A) * * *

           *       *       *       *       *       *       *

  (C) For purposes of this subsection, the term ``benefits'' 
means--
          (i) * * *

           *       *       *       *       *       *       *

          [(vi) benefits under title XX of the Social Security 
        Act;]
          [(vii)] (vi) benefits under the supplemental 
        nutrition assistance program (as defined in section 
        3(l) of the Food and Nutrition Act of 2008);
          [(viii)] (vii) benefits under chapters 11, 13, 15, 
        17, and 21 of title 38;
          [(ix)] (viii) benefits under the Black Lung Benefits 
        Act;
          [(x)] (ix) benefits under the special supplemental 
        nutrition program for women, infants, and children 
        established under section 17 of the Child Nutrition Act 
        of 1966;
          [(xi)] (x) benefits under section 336 of the Older 
        Americans Act;
          [(xii)] (xi) any annuity or other benefit under the 
        Railroad Retirement Act of 1974;
          [(xiii)] (xii) benefits under the Richard B. Russell 
        National School Lunch Act;
          [(xiv)] (xiii) benefits under any housing assistance 
        program for lower income families or elderly or 
        handicapped persons which is administered by the 
        Secretary of Housing and Urban Development or the 
        Secretary of Agriculture;
          [(xv)] (xiv) benefits under the Low-Income Home 
        Energy Assistance Act of 1981; and
          [(xvi)] (xv) benefits under part A of the Energy 
        Conservation in Existing Buildings Act of 1976,
which are intended for the personal use of the individual who 
receives the benefits or for a member of the individual's 
family.

           *       *       *       *       *       *       *

                              ----------                              


             SECTION 14502 OF TITLE 40, UNITED STATES CODE

Sec. 14502. Demonstration health projects

  (a) * * *

           *       *       *       *       *       *       *

  (d) Operation Grants.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Sources of assistance.--The federal contribution 
        may be provided entirely from amounts appropriated to 
        carry out this section or in combination with amounts 
        provided under other federal grant programs for the 
        operation of health related facilities and the 
        provision of health and child development services, 
        including parts A and B of title IV [and title XX] of 
        the Social Security Act (42 U.S.C. 601 et seq., 620 et 
        seq.[, 1397 et seq.]).

           *       *       *       *       *       *       *

                              ----------                              


             SECTION 2006 OF THE PUBLIC HEALTH SERVICE ACT

                     REQUIREMENTS FOR APPLICATIONS

  Sec. 2006. (a) An application for a grant for a demonstration 
project for services under this title shall be in such form and 
contain such information as the Secretary may require, and 
shall include--
          (1) * * *

           *       *       *       *       *       *       *

          (15) assurances that the applicant has or will make 
        and will continue to make every reasonable effort to 
        collect appropriate reimbursement for its costs in 
        providing services to persons entitled to services 
        under parts B and E of title IV [and title XX] of the 
        Social Security Act;

           *       *       *       *       *       *       *

                              ----------                              


OLDER AMERICANS ACT OF 1965

           *       *       *       *       *       *       *


TITLE II--ADMINISTRATION ON AGING

           *       *       *       *       *       *       *


                      FEDERAL AGENCY CONSULTATION

  Sec. 203. (a) * * *
  (b) For the purposes of subsection (a), programs related to 
the objectives of this Act shall include--
          (1) * * *

           *       *       *       *       *       *       *

          (3) titles XVI, XVIII, [XIX, and XX] and XIX of the 
        Social Security Act,

           *       *       *       *       *       *       *


                      SURPLUS PROPERTY ELIGIBILITY

  Sec. 213. Any State or local government agency, and any 
nonprofit organization or institution, which receives funds 
appropriated for programs for older individuals under this Act, 
under title IV [or title XX] of the Social Security Act, or 
under titles VIII and X of the Economic Opportunity Act of 1964 
and the Community Services Block Grant Act, shall be deemed 
eligible to receive for such programs, property which is 
declared surplus to the needs of the Federal Government in 
accordance with laws applicable to surplus property.

           *       *       *       *       *       *       *


      TITLE III--GRANTS FOR STATE AND COMMUNITY PROGRAMS ON AGING

Part A--General Provisions

           *       *       *       *       *       *       *


                               AREA PLANS

  Sec. 306. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) Subject to regulations prescribed by the Assistant 
Secretary, an area agency on aging designated under section 
305(a)(2)(A) or, in areas of a State where no such agency has 
been designated, the State agency, may enter into agreement 
with agencies administering programs under the Rehabilitation 
Act of 1973, and [titles XIX and XX] title XIX of the Social 
Security Act for the purpose of developing and implementing 
plans for meeting the common need for transportation services 
of individuals receiving benefits under such Acts and older 
individuals participating in programs authorized by this title.
  (2) In accordance with an agreement entered into under 
paragraph (1), funds appropriated under this title may be used 
to purchase transportation services for older individuals and 
may be pooled with funds made available for the provision of 
transportation services under the Rehabilitation Act of 1973, 
and [titles XIX and XX] title XIX of the Social Security Act.

           *       *       *       *       *       *       *

                              ----------                              


   SECTION 2605 OF THE LOW-INCOME HOME ENERGY ASSISTANCE ACT OF 1981

                     APPLICATIONS AND REQUIREMENTS

  Sec. 2605. (a) * * *
  (b) As part of the annual application required by subsection 
(a), the chief executive officer of each State shall certify 
that the State agrees to--
          (1) * * *

           *       *       *       *       *       *       *

          (4) coordinate its activities under this title with 
        similar and related programs administered by the 
        Federal Government and such State, particularly low-
        income energy-related programs under subtitle B of 
        title VI (relating to community services block grant 
        program), under the supplemental security income 
        program, under part A of title IV of the Social 
        Security Act, [under title XX of the Social Security 
        Act,] under the low-income weatherization assistance 
        program under title IV of the Energy Conservation and 
        Production Act, or under any other provision of law 
        which carries out programs which were administered 
        under the Economic Opportunity Act of 1964 before the 
        date of the enactment of this Act;

           *       *       *       *       *       *       *

  (j) In verifying income eligibility for purposes of 
subsection (b)(2)(B), the State may apply procedures and 
policies consistent with procedures and policies used by the 
State agency administering programs under part A of title IV of 
the Social Security Act, [under title XX of the Social Security 
Act,] under subtitle B of title VI of this Act (relating to 
community services block grant program), under any other 
provision of law which carries out programs which were 
administered under the Economic Opportunity Act of 1964 before 
the date of the enactment of this Act, or under other income 
assistance or service programs (as determined by the State).

           *       *       *       *       *       *       *

                              ----------                              


 SECTION 602 OF THE CHILD DEVELOPMENT ASSOCIATE SCHOLARSHIP ASSISTANCE 
                              ACT OF 1985

[SEC. 602. GRANTS AUTHORIZED.

  [The Secretary is authorized to make a grant for any fiscal 
year to any State receiving a grant under title XX of the 
Social Security Act for such fiscal year to enable such State 
to award scholarships to eligible individuals within the State 
who are candidates for the Child Development Associate 
credential.]

           *       *       *       *       *       *       *

                              ----------                              


   SECTION 3 OF THE ASSISTED SUICIDE FUNDING RESTRICTION ACT OF 1997

SEC. 3. RESTRICTION ON USE OF FEDERAL FUNDS UNDER HEALTH CARE PROGRAMS.

  (a)  * * *

           *       *       *       *       *       *       *

  (d) List of Programs to Which Restrictions Apply.--
          (1) Federal health care funding programs.--Subsection 
        (a) applies to funds appropriated under or to carry out 
        the following:
                  (A)  * * *

           *       *       *       *       *       *       *

                  [(C) Title xx social services block grant.--
                Title XX of the Social Security Act.]
                  [(D)] (C) Maternal and child health block 
                grant 
                program.--Title V of the Social Security Act.
                  [(E)] (D) Public health service act.--The 
                Public Health Service Act.
                  [(F)] (E) Indian health care improvement 
                act.--The Indian Health Care Improvement Act.
                  [(G)] (F) Federal employees health benefits 
                program.--Chapter 89 of title 5, United States 
                Code.
                  [(H)] (G) Military health care system 
                (including tricare and champus programs).--
                Chapter 55 of title 10, United States Code.
                  [(I)] (H) Veterans medical care.--Chapter 17 
                of title 38, United States Code.
                  [(J)] (I) Health services for peace corps 
                volunteers.--Section 5(e) of the Peace Corps 
                Act (22 U.S.C. 2504(e)).
                  [(K)] (J) Medical services for federal 
                prisoners.--
                Section 4005(a) of title 18, United States 
                Code.

           *       *       *       *       *       *       *


  DISSENTING VIEWS ON RECOMMENDATION TO ELIMINATE THE SOCIAL SERVICES 
                              BLOCK GRANT

    These recommendations to the Budget Committee follow a 
disturbing but familiar pattern. Once again, the Majority has 
targeted seniors, children, people with disabilities, and 
middle-income families rather than ask the very wealthiest 
Americans to pay their fair share. We strongly oppose this 
unfair approach, these specific legislative proposals, and the 
complete lack of consultation, public discussion, or analysis 
of the consequences of these policies that preceded our 
Committee action. We support a fair and balanced approach to 
deficit reduction. The Majority's recommendation is neither 
fair nor balanced.
    We strongly oppose eliminating the Social Services Block 
Grant, which helps fund protective services for abused 
children, home-based services for the disabled and elderly, and 
a variety of other services for vulnerable populations.
    The Social Services Block Grant (SSBG) was signed into law 
by President Reagan in 1981 to provide States and local 
communities with a flexible funding source to meet challenging 
social service needs. Annual funding for the SSBG has declined 
in nominal terms from $2.8 billion in 1995 to $1.7 billion 
today, so this program already has been significantly reduced 
in scope and cost.
    Without a single hearing, or even the introduction of a 
bill, the majority has moved to repeal the SSBG forever--a step 
that would have drastic consequences for millions of at-risk 
Americans. Services for up to 1.7 million older Americans, 
including home care and home delivered meals; services for up 
to 1 million disabled individuals, including respite care and 
transportation; and child care and child protective services 
for several million children would be severely jeopardized if 
the SSBG was eliminated.
    In opposing the repeal of this program, the National 
Conference of State Legislatures notes that ``State legislators 
would not necessarily be able to backfill programs funded by 
the SSBG due to four years of back to back reductions in their 
own state budgets.'' Only by raising taxes or cutting other 
important programs would States be able to maintain even some 
of the vital services provided by the SSBG.
    Even as the majority's Budget Resolution proposes to cut 
and replace Medicaid and the Supplemental Nutrition Assistance 
Program (SNAP) with block grants to supposedly make the 
programs more flexible, the majority has suggested they are 
seeking to eliminate the Social Services Block Grant in part 
because it is too flexible. This is especially disappointing 
given the past bipartisan support for the SSBG in this 
Committee. For example, between 2000 and 2003, Chairman Camp 
signed four separate letters urging an increase in SSBG 
funding, making the point that ``SSBG has been a key source of 
flexible funding for critical social services.''
    We are committed to bringing our budget into balance, but 
do not believe that children, senior citizens and the disabled 
should be targeted for massive cuts, as the wealthiest among us 
are asked to contribute nothing. We attempted to substitute 
these and other cuts with an equal amount of deficit reduction 
through the so-called ``Buffett Rule,'' which would have 
affected only those with annual incomes of $1 million or more a 
year. Regrettably, the majority refused to allow a vote on this 
more equitable approach for reducing our deficit.
                                                      Sander Levin.
                      The Committee on the Budget
                    Report Requirements of the House

                              ----------                              


                         Votes of the Committee

    Clause 3(b) of House Rule XIII requires each committee 
report to accompany any bill or resolution of a public 
character to include the total number of votes cast for and 
against each roll call vote, on a motion to report and any 
amendments offered to the measure or matter, together with the 
names of those voting for and against.
    Listed below are the actions taken in the Committee on the 
Budget of the House of Representatives on the Sequester 
Replacement Act of 2012.
    On May 7, 2012, the committee met in open session, a quorum 
being present.
    Chairman Ryan asked unanimous consent to be authorized, 
consistent with clause 4 of House Rule XVI, to declare a recess 
at any time during the committee meeting.
    There was no objection to the unanimous consent request.
    Chairman Ryan asked unanimous consent to dispense with the 
first reading of the bill and the bill be considered as read 
and open to amendment at any point.
    There was no objection to the unanimous consent request.
    The committee adopted and ordered reported the Sequester 
Replacement Reconciliation Act of 2012.
    Mr. Garrett made a motion that the committee report the 
bill with a favorable recommendation and that the bill do pass.
    The motion was agreed to by a roll call vote of 21 ayes and 
9 noes.

                           ROLLCALL VOTE NO. 1
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN        X                         VAN                  X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT     X                         SCHWARTZ             X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON     X                         KAPTUR
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL     X                         DOGGETT
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT     X                         BLUMENAU
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                                  McCOLLUM             X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE        X                         YARMUTH              X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE       X                         PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT     X                         HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET     X                         RYAN
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA     X                         WASSERMA             X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR     X                         MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK       X                         CASTOR               X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE      X                         SHULER               X
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES      X                         BASS                 X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE     X                         BONAMICI             X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA     X                         ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG       X     .......             ........
 (IN)
------------------------------------------------------------------------
AMASH       X                         ........
 (MI)
------------------------------------------------------------------------
ROKITA      X                         ........
 (IN)
------------------------------------------------------------------------
GUINTA      X                         ........
 (NH)
------------------------------------------------------------------------
WOODALL     X
 (GA)
------------------------------------------------------------------------

    Mr. Garrett made a motion that, pursuant to clause 1 of 
rule XXII, the Chairman be authorized to offer such motions as 
may be necessary in the House to go to conference with the 
Senate, and staff be authorized to make any necessary technical 
and conforming changes to the bill.
    The motion was agreed to without objection.

              MOTIONS ON THE RULE FOR CONSIDERATION OF THE
            SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012

A Motion Offered by Ms. Castor
    1. Representative Castor moved that the Committee on the 
Budget direct its chairman to request on behalf of the 
committee, that the rule for consideration of the Sequester 
Replacement Reconciliation Act of 2012 make in order an 
amendment that would strike the repeal of the Maintenance of 
Effort requirements and the Children's Health Insurance Program 
bonus payments and replace the section with a revenue increase 
from domestic oil companies through the elimination of certain 
deductions.
    The motion was not agreed to by a roll call vote of 12 ayes 
and 21 noes.

                           ROLLCALL VOTE NO. 2
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN                 X                VAN          X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT              X                SCHWARTZ     X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON              X                KAPTUR       X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL              X                DOGGETT      X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT              X                BLUMENAU
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                                  McCOLLUM     X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                 X                YARMUTH      X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE                X                PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT              X                HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET              X                RYAN         X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA              X                WASSERMA     X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR              X                MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK                X                CASTOR       X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE               X                SHULER       X
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES               X                BASS         X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE              X                BONAMICI     X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA              X                ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG                X                ........
 (IN)
------------------------------------------------------------------------
AMASH                X     .........
 (MI)
------------------------------------------------------------------------
ROKITA               X     .........
 (IN)
------------------------------------------------------------------------
GUINTA               X     .........
 (NH)
------------------------------------------------------------------------
WOODALL              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Ms. Schwartz and Ms. Wasserman Schultz
    2. Representatives Schwartz and Wasserman Schultz moved 
that the Committee on the Budget direct its chairman to request 
on behalf of the committee, that the rule for consideration of 
the Sequester Replacement Reconciliation Act of 2012 make in 
order an amendment that strikes the repeal of the Prevention 
and Public Health Fund under the Affordable Care Act and 
replace the section with a revenue increase from U.S. 
businesses with international operations.
    The motion was not agreed to by a roll call vote of 12 ayes 
and 21 noes.

                           ROLLCALL VOTE NO. 3
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN                 X                VAN          X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT              X                SCHWARTZ     X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON              X                KAPTUR       X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL              X                DOGGETT      X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT              X                BLUMENAU
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                 X                McCOLLUM     X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                 X                YARMUTH      X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE                                 PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT              X                HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET              X                RYAN         X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA              X                WASSERMA     X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR              X                MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK                X                CASTOR       X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE               X                SHULER       X
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES               X                BASS         X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE              X                BONAMICI     X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA              X                ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG                X                ........
 (IN)
------------------------------------------------------------------------
AMASH                X     .........
 (MI)
------------------------------------------------------------------------
ROKITA               X     .........
 (IN)
------------------------------------------------------------------------
GUINTA               X     .........
 (NH)
------------------------------------------------------------------------
WOODALL              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Doggett and Ms. Bonamici
    3. Representatives Doggett and Bonamici moved that the 
Committee on the Budget direct its chairman to request on 
behalf of the committee, that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that strikes the repeal of the Social Services 
Block Grant and replaces it with a revenue increase from the 
largest five oil companies.
    The motion was not agreed to by a roll call vote of 13 ayes 
and 21 noes.

                           ROLLCALL VOTE NO. 4
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN                 X                VAN          X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT              X                SCHWARTZ     X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON              X                KAPTUR       X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL              X                DOGGETT      X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT              X                BLUMENAU     X
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                                  McCOLLUM     X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                 X                YARMUTH      X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE                X                PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT              X                HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET              X                RYAN         X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA              X                WASSERMA     X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR              X                MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK                X                CASTOR       X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE               X                SHULER       X
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES               X                BASS         X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE              X                BONAMICI     X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA              X                ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG                X                ........
 (IN)
------------------------------------------------------------------------
AMASH                X     .........
 (MI)
------------------------------------------------------------------------
ROKITA               X     .........
 (IN)
------------------------------------------------------------------------
GUINTA               X     .........
 (NH)
------------------------------------------------------------------------
WOODALL              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Blumenauer and Mr. Yarmuth
    4. Representatives Blumenauer and Yarmuth moved that the 
Committee on the Budget direct its chairman to request on 
behalf of the committee, that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that strikes the reductions in Supplemental 
Nutrition Assistance Program and replaces it with reduced 
agriculture subsidies.
    The motion was not agreed to by a roll call vote of 13 ayes 
and 19 noes.

                           ROLLCALL VOTE NO. 5
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN                 X                VAN          X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT              X                SCHWARTZ     X
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON              X                KAPTUR       X
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL              X                DOGGETT      X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT              X                BLUMENAU     X
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN                 X                McCOLLUM     X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                 X                YARMUTH      X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE                X                PASCRELL
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT              X                HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET                               RYAN         X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA              X                WASSERMA     X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR                               MOORE
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK                X                CASTOR       X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE                                SHULER       X
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES               X                BASS         X
 (TX)                                  (CA)
------------------------------------------------------------------------
MULVANE              X                BONAMICI     X
 Y (SC)                                (OR)
------------------------------------------------------------------------
HUELSKA              X                ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG                X                ........
 (IN)
------------------------------------------------------------------------
AMASH                X     .........
 (MI)
------------------------------------------------------------------------
ROKITA               X     .........
 (IN)
------------------------------------------------------------------------
GUINTA               X     .........
 (NH)
------------------------------------------------------------------------
WOODALL              X
 (GA)
------------------------------------------------------------------------

    At the end of the vote on the fourth motion, Mr. Akin made 
a unanimous consent request that the record reflect that he had 
been unavoidably detained due to medical reasons, and had he 
been present he would have voted favorably to report the 
Sequester Reconciliation Replacement Act and would have voted 
against the first motion offered by Ms. Castor.

               Statement on Committee Oversight Findings

    Clause 3(c)(1) of rule XIII of the Rules of the House of 
Representatives requires the report of a committee on a measure 
that has been approved by the committee to contain oversight 
findings and recommendations required pursuant to clause 
(2)(b)(1) of rule X. These oversight findings and a description 
of hearings held by the Committee on the Budget may be found in 
the introduction to this report.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
reform government, make it more efficient, and to reduce 
spending.

                   Constitutional Authority Statement

    Pursuant to clause 7 of rule XII of the Rules of the House 
of Representatives, the committee finds the constitutional 
authority for this legislation in Article I, section 9, clause 
7.

                      Advisory Committee Statement

    No advisory committee within the meaning of section 5(b) of 
the Federal Advisory Committee Act was created by this 
legislation.

                Applicability to the Legislative Branch

    The committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       Federal Mandates Statement

    The committee adopted the estimate of Federal mandates 
prepared by the Director of the Congressional Budget Office 
pursuant to section 423 of the Unfunded Mandates Reform Act 
(Public Law 104-4).

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, this measure does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.

          Changes in Existing Law Made by the Bill as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the provisions of the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italics, existing law in 
which no change is proposed is shown in roman). These changes 
may be found in the individual titles of this report.

                        Committee Cost Estimate

    For purposes of clause 3(c)(2) and (3) of rule XIII of the 
Rules of the House of Representatives and section 308(a)(1) of 
the Congressional Budget Act of 1974 (relating to estimates of 
new budget authority, new spending authority, new credit 
authority, or increased or decreased revenues or tax 
expenditures), the committee report incorporates the cost 
estimate prepared by the Director of the Congressional Budget 
Office pursuant to sections 402 and 423 of the Congressional 
Budget Act of 1974.

                  Congressional Budget Office Estimate

                       Congressional Budget Office,
                                             U.S. Congress,
                                       Washington, DC, May 8, 2012.
Hon. Paul Ryan, Chairman,
Committee on the Budget, U.S. House of Representatives, Washington, DC 
        20515.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) has 
reviewed the Sequester Replacement Reconciliation Act, as ordered 
reported by the House Committee on the Budget on May 7, 2012. The two 
enclosed tables present estimates of the legislation's effects on 
direct spending and revenues under two alternative enactment date 
assumptions. Table 1 provides estimates assuming enactment around 
October 1, 2012, while Table 2 provides estimates assuming enactment by 
July 1, 2012, as you directed in your letter to CBO dated April 2, 
2012.
    Assuming enactment around October 1, 2012, CBO and the staff of the 
Joint Committee on Taxation (JCT) estimate that the reconciliation act 
would reduce deficits by $15.3 billion over the 2012-2013 period, by 
$136.9 billion over the 2012-2017 period, and by $328.0 billion over 
the 2012-2022 period.
    Under assumed enactment by July 1, 2012, CBO and JCT estimate that 
the legislation would reduce deficits by $19.7 billion over the 2012-
2013 period, by $142.0 billion over the 2012-2017 period, and by $333.0 
billion over the 2012-2022 period.
    The tables present changes in estimated direct spending and 
revenues, by title. The legislation's six titles reflect reconciliation 
recommendations approved by the House Committees on Agriculture, Energy 
and Commerce, Financial Services, Judiciary, Oversight and Government 
Reform, and Ways and Means. CBO previously transmitted cost estimates 
during the week of April 23-27 for the recommendations approved by 
those committees, all of which received reconciliation instructions 
under H. Con. Res. 112, the budget resolution for fiscal year 2013, as 
passed by the House of Representatives on March 29, 2012. The estimates 
for individual committee recommendations are posted under ``cost 
estimates'' on CBO's Web site (www.cbo.gov).
    The composite bill approved by the Committee on the Budget does not 
make any changes to the recommendations approved by the six committees. 
The estimates presented in Tables 1 and 2, however, account for the 
overlap and interactions between some of those committee proposals. 
Specifically, there are overlapping provisions in the recommendations 
contained in title II (Energy and Commerce) and title IV (Judiciary) 
that would impose limits on medical malpractice litigation in state and 
federal courts. Further, there are interactions between the health care 
provisions included in title II and title VI (Ways and Means).
    If you wish further details on this estimate, we will be pleased to 
provide them.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
Enclosure.
    cc: Hon. Chris Van Hollen, Ranking Member.

 TABLE 1.--ESTIMATE OF THE EFFECTS ON DIRECT SPENDING AND REVENUES FOR THE SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON THE BUDGET ON MAY 7,
                                                                         2012, ASSUMING ENACTMENT AROUND OCTOBER 1, 2012
                                                                            [By fiscal year, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      2012     2013       2014       2015       2016       2017       2018       2019       2020       2021       2022     2012-2017   2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Title I--Agriculture:
    Estimated Budget Authority.....................      0     -5,638     -3,347     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093     -3,096     -18,307     -33,694
    Estimated Outlays..............................      0     -5,633     -3,342     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093     -3,096     -18,297     -33,684
Title II--Energy and Commerce:
    Estimated Budget Authority.....................      0    -14,090     -6,470     -8,460    -12,600    -11,050    -10,280    -10,900    -10,830    -11,470    -16,870     -52,670    -113,020
    Estimated Outlays..............................      0     -2,870     -6,520    -12,220    -12,970    -10,580    -10,120    -10,740    -10,600    -11,420    -16,540     -45,160    -104,580
Title III--Financial Services:\a\
    Estimated Budget Authority.....................      0     -3,283     -4,586     -4,907     -4,122     -3,680     -3,845     -3,864     -4,068     -4,254     -4,443     -20,578     -41,052
    Estimated Outlays..............................      0     -3,207     -4,579     -4,905     -4,120     -3,678     -3,842     -3,861     -4,065     -4,251     -4,440     -20,489     -40,948
Title IV--Judiciary:
    Estimated Budget Authority.....................      0       -100       -650     -2,250     -3,850     -4,850     -5,200     -5,500     -5,900     -6,300     -6,700     -11,700     -41,300
    Estimated Outlays..............................      0       -100       -650     -2,250     -3,850     -4,850     -5,200     -5,500     -5,900     -6,300     -6,700     -11,700     -41,300
Title V--Oversight and Government Reform:\b\
    Estimated Budget Authority.....................      0        157        283        400        499        581        559        539        515        494        469       1,919       4,493
    Estimated Outlays..............................      0        157        283        400        499        581        559        539        515        494        469       1,919       4,493
Title VI--Ways and Means:
    Estimated Budget Authority.....................      0     -1,700     -3,561     -4,548     -5,635     -6,164     -6,512     -6,739     -6,904     -7,253     -7,483     -21,609     -56,501
    Estimated Outlays..............................      0     -1,360     -3,527     -4,650     -5,652     -6,164     -6,512     -6,739     -6,904     -7,253     -7,483     -21,354     -56,246
Interactions:\c\
    Estimated Budget Authority.....................      0        100        785      2,462      4,041      4,910      5,210      5,511      5,911      6,312      6,713      12,298      41,955
    Estimated Outlays..............................      0        100        785      2,462      4,041      4,910      5,210      5,511      5,911      6,312      6,713      12,298      41,955
Total changes in direct spending:
    Estimated Budget Authority.....................      0    -24,554    -17,546    -20,407    -24,795    -23,344    -23,129    -24,017    -24,351    -25,565    -31,410    -110,646    -239,119
    Estimated Outlays..............................      0    -12,913    -17,550    -24,267    -25,180    -22,872    -22,966    -23,854    -24,118    -25,512    -31,077    -102,782    -230,310

                                                                CHANGES IN REVENUES ASSUMING ENACTMENT AROUND OCTOBER 1, 2012\d\

Title II--Energy and Commerce......................      0        -10       -190       -960        650      1,210      1,340      1,570      1,640      1,720      1,820         700       8,790
Title III--Financial Services......................      0        -67       -248       -474       -715       -976     -1,207     -1,428     -1,644     -1,845     -1,981      -2,480     -10,585
Title IV--Judiciary................................      0          8         83        324        578        882        985      1,026      1,082      1,145      1,210       1,875       7,323
Title V--Oversight and Government Reform...........      0      2,426      4,505      6,625      8,633     10,514     10,671     10,849     11,009     11,212     11,350      32,704      87,794
Title VI--Ways and Means...........................      0          0        238        700      1,116      1,422      1,542      1,664      1,718      1,748      1,864       3,476      12,013
Interactions\c\....................................      0         -8       -119       -412       -664       -928       -990     -1,030     -1,086     -1,149     -1,215      -2,131      -7,601
Total changes in revenues..........................      0      2,349      4,269      5,803      9,598     12,124     12,341     12,651     12,719     12,830     13,048      34,144      97,734

                                                        INCREASE OR DECREASE (-) IN THE DEFICIT ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Net effect on deficits.............................      0    -15,262    -21,819    -30,071    -34,778    -34,996    -35,308    -36,505    -36,837    -38,342    -44,126    -136,926    -328,044
    On-Budget......................................      0    -15,106    -21,737    -30,228    -34,426    -34,269    -34,493    -35,655    -36,005    -37,516    -43,309    -135,766    -322,743
    Off-Budget e...................................      0       -157        -82        157       -351       -727       -816       -850       -832       -826       -817      -1,161      -5,302
Memorandum:
Reduction in Offsetting Receipts Resulting from          0      1,887      3,633      5,439      7,191      8,882      9,149      9,446      9,722     10,026     10,265      27,032      75,641
 Lower Employer Contributions\b\...................
Increased net income to the National Flood               0          0        -60       -150       -265       -405       -580       -775       -830       -890       -945        -880      -4,900
 Insurance Program\f\..............................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: CBO and the staff of the Joint Committee on Taxation

Note: Components may not sum to totals because of rounding

a. In addition, CBO estimates that implementing title III (Financial Services) would cost $766 million over the 2012-2017 period, assuming appropriation of the necessary amounts. That estimate
  includes funding for the Bureau of Consumer Financial Protection, the Financial Stability Oversight Council, and for mapping and mitigation efforts under the National Flood Insurance Program
b. Employer contributions are intragovernmental transactions that do not affect the deficit; positive numbers indicate a decrease in such intragovernmental receipts. The receipts shown in the
  memorandum result from federal employer contributions financed by future appropriations; such receipts are not considered to be an offset to direct spending because they are contingent on
  future appropriations
c. There are interactions between the medical malpractice provisions in Titles II and IV and additional interactions between the health provisions in Titles II and VI
d. Negative numbers denote a reduction in revenues and positive numbers denote an increase in revenues
e. Title V includes off-budget direct spending; Titles II, IV, and VI include both on- and off-budget revenues
f. The proposed language would raise premiums for certain subsidized flood insurance policies, increasing net income to the National Flood Insurance Program by $4.9 billion. However, because
  many policies would continue to be subsidized and the program would continue to face significant interest costs for borrowing over the past decade, CBO expects that additional receipts
  collected under this legislation would be spent to cover future program shortfalls, resulting in no net effect on the budget over the 2012-2022 period


 TABLE 2.--ESTIMATE OF THE EFFECTS ON DIRECT SPENDING AND REVENUES FOR THE SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON THE BUDGET ON MAY 7,
                                           2012, ASSUMING ENACTMENT BY JULY 1, 2012, AS DIRECTED BY THE CHAIRMAN OF THE HOUSE COMMITTEE ON THE BUDGET
                                                                            [By fiscal year, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022     2012-2017   2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT BY JULY 1, 2012

Title I--Agriculture:
    Estimated Budget Authority.................       -720     -7,064     -3,347     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093     -3,096     -20,453     -35,840
    Estimated Outlays..........................       -720     -7,059     -3,342     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093     -3,096     -20,443     -35,830
Title II--Energy and Commerce:
    Estimated Budget Authority.................    -12,440     -3,770     -6,470     -8,460    -12,600    -11,050    -10,280    -10,900    -10,830    -11,470    -16,870     -54,790    -115,140
    Estimated Outlays..........................       -410     -3,470     -7,160    -12,520    -13,070    -10,640    -10,120    -10,740    -10,600    -11,420    -16,540     -47,270    -106,690
Title III--Financial Services:\a\
    Estimated Budget Authority.................       -585     -3,994     -4,381     -4,826     -4,108     -3,765     -3,857     -3,869     -4,073     -4,258     -4,444     -21,659     -42,160
    Estimated Outlays..........................       -585     -3,918     -4,374     -4,824     -4,106     -3,763     -3,854     -3,866     -4,070     -4,255     -4,441     -21,570     -42,056
Title IV--Judiciary:
    Estimated Budget Authority.................          0       -100       -650     -2,250     -3,850     -4,850     -5,200     -5,500     -5,900     -6,300     -6,700     -11,700     -41,300
    Estimated Outlays..........................          0       -100       -650     -2,250     -3,850     -4,850     -5,200     -5,500     -5,900     -6,300     -6,700     -11,700     -41,300
Title V--Oversight and Government Reform:\b\
    Estimated Budget Authority.................          0        157        283        400        499        581        559        539        515        494        469       1,919       4,493
    Estimated Outlays..........................          0        157        283        400        499        581        559        539        515        494        469       1,919       4,493
Title VI--Ways and Means:
    Estimated Budget Authority.................          0     -1,700     -3,561     -4,548     -5,635     -6,164     -6,512     -6,739     -6,904     -7,253     -7,483     -21,609     -56,501
    Estimated Outlays..........................          0     -1,360     -3,527     -4,650     -5,652     -6,164     -6,512     -6,739     -6,904     -7,253     -7,483     -21,354     -56,246
Interactions:\c\
    Estimated Budget Authority.................          0        100        785      2,462      4,041      4,910      5,210      5,511      5,911      6,312      6,713      12,298      41,955
    Estimated Outlays..........................          0        100        785      2,462      4,041      4,910      5,210      5,511      5,911      6,312      6,713      12,298      41,955
Total changes in direct spending:
    Estimated Budget Authority.................    -13,745    -16,371    -17,341    -20,326    -24,781    -23,429    -23,141    -24,022    -24,356    -25,569    -31,411    -115,993    -244,493
    Estimated Outlays..........................     -1,715    -15,650    -17,985    -24,486    -25,266    -23,017    -22,978    -23,859    -24,123    -25,516    -31,078    -108,119    -235,674

                                                                    CHANGES IN REVENUES ASSUMING ENACTMENT BY JULY 1, 2012\d\

Title II--Energy and Commerce..................          0        -10       -190       -960        650      1,210      1,340      1,570      1,640      1,720      1,820         700       8,790
Title III--Financial Services..................        -15       -102       -298       -524       -760     -1,011     -1,247     -1,463     -1,674     -1,860     -1,996      -2,710     -10,950
Title IV--Judiciary............................          0          8         83        324        578        882        985      1,026      1,082      1,145      1,210       1,875       7,323
Title V--Oversight and Government Reform.......          0      2,426      4,505      6,625      8,633     10,514     10,671     10,849     11,009     11,212     11,350      32,704      87,794
Title VI--Ways and Means.......................          0          0        238        700      1,116      1,422      1,542      1,664      1,718      1,748      1,864       3,476      12,013
Interactions\c\................................          0         -8       -119       -412       -664       -928       -990     -1,030     -1,086     -1,149     -1,215      -2,131      -7,601
Total changes in revenues......................        -15      2,314      4,219      5,753      9,553     12,089     12,301     12,616     12,689     12,815     13,033      33,914      97,369

                                                           INCREASE OR DECREASE (-) IN THE DEFICIT ASSUMING ENACTMENT BY JULY 1, 2012

Net effect on deficits.........................     -1,700    -17,964    -22,204    -30,240    -34,819    -35,106    -35,280    -36,475    -36,812    -38,331    -44,112    -142,033    -333,043
    On-Budget..................................     -1,700    -17,808    -22,122    -30,397    -34,467    -34,379    -34,465    -35,625    -35,980    -37,505    -43,295    -140,873    -327,742
    Off-Budget\e\..............................          0       -157        -82        157       -351       -727       -816       -850       -832       -826       -817      -1,161      -5,302
Memorandum:
Reduction in Offsetting Receipts Resulting from          0      1,887      3,633      5,439      7,191      8,882      9,149      9,446      9,722     10,026     10,265      27,032      75,641
 Lower Employer Contributions\b\...............
Increased net income to the National Flood               0          0        -60       -150       -265       -405       -580       -775       -830       -890       -945        -880      -4,900
 Insurance Program\f\..........................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: CBO and the staff of the Joint Committee on Taxation

Note: Components may not sum to totals because of rounding

a. In addition, CBO estimates that implementing title III (Financial Services) would cost $766 million over the 2012-2017 period, assuming appropriation of the necessary amounts. That estimate
  includes funding for the Bureau of Consumer Financial Protection, the Financial Stability Oversight Council, and for mapping and mitigation efforts under the National Flood Insurance
  Program. Employer contributions are intragovernmental transactions that do not affect the deficit; positive numbers indicate a decrease in such intragovernmental receipts. The receipts shown
  in the memorandum result from federal employer contributions financed by future appropriations; such receipts are not considered to be an offset to direct spending because they are
  contingent on future appropriations
c. There are interactions between the medical malpractice provisions in Titles II and IV and additional interactions between the health provisions in Titles II and VI
d. Negative numbers denote a reduction in revenues and positive numbers denote an increase in revenues
e. Title V includes off-budget direct spending; Titles II, IV, and VI include both on- and off-budget revenues
f. The proposed language would raise premiums for certain subsidized flood insurance policies, increasing net income to the National Flood Insurance Program by $4.9 billion. However, because
  many policies would continue to be subsidized and the program would continue to face significant interest costs for borrowing over the past decade, CBO expects that additional receipts
  collected under this legislation would be spent to cover future program shortfalls, resulting in no net effect on the budget over the 2012-2022 period

                                Appendix

                              ----------                              


    The ``Revenue'' chapter of the Committee Report on the 
Concurrent Resolution on the Budget for Fiscal Year 2013 (H. 
Con. Res. 112 of the 112th Congress) did not reflect the full 
intent of the resolution as reported by the House Budget 
Committee. The following text represents the full and accurate 
``Revenue'' chapter as the Committee intended it to appear.

                                Revenue

    Led by House Ways and Means Committee Chairman Dave Camp of 
Michigan, this budget advances a framework that calls for an 
American tax system that is simple, efficient and fair to 
promote innovation and sustained job creation in the private 
sector.
    The House Ways and Means Committee held more than a dozen 
hearings devoted to tax reform last year. Last October, 
Chairman Camp formally released an international tax reform 
discussion draft, with proposals designed to boost 
competitiveness and job creation in the United States. This 
budget reflects the progress that has been made over the past 
year by the House Ways and Means Committee, and calls for 
continued leadership to advance tax reform in the year ahead.
    This budget starts with the proposition that first, 
Congress must do no harm. It assumes that Congress will not 
allow massive, across-the-board tax increases to hit the 
economy in 2013. This budget then attacks complexity, 
unfairness, and inefficiency in the tax code with a set of 
fundamental reforms designed to lower tax rates, broaden the 
tax base, and reform the U.S. international tax rules, while 
getting rid of distortions, loopholes and preferences that 
divert economic resources from their most efficient uses.
    Following the unveiling of a principled approach to tax 
reform in last year's budget resolution, an overwhelming 
consensus has emerged that the country is in dire need of 
reform that lowers rates, broadens the tax base, and addresses 
global competitiveness. After three years, the administration 
also has begun to recognize the need for tax reform. The 
outline for corporate tax reform released by the administration 
in February, however, falls woefully short: the rates are too 
high; the tax base is too narrow (and used as a tool to provide 
political favors); and the international reforms are anti-
competitive.
    By contrast, the principles of reform outlined in this 
budget ensure a simpler, fairer tax code not just for large 
corporations but for small businesses and American families as 
well. Unlike the administration's plan, it improves the 
competitiveness of American workers and businesses in the 
global economy. America's trading partners have already 
reformed their tax systems to provide their companies with a 
competitive advantage. Competing in a 21st century global 
economy requires that America do the same.
    Simplifying the Tax Code and Promoting Job Creation and 
Economic Growth
    Major proposals in this area are:
     Reject the President's call to raise taxes.
     Consolidate the current six individual income tax 
brackets into just two brackets of 10 and 25 percent.
     Reduce the corporate rate to 25 percent.
     Repeal the Alternative Minimum Tax.
     Broaden the tax base to maintain revenue at the 
appropriate level designated by this budget resolution for the 
next 10 years, and at a share of the economy consistent with 
historical norms of 18 to 19 percent in the following decades. 
These are levels compatible with growth, and--if the spending 
restraints in this budget are enacted--sufficient to fund 
government operations over time.
     Shift from a ``worldwide'' system of taxation to a 
``territorial'' tax system that puts American companies and 
their workers on a level playing field with foreign competitors 
and ends the ``lock-out effect'' that discourages companies 
from bringing back foreign earnings to invest in the United 
States.
    In 1981, President Ronald Reagan inherited a stagnant 
economy and a tax code that featured 16 brackets, with a top 
rate of 70 percent. When he left office in 1989, the tax code 
had been simplified down to just three brackets, with a top 
rate of 28 percent. Reagan's tax reforms proved to be a 
cornerstone of the unprecedented economic boom that occurred in 
the decade during his presidency and continued in the decade 
that followed.
    Over time, additional brackets, credits, carve-outs and 
lobbyist loopholes have undone the simpler and fairer tax code 
ushered in by the 1986 tax reform. In the last 10 years alone, 
there have been nearly 4,500 changes made to the tax code. The 
current version for individuals has six brackets, with a top 
rate of 35 percent (which is set to climb to over 40 percent 
after the end of 2012, when hidden rates are considered). 
Individuals react negatively toward the tax code partly because 
it is complex and attempts to steer them toward certain 
activities and away from others. In addition, there are always 
a few ``surprises'' that end up raising their tax bills. One 
such surprise--the Alternative Minimum Tax (AMT)--was initially 
designed to hit only the very highest-income taxpayers but now 
ensnares a growing number of middle-class households because of 
a flawed design.
    This budget affirmatively rejects President Obama's efforts 
to raise tax rates on small businesses and investors and to add 
new loopholes to the tax code for favored interests. Economic 
theory and analysis show that increasing marginal tax rates--
tax increases that reduce incentives to work, save and invest 
that next dollar of income--reduces economic output. By 
contrast, reductions in marginal tax rates increase output, 
mainly by letting people keep more of each dollar they earn and 
thereby strengthening incentives to work, produce, and invest 
in the future. The House plan both realizes the job-promoting 
benefits of lower rates and ensures these reductions are 
revenue neutral through base broadening.
    Unlike President Obama's proposal, the House plan would not 
penalize the nearly three quarters of America's small 
businesses that file taxes as individuals by imposing higher 
individual rates that make it harder for these vital 
enterprises to compete. As President Obama repeatedly says, 
small businesses have been responsible for two-thirds of the 
jobs created in the United States over the past 15 years, yet 
he often neglects to point out that roughly 50 percent of 
small-business profits are taxed at the top two individual tax 
rates. Raising these rates means increasing taxes on the most 
successful job creators.
    Raising taxes on capital is another idea that purports to 
affect the wealthy but actually hurts all participants in the 
economy. Mainstream economics, not to mention common sense, 
teaches that raising taxes on any activity generally results in 
less of it. Economics and common sense also teach that the size 
of a nation's capital stock--the pool of saved money available 
for investment and job creation--has an effect on employment, 
productivity, and wages. Tax reform should promote savings and 
investment because more savings and more investment mean a 
larger stock of capital available for job creation. That means 
more jobs, more productivity, and higher wages for all American 
workers.
    The negative effects of high tax rates on work, savings and 
investment are compounded when a large mix of exemptions, 
deductions and credits are added to the system. These tax 
preferences are similar to government spending--instead of 
markets directing economic resources to their most efficient 
uses, the government directs resources to politically favored 
uses, creating a drag on economic growth and job creation.
    In the worst cases, these tax subsidies literally take the 
form of spending through the tax code, because they take taxes 
paid by hardworking Americans and issue government checks to 
individuals and corporations who do not owe any taxes at all. 
In fact, President Obama's corporate tax ``reform'' framework 
would expand this practice by transferring taxes paid by 
middle-income Americans to the pockets of politically favored 
industries.
    Eliminating large tax subsidies would not be for the 
purpose of increasing total tax revenues. Instead, when offset 
by lower rates, it would have a doubly positive impact on the 
economy--it would stop diverting economic resources to less 
productive uses, while making possible the lower tax rates that 
provide greater incentives for economic growth.
    There is an emerging bipartisan consensus for tax reform 
that lowers tax rates, broadens the tax base, and promotes 
growth and job creation. President Reagan's tax reforms 
inaugurated an era of great prosperity. It is time to build 
upon his leadership and advance a fundamental reform of the 
broken tax code as a critical step in rebuilding the 
foundations for economic growth: spending restraint, reasonable 
and predictable regulations, sound money, and a simple tax code 
with low rates.
    Economists have shown that lowering overall rates and 
broadening the tax base will promote economic growth and 
support job creation by the private sector. There are many good 
ideas on that front--growth-oriented tax plans that could 
strengthen the economy and support the Nation's funding 
priorities. Congressman Woodall, for instance, has submitted a 
fundamental tax reform plan for consideration by the Ways and 
Means Committee that would eliminate taxes on wages, 
corporations, self-employment, capital gains, and gift and 
death taxes in favor of a personal consumption tax that would 
provide the economic certainty that American businesses, 
entrepreneurs, and taxpayers desire. Congress should consider 
this and the full myriad of pro-growth plans as it moves toward 
tax reform.
                       Views of Committee Members

                              ----------                              


    Clause 2(l) of rule XI requires each committee to provide 
two days to Members of the committee to file Minority, 
additional, supplemental, or dissenting views and to include 
such views in the report on legislation considered by the 
committee.
    The following views were submitted:
                             MINORITY VIEWS

      REPUBLICANS REJECT A BALANCED APPROACH TO DEFICIT REDUCTION

    Democrats and Republicans agree on the importance of 
reducing the deficit, but we disagree on how to do it. 
Democrats remain focused on creating more jobs now to support 
the fragile economy while pursuing a plan to reduce the deficit 
in a balanced way. That's why this spring, House Democrats 
offered a budget that preserves the Medicare guarantee, helps 
create more jobs now, makes us stronger through investments 
that build long-term growth, abides by the tight spending caps 
established last summer--which save nearly $1 trillion over ten 
years--and reduces the deficit through shared responsibility. 
In contrast, the House-passed Republican budget resolution for 
fiscal year 2013 reflects the Majority's unbalanced approach to 
deficit reduction: it provides costly additional tax breaks for 
millionaires while finding savings by ending the Medicare 
guarantee for seniors, slashing investments that strengthen our 
economy, and shredding the social safety net. Because 
Republicans reject a balanced approach and refuse to ask 
millionaires to contribute one cent to deficit reduction, their 
budget hits everyone and everything else.
    House Republicans are attempting to use the fast-track 
procedures provided under budget reconciliation to hasten 
consideration of some of their budget resolution's harmful 
priorities. Their resolution directed six committees to make 
recommendations for legislative changes that reduce the deficit 
by $261.5 billion over the 2012-2022 period. The results are 
shown in the table below.

                                          [Cuts in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                               Budget Resolution Target            Reconciliation Measure\2\
                Committee                -----------------------------------------------------------------------
                                           2012-2013   2012-2017   2012-2022   2012-2013   2012-2017   2012-2022
----------------------------------------------------------------------------------------------------------------
Agriculture\1\..........................       7.710      19.700      33.200       7.779      20.443      35.830
Energy & Commerce.......................       3.750      28.430      96.760       3.870      47.970     115.480
Financial Services\1\\3\................       3.490      16.700      29.800       4.386      19.740      36.006
Judiciary...............................       0.100      11.200      39.700       0.108      13.575      48.623
Oversight & Government Reform...........       2.200      30.100      78.900       2.269      30.785      83.301
Ways & Means............................       1.200      23.000      53.000       1.360      24.830      68.258
                                         -----------------------------------------------------------------------
      Gross Reconciliation Savings......      18.450     129.130     331.360      19.764     156.470     382.577
        Remove overlap..................      -0.100     -12.800     -69.900      -0.108     -14.429     -49.556
                                         -----------------------------------------------------------------------
      Net Total Reconciliation Savings..      18.350     116.330     261.460      19.664     142.913    337.943
----------------------------------------------------------------------------------------------------------------
\1\The rule ``deeming'' the House-passed budget resolution as the concurrent budget resolution shifted $490
  million from Agriculture to Financial Services. The 2012-2013 Agriculture target was originally $8.2 billion,
  while the Financial Services target was $3.0 billion. The 2012-2017 and 2012-2022 amounts, as well as the
  totals, were not changed.
\2\Assuming July 1 enactment, as reported by the Budget Committee on May 7, 2012.
\3\The Financial Services score includes $4.9 billion from floor insurance savings, per scoring direction from
  the Budget Committee.

    In addition, the Sequester Replacement Act of 2012, which 
the Budget Committee marked up on May 7, formalizes the plan 
laid out in the Republican budget resolution. The bill 
eliminates most of the roughly $100 billion across-the-board 
sequester of spending--50 percent from defense and 50 percent 
from non-
defense programs--scheduled for 2013. The bill leaves in place 
only the non-defense sequester of mandatory programs, which 
will affect programs such as Medicare. In place of the rest of 
the 2013 sequester, the bill uses both the multi-year savings 
from the permanent mandatory spending cuts included in the 
reconciliation package, and the savings from lowering the 
discretionary spending cap for fiscal year 2013 by $19 billion 
below the level set in the bipartisan Budget Control Act of 
2011 (BCA).
    Sequestration is a meat-ax approach to deficit reduction 
that does not make sense for our country. It was included in 
the BCA as a last resort intended to pressure Congress to 
develop a bipartisan alternative to achieve long-term deficit 
reduction. But because House Republicans continue to resist the 
balanced approach to deficit reduction that has been 
recommended by every bipartisan group that has looked at the 
budget challenge, on January 2, 2013, this ``Sword of 
Damocles'' will go into effect. The sequestration would impose 
indiscriminate cuts of almost $1 trillion over the next ten 
years--50 percent from defense and 50 percent from non-defense 
programs.
    Unfortunately, instead of looking for a balanced solution, 
the Republican reconciliation package targets programs that 
help the less powerful while protecting the tax breaks of 
powerful special interests. In fact, the reconciliation package 
makes deep cuts to food and nutrition programs for low-income 
families and Medicaid--both programs that would have been 
entirely exempt from any sequestration cuts.
    This unbalanced approach to deficit reduction--focused only 
on cutting investments rather than also closing tax loopholes--
is the wrong choice for America.

       DEMOCRATS OFFERED BETTER, BALANCED DEFICIT REDUCTION PLANS

    The deep spending cuts coming through the Republican 
reconciliation instructions and the sequestration of spending 
scheduled under the BCA are neither the right nor only ways to 
reduce the deficit. In fact, Democrats have proposed to achieve 
greater deficit reduction from targeted, balanced policy 
choices, rather than the slash-and-burn approach taken by an 
across-the-board sequester or the deep cuts made in the 
Republican reconciliation proposal. The President provided 
Congress with specific policies to reduce the deficit last fall 
and in his 2013 budget. This spring, the House Democratic 
budget would have replaced meat-ax spending cuts under 
sequestration with a combination of mandatory spending cuts and 
revenues from eliminating tax loopholes and asking millionaires 
to return to the same top tax rate they paid during the Clinton 
Administration, a time of strong economic growth and fiscal 
responsibility.
    Finally, in the Budget Committee mark-up this week, 
Democrats offered amendments to replace the Republican plans 
for deficit reduction in 2013 and beyond with a balanced 
approach that includes both spending cuts and revenues. 
Democrats offered an amendment that would have replaced both 
the reconciliation cuts and the entire multi-year sequester 
with at least $1.2 trillion of deficit reduction through a 
balanced approach. The deficit reduction would come through 
legislation that increases revenues without increasing the tax 
burden on middle-income Americans, that decreases spending 
while maintaining the Medicare guarantee and protecting Social 
Security and the social safety net for vulnerable Americans, 
and that promotes economic growth and jobs. In addition, 
Democrats offered a targeted amendment to replace the remaining 
2013 sequester of Medicare with greater deficit reduction from 
ending a tax break for the ``Big 5'' oil and gas companies. 
Republicans defeated both of these amendments on party-line 
votes.

  Part I of Mark-up: Sequester Replacement Reconciliation Act of 2012

    The Republican reconciliation package includes many cuts to 
vital services that will affect Americans in many harmful ways. 
Budget Committee Democrats offered motions to achieve similar 
savings by cutting tax breaks and subsidies to special 
interests.
     Rejecting the elimination of the Social Services 
Block Grant while ending taxpayer subsidies to ``Big Oil.'' The 
Social Services Block Grant gives states and localities the 
flexibility to target funding for essential services. Overall, 
it helps 23 million children, seniors, and disabled Americans 
become self-sufficient and economically independent. It 
provides states with flexible funds that support a range of 
services, such as providing Meals on Wheels, preventing child 
abuse and neglect for at-risk children, and helping low-income 
parents return to work by providing child care and related 
assistance. During the Budget Committee reconciliation mark-up 
this week, Democrats offered a motion to preserve the Social 
Services Block Grant and to replace cuts with even greater 
savings from repealing tax breaks for the ``Big 5'' oil 
companies. This motion was defeated on a party-line vote.
     Protecting food and nutrition support for 
struggling children and families while cutting taxpayer direct 
payments to agricultural Interests. The Republican proposal 
cuts the Supplemental Nutrition Assistance Program (SNAP), 
which helps struggling households purchase adequate food and 
nutrition. The legislation reduces assistance to every single 
household receiving SNAP benefits almost immediately and cuts 
1.8 million people off of food assistance entirely. In 
addition, nearly 300,000 children will lose free school meals, 
on top of losing the benefits that provide food at home. During 
the Budget Committee reconciliation mark-up this week, 
Democrats offered a motion to preserve the food and nutrition 
assistance, and instead reduce the deficit through reform of 
agricultural commodity payments and risk management programs. 
This motion was defeated on a party-line vote.
     Protecting health care coverage for at least 
300,000 low-income children and lowering the deficit by 
eliminating certain tax subsidies for Big Oil. The Republican 
proposal allows states to cut their support for Medicaid and 
the Children's Health Insurance Program (CHIP) by covering 
fewer people, and repeals bonuses to states for enrolling 
additional low-income children in the program. The first 
provision will result in a sharp increase in the number of 
uninsured Americans--100,000 children and adults in 2013 and at 
least 300,000 children in 2015, according to CBO. The second 
provision eliminates incentives for states to increase their 
enrollment of children, also likely increasing the number of 
uninsured children. Further, the legislation eliminates funding 
for state insurance exchanges that will take effect in 2014 to 
help uninsured people find affordable coverage. States will 
either have to raise their own funds for these exchanges or 
rely on the federal government to run their exchange. During 
the Budget Committee reconciliation mark-up this week, 
Democrats offered a motion to preserve the Medicaid and CHIP 
payments, and to replace the proposed deficit reduction with 
savings from ending a wasteful tax break that encourages the 
``Big 5'' oil and gas companies to produce oil in foreign 
countries rather than here at home. This motion was defeated on 
a party-line vote.
     Protecting the health of women and children 
through the Prevention and Public Health Fund while closing tax 
loopholes that reward corporations that ship American jobs 
overseas. The Republican proposal repeals the Prevention and 
Public Health Fund. The ACA appropriated funding to support 
such programs as cancer screenings, immunizations, research on 
prevention, and education and outreach. The goal of the fund is 
to provide an expanded and sustained investment in these 
programs to improve overall health and help restrain the rate 
of growth in private- and public-sector health care costs. Some 
of the funding to be cut is allocated for women's health, 
including breast cancer and cervical cancer screening. During 
the Budget Committee mark-up, Democrats offered a motion to 
reject the Republican recommendation, and instead close 
loopholes in the U.S. international corporate tax system that 
encourage companies to ship jobs overseas. This motion was 
defeated on a party-line vote.

 Analysis of Republican Committee Proposals Included in Reconciliation


          AGRICULTURE COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Agriculture Committee recommended reconciliation 
legislation cutting $36 billion from SNAP (formerly known as 
Food Stamps). The Committee chose to target all its cuts to 
food and nutrition assistance to low-income Americans, largely 
families with children, the disabled, and elderly, rather than 
look for savings from any other programs supporting the 
agriculture sector. All together, the recommendations make 
changes to the SNAP program that will reduce benefits to all 47 
million people currently receiving SNAP and entirely eliminate 
benefits to almost 2 million people. The Republican plan makes 
the following cuts:
     Almost immediately sunsets the Recovery Act SNAP 
enhancement. The enhancement is currently due to end on October 
31, 2013. This enhancement has been shortened twice already, 
most recently to provide an offset for the Child Nutrition 
Reauthorization Act in 2010. This saves $6.0 billion under the 
directed scoring ordered by the Committee (see below for more 
details), and $4.4 billion without it.
     Makes it more difficult to apply for and receive 
SNAP benefits. The bill limits categorical eligibility--a 
process that allows households who qualify for certain programs 
to automatically be eligible for SNAP--to those receiving cash 
assistance from Temporary Assistance for Needy Families, 
Supplemental Security Income, or a state general assistance 
program. This change not only stops households from receiving 
SNAP benefits, it removes nearly 300,000 children from the 
child nutrition program. The bill also eliminates the state 
option to apply a Standard Utility Allowance in determining 
SNAP benefits for anyone receiving LIHEAP benefits. Together 
these provisions reduce SNAP by $25 billion while taking an 
additional $0.5 billion from child nutrition.
     Eliminates federal match for SNAP's employment and 
training program. Republicans say that this is one of many job 
training programs funded by the federal government and is 
duplicative. However, many job programs are oversubscribed and 
this one is geared to a very vulnerable population. Total 
savings over the 11 years are $3.1 billion.
     Ends the state bonus program. The program provides 
additional funds to states that meet certain administrative 
targets. Elimination saves $0.5 billion.
     Removes automatic indexing from SNAP's nutrition 
education and obesity prevention program. Over time, this 
change gradually reduces the program's purchasing power. This 
saves $0.5 billion over 11 years.

      ENERGY AND COMMERCE COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Energy and Commerce Committee reported reconciliation 
legislation that cuts $115 billion from health expenditures. 
All of the cuts come from repeal of certain provisions of the 
Affordable Care Act (ACA), cuts to Medicaid, and medical 
malpractice reform, over which it shares jurisdiction with the 
Judiciary Committee.

Title I--Repeals and defunds parts of the ACA

    The recommendation impedes implementation of the ACA that 
is already benefitting millions of Americans. Overall, the 
changes cut $26.3 billion over the next decade.
     Repeals the Prevention and Public Health Fund. 
Repealing this fund and rescinding unobligated funding reduces 
spending on prevention and public health by $11.9 billion. The 
ACA appropriated a total of $5 billion for 2010 through 2014 
and $2 billion for each subsequent year to support such 
programs as cancer screenings, immunizations, research on 
prevention, and education and outreach. The goal of the fund is 
to provide an expanded and sustained investment in these 
programs to improve overall health and help restrain the rate 
of growth in private- and public-sector health care costs. Some 
of the funding to be cut is allocated for women's health, 
including breast cancer and cervical cancer screening. The 
Middle Class Tax Relief and Job Creation Act of 2012 (the first 
payroll tax cut extension bill) already reduced funding for 
this fund by $5.0 billion.
     Repeals funding for state health insurance 
exchanges. The proposal strikes the mandatory funding for state 
exchanges and rescinds unobligated funds, cutting $13.5 
billion. Starting in 2014, these exchanges will allow 
individuals and small businesses to compare health plans, 
determine if they are eligible for tax credits for private 
insurance or health programs like the CHIP, and enroll in a 
health plan that meets their needs. As a result of this 
proposal, states will either have to raise their own funds to 
pay for setting up an exchange or rely on the federal 
government to run their exchange.
     Defunds the Consumer Operated and Oriented Plan 
(CO-OP) program. The proposal reduces spending by $0.9 billion 
by rescinding all unobligated funds for the CO-OP program, 
which provides subsidized loans to qualified non-profit health 
insurance plans.

Title II--Cuts Medicaid and CHIP

    The recommendation cuts Medicaid spending and reduces the 
deficit by $22.7 billion over the next decade, harming hundreds 
of thousands of low-income Americans, including at least 
300,000 children.
     Repeals states' Medicaid and CHIP Maintenance of 
Effort (MOE) requirements. The ACA requires states to maintain 
their current Medicaid eligibility standards until 2014 (and 
CHIP eligibility standards until 2019), when nationwide 
Medicaid eligibility standards take effect and state-based 
health insurance exchanges will begin operating. Repealing the 
MOE provision would increase the number of Americans who are 
uninsured, as states scale back eligibility for low-income 
children, parents, seniors, and people with serious 
disabilities. CBO estimates that the provision will increase 
the number of uninsured children and adults by 100,000 in 2013 
and increase the number of uninsured children by at least 
300,000 in 2015. Repealing the MOE reduces the deficit by $0.6 
billion.
     Repeals CHIP performance bonus payments for states 
that provide more low-income children with health care 
coverage. The bonus payments, currently slated to end in 2013, 
help states with the additional coverage-related costs in 
Medicaid as well as CHIP; the more children a state enrolls 
above the target, the larger the federal bonus payment. 
Eliminating the bonuses reduces spending by $0.4 billion.
     Rebases the Disproportionate Share Hospital (DSH) 
allotment for uncompensated care to maintain the 2021 level of 
reductions for an additional year, which reduces spending by 
$4.2 billion. Current law includes annual aggregate DSH 
allotment reductions for 2014 through 2021, to reflect the 
expected reduction in uncompensated care that will result from 
the ACA.
     Repeals increased federal Medicaid funding cap and 
match for territories. The proposal replaces the ACA's 
increased Medicaid federal match and cap for the territories 
with the levels in place prior to the ACA, reducing spending by 
$6.3 billion, or 64 percent.
     Reduces the state provider tax threshold to 5.5 
percent, down from the current threshold of no higher than 6.0 
percent of the net patient service revenues. States can use 
these revenues from health care provider taxes to help finance 
the state share of Medicaid expenditures. This proposal reduces 
spending by $11.3 billion.

Title III--Medical Malpractice

    Jurisdiction over medical malpractice is shared by the 
Energy and Commerce and the Judiciary Committees. The medical 
malpractice proposal approved by Energy and Commerce differs in 
a few respects from the version approved by Judiciary. The 
Energy and Commerce version generates $66.5 billion in on-
budget savings over ten years ($56 billion in reduced spending 
and $10.5 billion in increased revenues). The Judiciary version 
saves about $18 billion less. The Energy and Commerce version 
saves more because it includes a provision to allow evidence of 
income from collateral sources (such as life insurance payouts 
and health insurance) at trial. Like the Judiciary bill, it 
caps non-economic damages at $250,000, imposes a strict statute 
of limitations on filing lawsuits, places restrictions on 
punitive damages, replaces joint-and-several liability with a 
``fair-share'' rule, provides a safe harbor from punitive 
damages for products that meet FDA applicable safety 
requirements, limits contingency fee payments, and applies the 
legislation's provisions beyond medical malpractice to ``any 
health care liability claim.'' Both the Judiciary and Energy 
and Commerce bills override applicable state laws in all 50 
states.

        WAYS AND MEANS COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Ways and Means Committee recommended reconciliation 
changes that save $68 billion. Instead of cutting tax loopholes 
that encourage the outsourcing of jobs overseas, eliminating 
egregious tax breaks, or eliminating additional tax breaks for 
millionaires, the Committee chose instead to raise taxes on 
families with children, eliminate valuable social services that 
help to support child protection services and home-based 
services, including Meals on Wheels, and make it harder to 
purchase health insurance for those returning to work. Ways and 
means Democrats attempted to offer the Buffett Rule as a 
substitute for the cuts, but were ruled out of order. The 
Republican proposal makes the following changes:
     Eliminates the Social Services Block Grant, which 
gives states and localities the flexibility to target funding 
for essential services. Overall, the Block Grant helps 23 
million children, seniors, and disabled Americans become self-
sufficient and economically independent through services funded 
in whole, or in part, by the program. It provides home-based 
services, such as Meals on Wheels, for 1.7 million seniors. It 
helps prevent child abuse and neglect, providing child 
protective services for 1.8 million at-risk children. It 
supports low-income parents returning to work by providing 
child care and related assistance for 4.4 million children. It 
also provides services for nearly 1 million disabled 
individuals, including respite care and transportation. Ending 
the program saves $16.7 billion.
     Attacks the ACA so another 350,000 Americans go 
without health care coverage. Under the ACA, Americans whose 
incomes are low but who are ineligible for Medicaid and do not 
have employer-sponsored coverage can receive a subsidy to help 
them afford private coverage. For them to receive real-time 
assistance, the tax credit is paid in advance (and directly to 
the insurer) based on prior-year income. However, if their 
incomes increase later in the year, they are responsible for 
repaying some or all of this subsidy through a process called 
``true up.'' The ACA sensibly limits true-up payments to 
encourage participation and avoid penalizing individuals and 
families whose circumstances change mid-year. Congress already 
raised the true-up limit twice. The Republican proposal 
requires these families to repay everything even if they got 
the subsidy they were eligible for at the time, saving $43.9 
billion. The Joint Committee on Taxation estimates that, as a 
result, 350,000 people will forgo purchasing health insurance--
mostly healthier people who are willing to take the risk. That 
will leave these families at risk and drive up premiums for the 
remaining less-healthy people purchasing health coverage 
through insurance exchanges.
     Denies refundable child tax credit to taxpayers 
filing with Individual Taxpayer Identification Numbers (ITINs). 
This provision requires a taxpayer to include his or her Social 
Security number on tax returns to claim the refundable child 
tax credit, saving $7.6 billion. This measure ends refundable 
child tax credits for more than 3 million children in 2013 
alone in families with an average income of about $20,000.

      FINANCIAL SERVICES COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Financial Services Committee recommended cuts that save 
$31.1 billion, assuming a July 1 enactment date, as the 
Republicans requested (in its score, CBO noted that the 
proposal would also increase the net income to the National 
Flood Insurance Program by $4.9 billion). The reconciliation 
instruction called for a total of $29.8 billion in net savings. 
Each of the five components to the Committee's proposal is 
controversial or raises scoring issues.
     `Repeals regulators' authority to shut down a 
failing large financial firm when that failure would threaten 
the financial stability of the U.S. This proposal relies on a 
budget gimmick to generate savings. The Dodd-Frank legislation 
designed this authority to pay for itself over time, with any 
initial up-front costs being recouped by selling assets and 
imposing an assessment, after the resolution, on financial 
institutions with more than $50 billion in assets. Thus, some 
of the offsetting recoveries are estimated to come outside the 
scoring window. Repealing the authority entirely eliminates the 
appearance of costs in the ten-year window, and therefore shows 
savings of $22.6 billion. But repealing the authority will 
prevent regulators from managing the orderly wind down of a 
failing firm--that inability could result in the disorderly 
collapse of large financial institutions--making future 
bailouts more likely and making it more likely that taxpayers 
will again be stuck with the bill.
     Eliminates the Home Affordable Modification 
Program (HAMP). Dismantling HAMP eliminates virtually the only 
federal assistance that helps homeowners who are struggling 
with foreclosure and need loan modifications. Its elimination 
saves $2.8 billion.
     Jeopardizes consumers' rights and protections by 
eliminating direct spending for the new Consumer Financial 
Protection Bureau (CFPB) and making it subject to 
appropriations, thereby further violating the discretionary 
spending caps in the BCA. This latest attack on the CFPB will 
likely lessen consumer protection while adding to the pressure 
of keeping to a low discretionary spending cap. The proposal 
scores $5.4 billion in savings from eliminating direct spending 
for the CFPB, and makes the CFPB the only banking regulator to 
be subject to appropriations. If the Budget Committee Chairman 
exercises his authority to modify the discretionary caps to 
reflect the shift of the CFPB spending from the mandatory to 
the discretionary category, then there are no savings. If he 
does not adjust the discretionary cap, then he is effectively 
further lowering the discretionary cap by requiring more items 
to be funded under the same limit. Republicans may use that 
argument to further their efforts to slash spending for the 
CFPB.
     Elimination of the Office of Financial Research. 
This office supports the Financial Stability Oversight Council 
by collecting information on financial markets and conducting 
research on financial stability issues. It is authorized to 
collect fees from financial institutions with more than $50 
billion in assets to offset its expenses. Eliminating the 
office saves slightly over $250 million. Because the office's 
fees also support the activities of the Financial Stability 
Oversight Council, new appropriations of about $10 million per 
year will be necessary to fund those activities, putting more 
pressure on the discretionary spending cap.
     Reforms the flood insurance program. The estimate 
of $4.9 billion in savings relies on the provision in the 
budget resolution directing CBO to treat the change in the 
program's net income as if it were deposited in the General 
Fund. The provisions are the same as those in H.R. 1309, which 
passed the House in July 2011.

           JUDICIARY COMMITTEE RECONCILIATION RECOMMENDATIONS

    The Judiciary Committee recommended medical malpractice 
legislation that is substantively identical to the medical 
malpractice provisions in H.R. 5 that the House passed in 
March. CBO scores this legislation as saving a net total of 
$48.6 billion, for total deficit reduction that exceeds the 
Committee's instruction to find $39.7 billion in savings. The 
legislation caps noneconomic damages at $250,000 and makes it 
more difficult to recover punitive damages, replaces joint and 
several liability for losses with a ``fair share'' rule, 
imposes a strict statute of limitations for filing lawsuits, 
provides a safe harbor from punitive damages for products that 
meet FDA applicable safety requirements, and puts limits on 
contingency fee payments. The provisions of the bill apply to 
not only medical malpractice, but also to any ``health care 
liability claims''--providing new protections for insurance 
companies, drug and device manufacturers, and nursing homes. 
Like the Energy and Commerce proposal on medical malpractice, 
the Judiciary legislation also overrides applicable state laws 
in all 50 states.

       OVERSIGHT AND GOVERNMENT REFORM COMMITTEE RECONCILIATION 
                            RECOMMENDATIONS

    The Committee on Oversight and Government Reform passed on 
a party-line vote reconciliation recommendations that generate 
$83 billion by requiring all federal employees, including 
postal workers, to pay more for their retirement benefits. 
Consequently, each federal employee will, in effect, have their 
pay cut an average of more than $30,000 over the next ten 
years. These new cuts to federal employee pay come on top of 
$60 billion in cuts resulting from the two-year pay freeze and 
$15 billion in cuts resulting from increasing retirement 
contributions on new federal employees enacted in H.R. 3630, 
the Middle Class Tax Relief Act of 2012. Under the bill, most 
existing employees under the Civil Service Retirement System 
(CSRS) and the Federal Employee Retirement System (FERS) will 
face a 5 percentage point increase in their retirement 
contributions, which will be phased in over five years. The 
increase for new FERS employees is smaller--2.7 percentage 
points--because their contributions were already increased by 
2.3 percentage points as part of the Middle Class Tax Relief 
Act of 2012, which will go into full effect starting 2013. (The 
table below shows all changes in employee contributions.)

------------------------------------------------------------------------
                                                Contribution rate
                                        --------------------------------
              Beneficiary                            Proposed
                                          Current    increase   Proposed
                                            (%)        (%)     final (%)
------------------------------------------------------------------------
Existing:
    Federal Employees (CSRS)...........        7          5         12
    Federal LEO Employees (CSRS).......        7.5        5         12.5
    Members of Congress (CSRS).........        8          8.5       16.5
    Congressional Staff (CSRS).........        7.5        7.5       15
    Federal Employees (FERS)...........        0.8        5          5.8
    Federal LEO Employees (FERS).......        1.3        5          6.3
    Members of Congress (FERS).........        1.3        8.5        9.8
    Congressional Staff (FERS).........        1.3        7.5        8.8
Newly Hired:
    Federal Employees (FERS+)..........        3.1        2.7        5.8
    Federal LEO Employees (FERS+)......        3.6        2.7        6.3
    Newly Elected Members (FERS+)......        3.1        2.7        5.8
    Congressional Staff (FERS+)........        3.1        2.7        5.8
------------------------------------------------------------------------

    The proposal requires larger contributions from the 
paychecks of current legislative employees than from other 
federal employees. Current Members of Congress will have to pay 
an additional 8.5 percent of their salaries for their 
retirement benefit and current Congressional staff will have to 
pay an additional 7.5 percent, increases that are also phased 
in over five years. After full phase-in of the increases, most 
FERS employees will pay 5.8 percent (6.3 percent if a law 
enforcement employee) of their salaries toward their retirement 
benefit, up from 0.8 percent (1.3 percent if law enforcement) 
they pay this year. Current Members of Congress will pay 9.8 
percent and congressional staff will pay 8.8 percent, up from 
1.3 percent.
    The bill also eliminates the FERS annuity supplement for 
new employees, except those subject to mandatory retirement, 
starting in 2013. However, any significant savings resulting 
from this provision will not be realized until beyond the 10-
year budget window.

         Part II of Mark-up: Sequester Replacement Act of 2012

    In the second part of the reconciliation mark-up, the 
Budget Committee marked up H.R. 4966, Chairman Ryan's Sequester 
Replacement Act of 2012. When that legislation is combined with 
the reconciliation cuts considered during the first part of the 
mark-up, it fulfills the Majority's plan to repeal and replace 
the sequester scheduled for 2013 under the BCA, as envisioned 
by the Republican budget resolution. The Majority's complete 
reconciliation package makes no changes to the BCA that affect 
the discretionary requirements for 2014 and beyond. As a 
result, the sequester of funding for both defense and non-
defense remains in place for those years.
    Instead of the BCA's roughly $100 billion across-the-board 
sequester of spending for 2013--50 percent from defense and 50 
percent from non-defense programs--H.R. 4966 cancels the entire 
defense sequester and the sequester of non-defense 
discretionary spending under existing law. However, certain 
non-defense mandatory programs--including Medicare--will still 
be subject to sequester for 2013. In addition, it establishes a 
temporary discretionary cap of $1.047 trillion for 2013--the 
level set by the BCA--without any firewall between defense and 
non-defense spending. Effective in January 2013, the bill 
reduces that cap by $19 billion, limiting regular discretionary 
spending to $1.028 trillion. Any discretionary spending above 
that level would trigger a sequester.

REPUBLICAN APPROACH TO REPLACING THE SEQUESTER IS UNFAIR AND UNBALANCED

    The Majority's legislation is another example of their 
refusal to take a fair and balanced approach to reducing the 
deficit. Every bipartisan commission has recommended and the 
majority of Americans agree that we should take a balanced, 
bipartisan approach to reducing the deficit that both increases 
revenue and decreases spending. However, 98 percent of the 
Majority's Representatives have signed a pledge that they will 
not reduce the deficit by a single penny by cutting tax breaks 
for the wealthy.
    Instead, the Republican budget resolution and this 
reconciliation mark-up took a lopsided approach to replacing 
the sequester and reducing the deficit that shreds the social 
safety net for vulnerable Americans, and that fails to protect 
Medicare from sequester for even one year. Rather than asking 
big corporations and wealthy special interests to give up tax 
breaks they do not need, the Majority passed a plan that asks 
hundreds of thousands of low-income children, women, seniors, 
and other Americans to give up vital assistance that helps them 
make it from day to day.
    Two particularly egregious examples of their misguided 
choices are basic nutrition assistance and health care 
coverage. Although the Deficit Control Act of 1985 protects 
nutrition assistance and health care coverage for lower-income 
children and their families from sequester, the Republican 
reconciliation package that replaces the sequester for just one 
year specifically cuts funding for this important safety net 
assistance. Furthermore, the Majority made these harmful 
choices while protecting subsidies for agricultural businesses, 
big oil companies, and tax breaks for the wealthiest Americans. 
The Republican approach is not the fair and balanced approach 
to deficit reduction that most Americans want.

 DEMOCRATIC AMENDMENTS WOULD HAVE MADE THE RIGHT CHOICES FOR AMERICAN 
          FAMILIES AND REPLACED THE SEQUESTER FOR ALL 10 YEARS

    During the Budget Committee's mark-up of H.R. 4966, 
Democrats offered two amendments to change the Majority's 
legislation so that it makes the right choices for American 
families by taking a fair and balanced approach to reducing the 
deficit. Democrats offered an amendment that would have 
replaced the sequester for the entire 10-year period called for 
under the BCA--not just one year, as the Republican plan does. 
The amendment would have replaced the sequester with balanced 
legislation that (1) cuts spending while maintaining the 
Medicare guarantee and protecting Social Security and a strong 
social safety net; (2) increases revenues without increasing 
the tax burden on middle-income Americans; and (3) grows jobs 
and the economy by, among other things, making strategic 
investments in education, science, research, and critical 
infrastructure necessary to compete in the global economy. This 
amendment was defeated on a party-line vote.
    Democrats also offered an amendment to exempt Medicare from 
the 2013 sequester. This amendment would have prevented across-
the-board payment cuts to doctors, hospitals, nursing homes, 
home health aides, and others that provide critical care to 
Medicare beneficiaries. The Democratic amendment would have 
paid for protecting Medicare from sequester by eliminating a 
wasteful tax break for big oil and gas companies. This 
amendment was defeated on a party-line vote.

 Democratic Motions and Amendments Offered in Budget Committee Mark-up


 Motion #1: Protecting Health Care Coverage for At Least 
        300,000 Low-Income Children and Lowering the Deficit by 
        Eliminating Certain Tax Subsidies for Big Oil

    A motion by Rep. Castor that the Committee on the Budget 
direct its Chairman to request on behalf of the Committee that 
the rule for consideration of the Sequester Replacement 
Reconciliation Act of 2012 make in order an amendment that 
would strike from Title II of the bill section 213, which 
repeals the maintenance of effort requirements for children in 
the Children's Health Insurance Program (CHIP) and children and 
adults in Medicaid; and section 215, which repeals CHIP 
performance bonus payments; and replaces them with a provision 
that increases revenue by eliminating a wasteful tax break that 
encourages big oil companies to produce oil in foreign 
countries rather than here at home.

 Motion #2: Protecting the Health of Women and Children While 
        Closing Tax Loopholes That Reward Corporations That Ship 
        American Jobs Overseas

    A motion by Rep. Schwartz and Rep. Wasserman Schultz that 
the Committee on the Budget direct its Chairman to request on 
behalf of the Committee that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that would strike from Title II of the bill 
section 202, which repeals the Prevention and Public Health 
Fund under the Affordable Care Act, and replace that section 
with changes in law to reduce the deficit by closing loopholes 
in the U.S. international corporate tax system that encourage 
companies to ship jobs overseas.
     Motion #3: Rejecting the Elimination of the Social 
Services Block Grant While Ending Taxpayer Subsidies to Big Oil
    A motion by Rep. Doggett and Rep. Bonamici that the 
Committee on the Budget direct its Chairman to request on 
behalf of the Committee that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that strikes Subtitle C of Title VI--the 
elimination of the Social Services Block Grant--of the bill, 
and replaces that section with changes in law that reduce the 
deficit by repealing the tax subsidies for the ``Big 5'' major 
integrated oil companies.

Motion #4: Protect Food and Nutrition Support for Struggling Children 
        and Families While Cutting Taxpayer Direct Payments to 
        Agricultural Interests

    A motion by Rep. Blumenauer and Rep. Yarmuth that the 
Committee on the Budget direct its Chairman to request on 
behalf of the Committee that the rule for consideration of the 
Sequester Replacement Reconciliation Act of 2012 make in order 
an amendment that (1) would strike Title 1, which reduces 
spending in the Supplemental Nutrition Assistance Program, and 
(2) replaces it with changes in law to reduce the deficit by 
reforming agricultural commodity and crop insurance programs.

Amendment #1: Taking a Fair and Balanced Approach To Reducing the 
        Deficit and Replacing the Sequester

    An amendment by Rep. Van HoIlen that replaces the sequester 
for the entire 10-year period called for under the Budget 
Control Act with balanced, bipartisan legislation that:
           increases revenues without increasing the 
        tax burden on middle-income Americans,
           decreases spending while maintaining the 
        Medicare guarantee and protecting Social Security and 
        the social safety net for vulnerable Americans, and
           promotes economic growth and jobs.

Amendment #2: Prevent Cuts to Medicare

    An amendment by Rep. McCollum and Rep. Tim Ryan (OH) that 
exempts Medicare from the 2013 sequester, preventing across-
the-board payment cuts to doctors, hospitals, nursing homes, 
home health aides, and others that provide critical care to 
Medicare beneficiaries. The amendment pays for protecting 
Medicare from sequester by eliminating wasteful tax breaks for 
big oil and gas companies.
                                   Chris Van Hollen.
                                   Tim Ryan.
                                   Mike Honda.
                                   Debbie Wasserman Schultz.
                                   Karen Bass.
                                   Bill Pascrell, Jr.
                                   Marcy Kaptur.
                                   Lloyd Doggett.
                                   Allyson Schwartz.
                                   Earl Blumenauer.
                                   Betty McCollum.
                                   Kathy Castor.
                                   Suzanne Bonamici.
                                   Gwen Moore.
                                   John Yarmuth.
                                   Heath Shuler.
                               H. R. 5652

To provide for reconciliation pursuant to section 201 of the concurrent 
             resolution on the budget for fiscal year 2013.

                    IN THE HOUSE OF REPRESENTATIVES

                              May 9, 2012

Mr. Ryan of Wisconsin from the Committee on the Budget, 
        reported the following bill; which was committed to the 
        Committee of the Whole House on the State of the Union 
        and ordered to be printed

  A BILL To provide for reconciliation pursuant to section 201 of the 
       concurrent resolution on the budget for fiscal year 2013.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sequester Replacement 
Reconciliation Act of 2012''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

                          TITLE I--AGRICULTURE

Sec. 101. Short title.
Sec. 102. ARRA sunset at June 30, 2012.
Sec. 103. Categorical eligibility limited to cash assistance.
Sec. 104. Standard utility allowances based on the receipt of energy 
          assistance payments.
Sec. 105. Employment and training; workfare.
Sec. 106. End State bonus program for the supplemental nutrition 
          assistance program.
Sec. 107. Funding of employment and training programs.
Sec. 108. Turn off indexing for nutrition education and obesity 
          prevention.
Sec. 109. Extension of Authorization of Food and Nutrition Act of 2008.
Sec. 110. Effective dates and application of amendments.

               TITLE II--COMMITTEE ON ENERGY AND COMMERCE

          Subtitle A--Repeal of Certain ACA Funding Provisions

Sec. 201. Repealing mandatory funding to states to establish American 
          Health Benefit Exchanges.
Sec. 202. Repealing Prevention and Public Health Fund.
Sec. 203. Rescinding unobligated balances for CO-OP program.

                          Subtitle B--Medicaid

Sec. 211. Revision of provider tax indirect guarantee threshold.
Sec. 212. Rebasing of State DSH allotments for fiscal year 2022.
Sec. 213. Repeal of Medicaid and CHIP maintenance of effort requirements 
          under PPACA.
Sec. 214. Medicaid payments to territories.
Sec. 215. Repealing bonus payments for enrollment under Medicaid and 
          CHIP.

                      Subtitle C--Liability Reform

Sec. 221. Findings and purpose.
Sec. 222. Encouraging speedy resolution of claims.
Sec. 223. Compensating patient injury.
Sec. 224. Maximizing patient recovery.
Sec. 225. Additional HEALTH benefits.
Sec. 226. Punitive damages.
Sec. 227. Authorization of payment of future damages to claimants in 
          HEALTH care lawsuits.
Sec. 228. Definitions.
Sec. 229. Effect on other laws.
Sec. 230. State flexibility and protection of States' rights.
Sec. 231. Applicability; effective date.

                      TITLE III--FINANCIAL SERVICES

Sec. 301. Table of contents.

                  Subtitle A--Orderly Liquidation Fund

Sec. 311. Repeal of liquidation authority.

            Subtitle B--Home Affordable Modification Program

Sec. 321. Short title.
Sec. 322. Congressional findings.
Sec. 323. Termination of authority.
Sec. 324. Sense of Congress.

           Subtitle C--Bureau of Consumer Financial Protection

Sec. 331. Bringing the Bureau of Consumer Financial Protection into the 
          regular appropriations process.

                   Subtitle D--Flood Insurance Reform

Sec. 341. Short title.
Sec. 342. Extensions.
Sec. 343. Mandatory purchase.
Sec. 344. Reforms of coverage terms.
Sec. 345. Reforms of premium rates.
Sec. 346. Technical Mapping Advisory Council.
Sec. 347. FEMA incorporation of new mapping protocols.
Sec. 348. Treatment of levees.
Sec. 349. Privatization initiatives.
Sec. 350. FEMA annual report on insurance program.
Sec. 351. Mitigation assistance.
Sec. 352. Notification to homeowners regarding mandatory purchase 
          requirement applicability and rate phase-ins.
Sec. 353. Notification to members of congress of flood map revisions and 
          updates.
Sec. 354. Notification and appeal of map changes; notification to 
          communities of establishment of flood elevations.
Sec. 355. Notification to tenants of availability of contents insurance.
Sec. 356. Notification to policy holders regarding direct management of 
          policy by FEMA.
Sec. 357. Notice of availability of flood insurance and escrow in RESPA 
          good faith estimate.
Sec. 358. Reimbursement for costs incurred by homeowners and communities 
          obtaining letters of map amendment or revision.
Sec. 359. Enhanced communication with certain communities during map 
          updating process.
Sec. 360. Notification to residents newly included in flood hazard 
          areas.
Sec. 361. Treatment of swimming pool enclosures outside of hurricane 
          season.
Sec. 362. Information regarding multiple perils claims.
Sec. 363. FEMA authority to reject transfer of policies.
Sec. 364. Appeals.
Sec. 365. Reserve fund.
Sec. 366. CDBG eligibility for flood insurance outreach activities and 
          community building code administration grants.
Sec. 367. Technical corrections.
Sec. 368. Requiring competition for national flood insurance program 
          policies.
Sec. 369. Studies of voluntary community-based flood insurance options.
Sec. 370. Report on inclusion of building codes in floodplain management 
          criteria.
Sec. 371. Study on graduated risk.
Sec. 372. Report on flood-in-progress determination.
Sec. 373. Study on repaying flood insurance debt.
Sec. 374. No cause of action.
Sec. 375. Authority for the corps of engineers to provide specialized or 
          technical services.

         Subtitle E--Repeal of the Office of Financial Research

Sec. 381. Repeal of the Office of Financial Research.

                  TITLE IV--COMMITTEE ON THE JUDICIARY

Sec. 401. Short title.
Sec. 402. Encouraging speedy resolution of claims.
Sec. 403. Compensating patient injury.
Sec. 404. Maximizing patient recovery.
Sec. 405. Punitive damages.
Sec. 406. Authorization of payment of future damages to claimants in 
          health care lawsuits.
Sec. 407. Definitions.
Sec. 408. Effect on other laws.
Sec. 409. State flexibility and protection of States' rights.
Sec. 410. Applicability; effective date.

          TITLE V--COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Sec. 501. Retirement contributions.
Sec. 502. Annuity supplement.
Sec. 503. Contributions to Thrift Savings Fund of payments for accrued 
          or accumulated leave.

                  TITLE VI--COMMITTEE ON WAYS AND MEANS

 Subtitle A--Recapture of Overpayments Resulting From Certain Federally-
                       subsidized Health Insurance

Sec. 601. Recapture of overpayments resulting from certain federally-
          subsidized health insurance.

  Subtitle B--Social Security Number Required to Claim the Refundable 
                     Portion of the Child Tax Credit

Sec. 611. Social security number required to claim the refundable 
          portion of the child tax credit.

                 Subtitle C--Human Resources Provisions

Sec. 621. Repeal of the program of block grants to States for social 
          services.

                          TITLE I--AGRICULTURE

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Agricultural 
Reconciliation Act of 2012''.

SEC. 102. ARRA SUNSET AT JUNE 30, 2012.

    Section 101(a)(2) of division A of the American Recovery 
and Reinvestment Act of 2009 (Public Law 111-5; 123 Stat. 120) 
is amended by striking ``October 31, 2013'' and inserting 
``June 30, 2012''.

SEC. 103. CATEGORICAL ELIGIBILITY LIMITED TO CASH ASSISTANCE.

    Section 5 of the Food and Nutrition Act of 2008 (7 U.S.C. 
2014) is amended--
            (1) in the 2d sentence of subsection (a) by 
        striking ``households in which each member receives 
        benefits'' and inserting ``households in which each 
        member receives cash assistance'', and
            (2) in subsection (j) by striking ``or who receives 
        benefits under a State program'' and inserting ``or who 
        receives cash assistance under a State program''.

SEC. 104. STANDARD UTILITY ALLOWANCES BASED ON THE RECEIPT OF ENERGY 
                    ASSISTANCE PAYMENTS.

    (a) Standard Utility Allowance.--Section 5 of the Food and 
Nutrition Act of 2008 (7 U.S.C. 2014) is amended--
            (1) in subsection (e)(6)(C) by striking clause 
        (iv), and
            (2) in subsection (k) by striking paragraph (4) and 
        inserting the following:
            ``(4) Third party energy assistance payments.--For 
        purposes of subsection (d)(1), a payment made under a 
        State law (other than a law referred to in paragraph 
        (2)(G)) to provide energy assistance to a household 
        shall be considered money payable directly to the 
        household.''.
    (b) Conforming Amendments.--Section 2605(f)(2) of the Low-
Income Home Energy Assistance Act of 1981 (42 U.S.C. 
8624(f)(2)) is amended--
            (1) by striking ``and for purposes of determining 
        any excess shelter expense deduction under section 5(e) 
        of the Food and Nutrition Act of 2008 (7 U.S.C. 
        2014(e))'', and
            (2) in subparagraph (A) by inserting before the 
        semicolon the following: ``, except that such payments 
        or allowances shall not be deemed to be expended for 
        purposes of determining any excess shelter expense 
        deduction under section 5(e)(6) of the Food and 
        Nutrition Act of 2008 (7 U.S.C. 2014(e)(6))''.

SEC. 105. EMPLOYMENT AND TRAINING; WORKFARE.

    (a) Administrative Cost-sharing for Employment and Training 
Programs.--
            (1) In general.--Section 16 of the Food and 
        Nutrition Act of 2008 (7 U.S.C. 2025) is amended--
                    (A) in subsection (a) by inserting ``(other 
                than a program carried out under section 
                6(d)(4) or section 20)'' after ``supplemental 
                nutrition assistance program'' the 1st place it 
                appears, and
                    (B) in subsection (h)--
                            (i) by striking paragraphs (2) and 
                        (3), and
                            (ii) by redesignating paragraphs 
                        (4) and (5) as paragraphs (2) and (3), 
                        respectively.
            (2) Conforming amendments.--
                    (A) Section 17(b)(1)(B)(iv)(III)(hh) of the 
                Food and Nutrition Act of 2008 (7 U.S.C. 
                2026(b)(1)(B)(iv)(III)(hh)) is amended by 
                striking ``(g), (h)(2), or (h)(3)'' and 
                inserting ``or (g)''.
                    (B) Section 22(d)(1)(B)(ii) of the Food and 
                Nutrition Act of 2008 (7 U.S.C. 
                2031(d)(1)(B)(ii)) is amended is amended by 
                striking ``, (g), (h)(2), and (h)(3)'' and 
                inserting ``and (g)''.
    (b) Administrative Cost-sharing and Reimbursements for 
Workfare.--Section 20 of the Food and Nutrition Act of 2008 (7 
U.S.C. 2029) is amended by striking subsection (g).

SEC. 106. END STATE BONUS PROGRAM FOR THE SUPPLEMENTAL NUTRITION 
                    ASSISTANCE PROGRAM.

    Section 16 of the Food and Nutrition Act of 2008 (7 U.S.C. 
2025) is amended by striking subsection (d).

SEC. 107. FUNDING OF EMPLOYMENT AND TRAINING PROGRAMS.

    For purposes of fiscal year 2013, the reference to 
$90,000,000 in section 16(h)(1)(A) of the Food and Nutrition 
Act of 2008 (7 U.S.C. 2025(h)(1)(A)) shall be deemed to be a 
reference to $79,000,000.

SEC. 108. TURN OFF INDEXING FOR NUTRITION EDUCATION AND OBESITY 
                    PREVENTION.

    Section 28(d) of the Food and Nutrition Act of 2008 (7 
U.S.C. 2037(d)) is amended by striking ``years--'' and all that 
follows through the period at the end, and inserting ``years, 
$375,000,000.''.

SEC. 109. EXTENSION OF AUTHORIZATION OF FOOD AND NUTRITION ACT OF 2008.

    Section 18(a)(1) of the Food and Nutrition Act of 2008 (7 
U.S.C. 2027(a)(1)) is amended by striking ``2012'' and 
inserting ``2013''.

SEC. 110. EFFECTIVE DATES AND APPLICATION OF AMENDMENTS.

    (a) General Effective Date.--Except as provided in 
subsection (b), this title and the amendments made by this 
title shall take effect on October 1, 2012, and shall apply 
only with respect to certification periods that begin on or 
after such date.
    (b) Special Effective Date.--Section 107 and the amendments 
made by sections 102, 103, 104, and 109 shall take effect on 
the date of the enactment of this Act and shall apply only with 
respect to certification periods that begin on or after such 
date.

               TITLE II--COMMITTEE ON ENERGY AND COMMERCE

          Subtitle A--Repeal of Certain ACA Funding Provisions

SEC. 201. REPEALING MANDATORY FUNDING TO STATES TO ESTABLISH AMERICAN 
                    HEALTH BENEFIT EXCHANGES.

    (a) In General.--Section 1311(a) of the Patient Protection 
and Affordable Care Act (42 U.S.C. 18031(a)) is repealed.
    (b) Rescission of Unobligated Funds.--Of the funds made 
available under such section 1311(a), the unobligated balance 
is rescinded.

SEC. 202. REPEALING PREVENTION AND PUBLIC HEALTH FUND.

    (a) In General.--Section 4002 of the Patient Protection and 
Affordable Care Act (42 U.S.C. 300u-11) is repealed.
    (b) Rescission of Unobligated Funds.--Of the funds made 
available by such section 4002, the unobligated balance is 
rescinded.

SEC. 203. RESCINDING UNOBLIGATED BALANCES FOR CO-OP PROGRAM.

    Of the funds made available under section 1322(g) of the 
Patient Protection and Affordable Care Act (42 U.S.C. 
18042(g)), the unobligated balance is rescinded.

                          Subtitle B--Medicaid

SEC. 211. REVISION OF PROVIDER TAX INDIRECT GUARANTEE THRESHOLD.

    Section 1903(w)(4)(C)(ii) of the Social Security Act (42 
U.S.C. 1396b(w)(4)(C)(ii)) is amended by inserting ``and for 
portions of fiscal years beginning on or after October 1, 
2012,'' after ``October 1, 2011,''.

SEC. 212. REBASING OF STATE DSH ALLOTMENTS FOR FISCAL YEAR 2022.

    Section 1923(f) of the Social Security Act (42 U.S.C. 
1396r-4(f)) is amended--
            (1) by redesignating paragraph (9) as paragraph 
        (10);
            (2) in paragraph (3)(A) by striking ``paragraphs 
        (6), (7), and (8)'' and inserting ``paragraphs (6), 
        (7), (8), and (9)''; and
            (3) by inserting after paragraph (8) the following 
        new paragraph:
            ``(9) Rebasing of state dsh allotments for fiscal 
        year 2022.--With respect to fiscal 2022, for purposes 
        of applying paragraph (3)(A) to determine the DSH 
        allotment for a State, the amount of the DSH allotment 
        for the State under paragraph (3) for fiscal year 2021 
        shall be treated as if it were such amount as reduced 
        under paragraph (7).''.

SEC. 213. REPEAL OF MEDICAID AND CHIP MAINTENANCE OF EFFORT 
                    REQUIREMENTS UNDER PPACA.

    (a) Repeal of PPACA Medicaid MOE.--Section 1902 of the 
Social Security Act (42 U.S.C. 1396a) is amended by striking 
subsection (gg).
    (b) Repeal of PPACA CHIP MOE.--Section 2105(d)(3) of the 
Social Security Act (42 U.S.C. 1397ee(d)(3)) is amended--
            (1) by striking subparagraph (A);
            (2) by redesignating subparagraphs (B) and (C) as 
        subparagraphs (A) and (B), respectively; and
            (3) in the paragraph heading, by striking 
        ``Continuation of eligibility standards for children 
        until october 1, 2019'' and inserting ``Continuity of 
        coverage''.
    (c) Conforming Amendments.--
            (1) Section 1902(a) of the Social Security Act (42 
        U.S.C. 1396a(a)) is amended by striking paragraph (74).
            (2) Effective January 1, 2014, paragraph (14) of 
        section 1902(e) (as added by section 2002(a) of Public 
        Law 111-148) is amended by striking the third sentence 
        of subparagraph (A).
    (d) Effective Date.--Except as provided in subsection 
(c)(2), the amendments made by this section shall take effect 
on the date of the enactment of this section.

SEC. 214. MEDICAID PAYMENTS TO TERRITORIES.

    (a) Limit on Payments.--Section 1108(g) of the Social 
Security Act (42 U.S.C. 1308(g)) is amended--
            (1) in paragraph (2)--
                    (A) by striking ``paragraphs (3) and (5)''; 
                and
                    (B) by inserting ``paragraph (3)'' after 
                ``and subject to'';
            (2) in paragraph (4), by striking ``(3), and'' and 
        all that follows through ``of this subsection'' and 
        inserting ``and (3) of this subsection''; and
            (3) by striking paragraph (5).
    (b) FMAP.--The first sentence of section 1905(b) of the 
Social Security Act (42 U.S.C. 1396d(b)) is amended by striking 
``shall be 55 percent'' and inserting ``shall be 50 percent''.

SEC. 215. REPEALING BONUS PAYMENTS FOR ENROLLMENT UNDER MEDICAID AND 
                    CHIP.

    (a) In General.--Paragraphs (3) and (4) of section 2105(a) 
of the Social Security Act (42 U.S.C. 1397ee(a)) are repealed.
    (b) Rescission of Unobligated Funds.--Of the funds made 
available by section 2105(a)(3) of the Social Security Act, the 
unobligated balance is rescinded.
    (c) Conforming Changes.--
            (1) Availability of excess funds for performance 
        bonuses.--Section 2104(n)(2) of the Social Security Act 
        (42 U.S.C. 1397dd(n)(2)) is amended by striking 
        subparagraph (D).
            (2) Outreach or coverage benchmarks.--Section 
        2111(b)(3) of the Social Security Act (42 U.S.C. 
        1397kk(b)(3)) is amended--
                    (A) in subparagraph (A)--
                            (i) in clause (i), by inserting 
                        ``or'' after the semicolon at the end; 
                        and
                            (ii) by striking clause (ii); and
                    (B) by striking subparagraph (C).

                      Subtitle C--Liability Reform

SEC. 221. FINDINGS AND PURPOSE.

    (a) Findings.--
            (1) Effect on health care access and costs.--
        Congress finds that our current civil justice system is 
        adversely affecting patient access to health care 
        services, better patient care, and cost-efficient 
        health care, in that the health care liability system 
        is a costly and ineffective mechanism for resolving 
        claims of health care liability and compensating 
        injured patients, and is a deterrent to the sharing of 
        information among health care professionals which 
        impedes efforts to improve patient safety and quality 
        of care.
            (2) Effect on interstate commerce.--Congress finds 
        that the health care and insurance industries are 
        industries affecting interstate commerce and the health 
        care liability litigation systems existing throughout 
        the United States are activities that affect interstate 
        commerce by contributing to the high costs of health 
        care and premiums for health care liability insurance 
        purchased by health care system providers.
            (3) Effect on federal spending.--Congress finds 
        that the health care liability litigation systems 
        existing throughout the United States have a 
        significant effect on the amount, distribution, and use 
        of Federal funds because of--
                    (A) the large number of individuals who 
                receive health care benefits under programs 
                operated or financed by the Federal Government;
                    (B) the large number of individuals who 
                benefit because of the exclusion from Federal 
                taxes of the amounts spent to provide them with 
                health insurance benefits; and
                    (C) the large number of health care 
                providers who provide items or services for 
                which the Federal Government makes payments.
    (b) Purpose.--It is the purpose of this subtitle to 
implement reasonable, comprehensive, and effective health care 
liability reforms designed to--
            (1) improve the availability of health care 
        services in cases in which health care liability 
        actions have been shown to be a factor in the decreased 
        availability of services;
            (2) reduce the incidence of ``defensive medicine'' 
        and lower the cost of health care liability insurance, 
        all of which contribute to the escalation of health 
        care costs;
            (3) ensure that persons with meritorious health 
        care injury claims receive fair and adequate 
        compensation, including reasonable noneconomic damages;
            (4) improve the fairness and cost-effectiveness of 
        our current health care liability system to resolve 
        disputes over, and provide compensation for, health 
        care liability by reducing uncertainty in the amount of 
        compensation provided to injured individuals; and
            (5) provide an increased sharing of information in 
        the health care system which will reduce unintended 
        injury and improve patient care.

SEC. 222. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    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; or
            (3) the presence of a foreign body, which has no 
        therapeutic or diagnostic purpose or effect, in the 
        person of the injured person.
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. 223. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses 
in Health Care Lawsuits.--In any health care lawsuit, nothing 
in this subtitle 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. 224. 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) Forty percent of the first $50,000 recovered by 
        the claimant(s).
            (2) Thirty-three and one-third percent of the next 
        $50,000 recovered by the claimant(s).
            (3) Twenty-five percent of the next $500,000 
        recovered by the claimant(s).
            (4) Fifteen 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. 225. 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. 226. 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.
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.
    (b) 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.
    (c) No Punitive Damages for Products That Comply With FDA 
Standards.--
            (1) In general.--
                    (A) No punitive damages may be awarded 
                against the manufacturer or distributor of a 
                medical product, or a supplier of any component 
                or raw material of such medical product, based 
                on a claim that such product caused the 
                claimant's harm where--
                            (i)(I) such medical product was 
                        subject to premarket approval, 
                        clearance, or licensure by the Food and 
                        Drug Administration with respect to the 
                        safety of the formulation or 
                        performance of the aspect of such 
                        medical product which caused the 
                        claimant's harm or the adequacy of the 
                        packaging or labeling of such medical 
                        product; and
                            (II) such medical product was so 
                        approved, cleared, or licensed; or
                            (ii) such medical product is 
                        generally recognized among qualified 
                        experts as safe and effective pursuant 
                        to conditions established by the Food 
                        and Drug Administration and applicable 
                        Food and Drug Administration 
                        regulations, including without 
                        limitation those related to packaging 
                        and labeling, unless the Food and Drug 
                        Administration has determined that such 
                        medical product was not manufactured or 
                        distributed in substantial compliance 
                        with applicable Food and Drug 
                        Administration statutes and 
                        regulations.
                    (B) Rule of construction.--Subparagraph (A) 
                may not be construed as establishing the 
                obligation of the Food and Drug Administration 
                to demonstrate affirmatively that a 
                manufacturer, distributor, or supplier referred 
                to in such subparagraph meets any of the 
                conditions described in such subparagraph.
            (2) Liability of health care providers.--A health 
        care provider who prescribes, or who dispenses pursuant 
        to a prescription, a medical product approved, 
        licensed, or cleared by the Food and Drug 
        Administration shall not be named as a party to a 
        product liability lawsuit involving such product and 
        shall not be liable to a claimant in a class action 
        lawsuit against the manufacturer, distributor, or 
        seller of such product. Nothing in this paragraph 
        prevents a court from consolidating cases involving 
        health care providers and cases involving products 
        liability claims against the manufacturer, distributor, 
        or product seller of such medical product.
            (3) Packaging.--In a health care lawsuit for harm 
        which is alleged to relate to the adequacy of the 
        packaging or labeling of a drug which is required to 
        have tamper-resistant packaging under regulations of 
        the Secretary of Health and Human Services (including 
        labeling regulations related to such packaging), the 
        manufacturer or product seller of the drug shall not be 
        held liable for punitive damages unless such packaging 
        or labeling is found by the trier of fact by clear and 
        convincing evidence to be substantially out of 
        compliance with such regulations.
            (4) Exception.--Paragraph (1) shall not apply in 
        any health care lawsuit in which--
                    (A) a person, before or after premarket 
                approval, clearance, or licensure of such 
                medical product, knowingly misrepresented to or 
                withheld from the Food and Drug Administration 
                information that is required to be submitted 
                under the Federal Food, Drug, and Cosmetic Act 
                (21 U.S.C. 301 et seq.) or section 351 of the 
                Public Health Service Act (42 U.S.C. 262) that 
                is material and is causally related to the harm 
                which the claimant allegedly suffered;
                    (B) a person made an illegal payment to an 
                official of the Food and Drug Administration 
                for the purpose of either securing or 
                maintaining approval, clearance, or licensure 
                of such medical product; or
                    (C) the defendant caused the medical 
                product which caused the claimant's harm to be 
                misbranded or adulterated (as such terms are 
                used in chapter V of the Federal Food, Drug, 
                and Cosmetic Act (21 U.S.C. 351 et seq.)).

SEC. 227. 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 accordance with 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 subtitle.

SEC. 228. DEFINITIONS.

    In this subtitle:
            (1) Alternative dispute resolution system; 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. 229. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) 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 subtitle does not affect the 
                application of the rule of law to such an 
                action; and
                    (B) any rule of law prescribed by this 
                subtitle in conflict with a rule of law of such 
                title XXI shall not apply to such action.
            (2) 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 subtitle 
        or otherwise applicable law (as determined under this 
        subtitle) will apply to such aspect of such action.
    (b) Other Federal Law.--Except as provided in this section, 
nothing in this subtitle 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. 230. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health 
care lawsuits set forth in this subtitle 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 subtitle. The provisions governing health care 
lawsuits set forth in this subtitle 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 subtitle; 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) Any 
issue that is not governed by any provision of law established 
by or under this subtitle (including State standards of 
negligence) shall be governed by otherwise applicable State or 
Federal law.
    (2) This subtitle 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 subtitle or create a cause of action.
    (c) State Flexibility.--No provision of this subtitle shall 
be construed to preempt--
            (1) any State law (whether effective before, on, or 
        after the date of the enactment of this subtitle) 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 subtitle, 
        notwithstanding section 223(a); or
            (2) any defense available to a party in a health 
        care lawsuit under any other provision of State or 
        Federal law.

SEC. 231. APPLICABILITY; EFFECTIVE DATE.

    This subtitle 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 subtitle, except that 
any health care lawsuit arising from an injury occurring prior 
to the date of the enactment of this subtitle shall be governed 
by the applicable statute of limitations provisions in effect 
at the time the injury occurred.

                     TITLE III--FINANCIAL SERVICES

SEC. 301. TABLE OF CONTENTS.

    The table of contents for this title is as follows:

                     TITLE III--FINANCIAL SERVICES

Sec. 301. Table of contents.

                  Subtitle A--Orderly Liquidation Fund

Sec. 311. Repeal of liquidation authority.

            Subtitle B--Home Affordable Modification Program

Sec. 321. Short title.
Sec. 322. Congressional findings.
Sec. 323. Termination of authority.
Sec. 324. Sense of Congress.

           Subtitle C--Bureau of Consumer Financial Protection

Sec. 331. Bringing the Bureau of Consumer Financial Protection into the 
          regular appropriations process.

                   Subtitle D--Flood Insurance Reform

Sec. 341. Short title.
Sec. 342. Extensions.
Sec. 343. Mandatory purchase.
Sec. 344. Reforms of coverage terms.
Sec. 345. Reforms of premium rates.
Sec. 346. Technical Mapping Advisory Council.
Sec. 347. FEMA incorporation of new mapping protocols.
Sec. 348. Treatment of levees.
Sec. 349. Privatization initiatives.
Sec. 350. FEMA annual report on insurance program.
Sec. 351. Mitigation assistance.
Sec. 352. Notification to homeowners regarding mandatory purchase 
          requirement applicability and rate phase-ins.
Sec. 353. Notification to members of congress of flood map revisions and 
          updates.
Sec. 354. Notification and appeal of map changes; notification to 
          communities of establishment of flood elevations.
Sec. 355. Notification to tenants of availability of contents insurance.
Sec. 356. Notification to policy holders regarding direct management of 
          policy by FEMA.
Sec. 357. Notice of availability of flood insurance and escrow in RESPA 
          good faith estimate.
Sec. 358. Reimbursement for costs incurred by homeowners and communities 
          obtaining letters of map amendment or revision.
Sec. 359. Enhanced communication with certain communities during map 
          updating process.
Sec. 360. Notification to residents newly included in flood hazard 
          areas.
Sec. 361. Treatment of swimming pool enclosures outside of hurricane 
          season.
Sec. 362. Information regarding multiple perils claims.
Sec. 363. FEMA authority to reject transfer of policies.
Sec. 364. Appeals.
Sec. 365. Reserve fund.
Sec. 366. CDBG eligibility for flood insurance outreach activities and 
          community building code administration grants.
Sec. 367. Technical corrections.
Sec. 368. Requiring competition for national flood insurance program 
          policies.
Sec. 369. Studies of voluntary community-based flood insurance options.
Sec. 370. Report on inclusion of building codes in floodplain management 
          criteria.
Sec. 371. Study on graduated risk.
Sec. 372. Report on flood-in-progress determination.
Sec. 373. Study on repaying flood insurance debt.
Sec. 374. No cause of action.
Sec. 375. Authority for the corps of engineers to provide specialized or 
          technical services.

         Subtitle E--Repeal of the Office of Financial Research

Sec. 381. Repeal of the Office of Financial Research.

                  Subtitle A--Orderly Liquidation Fund

SEC. 311. REPEAL OF LIQUIDATION AUTHORITY.

    (a) In General.--Title II of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act is hereby repealed and any 
Federal law amended by such title shall, on and after the date 
of enactment of this Act, be effective as if title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act had 
not been enacted.
    (b) Conforming Amendments.--
            (1) Dodd-frank wall street reform and consumer 
        protection act.--The Dodd-Frank Wall Street Reform and 
        Consumer Protection Act is amended--
                    (A) in the table of contents for such Act, 
                by striking all items relating to title II;
                    (B) in section 165(d)(6), by striking ``, a 
                receiver appointed under title II,'';
                    (C) in section 716(g), by striking ``or a 
                covered financial company under title II'';
                    (D) in section 1105(e)(5), by striking 
                ``amount of any securities issued under that 
                chapter 31 for such purpose shall be treated in 
                the same manner as securities issued under 
                section 208(n)(5)(E)'' and inserting 
                ``issuances of such securities under that 
                chapter 31 for such purpose shall by treated as 
                public debt transactions of the United States, 
                and the proceeds from the sale of any 
                obligations acquired by the Secretary under 
                this paragraph shall be deposited into the 
                Treasury of the United States as miscellaneous 
                receipts''; and
                    (E) in section 1106(c)(2), by amending 
                subparagraph (A) to read as follows:
                    ``(A) require the company to file a 
                petition for bankruptcy under section 301 of 
                title 11, United States Code; or''.
            (2) Federal deposit insurance act.--Section 
        10(b)(3) of the Federal Deposit Insurance Act (12 
        U.S.C. 1820(b)(3)) is amended by striking ``, or of 
        such nonbank financial company supervised by the Board 
        of Governors or bank holding company described in 
        section 165(a) of the Financial Stability Act of 2010, 
        for the purpose of implementing its authority to 
        provide for orderly liquidation of any such company 
        under title II of that Act''.
            (3) Federal reserve act.--Section 13(3) of the 
        Federal Reserve Act is amended--
                    (A) in subparagraph (B)--
                            (i) in clause (ii), by striking ``, 
                        resolution under title II of the Dodd-
                        Frank Wall Street Reform and Consumer 
                        Protection Act, or'' and inserting ``or 
                        is subject to resolution under''; and
                            (ii) in clause (iii), by striking 
                        ``, resolution under title II of the 
                        Dodd-Frank Wall Street Reform and 
                        Consumer Protection Act, or'' and 
                        inserting ``or resolution under''; and
                    (B) by striking subparagraph (E).

            Subtitle B--Home Affordable Modification Program

SEC. 321. SHORT TITLE.

    This subtitle may be cited as the ``HAMP Termination Act of 
2012''.

SEC. 322. CONGRESSIONAL FINDINGS.

    The Congress finds the following:
            (1) According to the Department of the Treasury--
                    (A) the Home Affordable Modification 
                Program (HAMP) is designed to ``help as many as 
                3 to 4 million financially struggling 
                homeowners avoid foreclosure by modifying loans 
                to a level that is affordable for borrowers now 
                and sustainable over the long term''; and
                    (B) as of February 2012, only 782,609 
                active permanent mortgage modifications were 
                made under HAMP.
            (2) Many homeowners whose HAMP modifications were 
        canceled suffered because they made futile payments and 
        some of those homeowners were even forced into 
        foreclosure.
            (3) The Special Inspector General for TARP reported 
        that HAMP ``benefits only a small portion of distressed 
        homeowners, offers others little more than false hope, 
        and in certain cases causes more harm than good''.
            (4) Approximately $30 billion was obligated by the 
        Department of the Treasury to HAMP, however, 
        approximately only $2.54 billion has been disbursed.
            (5) Terminating HAMP would save American taxpayers 
        approximately $2.84 billion, according to the 
        Congressional Budget Office.

SEC. 323. TERMINATION OF AUTHORITY.

    Section 120 of the Emergency Economic Stabilization Act of 
2008 (12 U.S.C. 5230) is amended by adding at the end the 
following new subsection:
    ``(c) Termination of Authority To Provide New Assistance 
Under the Home Affordable Modification Program.--
            ``(1) In general.--Except as provided under 
        paragraph (2), after the date of the enactment of this 
        subsection the Secretary may not provide any assistance 
        under the Home Affordable Modification Program under 
        the Making Home Affordable initiative of the Secretary, 
        authorized under this Act, on behalf of any homeowner.
            ``(2) Protection of existing obligations on behalf 
        of homeowners already extended an offer to participate 
        in the program.--Paragraph (1) shall not apply with 
        respect to assistance provided on behalf of a homeowner 
        who, before the date of the enactment of this 
        subsection, was extended an offer to participate in the 
        Home Affordable Modification Program on a trial or 
        permanent basis.
            ``(3) Deficit reduction.--
                    ``(A) Use of unobligated funds.--
                Notwithstanding any other provision of this 
                title, the amounts described in subparagraph 
                (B) shall not be available after the date of 
                the enactment of this subsection for obligation 
                or expenditure under the Home Affordable 
                Modification Program of the Secretary, but 
                should be covered into the General Fund of the 
                Treasury and should be used only for reducing 
                the budget deficit of the Federal Government.
                    ``(B) Identification of unobligated 
                funds.--The amounts described in this 
                subparagraph are any amounts made available 
                under title I of the Emergency Economic 
                Stabilization Act of 2008 that--
                            ``(i) have been allocated for use, 
                        but not yet obligated as of the date of 
                        the enactment of this subsection, under 
                        the Home Affordable Modification 
                        Program of the Secretary; and
                            ``(ii) are not necessary for 
                        providing assistance under such Program 
                        on behalf of homeowners who, pursuant 
                        to paragraph (2), may be provided 
                        assistance after the date of the 
                        enactment of this subsection.
            ``(4) Study of use of program by members of the 
        armed forces, veterans, and gold star recipients.--
                    ``(A) Study.--The Secretary shall conduct a 
                study to determine the extent of usage of the 
                Home Affordable Modification Program by, and 
                the impact of such Program on, covered 
                homeowners.
                    ``(B) Report.--Not later than the 
                expiration of the 90-day period beginning on 
                the date of the enactment of this subsection, 
                the Secretary shall submit to the Congress a 
                report setting forth the results of the study 
                under subparagraph (A) and identifying best 
                practices, derived from studying the Home 
                Affordable Modification Program, that could be 
                applied to existing mortgage assistance 
                programs available to covered homeowners.
                    ``(C) Covered homeowner.--For purposes of 
                this subsection, the term `covered homeowner' 
                means a homeowner who is--
                            ``(i) a member of the Armed Forces 
                        of the United States on active duty or 
                        the spouse or parent of such a member;
                            ``(ii) a veteran, as such term is 
                        defined in section 101 of title 38, 
                        United States Code; or
                            ``(iii) eligible to receive a Gold 
                        Star lapel pin under section 1126 of 
                        title 10, United States Code, as a 
                        widow, parent, or next of kin of a 
                        member of the Armed Forces person who 
                        died in a manner described in 
                        subsection (a) of such section.
            ``(5) Publication of member availability for 
        assistance.--Not later than 5 days after the date of 
        the enactment of this subsection, the Secretary of the 
        Treasury shall publish to its Website on the World Wide 
        Web in a prominent location, large point font, and 
        boldface type the following statement: `The Home 
        Affordable Modification Program (HAMP) has been 
        terminated. If you are having trouble paying your 
        mortgage and need help contacting your lender or 
        servicer for purposes of negotiating or acquiring a 
        loan modification, please contact your Member of 
        Congress to assist you in contacting your lender or 
        servicer for the purpose of negotiating or acquiring a 
        loan modification.'.
            ``(6) Notification to hamp applicants required.--
        Not later than 30 days after the date of the enactment 
        of this subsection, the Secretary of the Treasury shall 
        inform each individual who applied for the Home 
        Affordable Modification Program and will not be 
        considered for a modification under such Program due to 
        termination of such Program under this subsection--
                    ``(A) that such Program has been 
                terminated;
                    ``(B) that loan modifications under such 
                Program are no longer available;
                    ``(C) of the name and contact information 
                of such individual's Member of Congress; and
                    ``(D) that the individual should contact 
                his or her Member of Congress to assist the 
                individual in contacting the individual's 
                lender or servicer for the purpose of 
                negotiating or acquiring a loan 
                modification.''.

SEC. 324. SENSE OF CONGRESS.

    The Congress encourages banks to work with homeowners to 
provide loan modifications to those that are eligible. The 
Congress also encourages banks to work and assist homeowners 
and prospective homeowners with foreclosure prevention programs 
and information on loan modifications.

          Subtitle C--Bureau of Consumer Financial Protection

SEC. 331. BRINGING THE BUREAU OF CONSUMER FINANCIAL PROTECTION INTO THE 
                    REGULAR APPROPRIATIONS PROCESS.

    Section 1017 of the Consumer Financial Protection Act of 
2010 is amended--
            (1) in subsection (a)--
                    (A) by amending the heading of such 
                subsection to read as follows: ``Budget, 
                Financial Management, and Audit.--'';
                    (B) by striking paragraphs (1), (2), and 
                (3);
                    (C) by redesignating paragraphs (4) and (5) 
                as paragraphs (1) and (2), respectively; and
                    (D) by striking subparagraphs (E) and (F) 
                of paragraph (1), as so redesignated;
            (2) by striking subsections (b), (c), and (d);
            (3) by redesignating subsection (e) as subsection 
        (b); and
            (4) in subsection (b), as so redesignated--
                    (A) by striking paragraphs (1), (2), and 
                (3) and inserting the following:
            ``(1) Authorization of appropriations.--There is 
        authorized to be appropriated $200,000,000 to carry out 
        this title for each of fiscal years 2012 and 2013.''; 
        and
                    (B) by redesignating paragraph (4) as 
                paragraph (2).

                   Subtitle D--Flood Insurance Reform

SEC. 341. SHORT TITLE.

    This subtitle may be cited as the ``Flood Insurance Reform 
Act of 2012''.

SEC. 342. EXTENSIONS.

    (a) Extension of Program.--Section 1319 of the National 
Flood Insurance Act of 1968 (42 U.S.C. 4026) is amended by 
striking ``the earlier of the date of the enactment into law of 
an Act that specifically amends the date specified in this 
section or May 31, 2012'' and inserting ``September 30, 2016''.
    (b) Extension of Financing.--Section 1309(a) of such Act 
(42 U.S.C. 4016(a)) is amended by striking ``the earlier of the 
date of the enactment into law of an Act that specifically 
amends the date specified in this section or May 31, 2012'' and 
inserting ``September 30, 2016''.

SEC. 343. MANDATORY PURCHASE.

    (a) Authority To Temporarily Suspend Mandatory Purchase 
Requirement.--
            (1) In general.--Section 102 of the Flood Disaster 
        Protection Act of 1973 (42 U.S.C. 4012a) is amended by 
        adding at the end the following new subsection:
    ``(i) Authority To Temporarily Suspend Mandatory Purchase 
Requirement.--
            ``(1) Finding by administrator that area is an 
        eligible area.--For any area, upon a request submitted 
        to the Administrator by a local government authority 
        having jurisdiction over any portion of the area, the 
        Administrator shall make a finding of whether the area 
        is an eligible area under paragraph (3). If the 
        Administrator finds that such area is an eligible area, 
        the Administrator shall, in the discretion of the 
        Administrator, designate a period during which such 
        finding shall be effective, which shall not be longer 
        in duration than 12 months.
            ``(2) Suspension of mandatory purchase 
        requirement.--If the Administrator makes a finding 
        under paragraph (1) that an area is an eligible area 
        under paragraph (3), during the period specified in the 
        finding, the designation of such eligible area as an 
        area having special flood hazards shall not be 
        effective for purposes of subsections (a), (b), and (e) 
        of this section, and section 202(a) of this Act. 
        Nothing in this paragraph may be construed to prevent 
        any lender, servicer, regulated lending institution, 
        Federal agency lender, the Federal National Mortgage 
        Association, or the Federal Home Loan Mortgage 
        Corporation, at the discretion of such entity, from 
        requiring the purchase of flood insurance coverage in 
        connection with the making, increasing, extending, or 
        renewing of a loan secured by improved real estate or a 
        mobile home located or to be located in such eligible 
        area during such period or a lender or servicer from 
        purchasing coverage on behalf of a borrower pursuant to 
        subsection (e).
            ``(3) Eligible areas.--An eligible area under this 
        paragraph is an area that is designated or will, 
        pursuant to any issuance, revision, updating, or other 
        change in flood insurance maps that takes effect on or 
        after the date of the enactment of the Flood Insurance 
        Reform Act of 2012, become designated as an area having 
        special flood hazards and that meets any one of the 
        following 3 requirements:
                    ``(A) Areas with no history of special 
                flood hazards.--The area does not include any 
                area that has ever previously been designated 
                as an area having special flood hazards.
                    ``(B) Areas with flood protection systems 
                under improvements.--The area was intended to 
                be protected by a flood protection system--
                            ``(i) that has been decertified, or 
                        is required to be certified, as 
                        providing protection for the 100-year 
                        frequency flood standard;
                            ``(ii) that is being improved, 
                        constructed, or reconstructed; and
                            ``(iii) for which the Administrator 
                        has determined measurable progress 
                        toward completion of such improvement, 
                        construction, reconstruction is being 
                        made and toward securing financial 
                        commitments sufficient to fund such 
                        completion.
                    ``(C) Areas for which appeal has been 
                filed.--An area for which a community has 
                appealed designation of the area as having 
                special flood hazards in a timely manner under 
                section 1363.
            ``(4) Extension of delay.--Upon a request submitted 
        by a local government authority having jurisdiction 
        over any portion of the eligible area, the 
        Administrator may extend the period during which a 
        finding under paragraph (1) shall be effective, except 
        that--
                    ``(A) each such extension under this 
                paragraph shall not be for a period exceeding 
                12 months; and
                    ``(B) for any area, the cumulative number 
                of such extensions may not exceed 2.
            ``(5) Additional extension for communities making 
        more than adequate progress on flood protection 
        system.--
                    ``(A) Extension.--
                            ``(i) Authority.--Except as 
                        provided in subparagraph (B), in the 
                        case of an eligible area for which the 
                        Administrator has, pursuant to 
                        paragraph (4), extended the period of 
                        effectiveness of the finding under 
                        paragraph (1) for the area, upon a 
                        request submitted by a local government 
                        authority having jurisdiction over any 
                        portion of the eligible area, if the 
                        Administrator finds that more than 
                        adequate progress has been made on the 
                        construction of a flood protection 
                        system for such area, as determined in 
                        accordance with the last sentence of 
                        section 1307(e) of the National Flood 
                        Insurance Act of 1968 (42 U.S.C. 
                        4014(e)), the Administrator may, in the 
                        discretion of the Administrator, 
                        further extend the period during which 
                        the finding under paragraph (1) shall 
                        be effective for such area for an 
                        additional 12 months.
                            ``(ii) Limit.-- For any eligible 
                        area, the cumulative number of 
                        extensions under this subparagraph may 
                        not exceed 2.
                    ``(B) Exclusion for new mortgages.--
                            ``(i) Exclusion.--Any extension 
                        under subparagraph (A) of this 
                        paragraph of a finding under paragraph 
                        (1) shall not be effective with respect 
                        to any excluded property after the 
                        origination, increase, extension, or 
                        renewal of the loan referred to in 
                        clause (ii)(II) for the property.
                            ``(ii) Excluded properties.--For 
                        purposes of this subparagraph, the term 
                        `excluded property' means any improved 
                        real estate or mobile home--
                                    ``(I) that is located in an 
                                eligible area; and
                                    ``(II) for which, during 
                                the period that any extension 
                                under subparagraph (A) of this 
                                paragraph of a finding under 
                                paragraph (1) is otherwise in 
                                effect for the eligible area in 
                                which such property is 
                                located--
                                            ``(aa) a loan that 
                                        is secured by the 
                                        property is originated; 
                                        or
                                            ``(bb) any existing 
                                        loan that is secured by 
                                        the property is 
                                        increased, extended, or 
                                        renewed.
            ``(6) Rule of construction.--Nothing in this 
        subsection may be construed to affect the applicability 
        of a designation of any area as an area having special 
        flood hazards for purposes of the availability of flood 
        insurance coverage, criteria for land management and 
        use, notification of flood hazards, eligibility for 
        mitigation assistance, or any other purpose or 
        provision not specifically referred to in paragraph 
        (2).
            ``(7) Reports.--The Administrator shall, in each 
        annual report submitted pursuant to section 1320, 
        include information identifying each finding under 
        paragraph (1) by the Administrator during the preceding 
        year that an area is an area having special flood 
        hazards, the basis for each such finding, any 
        extensions pursuant to paragraph (4) of the periods of 
        effectiveness of such findings, and the reasons for 
        such extensions.''.
            (2) No refunds.--Nothing in this subsection or the 
        amendments made by this subsection may be construed to 
        authorize or require any payment or refund for flood 
        insurance coverage purchased for any property that 
        covered any period during which such coverage is not 
        required for the property pursuant to the applicability 
        of the amendment made by paragraph (1).
    (b) Termination of Force-Placed Insurance.--Section 102(e) 
of the Flood Disaster Protection Act of 1973 (42 U.S.C. 
4012a(e)) is amended--
            (1) in paragraph (2), by striking ``insurance.'' 
        and inserting ``insurance, including premiums or fees 
        incurred for coverage beginning on the date on which 
        flood insurance coverage lapsed or did not provide a 
        sufficient coverage amount.'';
            (2) by redesignating paragraphs (3) and (4) as 
        paragraphs (5) and 6), respectively; and
            (3) by inserting after paragraph (2) the following 
        new paragraphs:
            ``(3) Termination of force-placed insurance.--
        Within 30 days of receipt by the lender or servicer of 
        a confirmation of a borrower's existing flood insurance 
        coverage, the lender or servicer shall--
                    ``(A) terminate the force-placed insurance; 
                and
                    ``(B) refund to the borrower all force-
                placed insurance premiums paid by the borrower 
                during any period during which the borrower's 
                flood insurance coverage and the force-placed 
                flood insurance coverage were each in effect, 
                and any related fees charged to the borrower 
                with respect to the force-placed insurance 
                during such period.
            ``(4) Sufficiency of demonstration.--For purposes 
        of confirming a borrower's existing flood insurance 
        coverage, a lender or servicer for a loan shall accept 
        from the borrower an insurance policy declarations page 
        that includes the existing flood insurance policy 
        number and the identity of, and contact information 
        for, the insurance company or agent.''.
    (c) Use of Private Insurance to Satisfy Mandatory Purchase 
Requirement.--Section 102(b) of the Flood Disaster Protection 
Act of 1973 (42 U.S.C. 4012a(b)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``lending institutions not 
                to make'' and inserting ``lending 
                institutions--
                    ``(A) not to make'';
                    (B) in subparagraph (A), as designated by 
                subparagraph (A) of this paragraph, by striking 
                ``less.'' and inserting ``less; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(B) to accept private flood insurance as 
                satisfaction of the flood insurance coverage 
                requirement under subparagraph (A) if the 
                coverage provided by such private flood 
                insurance meets the requirements for coverage 
                under such subparagraph.'';
            (2) in paragraph (2), by inserting after ``provided 
        in paragraph (1).'' the following new sentence: ``Each 
        Federal agency lender shall accept private flood 
        insurance as satisfaction of the flood insurance 
        coverage requirement under the preceding sentence if 
        the flood insurance coverage provided by such private 
        flood insurance meets the requirements for coverage 
        under such sentence.'';
            (3) in paragraph (3), in the matter following 
        subparagraph (B), by adding at the end the following 
        new sentence: ``The Federal National Mortgage 
        Association and the Federal Home Loan Mortgage 
        Corporation shall accept private flood insurance as 
        satisfaction of the flood insurance coverage 
        requirement under the preceding sentence if the flood 
        insurance coverage provided by such private flood 
        insurance meets the requirements for coverage under 
        such sentence.''; and
            (4) by adding at the end the following new 
        paragraph:
            ``(5) Private flood insurance defined.--In this 
        subsection, the term `private flood insurance' means a 
        contract for flood insurance coverage allowed for sale 
        under the laws of any State.''.

SEC. 344. REFORMS OF COVERAGE TERMS.

    (a) Minimum Deductibles for Claims.--Section 1312 of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4019) is 
amended--
            (1) by striking ``The Director is'' and inserting 
        the following: ``(a) In General.--The Administrator 
        is''; and
            (2) by adding at the end the following:
    ``(b) Minimum Annual Deductibles.--
            ``(1) Subsidized rate properties.--For any 
        structure that is covered by flood insurance under this 
        title, and for which the chargeable rate for such 
        coverage is less than the applicable estimated risk 
        premium rate under section 1307(a)(1) for the area (or 
        subdivision thereof) in which such structure is 
        located, the minimum annual deductible for damage to or 
        loss of such structure shall be $2,000.
            ``(2) Actuarial rate properties.--For any structure 
        that is covered by flood insurance under this title, 
        for which the chargeable rate for such coverage is not 
        less than the applicable estimated risk premium rate 
        under section 1307(a)(1) for the area (or subdivision 
        thereof) in which such structure is located, the 
        minimum annual deductible for damage to or loss of such 
        structure shall be $1,000.''.
    (b) Clarification of Residential and Commercial Coverage 
Limits.--Section 1306(b) of the National Flood Insurance Act of 
1968 (42 U.S.C. 4013(b)) is amended--
            (1) in paragraph (2)--
                    (A) by striking ``in the case of any 
                residential property'' and inserting ``in the 
                case of any residential building designed for 
                the occupancy of from one to four families''; 
                and
                    (B) by striking ``shall be made available 
                to every insured upon renewal and every 
                applicant for insurance so as to enable such 
                insured or applicant to receive coverage up to 
                a total amount (including such limits specified 
                in paragraph (1)(A)(i)) of $250,000'' and 
                inserting ``shall be made available, with 
                respect to any single such building, up to an 
                aggregate liability (including such limits 
                specified in paragraph (1)(A)(i)) of 
                $250,000''; and
            (2) in paragraph (4)--
                    (A) by striking ``in the case of any 
                nonresidential property, including churches,'' 
                and inserting ``in the case of any 
                nonresidential building, including a church,''; 
                and
                    (B) by striking ``shall be made available 
                to every insured upon renewal and every 
                applicant for insurance, in respect to any 
                single structure, up to a total amount 
                (including such limit specified in subparagraph 
                (B) or (C) of paragraph (1), as applicable) of 
                $500,000 for each structure and $500,000 for 
                any contents related to each structure'' and 
                inserting ``shall be made available with 
                respect to any single such building, up to an 
                aggregate liability (including such limits 
                specified in subparagraph (B) or (C) of 
                paragraph (1), as applicable) of $500,000, and 
                coverage shall be made available up to a total 
                of $500,000 aggregate liability for contents 
                owned by the building owner and $500,000 
                aggregate liability for each unit within the 
                building for contents owned by the tenant''.
    (c) Indexing of Maximum Coverage Limits.--Subsection (b) of 
section 1306 of the National Flood Insurance Act of 1968 (42 
U.S.C. 4013(b)) is amended--
            (1) in paragraph (4), by striking ``and'' at the 
        end;
            (2) in paragraph (5), by striking the period at the 
        end and inserting ``; and'';
            (3) by redesignating paragraph (5) as paragraph 
        (7); and
            (4) by adding at the end the following new 
        paragraph:
            ``(8) each of the dollar amount limitations under 
        paragraphs (2), (3), (4), (5), and (6) shall be 
        adjusted effective on the date of the enactment of the 
        Flood Insurance Reform Act of 2012, such adjustments 
        shall be calculated using the percentage change, over 
        the period beginning on September 30, 1994, and ending 
        on such date of enactment, in such inflationary index 
        as the Administrator shall, by regulation, specify, and 
        the dollar amount of such adjustment shall be rounded 
        to the next lower dollar; and the Administrator shall 
        cause to be published in the Federal Register the 
        adjustments under this paragraph to such dollar amount 
        limitations; except that in the case of coverage for a 
        property that is made available, pursuant to this 
        paragraph, in an amount that exceeds the limitation 
        otherwise applicable to such coverage as specified in 
        paragraph (2), (3), (4), (5), or (6), the total of such 
        coverage shall be made available only at chargeable 
        rates that are not less than the estimated premium 
        rates for such coverage determined in accordance with 
        section 1307(a)(1).''.
    (d) Optional Coverage for Loss of Use of Personal Residence 
and Business Interruption.--Subsection (b) of section 1306 of 
the National Flood Insurance Act of 1968 (42 U.S.C. 4013(b)), 
as amended by the preceding provisions of this section, is 
further amended by inserting after paragraph (4) the following 
new paragraphs:
            ``(5) the Administrator may provide that, in the 
        case of any residential property, each renewal or new 
        contract for flood insurance coverage may provide not 
        more than $5,000 aggregate liability per dwelling unit 
        for any necessary increases in living expenses incurred 
        by the insured when losses from a flood make the 
        residence unfit to live in, except that--
                    ``(A) purchase of such coverage shall be at 
                the option of the insured;
                    ``(B) any such coverage shall be made 
                available only at chargeable rates that are not 
                less than the estimated premium rates for such 
                coverage determined in accordance with section 
                1307(a)(1); and
                    ``(C) the Administrator may make such 
                coverage available only if the Administrator 
                makes a determination and causes notice of such 
                determination to be published in the Federal 
                Register that--
                            ``(i) a competitive private 
                        insurance market for such coverage does 
                        not exist; and
                            ``(ii) the national flood insurance 
                        program has the capacity to make such 
                        coverage available without borrowing 
                        funds from the Secretary of the 
                        Treasury under section 1309 or 
                        otherwise;
            ``(6) the Administrator may provide that, in the 
        case of any commercial property or other residential 
        property, including multifamily rental property, 
        coverage for losses resulting from any partial or total 
        interruption of the insured's business caused by damage 
        to, or loss of, such property from a flood may be made 
        available to every insured upon renewal and every 
        applicant, up to a total amount of $20,000 per 
        property, except that--
                    ``(A) purchase of such coverage shall be at 
                the option of the insured;
                    ``(B) any such coverage shall be made 
                available only at chargeable rates that are not 
                less than the estimated premium rates for such 
                coverage determined in accordance with section 
                1307(a)(1); and
                    ``(C) the Administrator may make such 
                coverage available only if the Administrator 
                makes a determination and causes notice of such 
                determination to be published in the Federal 
                Register that--
                            ``(i) a competitive private 
                        insurance market for such coverage does 
                        not exist; and
                            ``(ii) the national flood insurance 
                        program has the capacity to make such 
                        coverage available without borrowing 
                        funds from the Secretary of the 
                        Treasury under section 1309 or 
                        otherwise;''.
    (e) Payment of Premiums in Installments for Residential 
Properties.--Section 1306 of the National Flood Insurance Act 
of 1968 (42 U.S.C. 4013) is amended by adding at the end the 
following new subsection:
    ``(d) Payment of Premiums in Installments for Residential 
Properties.--
            ``(1) Authority.--In addition to any other terms 
        and conditions under subsection (a), such regulations 
        shall provide that, in the case of any residential 
        property, premiums for flood insurance coverage made 
        available under this title for such property may be 
        paid in installments.
            ``(2) Limitations.--In implementing the authority 
        under paragraph (1), the Administrator may establish 
        increased chargeable premium rates and surcharges, and 
        deny coverage and establish such other sanctions, as 
        the Administrator considers necessary to ensure that 
        insureds purchase, pay for, and maintain coverage for 
        the full term of a contract for flood insurance 
        coverage or to prevent insureds from purchasing 
        coverage only for periods during a year when risk of 
        flooding is comparatively higher or canceling coverage 
        for periods when such risk is comparatively lower.''.
    (f) Effective Date of Policies Covering Properties Affected 
by Floods in Progress.--Paragraph (1) of section 1306(c) of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4013(c)) is 
amended by adding after the period at the end the following: 
``With respect to any flood that has commenced or is in 
progress before the expiration of such 30-day period, such 
flood insurance coverage for a property shall take effect upon 
the expiration of such 30-day period and shall cover damage to 
such property occurring after the expiration of such period 
that results from such flood, but only if the property has not 
suffered damage or loss as a result of such flood before the 
expiration of such 30-day period.''.

SEC. 345. REFORMS OF PREMIUM RATES.

    (a) Increase in Annual Limitation on Premium Increases.--
Section 1308(e) of the National Flood Insurance Act of 1968 (42 
U.S.C. 4015(e)) is amended by striking ``10 percent'' and 
inserting ``20 percent''.
    (b) Phase-In of Rates for Certain Properties in Newly 
Mapped Areas.--
            (1) In general.--Section 1308 of the National Flood 
        Insurance Act of 1968 (42 U.S.C. 4015) is amended--
                    (A) in subsection (a), in the matter 
                preceding paragraph (1), by inserting ``or 
                notice'' after ``prescribe by regulation'';
                    (B) in subsection (c), by inserting ``and 
                subsection (g)'' before the first comma; and
                    (C) by adding at the end the following new 
                subsection:
    ``(g) 5-Year Phase-In of Flood Insurance Rates for Certain 
Properties in Newly Mapped Areas.--
            ``(1) 5-year phase-in period.--Notwithstanding 
        subsection (c) or any other provision of law relating 
        to chargeable risk premium rates for flood insurance 
        coverage under this title, in the case of any area that 
        was not previously designated as an area having special 
        flood hazards and that, pursuant to any issuance, 
        revision, updating, or other change in flood insurance 
        maps, becomes designated as such an area, during the 5-
        year period that begins, except as provided in 
        paragraph (2), upon the date that such maps, as issued, 
        revised, updated, or otherwise changed, become 
        effective, the chargeable premium rate for flood 
        insurance under this title with respect to any covered 
        property that is located within such area shall be the 
        rate described in paragraph (3).
            ``(2) Applicability to preferred risk rate areas.--
        In the case of any area described in paragraph (1) that 
        consists of or includes an area that, as of date of the 
        effectiveness of the flood insurance maps for such area 
        referred to in paragraph (1) as so issued, revised, 
        updated, or changed, is eligible for any reason for 
        preferred risk rate method premiums for flood insurance 
        coverage and was eligible for such premiums as of the 
        enactment of the Flood Insurance Reform Act of 2012, 
        the 5-year period referred to in paragraph (1) for such 
        area eligible for preferred risk rate method premiums 
        shall begin upon the expiration of the period during 
        which such area is eligible for such preferred risk 
        rate method premiums.
            ``(3) Phase-in of full actuarial rates.--With 
        respect to any area described in paragraph (1), the 
        chargeable risk premium rate for flood insurance under 
        this title for a covered property that is located in 
        such area shall be--
                    ``(A) for the first year of the 5-year 
                period referred to in paragraph (1), the 
                greater of--
                            ``(i) 20 percent of the chargeable 
                        risk premium rate otherwise applicable 
                        under this title to the property; and
                            ``(ii) in the case of any property 
                        that, as of the beginning of such first 
                        year, is eligible for preferred risk 
                        rate method premiums for flood 
                        insurance coverage, such preferred risk 
                        rate method premium for the property;
                    ``(B) for the second year of such 5-year 
                period, 40 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property;
                    ``(C) for the third year of such 5-year 
                period, 60 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property;
                    ``(D) for the fourth year of such 5-year 
                period, 80 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property; and
                    ``(E) for the fifth year of such 5-year 
                period, 100 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property.
            ``(4) Covered properties.--For purposes of the 
        subsection, the term `covered property' means any 
        residential property occupied by its owner or a bona 
        fide tenant as a primary residence.''.
            (2) Regulation or notice.--The Administrator of the 
        Federal Emergency Management Agency shall issue an 
        interim final rule or notice to implement this 
        subsection and the amendments made by this subsection 
        as soon as practicable after the date of the enactment 
        of this Act.
    (c) Phase-In of Actuarial Rates for Certain Properties.--
            (1) In general.--Section 1308(c) of the National 
        Flood Insurance Act of 1968 (42 U.S.C. 4015(c)) is 
        amended--
                    (A) by redesignating paragraph (2) as 
                paragraph (7); and
                    (B) by inserting after paragraph (1) the 
                following new paragraphs:
            ``(2) Commercial properties.--Any nonresidential 
        property.
            ``(3) Second homes and vacation homes.--Any 
        residential property that is not the primary residence 
        of any individual.
            ``(4) Homes sold to new owners.--Any single family 
        property that--
                    ``(A) has been constructed or substantially 
                improved and for which such construction or 
                improvement was started, as determined by the 
                Administrator, before December 31, 1974, or 
                before the effective date of the initial rate 
                map published by the Administrator under 
                paragraph (2) of section 1360(a) for the area 
                in which such property is located, whichever is 
                later; and
                    ``(B) is purchased after the effective date 
                of this paragraph, pursuant to section 
                345(c)(3)(A) of the Flood Insurance Reform Act 
                of 2012.
            ``(5) Homes damaged or improved.--Any property 
        that, on or after the date of the enactment of the 
        Flood Insurance Reform Act of 2012, has experienced or 
        sustained--
                    ``(A) substantial flood damage exceeding 50 
                percent of the fair market value of such 
                property; or
                    ``(B) substantial improvement exceeding 30 
                percent of the fair market value of such 
                property.
            ``(6) Homes with multiple claims.--Any severe 
        repetitive loss property (as such term is defined in 
        section 1366(j)).''.
            (2) Technical amendments.--Section 1308 of the 
        National Flood Insurance Act of 1968 (42 U.S.C. 4015) 
        is amended--
                    (A) in subsection (c)--
                            (i) in the matter preceding 
                        paragraph (1), by striking ``the 
                        limitations provided under paragraphs 
                        (1) and (2)'' and inserting 
                        ``subsection (e)''; and
                            (ii) in paragraph (1), by striking 
                        ``, except'' and all that follows 
                        through ``subsection (e)''; and
                    (B) in subsection (e), by striking 
                ``paragraph (2) or (3)'' and inserting 
                ``paragraph (7)''.
            (3) Effective date and transition.--
                    (A) Effective date.--The amendments made by 
                paragraphs (1) and (2) shall apply beginning 
                upon the expiration of the 12-month period that 
                begins on the date of the enactment of this 
                Act, except as provided in subparagraph (B) of 
                this paragraph.
                    (B) Transition for properties covered by 
                flood insurance upon effective date.--
                            (i) Increase of rates over time.--
                        In the case of any property described 
                        in paragraph (2), (3), (4), (5), or (6) 
                        of section 1308(c) of the National 
                        Flood Insurance Act of 1968, as amended 
                        by paragraph (1) of this subsection, 
                        that, as of the effective date under 
                        subparagraph (A) of this paragraph, is 
                        covered under a policy for flood 
                        insurance made available under the 
                        national flood insurance program for 
                        which the chargeable premium rates are 
                        less than the applicable estimated risk 
                        premium rate under section 1307(a)(1) 
                        of such Act for the area in which the 
                        property is located, the Administrator 
                        of the Federal Emergency Management 
                        Agency shall increase the chargeable 
                        premium rates for such property over 
                        time to such applicable estimated risk 
                        premium rate under section 1307(a)(1).
                            (ii) Amount of annual increase.--
                        Such increase shall be made by 
                        increasing the chargeable premium rates 
                        for the property (after application of 
                        any increase in the premium rates 
                        otherwise applicable to such property), 
                        once during the 12-month period that 
                        begins upon the effective date under 
                        subparagraph (A) of this paragraph and 
                        once every 12 months thereafter until 
                        such increase is accomplished, by 20 
                        percent (or such lesser amount as may 
                        be necessary so that the chargeable 
                        rate does not exceed such applicable 
                        estimated risk premium rate or to 
                        comply with clause (iii)).
                            (iii) Properties subject to phase-
                        in and annual increases.--In the case 
                        of any pre-FIRM property (as such term 
                        is defined in section 578(b) of the 
                        National Flood Insurance Reform Act of 
                        1974), the aggregate increase, during 
                        any 12-month period, in the chargeable 
                        premium rate for the property that is 
                        attributable to this subparagraph or to 
                        an increase described in section 
                        1308(e) of the National Flood Insurance 
                        Act of 1968 may not exceed 20 percent.
                            (iv) Full actuarial rates.--The 
                        provisions of paragraphs (2), (3), (4), 
                        (5), and (6) of such section 1308(c) 
                        shall apply to such a property upon the 
                        accomplishment of the increase under 
                        this subparagraph and thereafter.
    (d) Prohibition of Extension of Subsidized Rates to Lapsed 
Policies.--Section 1308 of the National Flood Insurance Act of 
1968 (42 U.S.C. 4015), as amended by the preceding provisions 
of this subtitle, is further amended--
            (1) in subsection (e), by inserting ``or subsection 
        (h)'' after ``subsection (c)''; and
            (2) by adding at the end the following new 
        subsection:
    ``(h) Prohibition of Extension of Subsidized Rates to 
Lapsed Policies.--Notwithstanding any other provision of law 
relating to chargeable risk premium rates for flood insurance 
coverage under this title, the Administrator shall not provide 
flood insurance coverage under this title for any property for 
which a policy for such coverage for the property has 
previously lapsed in coverage as a result of the deliberate 
choice of the holder of such policy, at a rate less than the 
applicable estimated risk premium rates for the area (or 
subdivision thereof) in which such property is located.''.
    (e) Recognition of State and Local Funding for 
Construction, Reconstruction, and Improvement of Flood 
Protection Systems in Determination of Rates.--
            (1) In general.--Section 1307 of the National Flood 
        Insurance Act of 1968 (42 U.S.C. 4014) is amended--
                    (A) in subsection (e)--
                            (i) in the first sentence, by 
                        striking ``construction of a flood 
                        protection system'' and inserting 
                        ``construction, reconstruction, or 
                        improvement of a flood protection 
                        system (without respect to the level of 
                        Federal investment or participation)''; 
                        and
                            (ii) in the second sentence--
                                    (I) by striking 
                                ``construction of a flood 
                                protection system'' and 
                                inserting ``construction, 
                                reconstruction, or improvement 
                                of a flood protection system''; 
                                and
                                    (II) by inserting ``based 
                                on the present value of the 
                                completed system'' after ``has 
                                been expended''; and
                    (B) in subsection (f)--
                            (i) in the first sentence in the 
                        matter preceding paragraph (1), by 
                        inserting ``(without respect to the 
                        level of Federal investment or 
                        participation)'' before the period at 
                        the end;
                            (ii) in the third sentence in the 
                        matter preceding paragraph (1), by 
                        inserting ``, whether coastal or 
                        riverine,'' after ``special flood 
                        hazard''; and
                            (iii) in paragraph (1), by striking 
                        ``a Federal agency in consultation with 
                        the local project sponsor'' and 
                        inserting ``the entity or entities that 
                        own, operate, maintain, or repair such 
                        system''.
            (2) Regulations.--The Administrator of the Federal 
        Emergency Management Agency shall promulgate 
        regulations to implement this subsection and the 
        amendments made by this subsection as soon as 
        practicable, but not more than 18 months after the date 
        of the enactment of this Act. Paragraph (3) may not be 
        construed to annul, alter, affect, authorize any waiver 
        of, or establish any exception to, the requirement 
        under the preceding sentence.

SEC. 346. TECHNICAL MAPPING ADVISORY COUNCIL.

    (a) Establishment.--There is established a council to be 
known as the Technical Mapping Advisory Council (in this 
section referred to as the ``Council'').
    (b) Membership.--
            (1) In general.--The Council shall consist of--
                    (A) the Administrator of the Federal 
                Emergency Management Agency (in this section 
                referred to as the ``Administrator''), or the 
                designee thereof;
                    (B) the Director of the United States 
                Geological Survey of the Department of the 
                Interior, or the designee thereof;
                    (C) the Under Secretary of Commerce for 
                Oceans and Atmosphere, or the designee thereof;
                    (D) the commanding officer of the United 
                States Army Corps of Engineers, or the designee 
                thereof;
                    (E) the chief of the Natural Resources 
                Conservation Service of the Department of 
                Agriculture, or the designee thereof;
                    (F) the Director of the United States Fish 
                and Wildlife Service of the Department of the 
                Interior, or the designee thereof;
                    (G) the Assistant Administrator for 
                Fisheries of the National Oceanic and 
                Atmospheric Administration of the Department of 
                Commerce, or the designee thereof; and
                    (H) 14 additional members to be appointed 
                by the Administrator of the Federal Emergency 
                Management Agency, who shall be--
                            (i) an expert in data management;
                            (ii) an expert in real estate;
                            (iii) an expert in insurance;
                            (iv) a member of a recognized 
                        regional flood and storm water 
                        management organization;
                            (v) a representative of a State 
                        emergency management agency or 
                        association or organization for such 
                        agencies;
                            (vi) a member of a recognized 
                        professional surveying association or 
                        organization;
                            (vii) a member of a recognized 
                        professional mapping association or 
                        organization;
                            (viii) a member of a recognized 
                        professional engineering association or 
                        organization;
                            (ix) a member of a recognized 
                        professional association or 
                        organization representing flood hazard 
                        determination firms;
                            (x) a representative of State 
                        national flood insurance coordination 
                        offices;
                            (xi) representatives of two local 
                        governments, at least one of whom is a 
                        local levee flood manager or executive, 
                        designated by the Federal Emergency 
                        Management Agency as Cooperating 
                        Technical Partners; and
                            (xii) representatives of two State 
                        governments designated by the Federal 
                        Emergency Management Agency as 
                        Cooperating Technical States.
            (2) Qualifications.--Members of the Council shall 
        be appointed based on their demonstrated knowledge and 
        competence regarding surveying, cartography, remote 
        sensing, geographic information systems, or the 
        technical aspects of preparing and using flood 
        insurance rate maps. In appointing members under 
        paragraph (1)(H), the Administrator shall ensure that 
        the membership of the Council has a balance of Federal, 
        State, local, and private members, and includes an 
        adequate number of representatives from the States with 
        coastline on the Gulf of Mexico and other States 
        containing areas identified by the Administrator of the 
        Federal Emergency Management Agency as at high-risk for 
        flooding or special flood hazard areas.
    (c) Duties.--
            (1) New mapping standards.--Not later than the 
        expiration of the 12-month period beginning upon the 
        date of the enactment of this Act, the Council shall 
        develop and submit to the Administrator and the 
        Congress proposed new mapping standards for 100-year 
        flood insurance rate maps used under the national flood 
        insurance program under the National Flood Insurance 
        Act of 1968. In developing such proposed standards the 
        Council shall--
                    (A) ensure that the flood insurance rate 
                maps reflect true risk, including graduated 
                risk that better reflects the financial risk to 
                each property; such reflection of risk should 
                be at the smallest geographic level possible 
                (but not necessarily property-by-property) to 
                ensure that communities are mapped in a manner 
                that takes into consideration different risk 
                levels within the community;
                    (B) ensure the most efficient generation, 
                display, and distribution of flood risk data, 
                models, and maps where practicable through 
                dynamic digital environments using spatial 
                database technology and the Internet;
                    (C) ensure that flood insurance rate maps 
                reflect current hydrologic and hydraulic data, 
                current land use, and topography, incorporating 
                the most current and accurate ground and 
                bathymetric elevation data;
                    (D) determine the best ways to include in 
                such flood insurance rate maps levees, 
                decertified levees, and areas located below 
                dams, including determining a methodology for 
                ensuring that decertified levees and other 
                protections are included in flood insurance 
                rate maps and their corresponding flood zones 
                reflect the level of protection conferred;
                    (E) consider how to incorporate restored 
                wetlands and other natural buffers into flood 
                insurance rate maps, which may include 
                wetlands, groundwater recharge areas, erosion 
                zones, meander belts, endangered species 
                habitat, barrier islands and shoreline buffer 
                features, riparian forests, and other features;
                    (F) consider whether to use vertical 
                positioning (as defined by the Administrator) 
                for flood insurance rate maps;
                    (G) ensure that flood insurance rate maps 
                differentiate between a property that is 
                located in a flood zone and a structure located 
                on such property that is not at the same risk 
                level for flooding as such property due to the 
                elevation of the structure;
                    (H) ensure that flood insurance rate maps 
                take into consideration the best scientific 
                data and potential future conditions (including 
                projections for sea level rise); and
                    (I) consider how to incorporate the new 
                standards proposed pursuant to this paragraph 
                in existing mapping efforts.
            (2) Ongoing duties.--The Council shall, on an 
        ongoing basis, review the mapping protocols developed 
        pursuant to paragraph (1), and make recommendations to 
        the Administrator when the Council determines that 
        mapping protocols should be altered.
            (3) Meetings.--In carrying out its duties under 
        this section, the Council shall consult with 
        stakeholders through at least 4 public meetings 
        annually, and shall seek input of all stakeholder 
        interests including State and local representatives, 
        environmental and conservation organizations, insurance 
        industry representatives, advocacy groups, planning 
        organizations, and mapping organizations.
    (d) Prohibition on Compensation.--Members of the Council 
shall receive no additional compensation by reason of their 
service on the Council.
    (e) Chairperson.--The Administrator shall serve as the 
Chairperson of the Council.
    (f) Staff.--
            (1) FEMA.--Upon the request of the Council, the 
        Administrator may detail, on a nonreimbursable basis, 
        personnel of the Federal Emergency Management Agency to 
        assist the Council in carrying out its duties.
            (2) Other federal agencies.--Upon request of the 
        Council, any other Federal agency that is a member of 
        the Council may detail, on a non-reimbursable basis, 
        personnel to assist the Council in carrying out its 
        duties.
    (g) Powers.--In carrying out this section, the Council may 
hold hearings, receive evidence and assistance, provide 
information, and conduct research, as the Council considers 
appropriate.
    (h) Termination.--The Council shall terminate upon the 
expiration of the 5-year period beginning on the date of the 
enactment of this Act.
    (i) Moratorium on Flood Map Changes.--
            (1) Moratorium.--Except as provided in paragraph 
        (2) and notwithstanding any other provision of this 
        subtitle, the National Flood Insurance Act of 1968, or 
        the Flood Disaster Protection Act of 1973, during the 
        period beginning upon the date of the enactment of this 
        Act and ending upon the submission by the Council to 
        the Administrator and the Congress of the proposed new 
        mapping standards required under subsection (c)(1), the 
        Administrator may not make effective any new or updated 
        rate maps for flood insurance coverage under the 
        national flood insurance program that were not in 
        effect for such program as of such date of enactment, 
        or otherwise revise, update, or change the flood 
        insurance rate maps in effect for such program as of 
        such date.
            (2) Letters of map change.--During the period 
        described in paragraph (1), the Administrator may 
        revise, update, and change the flood insurance rate 
        maps in effect for the national flood insurance program 
        only pursuant to a letter of map change (including a 
        letter of map amendment, letter of map revision, and 
        letter of map revision based on fill).

SEC. 347. FEMA INCORPORATION OF NEW MAPPING PROTOCOLS.

    (a) New Rate Mapping Standards.--Not later than the 
expiration of the 6-month period beginning upon submission by 
the Technical Mapping Advisory Council under section 346 of the 
proposed new mapping standards for flood insurance rate maps 
used under the national flood insurance program developed by 
the Council pursuant to section 346(c), the Administrator of 
the Federal Emergency Management Agency (in this section 
referred to as the ``Administrator'') shall establish new 
standards for such rate maps based on such proposed new 
standards and the recommendations of the Council.
    (b) Requirements.--The new standards for flood insurance 
rate maps established by the Administrator pursuant to 
subsection (a) shall--
            (1) delineate and include in any such rate maps--
                    (A) all areas located within the 100-year 
                flood plain; and
                    (B) areas subject to graduated and other 
                risk levels, to the maximum extent possible;
            (2) ensure that any such rate maps--
                    (A) include levees, including decertified 
                levees, and the level of protection they 
                confer;
                    (B) reflect current land use and topography 
                and incorporate the most current and accurate 
                ground level data;
                    (C) take into consideration the impacts and 
                use of fill and the flood risks associated with 
                altered hydrology;
                    (D) differentiate between a property that 
                is located in a flood zone and a structure 
                located on such property that is not at the 
                same risk level for flooding as such property 
                due to the elevation of the structure;
                    (E) identify and incorporate natural 
                features and their associated flood protection 
                benefits into mapping and rates; and
                    (F) identify, analyze, and incorporate the 
                impact of significant changes to building and 
                development throughout any river or costal 
                water system, including all tributaries, which 
                may impact flooding in areas downstream; and
            (3) provide that such rate maps are developed on a 
        watershed basis.
    (c) Report.--If, in establishing new standards for flood 
insurance rate maps pursuant to subsection (a) of this section, 
the Administrator does not implement all of the recommendations 
of the Council made under the proposed new mapping standards 
developed by the Council pursuant to section 346(c), upon 
establishment of the new standards the Administrator shall 
submit a report to the Committee on Financial Services of the 
House of Representatives and the Committee on Banking, Housing, 
and Urban Affairs of the Senate specifying which such 
recommendations were not adopted and explaining the reasons 
such recommendations were not adopted.
    (d) Implementation.--The Administrator shall, not later 
than the expiration of the 6-month period beginning upon 
establishment of the new standards for flood insurance rate 
maps pursuant to subsection (a) of this section, commence use 
of the new standards and updating of flood insurance rate maps 
in accordance with the new standards. Not later than the 
expiration of the 10-year period beginning upon the 
establishment of such new standards, the Administrator shall 
complete updating of all flood insurance rate maps in 
accordance with the new standards, subject to the availability 
of sufficient amounts for such activities provided in 
appropriation Acts.
    (e) Temporary Suspension of Mandatory Purchase Requirement 
for Certain Properties.--
            (1) Submission of elevation certificate.--Subject 
        to paragraphs (2) and (3) of this subsection, 
        subsections (a), (b), and (e) of section 102 of the 
        Flood Disaster Protection Act of 1973 (42 U.S.C. 
        4012a), and section 202(a) of such Act, shall not apply 
        to a property located in an area designated as having a 
        special flood hazard if the owner of such property 
        submits to the Administrator an elevation certificate 
        for such property showing that the lowest level of the 
        primary residence on such property is at an elevation 
        that is at least three feet higher than the elevation 
        of the 100-year flood plain.
            (2) Review of certificate.--The Administrator shall 
        accept as conclusive each elevation certificate 
        submitted under paragraph (1) unless the Administrator 
        conducts a subsequent elevation survey and determines 
        that the lowest level of the primary residence on the 
        property in question is not at an elevation that is at 
        least three feet higher than the elevation of the 100-
        year flood plain. The Administrator shall provide any 
        such subsequent elevation survey to the owner of such 
        property.
            (3) Determinations for properties on borders of 
        special flood hazard areas.--
                    (A) Expedited determination.--In the case 
                of any survey for a property submitted to the 
                Administrator pursuant to paragraph (1) showing 
                that a portion of the property is located 
                within an area having special flood hazards and 
                that a structure located on the property is not 
                located within such area having special flood 
                hazards, the Administrator shall expeditiously 
                process any request made by an owner of the 
                property for a determination pursuant to 
                paragraph (2) or a determination of whether the 
                structure is located within the area having 
                special flood hazards.
                    (B) Prohibition of fee.--If the 
                Administrator determines pursuant to 
                subparagraph (A) that the structure on the 
                property is not located within the area having 
                special flood hazards, the Administrator shall 
                not charge a fee for reviewing the flood hazard 
                data and shall not require the owner to provide 
                any additional elevation data.
                    (C) Simplification of review process.--The 
                Administrator shall collaborate with private 
                sector flood insurers to simplify the review 
                process for properties described in 
                subparagraph (A) and to ensure that the review 
                process provides for accurate determinations.
            (4) Termination of authority.--This subsection 
        shall cease to apply to a property on the date on which 
        the Administrator updates the flood insurance rate map 
        that applies to such property in accordance with the 
        requirements of subsection (d).

SEC. 348. TREATMENT OF LEVEES.

    Section 1360 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4101) is amended by adding at the end the following 
new subsection:
    ``(k) Treatment of Levees.--The Administrator may not issue 
flood insurance maps, or make effective updated flood insurance 
maps, that omit or disregard the actual protection afforded by 
an existing levee, floodwall, pump or other flood protection 
feature, regardless of the accreditation status of such 
feature.''.

SEC. 349. PRIVATIZATION INITIATIVES.

    (a) FEMA and GAO Reports.--Not later than the expiration of 
the 18-month period beginning on the date of the enactment of 
this Act, the Administrator of the Federal Emergency Management 
Agency and the Comptroller General of the United States shall 
each conduct a separate study to assess a broad range of 
options, methods, and strategies for privatizing the national 
flood insurance program and shall each submit a report to the 
Committee on Financial Services of the House of Representatives 
and the Committee on Banking, Housing, and Urban Affairs of the 
Senate with recommendations for the best manner to accomplish 
such privatization.
    (b) Private Risk-Management Initiatives.--
            (1) Authority.--The Administrator of the Federal 
        Emergency Management Agency may carry out such private 
        risk-management initiatives under the national flood 
        insurance program as the Administrator considers 
        appropriate to determine the capacity of private 
        insurers, reinsurers, and financial markets to assist 
        communities, on a voluntary basis only, in managing the 
        full range of financial risks associated with flooding.
            (2) Assessment.--Not later than the expiration of 
        the 12-month period beginning on the date of the 
        enactment of this Act, the Administrator shall assess 
        the capacity of the private reinsurance, capital, and 
        financial markets by seeking proposals to assume a 
        portion of the program's insurance risk and submit to 
        the Congress a report describing the response to such 
        request for proposals and the results of such 
        assessment.
            (3) Protocol for release of data.--The 
        Administrator shall develop a protocol to provide for 
        the release of data sufficient to conduct the 
        assessment required under paragraph (2).
    (c) Reinsurance.--The National Flood Insurance Act of 1968 
is amended--
            (1) in section 1331(a)(2) (42 U.S.C. 4051(a)(2)), 
        by inserting ``, including as reinsurance of insurance 
        coverage provided by the flood insurance program'' 
        before ``, on such terms'';
            (2) in section 1332(c)(2) (42 U.S.C. 4052(c)(2)), 
        by inserting ``or reinsurance'' after ``flood insurance 
        coverage'';
            (3) in section 1335(a) (42 U.S.C. 4055(a))--
                    (A) by inserting ``(1)'' after ``(a)''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(2) The Administrator is authorized to secure reinsurance 
coverage of coverage provided by the flood insurance program 
from private market insurance, reinsurance, and capital market 
sources at rates and on terms determined by the Administrator 
to be reasonable and appropriate in an amount sufficient to 
maintain the ability of the program to pay claims and that 
minimizes the likelihood that the program will utilize the 
borrowing authority provided under section 1309.'';
            (4) in section 1346(a) (12 U.S.C. 4082(a))--
                    (A) in the matter preceding paragraph (1), 
                by inserting ``, or for purposes of securing 
                reinsurance of insurance coverage provided by 
                the program,'' before ``of any or all of'';
                    (B) in paragraph (1)--
                            (i) by striking ``estimating'' and 
                        inserting ``Estimating''; and
                            (ii) by striking the semicolon at 
                        the end and inserting a period;
                    (C) in paragraph (2)--
                            (i) by striking ``receiving'' and 
                        inserting ``Receiving''; and
                            (ii) by striking the semicolon at 
                        the end and inserting a period;
                    (D) in paragraph (3)--
                            (i) by striking ``making'' and 
                        inserting ``Making''; and
                            (ii) by striking ``; and'' and 
                        inserting a period;
                    (E) in paragraph (4)--
                            (i) by striking ``otherwise'' and 
                        inserting ``Otherwise''; and
                            (ii) by redesignating such 
                        paragraph as paragraph (5); and
                    (F) by inserting after paragraph (3) the 
                following new paragraph:
            ``(4) Placing reinsurance coverage on insurance 
        provided by such program.''; and
            (5) in section 1370(a)(3) (42 U.S.C. 4121(a)(3)), 
        by inserting before the semicolon at the end the 
        following: ``, is subject to the reporting requirements 
        of the Securities Exchange Act of 1934, pursuant to 
        section 13(a) or 15(d) of such Act (15 U.S.C. 78m(a), 
        78o(d)), or is authorized by the Administrator to 
        assume reinsurance on risks insured by the flood 
        insurance program''.
    (d) Assessment of Claims-Paying Ability.--
            (1) Assessment.--Not later than September 30 of 
        each year, the Administrator of the Federal Emergency 
        Management Agency shall conduct an assessment of the 
        claims-paying ability of the national flood insurance 
        program, including the program's utilization of private 
        sector reinsurance and reinsurance equivalents, with 
        and without reliance on borrowing authority under 
        section 1309 of the National Flood Insurance Act of 
        1968 (42 U.S.C. 4016). In conducting the assessment, 
        the Administrator shall take into consideration 
        regional concentrations of coverage written by the 
        program, peak flood zones, and relevant mitigation 
        measures.
            (2) Report.--The Administrator shall submit a 
        report to the Congress of the results of each such 
        assessment, and make such report available to the 
        public, not later than 30 days after completion of the 
        assessment.

SEC. 350. FEMA ANNUAL REPORT ON INSURANCE PROGRAM.

    Section 1320 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4027) is amended--
            (1) in the section heading, by striking ``report to 
        the president'' and inserting ``annual report to 
        congress'';
            (2) in subsection (a)--
                    (A) by striking ``biennially'';
                    (B) by striking ``the President for 
                submission to''; and
                    (C) by inserting ``not later than June 30 
                of each year'' before the period at the end;
            (3) in subsection (b), by striking ``biennial'' and 
        inserting ``annual''; and
            (4) by adding at the end the following new 
        subsection:
    ``(c) Financial Status of Program.--The report under this 
section for each year shall include information regarding the 
financial status of the national flood insurance program under 
this title, including a description of the financial status of 
the National Flood Insurance Fund and current and projected 
levels of claims, premium receipts, expenses, and borrowing 
under the program.''.

SEC. 351. MITIGATION ASSISTANCE.

    (a) Mitigation Assistance Grants.--Section 1366 of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4104c) is 
amended--
            (1) in subsection (a), by striking the last 
        sentence and inserting the following: ``Such financial 
        assistance shall be made available--
            ``(1) to States and communities in the form of 
        grants under this section for carrying out mitigation 
        activities;
            ``(2) to States and communities in the form of 
        grants under this section for carrying out mitigation 
        activities that reduce flood damage to severe 
        repetitive loss structures; and
            ``(3) to property owners in the form of direct 
        grants under this section for carrying out mitigation 
        activities that reduce flood damage to individual 
        structures for which 2 or more claim payments for 
        losses have been made under flood insurance coverage 
        under this title if the Administrator, after 
        consultation with the State and community, determines 
        that neither the State nor community in which such a 
        structure is located has the capacity to manage such 
        grants.''.
            (2) by striking subsection (b);
            (3) in subsection (c)--
                    (A) by striking ``flood risk'' and 
                inserting ``multi-hazard'';
                    (B) by striking ``provides protection 
                against'' and inserting ``examines reduction 
                of''; and
                    (C) by redesignating such subsection as 
                subsection (b);
            (4) by striking subsection (d);
            (5) in subsection (e)--
                    (A) in paragraph (1), by striking the 
                paragraph designation and all that follows 
                through the end of the first sentence and 
                inserting the following:
            ``(1) Requirement of consistency with approved 
        mitigation plan.--Amounts provided under this section 
        may be used only for mitigation activities that are 
        consistent with mitigation plans that are approved by 
        the Administrator and identified under subparagraph 
        (4).'';
                    (B) by striking paragraphs (2), (3), and 
                (4) and inserting the following new paragraphs:
            ``(2) Requirements of technical feasibility, cost 
        effectiveness, and interest of nfif.--The Administrator 
        may approve only mitigation activities that the 
        Administrator determines are technically feasible and 
        cost-effective and in the interest of, and represent 
        savings to, the National Flood Insurance Fund. In 
        making such determinations, the Administrator shall 
        take into consideration recognized benefits that are 
        difficult to quantify.
            ``(3) Priority for mitigation assistance.--In 
        providing grants under this section for mitigation 
        activities, the Administrator shall give priority for 
        funding to activities that the Administrator determines 
        will result in the greatest savings to the National 
        Flood Insurance Fund, including activities for--
                    ``(A) severe repetitive loss structures;
                    ``(B) repetitive loss structures; and
                    ``(C) other subsets of structures as the 
                Administrator may establish.'';
                    (C) in paragraph (5)--
                            (i) by striking all of the matter 
                        that precedes subparagraph (A) and 
                        inserting the following:
            ``(4) Eligible activities.--Eligible activities may 
        include--'';
                            (ii) by striking subparagraphs (E) 
                        and (H);
                            (iii) by redesignating 
                        subparagraphs (D), (F), and (G) as 
                        subparagraphs (E), (G), and (H);
                            (iv) by inserting after 
                        subparagraph (C) the following new 
                        subparagraph:
                    ``(D) elevation, relocation, and 
                floodproofing of utilities (including equipment 
                that serve structures);'';
                            (v) by inserting after subparagraph 
                        (E), as so redesignated by clause (iii) 
                        of this subparagraph, the following new 
                        subparagraph:
                    ``(F) the development or update of State, 
                local, or Indian tribal mitigation plans which 
                meet the planning criteria established by the 
                Administrator, except that the amount from 
                grants under this section that may be used 
                under this subparagraph may not exceed $50,000 
                for any mitigation plan of a State or $25,000 
                for any mitigation plan of a local government 
                or Indian tribe;'';
                            (vi) in subparagraph (H); as so 
                        redesignated by clause (iii) of this 
                        subparagraph, by striking ``and'' at 
                        the end; and
                            (vii) by adding at the end the 
                        following new subparagraphs:
                    ``(I) other mitigation activities not 
                described in subparagraphs (A) through (G) or 
                the regulations issued under subparagraph (H), 
                that are described in the mitigation plan of a 
                State, community, or Indian tribe; and
                    ``(J) personnel costs for State staff that 
                provide technical assistance to communities to 
                identify eligible activities, to develop grant 
                applications, and to implement grants awarded 
                under this section, not to exceed $50,000 per 
                State in any Federal fiscal year, so long as 
                the State applied for and was awarded at least 
                $1,000,000 in grants available under this 
                section in the prior Federal fiscal year; the 
                requirements of subsections (d)(1) and (d)(2) 
                shall not apply to the activity under this 
                subparagraph.'';
                    (D) by adding at the end the following new 
                paragraph:
            ``(6) Eligibility of demolition and rebuilding of 
        properties.--The Administrator shall consider as an 
        eligible activity the demolition and rebuilding of 
        properties to at least base flood elevation or greater, 
        if required by the Administrator or if required by any 
        State regulation or local ordinance, and in accordance 
        with criteria established by the Administrator.''; and
                    (E) by redesignating such subsection as 
                subsection (c);
            (6) by striking subsections (f), (g), and (h) and 
        inserting the following new subsection:
    ``(d) Matching Requirement.--The Administrator may provide 
grants for eligible mitigation activities as follows:
            ``(1) Severe repetitive loss structures.--In the 
        case of mitigation activities to severe repetitive loss 
        structures, in an amount up to 100 percent of all 
        eligible costs.
            ``(2) Repetitive loss structures.--In the case of 
        mitigation activities to repetitive loss structures, in 
        an amount up to 90 percent of all eligible costs.
            ``(3) Other mitigation activities.-- In the case of 
        all other mitigation activities, in an amount up to 75 
        percent of all eligible costs.'';
            (7) in subsection (i)--
                    (A) in paragraph (2)--
                            (i) by striking ``certified under 
                        subsection (g)'' and inserting 
                        ``required under subsection (d)''; and
                            (ii) by striking ``3 times the 
                        amount'' and inserting ``the amount''; 
                        and
                    (B) by redesignating such subsection as 
                subsection (e);
            (8) in subsection (j)--
                    (A) by striking ``Riegle Community 
                Development and Regulatory Improvement Act of 
                1994'' and inserting ``Flood Insurance Reform 
                Act of 2012'';
                    (B) by redesignating such subsection as 
                subsection (f); and
            (9) by striking subsections (k) and (m) and 
        inserting the following new subsections:
    ``(g) Failure to Make Grant Award Within 5 Years.--For any 
application for a grant under this section for which the 
Administrator fails to make a grant award within 5 years of the 
date of application, the grant application shall be considered 
to be denied and any funding amounts allocated for such grant 
applications shall remain in the National Flood Mitigation Fund 
under section 1367 of this title and shall be made available 
for grants under this section.
    ``(h) Limitation on Funding for Mitigation Activities for 
Severe Repetitive Loss Structures.--The amount used pursuant to 
section 1310(a)(8) in any fiscal year may not exceed 
$40,000,000 and shall remain available until expended.
    ``(i) Definitions.--For purposes of this section, the 
following definitions shall apply:
            ``(1) Community.--The term `community' means--
                    ``(A) a political subdivision that--
                            ``(i) has zoning and building code 
                        jurisdiction over a particular area 
                        having special flood hazards, and
                            ``(ii) is participating in the 
                        national flood insurance program; or
                    ``(B) a political subdivision of a State, 
                or other authority, that is designated by 
                political subdivisions, all of which meet the 
                requirements of subparagraph (A), to administer 
                grants for mitigation activities for such 
                political subdivisions.
            ``(2) Repetitive loss structure.--The term 
        `repetitive loss structure' has the meaning given such 
        term in section 1370.
            ``(3) Severe repetitive loss structure.--The term 
        `severe repetitive loss structure' means a structure 
        that--
                    ``(A) is covered under a contract for flood 
                insurance made available under this title; and
                    ``(B) has incurred flood-related damage--
                            ``(i) for which 4 or more separate 
                        claims payments have been made under 
                        flood insurance coverage under this 
                        title, with the amount of each such 
                        claim exceeding $15,000, and with the 
                        cumulative amount of such claims 
                        payments exceeding $60,000; or
                            ``(ii) for which at least 2 
                        separate claims payments have been made 
                        under such coverage, with the 
                        cumulative amount of such claims 
                        exceeding the value of the insured 
                        structure.''.
    (b) Elimination of Grants Program for Repetitive Insurance 
Claims Properties.--Chapter I of the National Flood Insurance 
Act of 1968 is amended by striking section 1323 (42 U.S.C. 
4030).
    (c) Elimination of Pilot Program for Mitigation of Severe 
Repetitive Loss Properties.--Chapter III of the National Flood 
Insurance Act of 1968 is amended by striking section 1361A (42 
U.S.C. 4102a).
    (d) National Flood Insurance Fund.--Section 1310(a) of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4017(a)) is 
amended--
            (1) in paragraph (7), by inserting ``and'' after 
        the semicolon; and
            (2) by striking paragraphs (8) and (9).
    (e) National Flood Mitigation Fund.--Section 1367 of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4104d) is 
amended--
            (1) in subsection (b)--
                    (A) by striking paragraph (1) and inserting 
                the following new paragraph:
            ``(1) in each fiscal year, from the National Flood 
        Insurance Fund in amounts not exceeding $90,000,000 to 
        remain available until expended, of which--
                    ``(A) not more than $40,000,000 shall be 
                available pursuant to subsection (a) of this 
                section only for assistance described in 
                section 1366(a)(1);
                    ``(B) not more than $40,000,000 shall be 
                available pursuant to subsection (a) of this 
                section only for assistance described in 
                section 1366(a)(2); and
                    ``(C) not more than $10,000,000 shall be 
                available pursuant to subsection (a) of this 
                section only for assistance described in 
                section 1366(a)(3).''.
                    (B) in paragraph (3), by striking ``section 
                1366(i)'' and inserting ``section 1366(e)'';
            (2) in subsection (c), by striking ``sections 1366 
        and 1323'' and inserting ``section 1366'';
            (3) by redesignating subsections (d) and (e) as 
        subsections (f) and (g), respectively; and
            (4) by inserting after subsection (c) the following 
        new subsections:
    ``(d) Prohibition on Offsetting Collections.--
Notwithstanding any other provision of this title, amounts made 
available pursuant to this section shall not be subject to 
offsetting collections through premium rates for flood 
insurance coverage under this title.
    ``(e) Continued Availability and Reallocation.--Any amounts 
made available pursuant to subparagraph (A), (B), or (C) of 
subsection (b)(1) that are not used in any fiscal year shall 
continue to be available for the purposes specified in such 
subparagraph of subsection (b)(1) pursuant to which such 
amounts were made available, unless the Administrator 
determines that reallocation of such unused amounts to meet 
demonstrated need for other mitigation activities under section 
1366 is in the best interest of the National Flood Insurance 
Fund.''.
    (f) Increased Cost of Compliance Coverage.--Section 
1304(b)(4) of the National Flood Insurance Act of 1968 (42 
U.S.C. 4011(b)(4)) is amended--
            (1) by striking subparagraph (B); and
            (2) by redesignating subparagraphs (C), (D), and 
        (E) as subparagraphs (B), (C), and (D), respectively.

SEC. 352. NOTIFICATION TO HOMEOWNERS REGARDING MANDATORY PURCHASE 
                    REQUIREMENT APPLICABILITY AND RATE PHASE-INS.

    Section 201 of the Flood Disaster Protection Act of 1973 
(42 U.S.C. 4105) is amended by adding at the end the following 
new subsection:
    ``(f) Annual Notification.--The Administrator, in 
consultation with affected communities, shall establish and 
carry out a plan to notify residents of areas having special 
flood hazards, on an annual basis--
            ``(1) that they reside in such an area;
            ``(2) of the geographical boundaries of such area;
            ``(3) of whether section 1308(g) of the National 
        Flood Insurance Act of 1968 applies to properties 
        within such area;
            ``(4) of the provisions of section 102 requiring 
        purchase of flood insurance coverage for properties 
        located in such an area, including the date on which 
        such provisions apply with respect to such area, taking 
        into consideration section 102(i); and
            ``(5) of a general estimate of what similar 
        homeowners in similar areas typically pay for flood 
        insurance coverage, taking into consideration section 
        1308(g) of the National Flood Insurance Act of 1968.''.

SEC. 353. NOTIFICATION TO MEMBERS OF CONGRESS OF FLOOD MAP REVISIONS 
                    AND UPDATES.

    Section 1360 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4101), as amended by the preceding provisions of 
this subtitle, is further amended by adding at the end the 
following new subsection:
    ``(l) Notification to Members of Congress of Map 
Modernization.--Upon any revision or update of any floodplain 
area or flood-risk zone pursuant to subsection (f), any 
decision pursuant to subsection (f)(1) that such revision or 
update is necessary, any issuance of preliminary maps for such 
revision or updating, or any other significant action relating 
to any such revision or update, the Administrator shall notify 
the Senators for each State affected, and each Member of the 
House of Representatives for each congressional district 
affected, by such revision or update in writing of the action 
taken.''.

SEC. 354. NOTIFICATION AND APPEAL OF MAP CHANGES; NOTIFICATION TO 
                    COMMUNITIES OF ESTABLISHMENT OF FLOOD ELEVATIONS.

    Section 1363 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4104) is amended by striking the section designation 
and all that follows through the end of subsection (a) and 
inserting the following:
    ``Sec. 1363. (a) In establishing projected flood elevations 
for land use purposes with respect to any community pursuant to 
section 1361, the Administrator shall first propose such 
determinations--
            ``(1) by providing the chief executive officer of 
        each community affected by the proposed elevations, by 
        certified mail, with a return receipt requested, notice 
        of the elevations, including a copy of the maps for the 
        elevations for such community and a statement 
        explaining the process under this section to appeal for 
        changes in such elevations;
            ``(2) by causing notice of such elevations to be 
        published in the Federal Register, which notice shall 
        include information sufficient to identify the 
        elevation determinations and the communities affected, 
        information explaining how to obtain copies of the 
        elevations, and a statement explaining the process 
        under this section to appeal for changes in the 
        elevations;
            ``(3) by publishing in a prominent local newspaper 
        the elevations, a description of the appeals process 
        for flood determinations, and the mailing address and 
        telephone number of a person the owner may contact for 
        more information or to initiate an appeal;
            ``(4) by providing written notification, by first 
        class mail, to each owner of real property affected by 
        the proposed elevations of--
                    ``(A) the status of such property, both 
                prior to and after the effective date of the 
                proposed determination, with respect to flood 
                zone and flood insurance requirements under 
                this Act and the Flood Disaster Protection Act 
                of 1973;
                    ``(B) the process under this section to 
                appeal a flood elevation determination; and
                    ``(C) the mailing address and phone number 
                of a person the owner may contact for more 
                information or to initiate an appeal; and''.

SEC. 355. NOTIFICATION TO TENANTS OF AVAILABILITY OF CONTENTS 
                    INSURANCE.

    The National Flood Insurance Act of 1968 is amended by 
inserting after section 1308 (42 U.S.C. 4015) the following new 
section:

``SEC. 1308A. NOTIFICATION TO TENANTS OF AVAILABILITY OF CONTENTS 
                    INSURANCE.

    ``(a) In General.--The Administrator shall, upon entering 
into a contract for flood insurance coverage under this title 
for any property--
            ``(1) provide to the insured sufficient copies of 
        the notice developed pursuant to subsection (b); and
            ``(2) require the insured to provide a copy of the 
        notice, or otherwise provide notification of the 
        information under subsection (b) in the manner that the 
        manager or landlord deems most appropriate, to each 
        such tenant and to each new tenant upon commencement of 
        such a tenancy.
    ``(b) Notice.--Notice to a tenant of a property in 
accordance with this subsection is written notice that clearly 
informs a tenant--
            ``(1) whether the property is located in an area 
        having special flood hazards;
            ``(2) that flood insurance coverage is available 
        under the national flood insurance program under this 
        title for contents of the unit or structure leased by 
        the tenant;
            ``(3) of the maximum amount of such coverage for 
        contents available under this title at that time; and
            ``(4) of where to obtain information regarding how 
        to obtain such coverage, including a telephone number, 
        mailing address, and Internet site of the Administrator 
        where such information is available.''.

SEC. 356. NOTIFICATION TO POLICY HOLDERS REGARDING DIRECT MANAGEMENT OF 
                    POLICY BY FEMA.

    Part C of chapter II of the National Flood Insurance Act of 
1968 (42 U.S.C. 4081 et seq.) is amended by adding at the end 
the following new section:

``SEC. 1349. NOTIFICATION TO POLICY HOLDERS REGARDING DIRECT MANAGEMENT 
                    OF POLICY BY FEMA.

    ``(a) Notification.--Not later than 60 days before the date 
on which a transferred flood insurance policy expires, and 
annually thereafter until such time as the Federal Emergency 
Management Agency is no longer directly administering such 
policy, the Administrator shall notify the holder of such 
policy that--
            ``(1) the Federal Emergency Management Agency is 
        directly administering the policy;
            ``(2) such holder may purchase flood insurance that 
        is directly administered by an insurance company; and
            ``(3) purchasing flood insurance offered under the 
        National Flood Insurance Program that is directly 
        administered by an insurance company will not alter the 
        coverage provided or the premiums charged to such 
        holder that otherwise would be provided or charged if 
        the policy was directly administered by the Federal 
        Emergency Management Agency.
    ``(b) Definition.--In this section, the term `transferred 
flood insurance policy' means a flood insurance policy that--
            ``(1) was directly administered by an insurance 
        company at the time the policy was originally purchased 
        by the policy holder; and
            ``(2) at the time of renewal of the policy, direct 
        administration of the policy was or will be transferred 
        to the Federal Emergency Management Agency.''.

SEC. 357. NOTICE OF AVAILABILITY OF FLOOD INSURANCE AND ESCROW IN RESPA 
                    GOOD FAITH ESTIMATE.

    Subsection (c) of section 5 of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2604(c)) is amended by adding 
at the end the following new sentence: ``Each such good faith 
estimate shall include the following conspicuous statements and 
information: (1) that flood insurance coverage for residential 
real estate is generally available under the national flood 
insurance program whether or not the real estate is located in 
an area having special flood hazards and that, to obtain such 
coverage, a home owner or purchaser should contact the national 
flood insurance program; (2) a telephone number and a location 
on the Internet by which a home owner or purchaser can contact 
the national flood insurance program; and (3) that the 
escrowing of flood insurance payments is required for many 
loans under section 102(d) of the Flood Disaster Protection Act 
of 1973, and may be a convenient and available option with 
respect to other loans.''.

SEC. 358. REIMBURSEMENT FOR COSTS INCURRED BY HOMEOWNERS AND 
                    COMMUNITIES OBTAINING LETTERS OF MAP AMENDMENT OR 
                    REVISION.

    (a) In General.--Section 1360 of the National Flood 
Insurance Act of 1968 (42 U.S.C. 4101), as amended by the 
preceding provisions of this subtitle, is further amended by 
adding at the end the following new subsection:
    ``(m) Reimbursement.--
            ``(1) Requirement upon bona fide error.--If an 
        owner of any property located in an area described in 
        section 102(i)(3) of the Flood Disaster Protection Act 
        of 1973, or a community in which such a property is 
        located, obtains a letter of map amendment, or a letter 
        of map revision, due to a bona fide error on the part 
        of the Administrator of the Federal Emergency 
        Management Agency, the Administrator shall reimburse 
        such owner, or such entity or jurisdiction acting on 
        such owner's behalf, or such community, as applicable, 
        for any reasonable costs incurred in obtaining such 
        letter.
            ``(2) Reasonable costs.--The Administrator shall, 
        by regulation or notice, determine a reasonable amount 
        of costs to be reimbursed under paragraph (1), except 
        that such costs shall not include legal or attorneys 
        fees. In determining the reasonableness of costs, the 
        Administrator shall only consider the actual costs to 
        the owner or community, as applicable, of utilizing the 
        services of an engineer, surveyor, or similar 
        services.''.
    (b) Regulations.--Not later than 90 days after the date of 
the enactment of this Act, the Administrator of the Federal 
Emergency Management Agency shall issue the regulations or 
notice required under section 1360(m)(2) of the National Flood 
Insurance Act of 1968, as added by the amendment made by 
subsection (a) of this section.

SEC. 359. ENHANCED COMMUNICATION WITH CERTAIN COMMUNITIES DURING MAP 
                    UPDATING PROCESS.

    Section 1360 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4101), as amended by the preceding provisions of 
this subtitle, is further amended by adding at the end the 
following new subsection:
    ``(n) Enhanced Communication With Certain Communities 
During Map Updating Process.--In updating flood insurance maps 
under this section, the Administrator shall communicate with 
communities located in areas where flood insurance rate maps 
have not been updated in 20 years or more and the appropriate 
State emergency agencies to resolve outstanding issues, provide 
technical assistance, and disseminate all necessary information 
to reduce the prevalence of outdated maps in flood-prone 
areas.''.

SEC. 360. NOTIFICATION TO RESIDENTS NEWLY INCLUDED IN FLOOD HAZARD 
                    AREAS.

    Section 1360 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4101), as amended by the preceding provisions of 
this subtitle, is further amended by adding at the end the 
following new subsection:
    ``(o) Notification to Residents Newly Included in Flood 
Hazard Area.--In revising or updating any areas having special 
flood hazards, the Administrator shall provide to each owner of 
a property to be newly included in such a special flood hazard 
area, at the time of issuance of such proposed revised or 
updated flood insurance maps, a copy of the proposed revised or 
updated flood insurance maps together with information 
regarding the appeals process under section 1363 (42 U.S.C. 
4104).''.

SEC. 361. TREATMENT OF SWIMMING POOL ENCLOSURES OUTSIDE OF HURRICANE 
                    SEASON.

    Chapter I of the National Flood Insurance Act of 1968 (42 
U.S.C. 4001 et seq.) is amended by adding at the end the 
following new section:

``SEC. 1325. TREATMENT OF SWIMMING POOL ENCLOSURES OUTSIDE OF HURRICANE 
                    SEASON.

    ``In the case of any property that is otherwise in 
compliance with the coverage and building requirements of the 
national flood insurance program, the presence of an enclosed 
swimming pool located at ground level or in the space below the 
lowest floor of a building after November 30 and before June 1 
of any year shall have no effect on the terms of coverage or 
the ability to receive coverage for such building under the 
national flood insurance program established pursuant to this 
title, if the pool is enclosed with non-supporting breakaway 
walls.''.

SEC. 362. INFORMATION REGARDING MULTIPLE PERILS CLAIMS.

    Section 1345 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4081) is amended by adding at the end the following 
new subsection:
    ``(d) Information Regarding Multiple Perils Claims.--
            ``(1) In general.--Subject to paragraph (2), if an 
        insured having flood insurance coverage under a policy 
        issued under the program under this title by the 
        Administrator or a company, insurer, or entity offering 
        flood insurance coverage under such program (in this 
        subsection referred to as a `participating company') 
        has wind or other homeowners coverage from any company, 
        insurer, or other entity covering property covered by 
        such flood insurance, in the case of damage to such 
        property that may have been caused by flood or by wind, 
        the Administrator and the participating company, upon 
        the request of the insured, shall provide to the 
        insured, within 30 days of such request--
                    ``(A) a copy of the estimate of structure 
                damage;
                    ``(B) proofs of loss;
                    ``(C) any expert or engineering reports or 
                documents commissioned by or relied upon by the 
                Administrator or participating company in 
                determining whether the damage was caused by 
                flood or any other peril; and
                    ``(D) the Administrator's or the 
                participating company's final determination on 
                the claim.
            ``(2) Timing.--Paragraph (1) shall apply only with 
        respect to a request described in such paragraph made 
        by an insured after the Administrator or the 
        participating company, or both, as applicable, have 
        issued a final decision on the flood claim involved and 
        resolution of all appeals with respect to such 
        claim.''.

SEC. 363. FEMA AUTHORITY TO REJECT TRANSFER OF POLICIES.

    Section 1345 of the National Flood Insurance Act of 1968 
(42 U.S.C. 4081) is amended by adding at the end the following 
new subsection:
    ``(e) FEMA Authority to Reject Transfer of Policies.--
Notwithstanding any other provision of this Act, the 
Administrator may, at the discretion of the Administrator, 
refuse to accept the transfer of the administration of policies 
for coverage under the flood insurance program under this title 
that are written and administered by any insurance company or 
other insurer, or any insurance agent or broker.''.

SEC. 364. APPEALS.

    (a) Television and Radio Announcement.--Section 1363 of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4104), as 
amended by the preceding provisions of this subtitle, is 
further amended--
            (1) in subsection (a), by adding at the end the 
        following new paragraph:
            ``(5) by notifying a local television and radio 
        station,''; and
            (2) in the first sentence of subsection (b), by 
        inserting before the period at the end the following: 
        ``and shall notify a local television and radio station 
        at least once during the same 10-day period''.
    (b) Extension of Appeals Period.--Subsection (b) of section 
1363 of the National Flood Insurance Act of 1968 (42 U.S.C. 
4104(b)) is amended--
            (1) by striking ``(b) The Director'' and inserting 
        ``(b)(1) The Administrator''; and
            (2) by adding at the end the following new 
        paragraph:
    ``(2) The Administrator shall grant an extension of the 90-
day period for appeals referred to in paragraph (1) for 90 
additional days if an affected community certifies to the 
Administrator, after the expiration of at least 60 days of such 
period, that the community--
            ``(A) believes there are property owners or lessees 
        in the community who are unaware of such period for 
        appeals; and
            ``(B) will utilize the extension under this 
        paragraph to notify property owners or lessees who are 
        affected by the proposed flood elevation determinations 
        of the period for appeals and the opportunity to appeal 
        the determinations proposed by the Administrator.''.
    (c) Applicability.--The amendments made by subsections (a) 
and (b) shall apply with respect to any flood elevation 
determination for any area in a community that has not, as of 
the date of the enactment of this Act, been issued a Letter of 
Final Determination for such determination under the flood 
insurance map modernization process.

SEC. 365. RESERVE FUND.

    (a) Establishment.--Chapter I of the National Flood 
Insurance Act of 1968 is amended by inserting after section 
1310 (42 U.S.C. 4017) the following new section:

``SEC. 1310A. RESERVE FUND.

    ``(a) Establishment of Reserve Fund.--In carrying out the 
flood insurance program authorized by this title, the 
Administrator shall establish in the Treasury of the United 
States a National Flood Insurance Reserve Fund (in this section 
referred to as the `Reserve Fund') which shall--
            ``(1) be an account separate from any other 
        accounts or funds available to the Administrator; and
            ``(2) be available for meeting the expected future 
        obligations of the flood insurance program.
    ``(b) Reserve Ratio.--Subject to the phase-in requirements 
under subsection (d), the Reserve Fund shall maintain a balance 
equal to--
            ``(1) 1 percent of the sum of the total potential 
        loss exposure of all outstanding flood insurance 
        policies in force in the prior fiscal year; or
            ``(2) such higher percentage as the Administrator 
        determines to be appropriate, taking into consideration 
        any circumstance that may raise a significant risk of 
        substantial future losses to the Reserve Fund.
    ``(c) Maintenance of Reserve Ratio.--
            ``(1) In general.--The Administrator shall have the 
        authority to establish, increase, or decrease the 
        amount of aggregate annual insurance premiums to be 
        collected for any fiscal year necessary--
                    ``(A) to maintain the reserve ratio 
                required under subsection (b); and
                    ``(B) to achieve such reserve ratio, if the 
                actual balance of such reserve is below the 
                amount required under subsection (b).
            ``(2) Considerations.--In exercising the authority 
        under paragraph (1), the Administrator shall consider--
                    ``(A) the expected operating expenses of 
                the Reserve Fund;
                    ``(B) the insurance loss expenditures under 
                the flood insurance program;
                    ``(C) any investment income generated under 
                the flood insurance program; and
                    ``(D) any other factor that the 
                Administrator determines appropriate.
            ``(3) Limitations.--In exercising the authority 
        under paragraph (1), the Administrator shall be subject 
        to all other provisions of this Act, including any 
        provisions relating to chargeable premium rates and 
        annual increases of such rates.
    ``(d) Phase-in Requirements.--The phase-in requirements 
under this subsection are as follows:
            ``(1) In general.--Beginning in fiscal year 2012 
        and not ending until the fiscal year in which the ratio 
        required under subsection (b) is achieved, in each such 
        fiscal year the Administrator shall place in the 
        Reserve Fund an amount equal to not less than 7.5 
        percent of the reserve ratio required under subsection 
        (b).
            ``(2) Amount satisfied.--As soon as the ratio 
        required under subsection (b) is achieved, and except 
        as provided in paragraph (3), the Administrator shall 
        not be required to set aside any amounts for the 
        Reserve Fund.
            ``(3) Exception.--If at any time after the ratio 
        required under subsection (b) is achieved, the Reserve 
        Fund falls below the required ratio under subsection 
        (b), the Administrator shall place in the Reserve Fund 
        for that fiscal year an amount equal to not less than 
        7.5 percent of the reserve ratio required under 
        subsection (b).
    ``(e) Limitation on Reserve Ratio.--In any given fiscal 
year, if the Administrator determines that the reserve ratio 
required under subsection (b) cannot be achieved, the 
Administrator shall submit a report to the Congress that--
            ``(1) describes and details the specific concerns 
        of the Administrator regarding such consequences;
            ``(2) demonstrates how such consequences would harm 
        the long-term financial soundness of the flood 
        insurance program; and
            ``(3) indicates the maximum attainable reserve 
        ratio for that particular fiscal year.
    ``(f) Availability of Amounts.--The reserve ratio 
requirements under subsection (b) and the phase-in requirements 
under subsection (d) shall be subject to the availability of 
amounts in the National Flood Insurance Fund for transfer under 
section 1310(a)(10), as provided in section 1310(f).''.
    (b) Funding.--Subsection (a) of section 1310 of the 
National Flood Insurance Act of 1968 (42 U.S.C. 4017(a)), as 
amended by the preceding provisions of this Act, is further 
amended by adding at the end the following new paragraph:
            ``(10) for transfers to the National Flood 
        Insurance Reserve Fund under section 1310A, in 
        accordance with such section.''.

SEC. 366. CDBG ELIGIBILITY FOR FLOOD INSURANCE OUTREACH ACTIVITIES AND 
                    COMMUNITY BUILDING CODE ADMINISTRATION GRANTS.

    Section 105(a) of the Housing and Community Development Act 
of 1974 (42 U.S.C. 5305(a)) is amended--
            (1) in paragraph (24), by striking ``and'' at the 
        end;
            (2) in paragraph (25), by striking the period at 
        the end and inserting a semicolon; and
            (3) by adding at the end the following new 
        paragraphs:
            ``(26) supplementing existing State or local 
        funding for administration of building code enforcement 
        by local building code enforcement departments, 
        including for increasing staffing, providing staff 
        training, increasing staff competence and professional 
        qualifications, and supporting individual certification 
        or departmental accreditation, and for capital 
        expenditures specifically dedicated to the 
        administration of the building code enforcement 
        department, except that, to be eligible to use amounts 
        as provided in this paragraph--
                    ``(A) a building code enforcement 
                department shall provide matching, non-Federal 
                funds to be used in conjunction with amounts 
                used under this paragraph in an amount--
                            ``(i) in the case of a building 
                        code enforcement department serving an 
                        area with a population of more than 
                        50,000, equal to not less than 50 
                        percent of the total amount of any 
                        funds made available under this title 
                        that are used under this paragraph;
                            ``(ii) in the case of a building 
                        code enforcement department serving an 
                        area with a population of between 
                        20,001 and 50,000, equal to not less 
                        than 25 percent of the total amount of 
                        any funds made available under this 
                        title that are used under this 
                        paragraph; and
                            ``(iii) in the case of a building 
                        code enforcement department serving an 
                        area with a population of less than 
                        20,000, equal to not less than 12.5 
                        percent of the total amount of any 
                        funds made available under this title 
                        that are used under this paragraph,
                except that the Secretary may waive the 
                matching fund requirements under this 
                subparagraph, in whole or in part, based upon 
                the level of economic distress of the 
                jurisdiction in which is located the local 
                building code enforcement department that is 
                using amounts for purposes under this 
                paragraph, and shall waive such matching fund 
                requirements in whole for any recipient 
                jurisdiction that has dedicated all building 
                code permitting fees to the conduct of local 
                building code enforcement; and
                    ``(B) any building code enforcement 
                department using funds made available under 
                this title for purposes under this paragraph 
                shall empanel a code administration and 
                enforcement team consisting of at least 1 full-
                time building code enforcement officer, a city 
                planner, and a health planner or similar 
                officer; and
            ``(27) provision of assistance to local 
        governmental agencies responsible for floodplain 
        management activities (including such agencies of 
        Indians tribes, as such term is defined in section 4 of 
        the Native American Housing Assistance and Self-
        Determination Act of 1996 (25 U.S.C. 4103)) in 
        communities that participate in the national flood 
        insurance program under the National Flood Insurance 
        Act of 1968 (42 U.S.C. 4001 et seq.), only for carrying 
        out outreach activities to encourage and facilitate the 
        purchase of flood insurance protection under such Act 
        by owners and renters of properties in such communities 
        and to promote educational activities that increase 
        awareness of flood risk reduction; except that--
                    ``(A) amounts used as provided under this 
                paragraph shall be used only for activities 
                designed to--
                            ``(i) identify owners and renters 
                        of properties in communities that 
                        participate in the national flood 
                        insurance program, including owners of 
                        residential and commercial properties;
                            ``(ii) notify such owners and 
                        renters when their properties become 
                        included in, or when they are excluded 
                        from, an area having special flood 
                        hazards and the effect of such 
                        inclusion or exclusion on the 
                        applicability of the mandatory flood 
                        insurance purchase requirement under 
                        section 102 of the Flood Disaster 
                        Protection Act of 1973 (42 U.S.C. 
                        4012a) to such properties;
                            ``(iii) educate such owners and 
                        renters regarding the flood risk and 
                        reduction of this risk in their 
                        community, including the continued 
                        flood risks to areas that are no longer 
                        subject to the flood insurance 
                        mandatory purchase requirement;
                            ``(iv) educate such owners and 
                        renters regarding the benefits and 
                        costs of maintaining or acquiring flood 
                        insurance, including, where applicable, 
                        lower-cost preferred risk policies 
                        under this title for such properties 
                        and the contents of such properties;
                            ``(v) encourage such owners and 
                        renters to maintain or acquire such 
                        coverage;
                            ``(vi) notify such owners of where 
                        to obtain information regarding how to 
                        obtain such coverage, including a 
                        telephone number, mailing address, and 
                        Internet site of the Administrator of 
                        the Federal Emergency Management Agency 
                        (in this paragraph referred to as the 
                        `Administrator') where such information 
                        is available; and
                            ``(vii) educate local real estate 
                        agents in communities participating in 
                        the national flood insurance program 
                        regarding the program and the 
                        availability of coverage under the 
                        program for owners and renters of 
                        properties in such communities, and 
                        establish coordination and liaisons 
                        with such real estate agents to 
                        facilitate purchase of coverage under 
                        the National Flood Insurance Act of 
                        1968 and increase awareness of flood 
                        risk reduction;
                    ``(B) in any fiscal year, a local 
                governmental agency may not use an amount under 
                this paragraph that exceeds 3 times the amount 
                that the agency certifies, as the Secretary, in 
                consultation with the Administrator, shall 
                require, that the agency will contribute from 
                non-Federal funds to be used with such amounts 
                used under this paragraph only for carrying out 
                activities described in subparagraph (A); and 
                for purposes of this subparagraph, the term 
                `non-Federal funds' includes State or local 
                government agency amounts, in-kind 
                contributions, any salary paid to staff to 
                carry out the eligible activities of the local 
                governmental agency involved, the value of the 
                time and services contributed by volunteers to 
                carry out such services (at a rate determined 
                by the Secretary), and the value of any donated 
                material or building and the value of any lease 
                on a building;
                    ``(C) a local governmental agency that uses 
                amounts as provided under this paragraph may 
                coordinate or contract with other agencies and 
                entities having particular capacities, 
                specialties, or experience with respect to 
                certain populations or constituencies, 
                including elderly or disabled families or 
                persons, to carry out activities described in 
                subparagraph (A) with respect to such 
                populations or constituencies; and
                    ``(D) each local government agency that 
                uses amounts as provided under this paragraph 
                shall submit a report to the Secretary and the 
                Administrator, not later than 12 months after 
                such amounts are first received, which shall 
                include such information as the Secretary and 
                the Administrator jointly consider appropriate 
                to describe the activities conducted using such 
                amounts and the effect of such activities on 
                the retention or acquisition of flood insurance 
                coverage.''.

SEC. 367. TECHNICAL CORRECTIONS.

    (a) Flood Disaster Protection Act of 1973.--The Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4002 et seq.) is 
amended--
            (1) by striking ``Director'' each place such term 
        appears, except in section 102(f)(3) (42 U.S.C. 
        4012a(f)(3)), and inserting ``Administrator''; and
            (2) in section 201(b) (42 U.S.C. 4105(b)), by 
        striking ``Director's'' and inserting 
        ``Administrator's''.
    (b) National Flood Insurance Act of 1968.--The National 
Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.) is 
amended--
            (1) by striking ``Director'' each place such term 
        appears and inserting ``Administrator''; and
            (2) in section 1363 (42 U.S.C. 4104), by striking 
        ``Director's'' each place such term appears and 
        inserting ``Administrator's''.
    (c) Federal Flood Insurance Act of 1956.--Section 15(e) of 
the Federal Flood Insurance Act of 1956 (42 U.S.C. 2414(e)) is 
amended by striking ``Director'' each place such term appears 
and inserting ``Administrator''.

SEC. 368. REQUIRING COMPETITION FOR NATIONAL FLOOD INSURANCE PROGRAM 
                    POLICIES.

    (a) Report.--Not later than the expiration of the 90-day 
period beginning upon the date of the enactment of this Act, 
the Administrator of the Federal Emergency Management Agency, 
in consultation with insurance companies, insurance agents and 
other organizations with which the Administrator has 
contracted, shall submit to the Congress a report describing 
procedures and policies that the Administrator shall implement 
to limit the percentage of policies for flood insurance 
coverage under the national flood insurance program that are 
directly managed by the Agency to not more than 10 percent of 
the aggregate number of flood insurance policies in force under 
such program.
    (b) Implementation.--Upon submission of the report under 
subsection (a) to the Congress, the Administrator shall 
implement the policies and procedures described in the report. 
The Administrator shall, not later than the expiration of the 
12-month period beginning upon submission of such report, 
reduce the number of policies for flood insurance coverage that 
are directly managed by the Agency, or by the Agency's direct 
servicing contractor that is not an insurer, to not more than 
10 percent of the aggregate number of flood insurance policies 
in force as of the expiration of such 12-month period.
    (c) Continuation of Current Agent Relationships.--In 
carrying out subsection (b), the Administrator shall ensure 
that--
            (1) agents selling or servicing policies described 
        in such subsection are not prevented from continuing to 
        sell or service such policies; and
            (2) insurance companies are not prevented from 
        waiving any limitation such companies could otherwise 
        enforce to limit any such activity.

SEC. 369. STUDIES OF VOLUNTARY COMMUNITY-BASED FLOOD INSURANCE OPTIONS.

    (a) Studies.--The Administrator of the Federal Emergency 
Management Agency and the Comptroller General of the United 
States shall each conduct a separate study to assess options, 
methods, and strategies for offering voluntary community-based 
flood insurance policy options and incorporating such options 
into the national flood insurance program. Such studies shall 
take into consideration and analyze how the policy options 
would affect communities having varying economic bases, 
geographic locations, flood hazard characteristics or 
classifications, and flood management approaches.
    (b) Reports.--Not later than the expiration of the 18-month 
period beginning on the date of the enactment of this Act, the 
Administrator of the Federal Emergency Management Agency and 
the Comptroller General of the United States shall each submit 
a report to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing, and 
Urban Affairs of the Senate on the results and conclusions of 
the study such agency conducted under subsection (a), and each 
such report shall include recommendations for the best manner 
to incorporate voluntary community-based flood insurance 
options into the national flood insurance program and for a 
strategy to implement such options that would encourage 
communities to undertake flood mitigation activities.

SEC. 370. REPORT ON INCLUSION OF BUILDING CODES IN FLOODPLAIN 
                    MANAGEMENT CRITERIA.

    Not later than the expiration of the 6-month period 
beginning on the date of the enactment of this Act, the 
Administrator of the Federal Emergency Management Agency shall 
conduct a study and submit a report to the Committee on 
Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate 
regarding the impact, effectiveness, and feasibility of 
amending section 1361 of the National Flood Insurance Act of 
1968 (42 U.S.C. 4102) to include widely used and nationally 
recognized building codes as part of the floodplain management 
criteria developed under such section, and shall determine--
            (1) the regulatory, financial, and economic impacts 
        of such a building code requirement on homeowners, 
        States and local communities, local land use policies, 
        and the Federal Emergency Management Agency;
            (2) the resources required of State and local 
        communities to administer and enforce such a building 
        code requirement;
            (3) the effectiveness of such a building code 
        requirement in reducing flood-related damage to 
        buildings and contents;
            (4) the impact of such a building code requirement 
        on the actuarial soundness of the National Flood 
        Insurance Program;
            (5) the effectiveness of nationally recognized 
        codes in allowing innovative materials and systems for 
        flood-resistant construction;
            (6) the feasibility and effectiveness of providing 
        an incentive in lower premium rates for flood insurance 
        coverage under such Act for structures meeting 
        whichever of such widely used and nationally recognized 
        building code or any applicable local building code 
        provides greater protection from flood damage;
            (7) the impact of such a building code requirement 
        on rural communities with different building code 
        challenges than more urban environments; and
            (8) the impact of such a building code requirement 
        on Indian reservations.

SEC. 371. STUDY ON GRADUATED RISK.

    (a) Study.--The National Academy of Sciences shall conduct 
a study exploring methods for understanding graduated risk 
behind levees and the associated land development, insurance, 
and risk communication dimensions, which shall--
            (1) research, review, and recommend current best 
        practices for estimating direct annualized flood losses 
        behind levees for residential and commercial 
        structures;
            (2) rank such practices based on their best value, 
        balancing cost, scientific integrity, and the inherent 
        uncertainties associated with all aspects of the loss 
        estimate, including geotechnical engineering, flood 
        frequency estimates, economic value, and direct 
        damages;
            (3) research, review, and identify current best 
        floodplain management and land use practices behind 
        levees that effectively balance social, economic, and 
        environmental considerations as part of an overall 
        flood risk management strategy;
            (4) identify examples where such practices have 
        proven effective and recommend methods and processes by 
        which they could be applied more broadly across the 
        United States, given the variety of different flood 
        risks, State and local legal frameworks, and evolving 
        judicial opinions;
            (5) research, review, and identify a variety of 
        flood insurance pricing options for flood hazards 
        behind levees which are actuarially sound and based on 
        the flood risk data developed using the top three best 
        value approaches identified pursuant to paragraph (1);
            (6) evaluate and recommend methods to reduce 
        insurance costs through creative arrangements between 
        insureds and insurers while keeping a clear accounting 
        of how much financial risk is being borne by various 
        parties such that the entire risk is accounted for, 
        including establishment of explicit limits on disaster 
        aid or other assistance in the event of a flood; and
            (7) taking into consideration the recommendations 
        pursuant to paragraphs (1) through (3), recommend 
        approaches to communicating the associated risks to 
        community officials, homeowners, and other residents.
    (b) Report.--Not later than the expiration of the 12-month 
period beginning on the date of the enactment of this Act, the 
National Academy of Sciences shall submit a report to the 
Committees on Financial Services and Science, Space, and 
Technology of the House of Representatives and the Committees 
on Banking, Housing, and Urban Affairs and Commerce, Science 
and Transportation of the Senate on the study under subsection 
(a) including the information and recommendations required 
under such subsection.

SEC. 372. REPORT ON FLOOD-IN-PROGRESS DETERMINATION.

    The Administrator of the Federal Emergency Management 
Agency shall review the processes and procedures for 
determining that a flood event has commenced or is in progress 
for purposes of flood insurance coverage made available under 
the national flood insurance program under the National Flood 
Insurance Act of 1968 and for providing public notification 
that such an event has commenced or is in progress. In such 
review, the Administrator shall take into consideration the 
effects and implications that weather conditions, such as 
rainfall, snowfall, projected snowmelt, existing water levels, 
and other conditions have on the determination that a flood 
event has commenced or is in progress. Not later than the 
expiration of the 6-month period beginning upon the date of the 
enactment of this Act, the Administrator shall submit a report 
to the Congress setting forth the results and conclusions of 
the review undertaken pursuant to this section and any actions 
undertaken or proposed actions to be taken to provide for a 
more precise and technical determination that a flooding event 
has commenced or is in progress.

SEC. 373. STUDY ON REPAYING FLOOD INSURANCE DEBT.

    Not later than the expiration of the 6-month period 
beginning on the date of the enactment of this Act, the 
Administrator of the Federal Emergency Management Agency shall 
submit a report to the Congress setting forth a plan for 
repaying within 10 years all amounts, including any amounts 
previously borrowed but not yet repaid, owed pursuant to clause 
(2) of subsection (a) of section 1309 of the National Flood 
Insurance Act of 1968 (42 U.S.C. 4016(a)(2)).

SEC. 374. NO CAUSE OF ACTION.

    No cause of action shall exist and no claim may be brought 
against the United States for violation of any notification 
requirement imposed upon the United States by this subtitle or 
any amendment made by this subtitle.

SEC. 375. AUTHORITY FOR THE CORPS OF ENGINEERS TO PROVIDE SPECIALIZED 
                    OR TECHNICAL SERVICES.

    (a) In General.--Notwithstanding any other provision of 
law, upon the request of a State or local government, the 
Secretary of the Army may evaluate a levee system that was 
designed or constructed by the Secretary for the purposes of 
the National Flood Insurance Program established under chapter 
1 of the National Flood Insurance Act of 1968 (42 U.S.C. 4011 
et seq.).
    (b) Requirements.--A levee system evaluation under 
subsection (a) shall--
            (1) comply with applicable regulations related to 
        areas protected by a levee system;
            (2) be carried out in accordance with such 
        procedures as the Secretary, in consultation with the 
        Administrator of the Federal Emergency Management 
        Agency, may establish; and
            (3) be carried out only if the State or local 
        government agrees to reimburse the Secretary for all 
        cost associated with the performance of the activities.

         Subtitle E--Repeal of the Office of Financial Research

SEC. 381. REPEAL OF THE OFFICE OF FINANCIAL RESEARCH.

    (a) In General.--Subtitle B of title I of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act is hereby 
repealed.
    (b) Conforming Amendments to the Dodd-Frank Act.--The Dodd-
Frank Wall Street Reform and Consumer Protection Act is 
amended--
            (1) in section 102(a), by striking paragraph (5);
            (2) in section 111--
                    (A) in subsection (b)(2)--
                            (i) by striking subparagraph (A); 
                        and
                            (ii) by redesignating subparagraphs 
                        (B), (C), (D), and (E) as subparagraphs 
                        (A), (B), (C), and (D), respectively;
                    (B) in subsection (c)(1), by striking 
                ``subparagraphs (C), (D), and (E)'' and 
                inserting ``subparagraphs (B), (C), and (D)'';
            (3) in section 112--
                    (A) in subsection (a)(2)--
                            (i) in subparagraph (A), by 
                        striking ``direct the Office of 
                        Financial Research to'';
                            (ii) by striking subparagraph (B); 
                        and
                            (iii) by redesignating 
                        subparagraphs (C), (D), (E), (F), (G), 
                        (H), (I), (J), (K), (L), (M), and (N) 
                        as subparagraphs (B), (C), (D), (E), 
                        (F), (G), (H), (I), (J), (K), (L), and 
                        (M), respectively; and
                    (B) in subsection (d)--
                            (i) in paragraph (1), by striking 
                        ``the Office of Financial Research, 
                        member agencies, and'' and inserting 
                        ``member agencies and'';
                            (ii) in paragraph (2), by striking 
                        ``the Office of Financial Research, any 
                        member agency, and'' and inserting 
                        ``any member agency and'';
                            (iii) in paragraph (3)--
                                    (I) by striking ``, acting 
                                through the Office of Financial 
                                Research,'' each place it 
                                appears; and
                                    (II) in subparagraph (B), 
                                by striking ``the Office of 
                                Financial Research or''; and
                            (iv) in paragraph (5)(A), by 
                        striking ``, the Office of Financial 
                        Research,'';
            (4) in section 116, by striking ``, acting through 
        the Office of Financial Research,'' each place it 
        appears; and
            (5) by striking section 118.
    (c) Conforming Amendment to the Paperwork Reduction Act.--
Effective as of the date specified in section 1100H of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, 
section 1100D(a) of such Act is amended to read as follows:
    ``(a) Designation as an Independent Agency.--Section 
3502(5) of subchapter I of chapter 35 of title 44, United 
States Code (commonly known as the Paperwork Reduction Act) is 
amended by inserting `the Bureau of Consumer Financial 
Protection,' after `the Securities and Exchange 
Commission,'.''.
    (d) Technical Amendments.--The table of contents for the 
Dodd-Frank Wall Street Reform and Consumer Protection Act is 
amended--
            (1) by striking the item relating to section 118; 
        and
            (2) by striking the items relating to subtitle B of 
        title I.

                  TITLE IV--COMMITTEE ON THE JUDICIARY

SEC. 401. SHORT TITLE.

    This title may be cited as the ``Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011''.

SEC. 402. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    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; or
            (3) the presence of a foreign body, which has no 
        therapeutic or diagnostic purpose or effect, in the 
        person of the injured person.
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. 403. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses 
in Health Care Lawsuits.--In any health care lawsuit, nothing 
in this title 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. 404. 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) Forty percent of the first $50,000 recovered by 
        the claimant(s).
            (2) Thirty-three and one-third percent of the next 
        $50,000 recovered by the claimant(s).
            (3) Twenty-five percent of the next $500,000 
        recovered by the claimant(s).
            (4) Fifteen 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. 405. 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.
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.
    (b) 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.
    (c) No Punitive Damages for Products That Comply With FDA 
Standards.--
            (1) In general.--
                    (A) No punitive damages may be awarded 
                against the manufacturer or distributor of a 
                medical product, or a supplier of any component 
                or raw material of such medical product, based 
                on a claim that such product caused the 
                claimant's harm where--
                            (i)(I) such medical product was 
                        subject to premarket approval, 
                        clearance, or licensure by the Food and 
                        Drug Administration with respect to the 
                        safety of the formulation or 
                        performance of the aspect of such 
                        medical product which caused the 
                        claimant's harm or the adequacy of the 
                        packaging or labeling of such medical 
                        product; and
                            (II) such medical product was so 
                        approved, cleared, or licensed; or
                            (ii) such medical product is 
                        generally recognized among qualified 
                        experts as safe and effective pursuant 
                        to conditions established by the Food 
                        and Drug Administration and applicable 
                        Food and Drug Administration 
                        regulations, including without 
                        limitation those related to packaging 
                        and labeling, unless the Food and Drug 
                        Administration has determined that such 
                        medical product was not manufactured or 
                        distributed in substantial compliance 
                        with applicable Food and Drug 
                        Administration statutes and 
                        regulations.
                    (B) Rule of construction.--Subparagraph (A) 
                may not be construed as establishing the 
                obligation of the Food and Drug Administration 
                to demonstrate affirmatively that a 
                manufacturer, distributor, or supplier referred 
                to in such subparagraph meets any of the 
                conditions described in such subparagraph.
            (2) Liability of health care providers.--A health 
        care provider who prescribes, or who dispenses pursuant 
        to a prescription, a medical product approved, 
        licensed, or cleared by the Food and Drug 
        Administration shall not be named as a party to a 
        product liability lawsuit involving such product and 
        shall not be liable to a claimant in a class action 
        lawsuit against the manufacturer, distributor, or 
        seller of such product. Nothing in this paragraph 
        prevents a court from consolidating cases involving 
        health care providers and cases involving products 
        liability claims against the manufacturer, distributor, 
        or product seller of such medical product.
            (3) Packaging.--In a health care lawsuit for harm 
        which is alleged to relate to the adequacy of the 
        packaging or labeling of a drug which is required to 
        have tamper-resistant packaging under regulations of 
        the Secretary of Health and Human Services (including 
        labeling regulations related to such packaging), the 
        manufacturer or product seller of the drug shall not be 
        held liable for punitive damages unless such packaging 
        or labeling is found by the trier of fact by clear and 
        convincing evidence to be substantially out of 
        compliance with such regulations.
            (4) Exception.--Paragraph (1) shall not apply in 
        any health care lawsuit in which--
                    (A) a person, before or after premarket 
                approval, clearance, or licensure of such 
                medical product, knowingly misrepresented to or 
                withheld from the Food and Drug Administration 
                information that is required to be submitted 
                under the Federal Food, Drug, and Cosmetic Act 
                (21 U.S.C. 301 et seq.) or section 351 of the 
                Public Health Service Act (42 U.S.C. 262) that 
                is material and is causally related to the harm 
                which the claimant allegedly suffered
                    (B) a person made an illegal payment to an 
                official of the Food and Drug Administration 
                for the purpose of either securing or 
                maintaining approval, clearance, or licensure 
                of such medical product; or
                    (C) the defendant caused the medical 
                product which caused the claimant's harm to be 
                misbranded or adulterated (as such terms are 
                used in chapter V of the Federal Food, Drug, 
                and Cosmetic Act (21 U.S.C. 351 et seq.)).

SEC. 406. 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 accordance with 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 title.

SEC. 407. DEFINITIONS.

    In this title:
            (1) Alternative dispute resolution system; 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) 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.
            (4) 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.
            (5) 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.
            (6) 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.
            (7) 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.
            (8) 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.
            (9) 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.
            (10) 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.
            (11) 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.
            (12) 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.
            (13) 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.
            (14) 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.
            (15) 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.
            (16) 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.
            (17) 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. 408. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) 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 title does not affect the 
                application of the rule of law to such an 
                action; and
                    (B) any rule of law prescribed by this 
                title in conflict with a rule of law of such 
                title XXI shall not apply to such action.
            (2) 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 title or 
        otherwise applicable law (as determined under this 
        title) will apply to such aspect of such action.
    (b) Other Federal Law.--Except as provided in this section, 
nothing in this title 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. 409. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health 
care lawsuits set forth in this title 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 title. The provisions governing health care 
lawsuits set forth in this title 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 title; 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) Any 
issue that is not governed by any provision of law established 
by or under this title (including State standards of 
negligence) shall be governed by otherwise applicable State or 
Federal law.
    (2) This title 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 title or create a cause of action.
    (c) State Flexibility.--No provision of this title 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 title, 
        notwithstanding section 303(a); or
            (2) any defense available to a party in a health 
        care lawsuit under any other provision of State or 
        Federal law.

SEC. 410. APPLICABILITY; EFFECTIVE DATE.

    This title 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.

         TITLE V--COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

SEC. 501. RETIREMENT CONTRIBUTIONS.

    (a) Civil Service Retirement System.--
            (1) Individual contributions.--Section 8334(c) of 
        title 5, United States Code, is amended--
                    (A) by striking ``(c) Each'' and inserting 
                ``(c)(1) Each''; and
                    (B) by adding at the end the following:
    ``(2) Notwithstanding any other provision of this 
subsection, the applicable percentage of basic pay under this 
subsection shall--
            ``(A) except as provided in subparagraph (B) or 
        (C), for purposes of computing an amount--
                    ``(i) for a period in calendar year 2013, 
                be equal to the applicable percentage under 
                this subsection for calendar year 2012, plus an 
                additional 1.5 percentage points;
                    ``(ii) for a period in calendar year 2014, 
                be equal to the applicable percentage under 
                this subsection for calendar year 2013 (as 
                determined under clause (i)), plus an 
                additional 0.5 percentage point;
                    ``(iii) for a period in calendar year 2015, 
                2016, or 2017, be equal to the applicable 
                percentage under this subsection for the 
                preceding calendar year (as determined under 
                clause (ii) or this clause, as the case may 
                be), plus an additional 1.0 percentage point; 
                and
                    ``(iv) for a period in any calendar year 
                after 2017, be equal to the applicable 
                percentage under this subsection for calendar 
                year 2017 (as determined under clause (iii));
            ``(B) for purposes of computing an amount with 
        respect to a Member for Member service--
                    ``(i) for a period in calendar year 2013, 
                be equal to the applicable percentage under 
                this subsection for calendar year 2012, plus an 
                additional 2.5 percentage points;
                    ``(ii) for a period in calendar year 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this subsection for the 
                preceding calendar year (as determined under 
                clause (i) or this clause, as the case may be), 
                plus an additional 1.5 percentage points; and
                    ``(iii) for a period in any calendar year 
                after 2017, be equal to the applicable 
                percentage under this subsection for calendar 
                year 2017 (as determined under clause (ii)); 
                and
            ``(C) for purposes of computing an amount with 
        respect to a Member or employee for Congressional 
        employee service--
                    ``(i) for a period in calendar year 2013, 
                be equal to the applicable percentage under 
                this subsection for calendar year 2012, plus an 
                additional 2.5 percentage points;
                    ``(ii) for a period in calendar year 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this subsection for the 
                preceding calendar year (as determined under 
                clause (i) or this clause, as the case may be), 
                plus an additional 1.5 percentage points; and
                    ``(iii) for a period in any calendar year 
                after 2017, be equal to the applicable 
                percentage under this subsection for calendar 
                year 2017 (as determined under clause (ii)).''.
            (2) Government contributions.--Section 
        8334(a)(1)(B) of title 5, United States Code, is 
        amended--
                    (A) in clause (i), by striking ``Except as 
                provided in clause (ii),'' and inserting 
                ``Except as provided in clause (ii) or 
                (iii),''; and
                    (B) by adding at the end the following:
    ``(iii) The amount to be contributed under clause (i) 
shall, with respect to a period in any year beginning after 
December 31, 2012, be equal to--
            ``(I) the amount which would otherwise apply under 
        clause (i) with respect to such period, reduced by
            ``(II) the amount by which, with respect to such 
        period, the withholding under subparagraph (A) exceeds 
        the amount which would otherwise have been withheld 
        from the basic pay of the employee or elected official 
        involved under subparagraph (A) based on the percentage 
        applicable under subsection (c) for calendar year 
        2012.''.
    (b) Federal Employees' Retirement System.--Section 
8422(a)(3) of title 5, United States Code, is amended--
            (1) by redesignating subparagraph (B) as 
        subparagraph (C);
            (2) by inserting after subparagraph (A) the 
        following:
    ``(B) Notwithstanding any other provision of this 
paragraph, the applicable percentage under this paragraph 
shall--
            ``(i) except as provided in clause (ii) or (iii), 
        for purposes of computing an amount--
                    ``(I) for a period in calendar year 2013, 
                be equal to the applicable percentage under 
                this paragraph for calendar year 2012, plus an 
                additional 1.5 percentage points;
                    ``(II) for a period in calendar year 2014, 
                be equal to the applicable percentage under 
                this paragraph for calendar year 2013 (as 
                determined under subclause (I)), plus an 
                additional 0.5 percentage point;
                    ``(III) for a period in calendar year 2015, 
                2016, or 2017, be equal to the applicable 
                percentage under this paragraph for the 
                preceding calendar year (as determined under 
                subclause (II) or this subclause, as the case 
                may be), plus an additional 1.0 percentage 
                point; and
                    ``(IV) for a period in any calendar year 
                after 2017, be equal to the applicable 
                percentage under this paragraph for calendar 
                year 2017 (as determined under subclause 
                (III));
            ``(ii) for purposes of computing an amount with 
        respect to a Member--
                    ``(I) for a period in calendar year 2013, 
                be equal to the applicable percentage under 
                this paragraph for calendar year 2012, plus an 
                additional 2.5 percentage points;
                    ``(II) for a period in calendar year 2014, 
                2015, 2016, or 2017, be equal to the applicable 
                percentage under this paragraph for the 
                preceding calendar year (as determined under 
                subclause (I) or this subclause, as the case 
                may be), plus an additional 1.5 percentage 
                points; and
                    ``(III) for a period in any calendar year 
                after 2017, be equal to the applicable 
                percentage under this paragraph for calendar 
                year 2017 (as determined under subclause (II)); 
                and
            ``(iii) for purposes of computing an amount with 
        respect to a Congressional employee--
                    ``(I) for a period in calendar year 2013, 
                2014, 2015, 2016, or 2017, be equal to the 
                applicable percentage under this paragraph for 
                the preceding calendar year (including as 
                increased under this subclause, if applicable), 
                plus an additional 1.5 percentage points; and
                    ``(II) for a period in any calendar year 
                after 2017, be equal to the applicable 
                percentage under this paragraph for calendar 
                year 2017 (as determined under subclause 
                (I)).''; and
            (3) in subparagraph (C) (as so redesignated by 
        paragraph (1))--
                    (A) by striking ``9.3'' each place it 
                appears and inserting ``12''; and
                    (B) by striking ``9.8'' each place it 
                appears and inserting ``12.5''.

SEC. 502. ANNUITY SUPPLEMENT.

    Section 8421(a) of title 5, United States Code, is 
amended--
            (1) in paragraph (1), by striking ``paragraph (3)'' 
        and inserting ``paragraphs (3) and (4)'';
            (2) in paragraph (2), by striking ``paragraph (3)'' 
        and inserting ``paragraphs (3) and (4)''; and
            (3) by adding at the end the following:
    ``(4)(A) Except as provided in subparagraph (B), no annuity 
supplement under this section shall be payable in the case of 
an individual who first becomes subject to this chapter after 
December 31, 2012.
    ``(B) Nothing in this paragraph applies in the case of an 
individual separating under subsection (d) or (e) of section 
8412.''.

SEC. 503. CONTRIBUTIONS TO THRIFT SAVINGS FUND OF PAYMENTS FOR ACCRUED 
                    OR ACCUMULATED LEAVE.

    (a) Amendments Relating to CSRS.--Section 8351(b) of title 
5, United States Code, is amended--
            (1) by striking paragraph (2)(A) and inserting the 
        following:
    ``(2)(A) An employee or Member may contribute to the Thrift 
Savings Fund in any pay period any amount of such employee's or 
Member's basic pay for such pay period, and may contribute (by 
direct transfer to the Fund) any part of any payment that the 
employee or Member receives for accumulated and accrued annual 
or vacation leave under section 5551 or 5552. Notwithstanding 
section 2105(e), in this paragraph the term `employee' includes 
an employee of the United States Postal Service or of the 
Postal Regulatory Commission.'';
            (2) by striking subparagraph (B) of paragraph (2); 
        and
            (3) by redesignating subparagraph (C) of paragraph 
        (2) as subparagraph (B).
    (b) Amendments Relating to FERS.--Section 8432(a) of title 
5, United States Code, is amended--
            (1) by striking all that precedes paragraph (3) and 
        inserting the following:
    ``(a)(1) An employee or Member--
            ``(A) may contribute to the Thrift Savings Fund in 
        any pay period, pursuant to an election under 
        subsection (b), any amount of such employee's or 
        Member's basic pay for such pay period; and
            ``(B) may contribute (by direct transfer to the 
        Fund) any part of any payment that the employee or 
        Member receives for accumulated and accrued annual or 
        vacation leave under section 5551 or 5552.
    ``(2) Contributions made under paragraph (1)(A) pursuant to 
an election under subsection (b) shall, with respect to each 
pay period for which such election remains in effect, be made 
in accordance with a program of regular contributions provided 
in regulations prescribed by the Executive Director.''; and
            (2) by adding at the end the following:
    ``(4) Notwithstanding section 2105(e), in this subsection 
the term `employee' includes an employee of the United States 
Postal Service or of the Postal Regulatory Commission.''.
    (c) Regulations.--The Executive Director of the Federal 
Retirement Thrift Investment Board shall promulgate regulations 
to carry out the amendments made by this section.
    (d) Effective Date.--The amendments made by subsections (a) 
and (b) shall take effect 1 year after the date of the 
enactment of this Act.

                 TITLE VI--COMMITTEE ON WAYS AND MEANS

Subtitle A--Recapture of Overpayments Resulting From Certain Federally-
                      subsidized Health Insurance

SEC. 601. RECAPTURE OF OVERPAYMENTS RESULTING FROM CERTAIN FEDERALLY-
                    SUBSIDIZED HEALTH INSURANCE.

    (a) In General.--Paragraph (2) of section 36B(f) of the 
Internal Revenue Code of 1986 is amended by striking 
subparagraph (B).
    (b) Conforming Amendment.--So much of paragraph (2) of 
section 36B(f) of such Code, as amended by subsection (a), as 
precedes ``advance payments'' is amended to read as follows:
            ``(2) Excess advance payments.--If the''.
    (c) Effective Date.--The amendments made by this section 
shall apply to taxable years ending after December 31, 2013.

  Subtitle B--Social Security Number Required to Claim the Refundable 
                    Portion of the Child Tax Credit

SEC. 611. SOCIAL SECURITY NUMBER REQUIRED TO CLAIM THE REFUNDABLE 
                    PORTION OF THE CHILD TAX CREDIT.

    (a) In General.--Subsection (d) of section 24 of the 
Internal Revenue Code of 1986 is amended by adding at the end 
the following new paragraph:
            ``(5) Identification requirement with respect to 
        taxpayer.--
                    ``(A) In general.--Paragraph (1) shall not 
                apply to any taxpayer for any taxable year 
                unless the taxpayer includes the taxpayer's 
                Social Security number on the return of tax for 
                such taxable year.
                    ``(B) Joint returns.--In the case of a 
                joint return, the requirement of subparagraph 
                (A) shall be treated as met if the Social 
                Security number of either spouse is included on 
                such return.
                    ``(C) Limitation.--Subparagraph (A) shall 
                not apply to the extent the tentative minimum 
                tax (as defined in section 55(b)(1)(A)) exceeds 
                the credit allowed under section 32.''.
    (b) Omission Treated as Mathematical or Clerical Error.--
Subparagraph (I) of section 6213(g)(2) of such Code is amended 
to read as follows:
                    ``(I) an omission of a correct Social 
                Security number required under section 24(d)(5) 
                (relating to refundable portion of child tax 
                credit), or a correct TIN under section 24(e) 
                (relating to child tax credit), to be included 
                on a return,''.
    (c) Conforming Amendment.--Subsection (e) of section 24 of 
such Code is amended by inserting ``With Respect to Qualifying 
Children'' after ``Identification Requirement'' in the heading 
thereof.
    (d) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after the date of the 
enactment of this Act.

                 Subtitle C--Human Resources Provisions

SEC. 621. REPEAL OF THE PROGRAM OF BLOCK GRANTS TO STATES FOR SOCIAL 
                    SERVICES.

    (a) Repeals.--Sections 2001 through 2007 of the Social 
Security Act (42 U.S.C. 1397-1397f) are repealed.
    (b) Conforming Amendments.--
            (1) Section 404(d) of the Social Security Act (42 
        U.S.C. 604(d)) is amended--
                    (A) in paragraph (1), by striking ``any or 
                all of the following provisions of law:'' and 
                all that follows through ``The'' and inserting 
                ``the'';
                    (B) in paragraph (3)--
                            (i) by striking ``rules'' and all 
                        that follows through ``any amount 
                        paid'' and inserting ``rules.--Any 
                        amount paid'';
                            (ii) by striking ``a provision of 
                        law specified in paragraph (1)'' and 
                        inserting ``the Child Care and 
                        Development Block Grant Act of 1990''; 
                        and
                            (iii) by striking subparagraph (B); 
                        and
                    (C) by striking paragraph (2) and 
                redesignating paragraph (3) as paragraph (2).
            (2) Section 422(b) of the Social Security Act (42 
        U.S.C. 622(b)) is amended--
                    (A) in paragraph (1)(A)--
                            (i) by striking ``administers or 
                        supervises'' and inserting 
                        ``administered or supervised''; and
                            (ii) by striking ``subtitle 1 of 
                        title XX'' and inserting ``subtitle A 
                        of title XX (as in effect before the 
                        repeal of such subtitle)''; and
                    (B) in paragraph (2), by striking ``under 
                subtitle 1 of title XX,''.
            (3) Section 471(a) of the Social Security Act (42 
        U.S.C. 671(a)) is amended--
                    (A) in paragraph (4), by striking ``, under 
                subtitle 1 of title XX of this Act,''; and
                    (B) in paragraph (8), by striking ``XIX, or 
                XX'' and inserting ``or XIX''.
            (4) Section 472(h)(1) of the Social Security Act 
        (42 U.S.C. 672(h)(1)) is amended by striking the 2nd 
        sentence.
            (5) Section 473(b) of the Social Security Act (42 
        U.S.C. 673(b)) is amended--
                    (A) in paragraph (1), by striking ``(3)'' 
                and inserting ``(2)'';
                    (B) in paragraph (4), by striking 
                ``paragraphs (1) and (2)'' and inserting 
                ``paragraph (1)''; and
                    (C) by striking paragraph (2) and 
                redesignating paragraphs (3) and (4) as 
                paragraphs (2) and (3), respectively.
            (6) Section 504(b)(6) of the Social Security Act 
        (42 U.S.C. 704(b)(6)) is amended in each of 
        subparagraphs (A) and (B) by striking ``XIX, or XX'' 
        and inserting ``or XIX''.
            (7) Section 1101(a)(1) of the Social Security Act 
        (42 U.S.C. 1301(a)(1)) is amended by striking the 
        penultimate sentence.
            (8) Section 1128(h) of the Social Security Act (42 
        U.S.C. 1320a-7(h)) is amended--
                    (A) by adding ``or'' at the end of 
                paragraph (2); and
                    (B) by striking paragraph (3) and 
                redesignating paragraph (4) as paragraph (3).
            (9) Section 1128A(i)(1) of the Social Security Act 
        (42 U.S.C. 1320a-7a(i)(1)) is amended by striking ``or 
        subtitle 1 of title XX''.
            (10) Section 1132(a)(1) of the Social Security Act 
        (42 U.S.C. 1320b-2(a)(1)) is amended by striking ``XIX, 
        or XX'' and inserting ``or XIX''.
            (11) Section 1902(e)(13)(F)(iii) of the Social 
        Security Act (42 U.S.C. 1396a(e)(13)(F)(iii)) is 
        amended--
                    (A) by striking ``Exclusions'' and 
                inserting ``Exclusion''; and
                    (B) by striking ``an agency that determines 
                eligibility for a program established under the 
                Social Services Block Grant established under 
                title XX or''.
            (12) The heading for title XX of the Social 
        Security Act is amended by striking ``BLOCK GRANTS TO 
        STATES FOR SOCIAL SERVICES'' and inserting ``HEALTH 
        PROFESSIONS DEMONSTRATIONS AND ENVIRONMENTAL HEALTH 
        CONDITION DETECTION''.
            (13) The heading for subtitle A of title XX of the 
        Social Security Act is amended by striking ``Block 
        Grants to States for Social Services'' and inserting 
        ``Health Professions Demonstrations and Environmental 
        Health Condition Detection''.
            (14) Section 16(k)(5)(B)(i) of the Food and 
        Nutrition Act of 2008 (7 U.S.C. 2025(k)(5)(B)(i)) is 
        amended by striking ``, or title XX,''.
            (15) Section 402(b)(3) of the Personal 
        Responsibility and Work Opportunity Reconciliation Act 
        of 1996 (8 U.S.C. 1612(b)(3)) is amended by striking 
        subparagraph (B) and redesignating subparagraph (C) as 
        subparagraph (B).
            (16) Section 245A(h)(4)(I) of the Immigration 
        Reform and Control Act of 1986 (8 U.S.C. 
        1255a(h)(4)(I)) is amended by striking ``, XVI, and 
        XX'' and inserting ``and XVI''.
            (17) Section 17 of the Richard B. Russell National 
        School Lunch Act (42 U.S.C. 1766) is amended--
                    (A) in subsection (a)(2)--
                            (i) in subparagraph (B)--
                                    (I) by striking ``--'' and 
                                all that follows through 
                                ``(i)'';
                                    (II) by striking ``or'' at 
                                the end of clause (i); and
                                    (III) by striking clause 
                                (ii); and
                            (ii) in subparagraph (D)(ii), by 
                        striking ``or title XX''; and
                    (B) in subsection (o)(2)(B)--
                            (i) by striking ``or title XX'' 
                        each place it appears; and
                            (ii) by striking ``or XX''.
            (18) Section 201(b) of the Indian Child Welfare Act 
        of 1978 (25 U.S.C. 1931(b)) is amended by striking 
        ``titles IV-B and XX'' each place it appears and 
        inserting ``part B of title IV''.
            (19) Section 3803(c)(2)(C) of title 31, United 
        States Code, is amended by striking clause (vi) and 
        redesignating clauses (vii) through (xvi) as clauses 
        (vi) through (xv), respectively.
            (20) Section 14502(d)(3) of title 40, United States 
        Code, is amended--
                    (A) by striking ``and title XX''; and
                    (B) by striking ``, 1397 et seq.''.
            (21) Section 2006(a)(15) of the Public Health 
        Service Act (42 U.S.C. 300z-5(a)(15)) is amended by 
        striking ``and title XX''.
            (22) Section 203(b)(3) of the Older Americans Act 
        of 1965 (42 U.S.C. 3013(b)(3)) is amended by striking 
        ``XIX, and XX'' and inserting ``and XIX''.
            (23) Section 213 of the Older Americans Act of 1965 
        (42 U.S.C. 3020d) is amended by striking ``or title 
        XX''.
            (24) Section 306(d) of the Older Americans Act of 
        1965 (42 U.S.C. 3026(d)) is amended in each of 
        paragraphs (1) and (2) by striking ``titles XIX and 
        XX'' and inserting ``title XIX''.
            (25) Section 2605 of the Low-Income Home Energy 
        Assistance Act of 1981 (42 U.S.C. 8624) is amended in 
        each of subsections (b)(4) and (j) by striking ``under 
        title XX of the Social Security Act,''.
            (26) Section 602 of the Child Development Associate 
        Scholarship Assistance Act of 1985 (42 U.S.C. 10901) is 
        repealed.
            (27) Section 3(d)(1) of the Assisted Suicide 
        Funding Restriction Act of 1997 (42 U.S.C. 14402(d)(1)) 
        is amended by striking subparagraph (C) and 
        redesignating subparagraphs (D) through (K) as 
        subparagraphs (C) through (J), respectively.
    (c) Effective Date.--The repeals and amendments made by 
this section shall take effect on October 1, 2012.

                                  
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